Privacy and Asset Protection – Episode 346

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[00:01] Welcome to the Prosperity Podcast. On today’s episode of the Prosperity Podcast, we’re going to be talking about how to keep those prying eyes of the IRS, government entities, and people you don’t want away from your finances. Kim, I am so excited to hear your insight and what we can do. Well, I’m grateful to be able to share what I do know about this. I’m not sure that I have a lot of expertise in the space, but tell us how this question came up. Absolutely. So as I was rereading your book and learning again about the principles that you follow with finances… And this was the Live Your Life Insurance book? The Live Your Life Insurance book. It kind of raised, I don’t know, I guess I was in a different place of life. And so I looked at this topic differently.

[00:54] And in here, it’s talking about privacy and asset protection. And it’s explaining how when we have the cash value accounts, they’re not reported to the IRS. And it really helps us see things through a different filter saying, I actually have a little bit more control over it and a lot more protection than I previously thought. Yes. You know, it’s interesting. I was just at an event with a bunch of financial advisors and a lot of them were saying that they were tax… I forget what their word was. They didn’t use the word like CPA or tax professional, but they were tax strategists in some way. And I thought, that’s interesting. And I know that each one of them is an expert in the area of whole life insurance. And when I thought about a little

[01:42] further, that can absolutely make sense because building up the asset called cash value of whole life insurance is not a taxable event. While you are building it, it is growing without taxes. And because it is growing without taxes, there is no 1099. There is no reporting that comes from the IRS to you because there is no taxation that would cause for that type of transaction to become available to the public eye. I mean, generally we think of our finances as private, but frankly, when something shows up on our tax return, it really is no longer private. Now, there are different rules for different states as it relates to the protection of that asset if something like a bankruptcy or a lawsuit occurred.

[02:36] And so you’ll want to pay attention to those. And a really good resource for that is asset protection society dot org. Asset protection society dot org. You can actually go on there and look your state up and see what the rules are for your state as it relates to how much cash value of life insurance is protected in the event of some type of liability. But back to just simple normal everyday life, just having something not taxed immediately gives us a level of privacy that is not available to our bank accounts and or our money market accounts or any other thing where interest generates at 1099 from the IRS, which then essentially makes that account be available in the public eye. So very true. And you know, to clarify for listeners, this episode is not about avoiding

[03:33] taxes. It’s not about hiding anything. And it’s also not something that’s only safe for quote unquote, the one percent. This is a way for you to approach your finances as a smarter individual. So I think oftentimes when when we hear this, it’s easier for them, easy for the media to misconstrue things and say, Oh, it’s just the rich that are trying to hide or avoid. And it’s nothing of that. This is looking to preserve your financial future and protect yourself from whatever that may be. Correct? Absolutely. And I think we forget that the little bit of money that we pay in taxes along the way on our liquid dollars. So you have a savings account, you have a money market account, you know, maybe even a bond fund you consider kind of your emergency money.

[04:24] Well, every time there’s tax on that account, even though it may seem small right now, because interest rates are so low, you lose those tax dollars. And you also lose the opportunity to do anything else with those tax dollars for the rest of your life. And so if you just put some easy math on it, let’s say you have $100,000 sitting in a savings account. And let’s just say for ease of discussion, it’s going to earn 2%. So that’s $2,000 of growth in that year. And maybe you’re in the 24 or 32% tax bracket. Let’s just use an easy number of 33% tax bracket. There isn’t such a thing. But so we can just cut it in a third for easy discussion. So you have this $2,000 of growth while a third of 2000 is I think out loud here, it would be about 600 bucks in taxes that you

[05:18] would owe because all of this type of dollar is done at the marginal tax bracket. This is not going to creep up through the lower brackets of 10 and 14, whatever they are these days. So you have this $600 that has to go to the government. And then you never see that money again. You never get to do anything with that money again. And let’s just say that you had the ability to invest that $600 at 10%. It’s some investment, it probably had to go with a whole bunch of other money. But if you know of an investment that’s at 10% that you can do, that you’re comfortable with, then your opportunity cost is measured at 10%. And even if you say, Oh, well, you know, that’s a $50,000 minimum investment. Well,

[06:10] okay, fine. But you know about one that you can do. So that’s your measuring stick. So we now have $600 times 10% for the rest of your life. That’s the opportunity cost of that tax bill. That year’s tax bill is not just the 600 bucks. It’s 600 bucks times 10% for the rest of your life. That’s a big number. Yeah, absolutely is. And it’s astonishing that people don’t look at the long term effects of that. And also, you know, tying in the conversation of the privacy and asset protection, people aren’t looking at the long term liabilities that can potentially happen as well. So just for fun, I did the math real quick, if you take $600. And what I use to do this is called a future value calculator, which anybody can get for

[06:58] free by going to the App Store, either your Apple App Store or Google Play for Android, and looking up Truth Concepts. There is an app that has available a future value calculator, a present value calculator, an interest rate calculator, a timeframe calculator, and a payment calculator on the free app, the Truth Concepts app. So I took a future value calculator. We’re trying to figure out the future value of the 600 bucks. I put in 10%, and I put in 50 years. Just, you know, let’s say you were a 30-year-old thinking you’re going to live to 80. By the way, you’ll probably live to 100. But that’s not part of our discussion that we’re having right now. So 600 bucks, 10%, 50 years, that’s $70,435.

[07:46] The flight attendant, can I have that bag, please? Yeah, I think that really hits home because most people don’t see that. They don’t realize what they’re doing. And opportunity cost is one of the biggest areas that we make mistakes around as it relates to our personal finances and taxation, because we just don’t see it. And so we don’t think about it. And it’s not soft money. This is not funny money. This is real dollars that if that same $2,000, in my earlier example, was inside the cash value of life insurance, there would be no $600 tax bill. And there would be no 70,000 of opportunity costs on that just one year of $600 given to the government that didn’t need to be. You know, as I fork off a part of this conversation in my head, I think about some

[08:39] of the often comments and strategies that people have. And you’ll often hear the common investments in 401k, mutual fund talk and whatnot, and IRAs, which is, oh, I’m going to get in right now at a lower tax bracket. And then in the future, I’ll be, I don’t know, at a, I was just going to say this. I’m going to get in now at this tax bracket that I know of, but in the future, I’m going to be at a lower tax bracket. And the truth is, we don’t know what the future is. We have no control over that. We don’t know what legislation looks like. And so protecting ourselves and hedging against what we can do right now, and viewing the future value and future opportunity is something that I think all of us should be

[09:26] paying attention to. Yes, really well said. And just learning about this and paying attention to it will enable you to learn more about it and pay even better attention to it. So just start if you’re feeling a little overwhelmed in this area. As Spencer said, there’s books that are available on Amazon. There is an audio version of every one of them, as well as a Kindle version, as well as a physical copy, if you prefer that. And there’s YouTubes that are available on the partnersforprosperity.com YouTube channel. So learn, learn away. Absolutely. Thank you for listening to the podcast today. And we appreciate you diligently learning about all of these things that will help you and your family with your

[10:11] finances. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.