You may have seen the recent news about NASCAR champion Kyle Busch and his wife, Samantha, claiming they lost $8.5 million inside an Indexed Universal Life (IUL) policy strategy. When something like this hits headlines, it spreads fast and it can leave people wondering whether IULs are “good,” “bad,” or something to avoid altogether.

Before jumping to conclusions, it’s important to understand what actually happened because the problem wasn’t simply that the policy was an IUL. The core issue appears to be how the policy was designed, illustrated, and communicated.

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First, a Quick Clarification

I work with families and business owners to help them control the banking function in their own lives, which is the heart of the Infinite Banking Concept. True Infinite Banking requires:

• Stable, guaranteed growth
• Contractual access to capital
• Predictable costs and performance
• No dependence on market conditions

This is why the Nelson Nash Institute teaches that Infinite Banking is best implemented using dividend-paying whole life insurance from a mutual company because it provides control and certainty.

Now, yes, you can take policy loans and repay them inside an IUL. It can grow. It has cash value.
But because IULs are tied to market index performance and cost-of-insurance adjustments, you cannot fully control the banking function the same way you can with properly structured whole life.

This distinction becomes very important in the Busch situation.

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What Went Wrong Here

According to the lawsuit, the Busches were told:

• The policy would become “self-sustaining” after a short period
• It would later generate large tax-free income
• Risk was low
• Costs would not dramatically change

However, the complaint states that the policy:

• Was built with high multipliers and rising internal costs
• Used performance illustrations that were unlikely to hold up in reality
• Was not structured to maximize cash value
• Included a 1035 exchange that triggered significant charges

To quote an industry attorney reviewing the case:

“If the allegations are true, this policy is a case study in how not to design and sell an IUL.”

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So Are IULs Automatically Bad?

Not necessarily.

The better answer is: It depends on the purpose and the design.

But we should not lump all “life insurance” into one bucket.

There are major structural differences:

Whole Life	IUL / UL / VUL
Guaranteed, contractual growth	Performance tied to indexes or investments
Premium and cost structure is fixed and predictable	Costs can rise over time
Designed for stability and control	Designed around market movement and variability
Ideal for Infinite Banking	Not built to support banking control long term

They are not interchangeable tools.

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Why Properly Structured Whole Life Avoids These Problems

When whole life is designed for maximum cash value, minimal necessary death benefit, and long-term flexibility, you don’t run into the same deterioration risks that are common in IUL over time.

In my personal experience reviewing policies from new clients over the years:

Less than 10% of the IUL policies I’ve reviewed were on track to sustain themselves long term. The majority showed increasing internal charges that eventually caused the policy to collapse unless the owner injected more premiums later.

This is the opposite of control.

Which is why whole life is the foundation of Infinite Banking – not because it’s “better” emotionally, but because it is more stable structurally.

When you are trying to control the banking function, stability matters more than hypothetical upside.

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If You Have an IUL (or Were Recently Shown One)

This situation is your cue to review what you actually own:

• How have cap rates changed historically?
• What triggers cost increases?
• Was your policy designed for your benefit or for commissions?
• Does this structure support control?

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Planning for a child’s or your own college education can often seem overwhelming, with numerous options and decisions to make. Navigating the complexities of financing this significant investment in one’s future demands careful consideration and strategic planning. While the conventional approach often involves financing college through student loans, (which has resulted in a staggering $1.7 trillion in student loan debt in the U.S.!), exploring alternative methods and savings strategies can provide a more financially secure path toward achieving higher education goals.

