Asset Protection – Episode 445

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[00:00] Welcome to the Prosperity Podcast. This is a special bonus episode of the Prosperity Podcast. Kim is being interviewed on the Cover Your Assets podcast with Joe Barcate. And they’re going to be talking about asset protection. Now the reason why this is a special bonus episode is because asset protection is important, especially coming up with the new year and getting finances in place is something that’s even more top of mind. Let’s dive into the episode. So welcome to another session of Cover Your Assets. And today we have a very special guest. Kim Butler. Hello, Kim. Hello. So good to talk with you. Good to talk with you too. Kim and I go way back. So Kim, go ahead and introduce yourself. Well, I’m so glad to get to talk with you.

[00:54] I actually got rid of all my licenses except life insurance. Oh, gotcha. Okay, good. Yep. I have been helping people with their finances for 30 years and I love doing that. And I have a lot of wisdom about what works and what doesn’t work. And yet the only way I get paid anymore is to help people buy life insurance. So it’s fun because I get to focus on the one product that I love and provide all the ancillary commentary and answer questions around the edges without anybody worrying about it. What is she getting out of it? I think you under represent yourself there because, okay, you may not have those licenses anymore, but you do quite a bit more. For instance, I know you have a very successful and long running podcast with

[01:41] a lot of followers. So that’s great. That’s something I’m trying to achieve. And so I admire you for that. You also have gatherings a few times a year where you have a lot of your investors, a lot of the people you work with come down to see us. And those are very successful. My office has been down there several times to participate in those, and it always comes back how great they are. And you’re also an author. You currently have a book on Amazon. Do you want to tell us a little bit about your book? Absolutely. We actually have about seven books on Amazon. One is Live Your Life Insurance. Another is Perpetual Wealth, which is a fabulous story about a family that has chosen to do a family retreat and all of the good things that they cover on that.

[02:25] I have Busting the Life Insurance Lies. I have Busting the Financial Planning Lies, Busting the Real Estate Investing Lies, and Busting the Interest Rate Lies. Okay. So one plays particularly well with what we’re talking about today. My podcast is Cover Your Assets. And one of our biggest topics is asset protection in two respects, asset protection from litigation creditors and so forth. And also asset protection from market downturns and that kind of catastrophes. What I’d like to talk about are some of the products you offer, specifically your life insurance and annuity type products that fit into that mold. First, let’s talk life insurance. And from there, we have life insurance, as I’ve mentioned, has a great asset protection

[03:06] and risk mitigation feature. Kim, you want to tell us about your best-selling products and how they fit into that mold? Absolutely. A lot of people are not aware that whole life insurance, the type that has cash value, is 100% protected in the event of lawsuit in at least three states and might be a lot higher than that. But the specific states that I know of are Texas, Arizona, and Florida. And a lot of the other states protect a certain percentage of that cash value in the event of a lawsuit. So it’s like a free asset protection aspect that has been given us from these states to protect the whole life insurance cash value. This is the liquid part that is in existence on somebody’s balance sheet that operates

[03:54] very similar to a savings account. The other way, Joe, that is protected is that mutual life insurance companies, so like Guardian, New York Life, Northwestern Mutual, Penn Mutual, companies like that, they are reserved dollar for dollar. So the protection is there against the fractional reserve system that our banks use. And a lot of people are not aware of that. But if your bank says that it has a dollar, it actually only has seven to ten cents of that dollar, whereas life insurance companies by law are 100% legal reserve companies. So they protect against a fractional reserve banking run or a problem of the banks only having a certain percentage of your money. So when we use the term guarantee, we can’t use the term guarantee in the financial

[04:46] services industry unless we’re a legal reserve life insurance company or a legal reserve, a federally protected bank. So that’s why a life insurance company can say guarantee because they have the money back and we know it’s 100%. And so that’s like you said, the nice thing about permanent life insurance is that you have that cash value in there. It’s asset protected, like you say, from lawsuits. It grows tax free, which is nice. And like you say, it’s protected from the downside. Did you want to cover more about how is it protected from the downside? How is it prevented from market loss? Yeah, it’s a great question. And the quick answer is that it’s not in the stock market at all, but it goes

[05:22] a little deeper than that. And that is because cash value of life insurance has a guaranteed floor that is a dollar figure. And that floor is guaranteed to rise every single year, even if no dividends are paid from the life insurance company. And let’s not confuse dividends from a stock company or the stock market with dividends from a whole life insurance company or a mutual life insurance company is a better way to say that. So let’s just pretend that dividends are off the table. Never mind the fact that they’ve been paid every year for over 100 years. Let’s just pretend they don’t get paid. You still have a guaranteed cash value dollar figure that is guaranteed to be there and you have a guaranteed increase on that dollar figure that is

