Blog 109 – An Infinite Banking Tax Strategy

Let us be perfectly clear that our strategy does not reduce your tax liability. This is not about “finding a tax loophole.” Rather, we are pointing out one option that people with large cashflows — such as business owners who annually make a large payment to the IRS — have, if they’ve been convinced that obtaining a well-funded IBC-type policy is a good idea. This strategy isn’t about “paying taxes” per se; it would work for any recurring expenditure that is of a comparable size, year after year.

Before we go further, let us also stress that this is not to be construed as formal tax or investment advice. The ideas presented here are only thinking exercises. In fact, we recommend that you discuss these ideas with your own personal tax, investment, or legal advisor.

As every owner of an Infinite Banking Concept (IBC) policy knows, these are designed to facilitate the use of the “living benefits” available to any policy owner, which allows the policy to be a financing instrument. The financing function is made possible because the owner can take out policy loans with the available cash value of the policy serving as collateral; this is a legal right that is provided to all policy owners and is spelled out in the language of the insurance contract.

As we have discussed in previous blogs, when you take a policy loan, the money loaned to you does not come from your cash value but from the general account of the insurance company which is charging you an annual loan interest rate. The cash value collateralizing the loan remains in your account earning interest and dividends.

By using the cash flows earmarked to pay taxes as contributions to your unscheduled Paid-Up Additions rider, you would have the proper amount of cash value in your IBC policy to take a policy loan every year when it is time to pay your taxes to the IRS. When the policy owner repays the loan and the interest charge on it, the collateral held by the company is released and additional borrowing capacity for the policy owner is increased by the same amount. By repeatedly doing so, you are ready to pay your taxes the following years.

Now let’s look at these three important statements:

A — Access and Control Over Your Money: If you have cash value in your policy you have a contractual right to policy loans.

B — Flexibility of Repayment Terms: You can pay back the policy loans on your own terms or even not at all if you wish.

C — Uninterrupted Compounding Of Your Money: Whatever amount you borrow, that same amount continues to earn money in the form of interest, dividends, and equity in your policy as long as you live and as long as your policy remains in force.

Let’s pay additional attention to statement C. By initially contributing to the unscheduled Paid-Up Additions rider the cash flows earmarked to pay your annual taxes, you are increasing the cash value of your IBC policy. Those increases in value are higher and higher every year due to compounding. The net effect is that by using this tax strategy, not only you are paying your taxes, but you are in effect increasing your wealth.

If you would like to learn how you can grow a substantial amount of cash that you have access to at any time without penalties, is unrelated to the stock market, and will generate income that is not included in your tax return, visit our website at or feel free to email us your questions at or call us toll-free at 1-844-443-8422.

Isis B. Palicio, LUTCF, MBA
Pedro A. Palicio, MBA, Ph.D.
Infinite Banking Concepts® Authorized Practitioners

We are experts in designing high cash value dividend-paying whole life policies.

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