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The Traditional Saving Approach – The 529 Plan

529 Plans have been the staple savings method since 1996, created by the IRS. While 529 Plans offer many benefits for saving for college expenses, there are also some drawbacks to consider:

• Limited investment options: 529 Plans typically have a limited selection of investment options, which may not suit every investor’s preferences or risk tolerance.
• Restricted use of funds: Funds in a 529 Plan must be used for qualified education expenses, such as tuition, books, and room and board. If the funds are used for non-qualified expenses, the earnings portion of the withdrawal will be subject to federal income tax and a 10% penalty. These rules have changed somewhat since 2022, and continue to do so.
• Impact on financial aid: Although 529 Plan assets have a relatively low impact on federal financial aid calculations, they can still reduce the amount of aid a student may be eligible to receive. The impact varies depending on whether the account owner is the parent or another relative.
• Limited flexibility for changing beneficiaries: Although you can change the beneficiary of a 529 Plan, there are restrictions on who can be named as a new beneficiary. The new beneficiary must be a family member of the original beneficiary, as defined by the IRS, to avoid tax penalties.
• Loss of control over assets: The account owner of a 529 Plan retains control over the assets, but some individuals may be concerned about giving up control to the plan administrator when it comes to managing the investments.
• No guarantee on investment returns: The performance of a 529 Plan’s investments is not guaranteed, and the value of the account can fluctuate with market conditions. This could result in lower-than-expected returns, potentially affecting the amount available for college expenses.

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Alternatives to the 529 Plan

Prior to the introduction of 529 Plans (and many ways still), some traditional methods for college savings included:^*

• Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts: These custodial accounts allowed parents, grandparents, or other relatives to transfer assets to minors without the need for a legal guardian or trust. Assets in these accounts could be used for any purpose, including college expenses. However, unlike 529 Plans, earnings in UGMA/UTMA accounts are subject to taxes, and the assets may have a larger impact on financial aid eligibility.
• Savings bonds: Families would often purchase U.S. Treasury Savings Bonds (such as Series EE and Series I bonds) as a safe, low-risk investment for college savings. The interest earned on these bonds may be tax-free if used for qualified education expenses, but their low return rates may not keep up with the rising costs of college education.
• Traditional savings accounts or Certificates of Deposit (CDs): Parents would set aside funds in a regular savings account or CDs as a simple method to save for college. However, the interest rates on these accounts are typically lower than other investment options, and the interest earned is taxable.
• Coverdell Education Savings Accounts (ESAs): Previously known as Education IRAs, these accounts allow for tax-free growth and withdrawals for qualified education expenses, including K-12 and higher education costs. However, annual contributions are limited to $2,000 per beneficiary, which may not be sufficient to cover the full cost of college education.
• Whole life insurance policies: Some families utilized the cash value growth in whole life insurance policies as a method to save for college. The cash value can be accessed through loans or withdrawals, generally tax-free, to cover education expenses. However, these policies can be more expensive and may not offer the same level of tax advantages as 529 Plans.
• Regular investment accounts: Parents and grandparents could also invest in stocks, bonds, and mutual funds through a standard brokerage account to save for college expenses. However, these accounts do not offer the same tax advantages as 529 Plans, and the assets may be subject to capital gains tax upon sale.

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An out-of-the-box approach for college savings

One creative and little used strategy to build up money for college is properly structured whole life insurance. It has guaranteed cash value growth (not market tied!), tax advantages, flexible access to funds, ZERO impact on financial aid, and so many more benefits.

• Guaranteed cash value growth: Whole life insurance policies have a guaranteed cash value that grows over time, which can provide a stable and reliable savings vehicle for college expenses.
• Tax advantages: The cash value growth in a whole life insurance policy is tax-deferred, meaning that you won’t pay taxes on the gains while the money remains in the policy – ever. When you do access the cash value, you can borrow against the policy instead of a withdrawal – and the IRS does not tax this method.
• Flexible access to funds: You can borrow against the cash value of the policy, without the need to sell investments or liquidate assets, which can be helpful when you need money for college tuition and expenses. Instead of borrowing from a ‘traditional bank’, you’re borrowing from yourself, thus can pay yourself back over time (or set up a payment arrangement for your child to pay it back over time – and keep the money in the family rather than out to a company providing Student Loans). Every penny paid back, is money that can be borrowed back out for something else that will make or save you money.
• Protection for your family: A whole life insurance policy not only provides a savings component but also offers a death benefit to protect your family financially. In the unfortunate event of your passing before your child attends college, the death benefit can be used to cover educational expenses.
• Not included in FAFSA. No impact on financial aid: Unlike some other assets, the cash value of a whole life insurance policy is generally not counted as an asset when determining eligibility for federal financial aid, which can improve your chances of receiving assistance for college expenses.
• Can be used for anything, not just college: The policy owner has control of the policy’s potential accumulated cash value. If plans change, the accumulated cash value can be used for other purposes, such as supplementing your retirement income.
• Forced & long-term savings: A whole life insurance policy requires regular premium payments, which can help instill a disciplined savings approach for college funding. It ensures that you consistently put money away for your child’s education. Whole life insurance policies can be held for decades, allowing you to build significant cash value over time. This can help you prepare for future education expenses, even beyond college, such as graduate school or continuing education.