[06:17] guaranteed to increase every single year. So those two guarantees work together on the same amount of money. It’s guaranteed and it’s guaranteed to increase in a way that there is literally no other asset like this. Because even a bank, they could guarantee you a particular interest rate for a particular period of time, like for a CD, but that’s it. Whole life is guaranteed for your entire life. That’s why the product is called what it is. Guaranteed floor raises every single year guaranteed. It has all those great features. You have the asset protection, both from the downside protection, lawsuit protection. It grows tax free. It has the liquidity so you can tap it anytime you want, put the money back

[07:00] anytime you want. And along with that, there’s a strategy out there. I know that one of your books covers, which is the Be Your Own Banker Strategy. And which book is that that covers that, that talks about that? The easiest read is Live Your Life Insurance. And the Be Your Own Banker Strategy essentially means that you’re borrowing against the cash value of life insurance to go do other things. And I do cover it more extensively in busting the life insurance lies, but I wouldn’t recommend starting with that. Live Your Life Insurance is just a tiny little book. If you’re looking at the camera, I’ve got it right there. Thin little thing that’s an easy read. That’s your plane exactly to me. Can I read it before I go to bed at night?

[07:38] Yes, that’s something I can read. You can read it on a normal plane flight. Probably not your plane flights, but a normal one. Now, the disadvantage of life insurance, and I’m not sure if you’ll agree with me on this, but usually you can achieve some of the returns over time that you can in place like the stock market. Absolutely realistic market. So you’re looking at maybe 3% to 5% or so in life insurance. That’s what you’re looking for. The stock market might average over time 8%, but you’re not going to get that down. You’re not going to get it down 20 or 30% in a year, but you’re not going to get an up 20 or 40 or 50% in a year. So that’s the disadvantage. So it’s not something where you put all your money, but it’s something

[08:13] where you put a good chunk of your safe money that you want to have, which actually is the strategy I’ve done. That’s where I have a good chunk of, I call that my emergency fund. So I used to have my emergency fund in a bank account. I stuck with my bank account, earned nothing. It was, it could have been taken from any creditor. Granted, it wasn’t going to go down, but it wasn’t going to go up. It was just kind of money sitting there dead. Now I put all that money into my life insurance policy and my whole life policy, and it does give me all those other features in addition to life insurance, one of the other products you sell are annuities and annuities have some of the same features. So do you want to, most of our listeners probably know what an annuity

[08:49] is, but you want to describe one anyway, what’s an annuity? I will. And my tack on annuities is very different from, I think what most people have known of annuities to be. And so I’ll share both so that we’re clear. The typical annuity that you hear about out in the marketplace, which does have some asset protection elements is typically called a deferred annuity. And it might have a whole bunch of other names associated with it, but it actually can potentially be in stock market like investments, but it’s deferred. It’s for later. The type that I like to work with is called an immediate annuity. And these are really better for people in their seventies and eighties and nineties, they earn correspondingly seven, eight and 9% and they

[09:37] guarantee income for life. And so with our healthy people living longer, you want to have part of your income guaranteed for life. And so for somebody in their seventies or eighties to lock in an income stream that will be guaranteed. And again, like we spoke of earlier, this is one of the only products that can use this language. An income stream that is guaranteed for life is very, very valuable because while it does pay the interest rates that I indicated, it’s not the important thing. The important thing is that it will keep paying the payment, whatever that is for life. And you can adjust it by inflation if you want, but it doesn’t matter whether you live till a hundred, 110, 120, which is going to become so

[10:29] normal in our world insurance company will keep paying you. And again, not subject to creditors and because it’s not technically in the market, although I think that’s how some of the life insurance companies actually make the returns is investing in the market. But it’s not that product. Your product is not in the market. It’s guaranteed by the life insurance company. Correct. And you’d be surprised how little of an insurance company’s asset base is in the stock market. It is typically in long-term government bonds that they actually hold for 30 years. So they’re able to get the good returns and private real estate deal. Okay. And so I’m also aware that in both of the products and both the life

[11:06] insurance and the annuities that all those good characteristics we talk about, we also have a long-term care rider now that’s getting very popular and you’re more an expert on that than I am. You want to explain how that long-term care rider works and what the options are there? Absolutely. So the long-term care rider is something that can be added to either the annuity space or the life insurance space. It typically though needs to be a new product. So while it’s a rider added to, you can’t, at least to my knowledge, add it to an existing product that you own. So this is a space where long-term care insurance is a lot of people’s concerns, but they don’t like to buy it because if they die healthy, then

[11:48] they will have wasted the money. With a rider, you can still keep your investment if it’s an annuity or your life insurance policy. And then your family would just get more money if you died healthy. So these are really valuable riders to look at. They’ve only been in the marketplace two or three years. And we work with a lot of people in their fifties and sixties and seventies that buy new life insurance for the purpose of having that long-term care rider in place, but there is an age cap and it depends on the state, but 68 to 70 is the cap. Okay. So I think in summation, what we’ve seen is everybody should probably consider having life, whole permanent life insurance in their portfolio, because all of the things we talked about, the asset protection,

[12:41] both from creditor attachment, from lawsuits, from the market downturn, it has the tax-free growth. It’s like you say, protection from the market downturn. You can get long-term care riders in that life insurance. There’s a lot of great things you can use it for. And I love that strategy about to be your own banker. That’s what I use. So if I’m going to go buy a car, actually I’m in the market for a car. Now I’m going to take that money out of the life insurance policy, let’s say 50,000 and go out and buy the car. And I’m going to pay myself back at 5% interest instead of the bank. So instead of the bank making money off Joe, Joe’s making money off Joe, which is really what I like. It’s interesting that you use those words.

