The Living Benefits of Life Insurance, A Now Asset

Ready to retire with more calm and less compromise? We break down how a high-cash-value life insurance policy—structured the right way—can become your liquid reserve, your market downturn buffer, and your most flexible tax-advantaged income source, all while protecting your legacy. No fluff, just clear mechanics and real stories that show this can be a “now asset,” not a someday hope.

We start with intent: are you optimizing for legacy or wealth accumulation? That single choice drives costs, design, and how closely you can fund a policy while keeping it a non-MEC under IRS rules. From there, we dive into practical use. Hear how a real estate flipper funded a project with a policy loan, kept growth uninterrupted, skipped monthly payments during the rehab, and repaid at sale—an example of borrowing against, not from, your capital. We unpack why policy loans are often simple interest and non-recourse, and how that creates a more borrower-friendly experience than typical bank lending.

Living benefits take center stage. Many modern contracts include accelerated death benefit riders for chronic or terminal illness, allowing a portion of the death benefit to be advanced for long-term care needs. One smart premium dollar can provide three outcomes: tax-free legacy, potential LTC funding, and accessible liquidity across your life. We also show how keeping three to five years of retirement income in policy cash value can serve as a powerful volatility buffer, helping you avoid selling equities at a loss and extending portfolio longevity—an elegant alternative to overrelying on bonds.

Taxes matter, maybe more than you think. Properly structured policy loans and withdrawals aren’t included in Social Security’s provisional income and carry no required minimum distributions. That makes cash value a clean lever for managing tax brackets, IRMAA exposure, and sequence risk. For heirs, tax-free death benefits often beat inheriting taxable IRAs forced out within ten years. Put simply, this tool doesn’t compete with your investments—it makes your whole plan stronger.

If you’re curious how to design for cash efficiency, stay within non-MEC rules, and put the benefits to work, hit play now. If the episode helps, subscribe, share it with a friend, and leave us a review to tell us what topic you want next.

Sources:
7702 tax code:
https://finance.yahoo.com/news/understanding-section-7702-plans-190008193.html

MEC Rules: 
https://www.law.cornell.edu/uscode/text/26/7702

Life Insurance Protections:
https://www.insuranceandestates.com/life-insurance-creditor-protection-by-state/

Long-Term Care Needs:
https://acl.gov/ltc/basic-needs/how-much-care-will-you-need

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Disclosure: Information contained in this podcast is for entertainment and informational purposes only, and should not be considered as financial advice. Financial Planning and Advisory Services are offered through Prosperity Capital Advisors (“PCA”), an SEC registered investment adviser.  Registration as an investment adviser does not imply a certain level of skill or training. Keystone Financial Group and PCA are separate, non- affiliated entities. PCA does not provide tax or legal advice. 

Transcript

Welcome Back And Setup

Announcer 0:00

For more stats in this episode, please see the description for their sources. The financial huddle does not provide tax, legal, financial, or other professional advice. Listeners are encouraged to consult with their own advisors in these areas.

Brian Minier 0:09

All right, everybody, huddle up. Play cuddles in. This is the Financial Huddle. Ready? Hello, everybody. Welcome back to the Financial Huddle. Huddlers, we're so glad that you took some time to join us today. As always, I am joined by my two compadres, Ed B. Miller.

Ed Beemiller 0:29

Hello, hello.

Brian Minier 0:30

Ryan Fleming.

Ed Beemiller 0:31

What's going on, everybody? What's up, B? How's everybody doing? Doing awesome. Woke up this morning. It's a beautiful day. Yeah. Right?

Ryan Fleming 0:38

Glad to be back. Another episode. When you're above ground, it's a good day. There you go. There you go. Hope you guys are doing good too, huddlers.

Why Cash Value Is A Now Asset

Brian Minier 0:44

That's right. So we are going to continue into part two of that two-word curse curse words, I should say, that we talked about last time. What's that? Going to talk about life insurance. Oh, yeah. A little bit polarizing out there. And hopefully, if you have not had a chance to listen or watch that, we want to encourage you to go and do that. A lot of really good information where we talked about is cash value life insurance a viable asset. And obviously we feel that it's a very important part of your financial outlay.