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In conclusion, whole life insurance can be an amazing alternative to 529 Plans for college savings, providing unique benefits that may align better with many families’ financial goals and circumstances. With its guaranteed cash value growth, tax advantages, flexible access to funds, and the added protection of a death benefit, whole life insurance policies can serve as a versatile and reliable savings vehicle. Furthermore, the forced savings aspect instills a disciplined approach, while the minimal impact on financial aid eligibility ensures that additional assistance remains within reach. Ultimately, each family’s financial situation and preferences will dictate the best approach to saving for college, but whole life insurance policies present an attractive option for those seeking a well-rounded and secure strategy.

Reach out today, to see what we can do for you and your family…

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*Details change year over year, and laws change. These facts apply through 2021, and may have changed. Please do your due diligence and gather all your facts from various sources before choosing a method and sticking to it.

We are Private Banking System experts who design personalized strategies for INDIVIDUALS, FAMILIES, BUSINESSES & NON-PROFITS. Through education, conversation and discovery, we craft custom strategies for our clients using the Infinite Banking Concept (IBC). We show businesses how to restructure their finances to make their money work for them. We utilize the Infinite Banking Concept with properly structured, dividend-paying whole life insurance through a mutual carrier. 

I could write a whole book on the many ways whole life insurance gets misunderstood. Fortunately, others already have! Instead, let’s start with a simple fact: a person can borrow against the cash value of a whole life policy; if you have a basic understanding of this, the following discussion should make sense. Regardless, I encourage you to go back and read previous articles on IBC and whole life.

Interrupted Growth & Paying Interest
Someone once said to me, “Why would I want to borrow my own money and pay interest on it?”  It’s a valid question. Here’s the answer: You wouldn’t want to… necessarily. Fortunately, that is not really how it works inside a properly structured policy.  Instead, you are borrowing “against” the cash value of your policy. You are not borrowing “from” the cash value of your policy. 

The Scenario. Maxwell calls his insurance carrier and asks them how much cash value he has available to borrow against. They look at his cash value and tell him he can borrow $188,000. Let’s say he borrowed $20,000 against his policy and the carrier is going to charge him 5%. It is an unstructured loan, so they let you decide how much and how often you are going to pay that back. Now you think to yourself, “I can get a loan from Bob-The-Loan-Guy for 3%, so why would I borrow from here?”

Defining the terms. Uninterrupted compounding is the basic principle where something (your money) and its gains grow continuously on top of each other over time. Contrast that with standard compound growth, where each time you withdraw money or investment growth declines, that growth is interrupted.  Inside your policy, the cash value grows uninterrupted.  The insurance carrier sees your death benefit is worth a certain amount and the cash value is worth another amount. They are usually willing to loan you 95% of the existing cash value.  The difference is they are loaning you the money from their pile, not your pile.  That’s why we use the term ‘borrow against’ instead of ‘borrow from’ when we talk about taking loans inside a life insurance policy. Since they are loaning you their money, yours will continue to grow uninterrupted. 

