Although there are different ways to handle policy loans from your banking policies, the process described below provides you greater control and better tracking at tax preparation time from those loans that might have tax implications.
You should follow these steps when taking out a policy loan from a banking policy:
- Contact us and let us know the loan amount that you are requesting and from which IBC policy or policies.
- Use your loan check from the insurance company to open a personal, segregated IBC checking account with your spouse.
- Select a bank that offers online banking.
- Use your current bank if possible.
- Open your account with your Social Security Number (tax ID is not required).
- Do not use the words “BANK”, “BANKING” or “FINANCE” in the name of your account.
- Deposit the insurance company loan check into your personal, segregated IBC checking account.
- You tell us a range of monthly loan repayment amounts that is financially comfortable to you. Based on that information, we provide you two amortization schedules: a) one for the insurance company loan rate, of let’s say 5%, and for the number of months necessary to pay off the loan, and b) the second one for the same number of months as the first one but with a rate similar to the one you would be paying an outside financial institution, let’s say 10% or 12%.
- All transactions pertaining to loans should be deposited to, or payed from, the personal, segregated IBC checking account, not from your personal checking account. For making loan repayments or additional payments to the PUA rider, transfer funds from your personal checking account to your personal, segregated IBC checking account.
- Let’s assume that the monthly payments in 4 a) above are $100.00 and the monthly payments in 4 b) above are $120.00. Every month, you should write a check for $100.00 from your personal, segregated IBC checking account to the proper insurance company and in the memo line of the check write “Policy # XXXX, Apply to Loan Repayment”, and either every month or at the end of the year, you should write a check for either $20.00 ($120.00 – $100.00) or for $20.00 X (number of months to the end of the year) from your personal, segregated IBC checking account to the proper insurance company and in the memo line of the check write “Policy # XXXX, Apply to PUA Rider”.
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 http://InfiniteBankingSimplified.com or feel free to email us your questions at ContactUs@InfiniteBankingSimplified.com 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.