Ed Beemiller 1:17

Yeah. And this one, you know, is what we talked about the last time is let's get let's dig into the weeds a little bit on what are the living benefits of this asset class, right? That's really what it is. And we we talked about, and you talked about it's it's a now asset. It's not a it's not a then asset or weight asset.

Real Estate Flip Funded By Policy Loans

Brian Minier 1:38

Yeah, using these benefits while you're alive. And and we talked a little bit about how it's not a comparable or a competing asset to an investment, but it works in conjunction and it works together. So I thought what I would do is I want to tell a real life story about a really close personal friend of mine who is also a client. And and this person likes to flip home. Very good at it, it's very handy. And he's gotten multiple financial strategies with me. And he called me one time and said, Brian, I I need some capital, and I'm thinking about going into my Roth IRAs to get some capital because I know from a tax perspective, I can get my cost basis without any taxes or penalties. And I said, You know, you know, you have these cash value life insurance policies that you can access, take a loan against the policy, use that, not have any uninterrupted growth, and then when you sell the home after you flip it, pay that back into the policy, and it's if you've never taken a dollar out of that policy. The light bulb went off, then the light bulb went off, and sure enough, the next day, got some information. I need X amount for my policy. Yeah, we were and and it's and I said, guess what? You can continue to do this as you continue to flip homes. So it's a it's it's he went light bulb went off. Uh, it's gonna work very well for him. And this is he's able to do this because of how we created this policies. And then I and I know you talk a lot about this. What is really important when we are designing the policies?

Ed Beemiller 3:10

Yeah. So the first thing we do that we need to identify as advisors is ask the question, what's your objective? What are you what are you looking for? And we talked about in the last episode. Is the focus or objective death benefit, i.e. legacy value, or is it wealth accumulation? And most of the people we talk to, we feel there's definitely a role for or a need for that wealth accumulation aspect. So getting back to how is it structured, first and foremost, because everyone out there's a lot of people out there that sell life insurance, right? A ton.

Brian Minier 3:47

There's a lot.

Ed Beemiller 3:49

98% of those have no idea how to truly efficiently design a high cash value insurance policy. I don't know how many people and we all have come across where they're like, oh yeah, I have that. Oh, can I take a look at your policy? No, you you don't you don't have this. You have a policy that, yeah, it's building some cash over the next you know 10, 15, 20 years, but let me show you how we design those policies. So so working with someone that understands how to design and structure these, but not only how to design them up front, what's just as important is how do I utilize them moving forward. So the the structure of these plans and what we talk about, the value of a traditional plan is all based upon what they're trying to achieve is a certain level of death benefit. So they're trying to maximize the death benefit. When we're looking at this from a wealth accumulation vehicle, we're looking to maximize the cash value and wealth accumulation and to minimize that associated cost. So there's there's a certain level of cost that you you can envoy can avoid because it is defined as a life insurance plan by the IRS and tax code. And we went over a little bit of that in the last uh the first episode with that, but it's extremely important that it's designed to maximize that cash value. Yeah. You know, that is, and what I like to call the icing on top of the cake is that legacy value, because we always make these statements. You can't take it with you, right? So what's the best form of wealth that you could pass on to your beneficiaries? Well, tax-free wealth. So hands down, I don't care what type of life insurance you're using, term insurance, index universal life, whole life, all these different types of insurance out there, universal life. The death benefit is tax-free. So hands down, best legacy vehicle and strategy out there.

Ryan Fleming 6:01

But if it's not good, if it's not structured correctly, it's not going to do what we need it to do. And a lot of advisors and agents, they they don't structure it right.

Ed Beemiller 6:12

And they don't structure it right because they don't know how to. Trevor Burrus, Jr. Correct.

Brian Minier 6:15

Either they don't structure it right from a tax perspective, or they build on a way that's not as efficient and as rich as we would hope that it would be.

Ed Beemiller 6:22

Yeah. And and it's all about controlling and minimizing the cost, you know, staying within Ryan, you say it all the time, kind of staying within those ratios, because that that tax code is gonna evaluate each of those plans and say, listen, you've got to have a certain level of death benefit, you know, and and so much.

Non-MEC Rules And Tax Treatment

Ryan Fleming 6:40

Yeah, and what do we call that? So I think the Huddlers would appreciate, right? So what is a what do we call it as a maximally efficient contract, right? It's gotta it's gotta pass the mechanism. Well, it's gotta pass, yeah, right? The modified endowment contract. So we want a non-MEC. We want a non-MEC. We want to make it as rich as possible, but stay underneath that IRS model.