Back to the story. Our friend, Maxwell, borrowed $20,000 against his policy, but he was eight years into the life of his policy, and it was projected to grow by $25,000 that year. In nearly all outside situations, qualified money included, when you borrow $20,000 from a pile of money, you have interrupted that growth. Logically, it would only be growing off his remaining $168,000 in the policy; however, it is actually growing off of the original $188,000. Why? Because the insurance carrier is loaning you their money, not your money. In this scenario, Maxwell’s policy grew from $188,000 to $215,000 that year ($27,000 growth!). He was paying a premium of $20,000 per year, so his net growth was $7,000.

Maxwell could have borrowed the entire $188,000 and his policy still would have had a net growth of $7,000 that year. This is the power of uninterrupted compounding. Also, it should be noted that the $7,000 in growth is not taxable by the IRS. 

Through a properly structured whole life policy, Maxwell gained:

• Activated uninterrupted compound growth in his policy.
• Tax-free growth inside his policy.
• The ability to loan his real estate investment business the money and then deducting the interest expense.
• Recaptured money by paying himself back, instead of a bank.
• An unstructured loan that he could decide the terms on.
• A substantial death benefit tied to the policy that would pay everything back if there were any outstanding loans, leaving plenty for his inheritors.  
• Eventually, he would build up a cash value large enough to retire off of his policy, instead of through a qualified account.
  
  

Where else can this be done? Let us show you how to set up your own private family banking system using Infinite Banking strategies. Create a legacy that can last for generations to come.

Article written by Jason K. Powers

In these unique times during the COVID-19 pandemic, we have seen practically every response under the sun, when it comes to personal finances.  The initial impact is obvious throughout the U.S., but the reactions are abounding.  With upwards of 40% of the adults in the Nation who cannot afford a $400 unexpected expense, it’s no wonder we are seeing such a wide range of responses.

We’ve seen a borderline run on the banks with people worried money will be hard to come by.  We’re hearing of people cashing out their 401(k) amid fear of losing the rest, or taking advantage of the newly passed CARES Act.  However, even through the range of financial obstacles, we’re seeing a positive trend in many areas, including those who are utilizing their own private family banking system now more than ever.

When it comes to our clients, we’ve had a much different response. One client just last week at his Annual Review said, ‘I finally get the true power of Private Family Banking’. His 401(k) was down more than 20% for the year, but his Banking System is growing 5% and will continue to no matter what happens with the market. We have been talking to our clients about a coming recession for over a year and even though we weren’t expecting it to come so quickly, most of our clients have been preparing themselves in cash-ready positions to make the most of this crisis and the potential recession it will bring.

Here at Unbridled Wealth, our strategy has remained true despite the numerous ripple effects of COVID-19 – helping families, businesses and non-profits achieve financial wellness through uncommon approaches.  Our approach is and has always been to help our clients better understand their financial landscape, along with their financial goals & objectives.  We want to help them connect their finances with their goals and objectives by utilizing private family banking.  Now more than ever, a good solid strategy is needed amidst this global tragedy, and we want to see our clients not only survive, but thrive.  The beauty of private family banking is that none of our clients cash values have actually declined, because these banking systems utilize guaranteed returns – giving them the ability to prepare to make investments in real estate, and stay ahead financially.

We have been working hard to help our clients come up with practical and creative solutions to their finances.  It is important not to make knee-jerk reactions that may impact you for decades.  We have been equipping our clients with the tools necessary to create their own private family banking systems.  Through our free education and strategy sessions, we are helping them discover even more creative ways to access, redirect and rearrange their finances, as well as start creating financial velocity amidst these unprecedented times. 

We encourage you that NOW is the time to be creating a plan and looking for opportunities to capitalize and stabilize during the economic disorder.  

If you would like to hear more about creating your own private family banking system, while developing your overall personal financial strategy at the same time, do not hesitate to reach out!  We are here to serve you and be a resource for you in your real estate investing endeavors.

Article written by Jason K. Powers

Photo by Anastasia Petrova on Unsplash