Understanding Asset Protection with Cash Value Life Insurance – Episode 401

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[00:02] Hello, partners. On this episode, we’re going to be talking about the different regulations and the protections that you get state by state. Now, we’re not going to dive into every single state, so this isn’t going to be one of those snoozer episodes. You actually want to hear how you may be more protected or less protected. Is that a good way to frame it, Kim? It is. So what we’re talking about in particular is cash value of life insurance and whether your state protects your cash value of life insurance from any type of lawsuit or way that people could get at your assets. So it’s interesting to me. People will reach out to me from time to time wanting asset protection, and this is not an area of my

[00:49] expertise at all. If you have some serious issue, number one, probably it’s too late. Number two, it’s definitely something you should get with an attorney about. However, I do have some knowledge to share that I think will be beneficial to people. And one of the most common questions that follows it is not only is my cash value protected, but what do I do if I move? Because people have started to learn, which I think is a really important thing, that the life insurance industry is state regulated, not federally regulated. In other words, not regulated by the federal government, it’s regulated by each of the states. And so let’s start with the first part first, and then we’ll talk about what happens when you move. There are some states, as an example,

[01:35] Texas, Arizona, Florida, off the top of my head, that protect 100% of the cash value of life insurance from lawsuits. And again, this is not a deep area of expertise, so I don’t know really what else they are protected from. But I know in that space, the protection percentage is at 100%. There are other states where the protection percentage could be as low as 15%, one five. And then other states have a dollar figure maximum, like $100,000 or $150,000. Source that you want to go to is assetprotectionsociety.org. Now, when you get in there, you can dig around and you can find your state and read the language, which it is legal language, so it’s not super easy to understand. But you can read the language that relates to your state. And then

[02:41] if you have specific questions, all I know to do to tell you is to reach out to somebody at assetprotectionsociety.org or if you have a local estate planning attorney, they may be able to help you as well. And so this is just something that is interesting for us to learn about because some states clearly do a very good job in the space and other ones not so much. And then there’s a whole bunch that are just kind of in the middle. And I guess we could call it at a decent level of protection. Does that make sense so far? It does. Yes. So the next question that obviously comes up and then I have a fun story actually to tell you about Arizona. But the next question people are going to most logically ask is what happens

[03:24] if I move? So I started my policy in Massachusetts as an example, and now I’m moving to Texas. Well, when you live in Massachusetts, in other words, when that is your primary residence and your driver’s license shows that state you’re under their law. When you move to Texas or anywhere else, then your protection is under their law, literally dictated by proof of residence, which is most often a driver’s license. So if you literally drove yourself from one state to the other, and then 30 days later you got your driver’s license fixed, I believe it would be the date of your driver’s license getting fixed. It would designate that, quote, proof of residence. I know some states have lots of things you

[04:08] have to do to prove residency, like Las Vegas, because a lot of people move to Nevada. And especially if you’re from New York or New Jersey, they really, really, really want to keep you. So there’s a lot more of a list that goes on in terms of, quote, proof of residence. But I believe that the driver’s license is kind of the main one. And again, it doesn’t matter where you got your policy. In fact, there is no difference between a policy that’s issued, for example, to the state to somebody living in the state of Massachusetts or to somebody living in the state of Texas, even though the illustration is going to list the state, there’s no difference. The only time there would be a difference is there are some

[04:49] life insurance companies that don’t do business in New York in particular, because that is a very tough state for all of its rules and regulations. And so there’s quite a few good mutual companies that only do business in 49 states. Not a bad thing, just sort of an interesting fact to lay out before I tell my Arizona story. Okay. Because for a second, you’re going through and I think, one, what you’ve done is you’ve listed out that next question, which is what happens if I move. There may be another one of out of country, but maybe that’s getting too far in the weeds and they should just go to assetprotectionsociety.org and discover that. Yeah, I’m happy to address the out of country to the best of my knowledge. And again, reiterating, this is now even further a field

[05:37] for my area of expertise. But my understanding is that for most of us, you’ll retain your U.S. citizenship. And so you will still have to have some state that you are connected to. Most people use, you know, maybe a parent or a sibling or a child’s adult child’s home as their quote home state and mail and anything from the IRS and that type of thing go there. Well, that would be the same then if you were living in France, working for even if it was years and years and years. If you maintain U.S. residency, you’re going to have to have a state. And so that state is going to be the one to dictate it. And the life insurance cash value, as we know, is done in dollars and death claims will still be paid in dollars,