Ed Beemiller 7:03

And what that non-MEC means for, you know, for we're introducing this concept to a lot of people, is that the account will grow tax-free. It's liquid and accessible, that you can access and utilize it. I'm gonna talk about that in the next point, a little bit more about that. Yeah, for the most part, it is a protected asset. It's protected from all lienholder and creditor rights. In most cases, it's even protected from a personal bankruptcy.

Ryan Fleming 7:30

Yeah, and there's no tax on gain if it's done right, right? No 1099s.

Ed Beemiller 7:34

Right, right. And and then ultimately it can be utilized throughout your lifetime, and then when you do re, you know, so it's a lifetime while you work asset, it can be a retirement, complementary income, capital reserve. There's so many different ways, you know. You you've heard a lot where it's like the Swiss Army knife of financial planning vehicles, and you don't have to determine today how you're gonna utilize it in the future.

Ryan Fleming 7:59

Now, um I've heard people say that everything that you buy in life, you finance it. Whether you buy a candy bar or you're buying a college education, everything that you buy in life, you finance it. Yep. So maybe speak to our our listeners out there, how do we use it as like a to control the banking function of our life?

Be Your Own Bank: How Loans Work

Ed Beemiller 8:21

Yeah, so a a a big part of this, you know, if if you've heard different names thrown around for you know, this cash value life insurance, uh, bank on yourself, infinite banking, wealth beyond Wall Street. Also, you know, a common acronym is the what you use, Ryan, a lot. We use is Alert.

Ryan Fleming 8:42

Yeah. A life insurance retirement plan. There you go. Yep.

Ed Beemiller 8:45

So one of the significant advantages of this, and this gets back into the concept of banking, is that you can actually use this as your liquid accessible source of capital. And you're able to borrow against the value in that plan. So, i.e., leverage it. Borrow from that asset without interrupting continuous growth. And not not to get way too far in the weeds, but effectively, when you're borrowing against this type of plan, you're borrowing against the value from the value. So the growth within the plan continues at 100% whether you borrow or not. So it's a very unique feature. And then on top of that, you know, you brought up your example of someone involved in real estate. And that I'm assuming that's more of a side hustle for him, or is that what he does for his business for his job? Yeah. So listen, whether it's a side hustle or whether that's what you do, investment real estate, they need access to capital. The best thing about it, and the example that you brought up, one if you you had the ability, and I'm sure this is what he's doing, he can borrow against that policy. He's both the bank and the borrower, because effectively it's his asset. And then because he's flipping it, it's going to take whatever a month, two months, three months to do the rehab, reconstruction. You don't have to make any payments during that period of time. That's right. And then he puts the house back on sale and then uses the proceeds to pay off the loan plus whatever interest that accrued. But during that time, there's no carrying cost for him.

Brian Minier 10:23

That's right. And if he would have taken the money from the Roth and whatever he would have taken out, he would have had to put that money back within 60 days, or guess what? He can't put it back. Correct. And so he just lost all of the growth and the future growth of that asset.

Simple Interest Advantage On Policy Loans

Ryan Fleming 10:38

And the other thing I might add to that um is when you have a loan against your life insurance policy, you could say that that's the best loan position ever to be in because it's a non-recourse loan. Which means that if he does it's let's say he let's say he unfortunately died during that process. He took the loan against it, he bought the rental property, he passed away. Well, he didn't pay it back, right? But but somebody will. The insurance company will pay it back because it's just collateral against that death benefit. They'll pay that back, and then his family gets the net proceeds completely income tax-free. Right? If you don't pay back the mortgage on your house, what happens? If you don't pay back the mortgage on your car, what happens? Right? They're going to take it from the I just say bad stuff. Bad stuff, man. So that that loan position is very, very favorable. And again, technically it's called a non-recourse loan. If you don't pay it back, somebody else will, the insurance company will.

Ed Beemiller 11:31

And one more thing on that, in talking about the loan, and as a someone that was a commercial lender for 17 years, this is something that most people don't know and maybe don't really truly understand. It is the loan is a simple interest loan as opposed to an amortizing loan. Huge. So what that means is a lot of people probably don't even understand what that is. Simple interest loans almost don't exist anymore.