[13:15] And I think it’s fairly common for people to say that, but I want to take a minute and break that down because a lot, wait, how does that happen? And I think if it’s broken down, it’s actually easier to understand. Okay. Very good. So let’s pretend that you have a hundred thousand dollars of cash value in your whole life product at a mutual company and you find a car that’s $80,000 and you want to go pay cash for the car. And you’ve worked out this great deal because maybe the car actually costs 90 grand, but they’re going to give it to you for 80 because you’ve said that you’re going to pay cash, right? So you go to your life insurance company and you say, I want to borrow against my hundred thousand dollars and I need 80 grand to do it.

[14:04] So the life insurance company is going to keep your hundred thousand dollars and let’s say that’s earning 4% and they’re going to lend you their money. They’re keeping your hundred thousand. They’re going to lend you their 80,000. That’s actually the life insurance company’s money and you’re going to pay them to use your example, 5%. So you might think that you are paying yourself and it’s common words to use. However, I think it’s more accurate to say my money is still earning money. A hundred percent of my money is still earning money at whatever rate it is for three, four, five percent could be six or seven in the future. We don’t know while I’m paying the life insurance company, the 5%. And that is an important distinction because that’s exactly what you’re

[14:55] doing. You’re paying the life insurance company for the life insurance company’s money, separate and distinct. It really works just like real estate does. You know, we have our home and we use our entire home, but it’s collateralized or borrowed against with the mortgage, right? So then people stop and say, well, wait a minute, let’s, let’s pretend I’m earning 5% and I’m paying 5%. I’m not getting ahead. That’s the wrong comparison to make. The comparison to make is your account at the life insurance company called cash value is earning four or 5%. That’s compared to the 1%. It could be earning in the bank and the 4 or 5% is not taxed where the 1% is that’s the comparison on that side of the table.

[15:42] And then the loan comparison needs to be made on the other side of the table, whereby, where else could you get a car loan? So we use the example 5%. Well, frankly, if you can get a car loan at two or 3%, you should go do that. That’s a better deal. But we know people that either because of poor credit or past business practices or whatever it is, their credit would cause their car loan to be 7 or 8%. Well there in, you would have access to money at 5%. So your 5% loan is better than the 7 or 8% that you might have to pay through the car financing company, depending on your credit. That’s a long answer and it’s never, you know, we want these one sentence sound bites, right? So it’s never a fun sound bite, but that’s truly what’s going on.

[16:34] And I think when explained that way, it helps people understand and have more faith in the information that they’re learning because otherwise it seems like smoke and mirrors. And so that’s, that’s a good distinction. And I always have looked at it as paying myself back, but you’re right. It’s not a borrowed life insurance company’s money. My money’s still earning. It’d be nice though, if I was actually paying them back at 3%, my money was making 5%. That’d be something I could really, there are ways to borrow against your cash value and not use the insurance company’s loan rate. And so make sure you reach out to me personally, if you have questions about that, because you can use public and private

[17:15] institutions that will lend against cash value at an interest rate that is lower than your life insurance company’s interest rate. And so do you know if they do that is at a recourse loan against your life insurance policy? It is. It’s collateralized just the same way your life insurance loan would be. Okay. Okay. Interesting. So I really like that. So the whole idea of this podcast, we’re not trying, I’m not trying to sell you life insurance. If you want life insurance, you got to talk to Kim. I talked to Kim, but my point is cover your assets. A big part of your asset protection strategy has to be the life insurance and annuity piece, how that fits in because that covers your, that protects your assets from creditors, lawsuits,

[17:57] downside market protection in many ways. Now, again, you don’t want to have all your money there because you’re not going to get the returns you want, but it’s a good place for a foundation. If everything goes terrible, you’ve still got that. That’s something you’re going to have because it is a true guarantee. Kim, we certainly appreciate you being on today. And again, this is take two and I certainly appreciate you giving me that time. Always a joy. And we’ve made a special video for your community that is at ProsperityThinkers.com forward slash Joe Barcate. Hey, I like that. That’s catchy. Again, thank you very much, Kim, for your time and looking forward to having you on in the future. Thank you for listening to the Prosperity Podcast.

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