[06:25] even if you should happen to die overseas to a U.S. bank account. You know, they’re not going to convert anything to any other type of currency, at least not under current environment. Everything is done in the dollar regardless. Wonderful. I’m excited to hear about Arizona. Is this is this one of those cliffhangers? Well, it’s a really cool story. So the state of Arizona had, I think, 15 percent of cash value protected. And this was gosh, this is probably 15 years ago, I’m going to guess. And a friend of mine named Ann Groth decided that, holy cow, you know, there’s other states where they protect 100 percent of the cash value. Why doesn’t Arizona? And so she took it upon herself to go down to the legislature

[07:21] and started to ask. And she would ask this person and they would say, I don’t know, go ask this person. And she would just follow the trail and person after person after person literally said, I don’t know. I don’t know why it’s only 15 percent. It’s never come up. Well, she understands whole life insurance and felt like it was a really important thing that Arizona and do notice the states that I’ve used as examples, you know, heavily retirement oriented states, even though Spencer, you and I don’t like the idea of retirement, our society is still stuck on the idea currently until you and I can get them off of it. So she just felt like, hey, Arizona should have 100 percent cash value protection unless

[08:04] there’s a really good reason why we shouldn’t. And the bottom line is that nobody could give her a good reason why why Arizona shouldn’t. And so they changed the law. Oh, that’s great. Wow. Now, yep, Arizona has 100 percent of cash value protected because Anne got in there and talked to enough people and made a strong enough case that they changed the law. Isn’t that cool? Well, yeah. And the thing is that affects so many families. Absolutely. So a little leak of some fun information. Kim and team have our perpetual wealth book coming out in Kindle and hardback form here in the next few months. And what you said is so accurate. The work that we do is often in perpetuity. It is perpetual wealth that is

[09:03] taught and generated and protected and worked with. And the perpetual wealth book talks about that idea, the whole idea of family financing. And maybe in the future that will be a book that we could give as a fun wedding gift to link us back to another podcast or maybe link us forward, depending on which direction we go. And yet there are so many people that just think about their own generation or maybe theirs and the next. And so I think it’s part of our mission that we get people thinking in longer generations. In other words, think three, four generations out. And without a doubt, Arizona converting from only 15 percent. If I have my facts right, maybe it was 10. I can’t remember the cash value protected to 100 percent of the cash

[09:59] value protected. You’re right. That affects generations and generations and generations. Yes. So I want to pull one other call to action and we’ll lay it out like this, if you don’t mind. So it’s this. Anne went through and she asked why a lot to several different people. And she kept on getting an additional person she had to ask and there wasn’t really clear answers. And I think for anyone that is in the situation where maybe their state isn’t 100 percent or even if it is, should be asking, why am I not protected? And go through that and ask and determine why it’s not the way that it should be ideal for you and then make it that way. I think that we all have the ability to do that. And Kim,

[10:53] on these 300, almost 400 episodes, you’ve shown that going through a line of questioning and maybe not accepting the status quo, the typical way of thinking, we don’t have to go down that approach. Isn’t that right? So true. And that’s why I think as a verb and as a noun and as an action word is the first principle of prosperity that we’ve worked with for so many years, which is just a reminder to get that brain turned on and don’t be a statistic. Don’t be one of those sheep that just blindly following the leader without really paying attention or opening up your eyes and your ears and your brain to be conscious of things. Dan Sullivan, my mentor for so long of many, but certainly one of the most important ones,

[11:48] has a saying that I just love. It’s something to the effect of your eyes will only see and your ears will only hear what your brain is looking for. And so that’s what the principle of think reminds us to do is turn that brain on. Oh, I love it. That’s so good. For listeners, Kim did drop a hint about her book, Perpetual Wealth. That’ll be coming out in a few months on Kindle and also printed version and Audible. If you’d like to get noticed of when it’s going to come out, go over to partnersforprosperity.com and you can sign up for the newsletter and you’ll hear first thing when it’s ready and you can get your fingers on it. Sound like a plan? That’s perfect. Awesome. Well, listeners, thank you for being with us on this episode today.

[12:32] If you’re not already subscribed to the podcast, make sure you hit that subscribe or follow button and we look forward to getting you another episode soon. 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.