Ryan Fleming 11:56

Yep.

Ed Beemiller 11:57

And the reason being is a simple interest loan is designed so that every payment you make goes 100% to principal.

Ryan Fleming 12:05

So you're only paying interest on what's left.

Ed Beemiller 12:08

Correct.

Ryan Fleming 12:09

Right?

Ed Beemiller 12:10

So that's great. That interest is significantly less than in, let's use an example, a typical mortgage or a car loan, an amortizing loan, where in the beginning, probably 90% of your monthly payment is going towards interest carry.

Ryan Fleming 12:26

Yeah. That's right.

Ed Beemiller 12:27

So a simple interest loan is by far the best type of loan you can get because it basically minimizes, relatively speaking, that interest accrual and interest expense over the period of loan, which means you're going to pay significantly less than interesting.

Brian Minier 12:41

Such a big deal. A lot of times people are like, what's the rate? And what's the rate of this? And but with your description, it makes a big deal. Yeah. And you're paying a lot less in interest than you would at on an ordinary level.

Ed Beemiller 12:53

Yeah. A lot of people don't really understand there's a lot of very unique features that come with today's policies. And I know, Ryan, something that you talk a lot about, which I'll kind of throw it over to you, is you know, what's another feature? Yeah.

Long-Term Care Via Accelerated Benefits

Ryan Fleming 13:06

Unique feature that we So we talked about the importance of the structure, and we talked about how to utilize it as a banking source to be your own source of financing, because we finance everything that we do in our life. But there's two really, really important ones. I think we'd all three would agree. These are massively important when it comes to income and distribution planning and estate planning. And um over the past uh several, several years, um, relative to this topic that's a very big buzz topic in our culture, long-term care. Um, long-term care can decimate a lifetime of portfolio uh growth and savings. Um, it's an insidious risk that faces millions of people as the baby boom generation gets older. And uh it's just really, really expensive to consider. And so um it if you don't have a plan to pay for long-term care, your money is your plan, right, fellas? That's right.

Ed Beemiller 13:55

Yeah, you're you're self-insured.

Ryan Fleming 13:57

Yeah, I mean, so your your plan is your money. Yeah, right. Well, over the past several years, you could you could quell that potential risk by purchasing a traditional long-term care policy. And um, that's a different discussion for a different day, but those have kind of fallen out of favor. And what a lot of people don't understand is that by purchasing certain types of cash value life insurance contracts, there's a writer that comes along with the contract that there's no premium that's needed to be paid for. It's called an accelerated death benefit writer. And what that means is if you couldn't perform two out of the six activities of daily living, and you could get a doctor that would write a letter stating uh that, then you have the potential to have some of that death benefit fast forwarded to you over a period of, let's say, four years. And typically it's right around maybe 25% of the death benefit that can be fast forwarded to you again while you're living the living benefits of life insurance to address those insidious risks like an assisted living or God forbid a terminal illness or a memory care type of a situation. And that is arguably maybe one of the most important reasons to consider opening up one of these policies is that it there's a 70% chance that a spouse today, one if you're married today, there's a 70% chance that one of you or your spouse is going to experience some kind of long-term care event. So uh having that uh right along with the policy is is massively important.

Brian Minier 15:23

It's huge. I I can tell you when I first started in this industry and long-term care would come up, I would I was just yeah, okay. I just I don't see it. I don't think it's ever gonna happen. And I can I can firsthand speak to it's something that we're dealing with in our family. So it happens way more than you think, and it is something to prepare for. And these policies, having that writer, it's a big deal.

Volatility Buffer For Retirement Income

Ryan Fleming 15:45

It's a game changer. And again, I think it's one of the most, if not the most important reason to consider a policy. Um, you know, because I mean at the end of the day, if you if you pass away in your sleep never needing long-term care and somebody's getting that death benefit tax-free. Um, if you if you do get sick, okay, then you have that ability to do uh to turn on that long-term care uh help source. Or if you live to 100 years old, you can access the capital to live. So you should never get the sensation that all the premiums you put into the policy, you're not going to get something, right? So that's important. All right. So one dollar into a life insurance policy gets us three things. It gets us a death benefit that passes to your heirs, it gets us a potential long-term care help source, and it gets us potential tax-free access to capital all throughout our life without the interruption of compound interest. The the next thing that I think is important from a retirement income and distribution standpoint is that uh this serves as a phenomenal volatility buffer, an absolute awesome uh antithesis to bonds, if you will. So, one of the things that we tell our clients, one of the things I preach a lot, and I know you guys do too, is that the day you retire, it you may want to consider trying to have three to five years of your retirement income needs saved up in cash value inside a life insurance contract structured properly. So if you need to retire on $100,000 a year, we would like to see somewhere between $300,000 to $500,000 of cash value the day that you retire. Because when you when you go to pull money out of accounts and the markets down, okay, instead of pulling it out of your equities, you could pull it from your life insurance policy because these policies are not correlated to the stock market. It's a non-correlated asset. And that allows your equities to rebound and can lengthen the sustainable withdrawal rate on those equities. So it serves as a wonderful volatility buffer in that way. Okay.

Ed Beemiller 17:39

Or with the flexibility, when those equities do come back and maybe even grow a little more, you could take some of the chips off the table, pay back your high cash value insurance policy just to kind of re-up the availability on that. So there's so many different things you can get.

Tax-Free Income And Social Security Impact

Ryan Fleming 17:57

Or maybe you get an inheritance late in life. You need somewhere to put it, right? So, you know, so long-term care supplement um and a volatility buffer are another amazing living benefits that many people don't understand, but they should.

Brian Minier 18:11

Yeah. That's right. Yep. And then I think finally, we've talked about this quite a bit, is this is a vehicle that, if you structure it properly, to your point, it is a tax-free source of additional income. Now, I always ask my classes when I teach them what is the number one expense you're gonna have in retirement? People think that's medical. It's not, it's taxes. It's not even close. Taxes is by far the biggest expense. So if you can have sources that you can utilize that you don't owe taxes, that's huge. Now, here's the other thing, too, that that a lot of people don't realize that not only does it impact what taxes you pay by determining where you're pulling the money from, it also impacts your social security benefits. So there are two main sources that are not included in the provisional income as it pertains to social security, and they are Roth IRAs, cash value life insurance. So as you pull a distribution, whether it's a loan or a withdrawal, a partial withdrawal, it does not include it in the provisional income. It's not taxable income. That's right. And so it's not included in that.

Ryan Fleming 19:13

And I'll add one other thing: there's no required minimum distribution from cash value life insurance. There's no RMDs. So there's no tax bomb down the road if taxes double.

Ed Beemiller 19:23

And nor is there, especially from legacy or intergenerational wealth transfer, passing this asset, obviously the high cash value life insurance, death benefit tax-free, but you talked about Roths, getting the money into those tax advantage accounts really can go a long way, you know, as far as legacy. We have this company and passing it out.

Brian Minier 19:44

A lot of our clients they hate to see the balances and their IRAs go down. And I always tell them, do your kids want that IRA balance? Or would they rather have life insurance? Not even close. Well, yeah. Cash, tax-free. Tax free versus IRA.

Ed Beemiller 20:00

I got to spend this all down in 10 years and pay my tax.

Brian Minier 20:06

Right. You don't want to do that.

Ed Beemiller 20:08

And and where do you want to be if you just look at the tax environment? Most most talking heads, most people believe taxes are going up.

Legacy Planning And Next Steps

Ryan Fleming 20:16

That's what I was going to say. Yeah. And this is this is one of six different tax-free streams of income that we can create. It's not the only one. Right. But like I said earlier, it gets treated different than any other thing in a tax code. It's part, it's a viable option. It's it's a it's a hedge against higher taxes and everything that we talked about today. Right?

Ed Beemiller 20:34

Yep.

Closing And Listener Requests

Brian Minier 20:34

So well, good information. And I hope as you're listening or watching that you realize that these dirty words were were not so dirty. They were actually uh that's right. I think I think helpful. So so it is a great piece of your overall financial outlay. If you have questions on how to implement one of these or how this could work for you, please. Yeah, or just want more information about information. Um, so be glad to give that to you. So, as always, huddlers, we really appreciate your time. And if you have things that you want to hear about or want us to talk about, please send those. We would love to bring those up in our in our next episodes. Yes, sir. With that, thank you for your time. Have a great day. We'll see you next time. Like, follow, and subscribe.

Ryan Fleming 21:16

See you guys. See you next time.