IRC Section 7702 Changes | How Can I Benefit With IUL - YouTube

Now, may be the best time since 1988 to get  an indexed universal life insurance policy.  

In this episode, I'm going to address internal  revenue code section 7702 the changes that just  

recently took place and how I can benefit  from this with my IUL policy, get ready.  

Most insurance agents do not understand this yet.

So my name's Doug Andrew and I've actually  had an insurance license since 1974.  

My favorite vehicle since 1980 when  they were first introduced by EF Hutton  

which was not an insurance company by the way. They were a brokerage firm and they were the brainchild  

behind the emergence of universal life and then  in 1997 when interest rates started coming down. 

In order for people to earn rates of return in the  seven to ten percent range average they introduced  

indexed universal life. Where you can earn returns  linked to the market without your money at risk in  

the market. So, there's lots of videos and episodes  on this very three-dimensional wealth channel  

that you can view to learn about indexing. But a lot of times when people are searching for  

section 7702 they want to understand, "Golly,  I heard something happen with section 7702,

that has not been changed since June 21st 1988.  What's up?". So, that's the purpose of this episode  

is to help you learn what changes took  place in late December of the year 2020.  

They sort of sneaked it under the radar with  some of the stimulus packages that they passed  

and what it means for you because now may be the  absolute best time ever for you to take out an  

index universal life insurance policy if you're  trying to structure it to put in the most money  

the IRS allows as fast as they allow and get away  with the least amount of insurance the IRS will  

let you get away with. Are you ready? So, in a max  funded indexed universal life insurance policy  

what you're trying to do is take the least amount  of insurance that the IRS will let you get away with. 

That is based upon your age and gender. This is under tax citations Tefra and Defra. Now I have  

episodes that talk about those. Tefra, is the  tax equity fiscal responsibility act of 1982.  

Defra is the deficit reduction act of 1984.  Now, you can search on my channel if you want  

to understand those but they were passed in order  to dictate the minimum amount of life insurance  

death benefit that you had to have attached to  your insurance contract if you're designing it  

for living benefits, for tax-free accumulation  and tax-free income, and so you had to have a  

commensurate amount of insurance based upon your  age and gender and your health. But it gave parity  

meaning equality. Meaning, that if you were a 20  year old athletic marathon running female and you  

wanted to invest a half a million dollars into  a universal life policy. You might have to have  

five million or more of life insurance but  because you're younger that insurance is cheaper.  

So if your objective is to earn like I have over a  25-year period I measured my rate of return and it  

was 11.17. The cost of the insurance was a little  over one percent during that period I netted  

10.07. So, I'm earning 11 netting 10 percent cash on  cash tax-free returns. That one percent is actually  

money that sometimes people say well that's a  cost. Well, yeah it's a cost of the insurance but  

it's money that would otherwise go out the window  in unnecessary income tax. If I followed the herd  

and put my money into traditional accounts like  IRAs & 401ks. I mean, I would have to be earning  

15 or 16 percent and then after-tax I finally  net 10. I only have to earn 11 in an IUL to net  

10 in that same scenario and that's why EF Hutton  came out with this idea so that people could have  

more safe stable rates of return of 11 netting  10. Instead of trying to earn 16 10 in the stock  

market. Does that make sense? These are tax-free  as long as you adhere to Tefra, Defra. But see  

they gave it parity. So, a 60 year old who wants to  put in a half a million only has to have a million  

250,000 of insurance instead of the 20-year-old  that has to have 5 million. So, you get away with  

less insurance and so the 60-year-old if they're  doing it for living benefits can earn 11 a net 10  

because their insurance cost will only drain  out one of the percentage points just like the  

20 year old. A lot of times people think well  insurance gets more expensive as you get older.  

Well, the amount of insurance required in an IUL policy goes down as you get older. If you're an  

80 year old we had an 80-year-old gentleman  that had three blocked arteries a dull onset  

diabetes a prostate cancer episode he had six  sisters pre-decision and three brothers and so  

a lot of times people thought he had one foot in  the grave. But he actually had a better lifestyle  

than his siblings and we got him approved but we  were able to squeeze down the death benefit for  

his half-million down to 800,000. Now some people  go well who puts 500,000 into a hundred thousand  

dollar life insurance policy? Well, he did. Why? His objective was not the insurance I mean if he did  

die five hundred thousand blossoms to eight  hundred. He did it because he wanted his five  

hundred thousand dollars to be earning eleven and  netting 10 and be able to pull out 50 grand a year  

tax-free the rest of his life. Where else could  he get that and so that's why he did that. But see,  

the cost of the insurance was the same for the  80-year-old as the 60-year-old as the 20-year-old  

because the amount of insurance under Tefra, Defra  goes down as you get older. Does that make sense?  

So, in 1988 June 21st to be exact brokerage  firms and the banks lobbied congress because  

they couldn't compete with these. These max funded  IUL policies are safer, they pay higher interest,  

they're tax-free, and they blossom when you  die to a larger amount and transfer tax-free.  

There's not a bank or credit union or even  a mutual fund around that will do that.  

So, they didn't want to kill these because this  is where they put some of their money. Banks  

will take your money and put a portion of it into  insurance companies so they don't want to kill it.  

But they wanted to slow the flow they complained,  "Oh, the money there's this massive exodus of money  

leaving our banks going into these insurance  companies." So let's slow the flow, that was passed  

in 1988 under the technical and miscellaneous  revenue act TAMRA is the acronym. It simply means  

if somebody after June 21 1988 wanted to design  an insurance contract to accommodate 500,000. 

If they put in all that money in one fell swoop  it would grow tax-deferred. But if they started  

taking out income it would now be taxable like an  annuity better than an annuity because annuities  

don't blossom to a death benefit most don't. But  if you wanted tax-free income you had to spread  

out the funding with universal life over four  years in one day, five installments. So let's  

say you wanted to put in five hundred thousand. You could put in a hundred thousand the first day of  

the first year. A hundred thousand the first day of  the second year. So, four years and one day one day  

into the fifth year you put in the last hundred  thousand now you have five hundred thousand.  

You complied with TAMRA and now that policy is  grandfathered to allow you to have tax-free income  

forever after that's TAMRA and it has never  changed until December 27th of the year 2020.  

And so what does this mean? So, under the new  7702 changes that happened in December of 2020. 

A million-dollar death benefit allows a 65-year-old  male to put in more money than 500,000  

and they can put it in faster 107,000  that's the TAMRA or premium down  

here. Whereas before they could only  put in like 497,000 not quite 500  

and the most they could put in is about  82,000 a year. What does this mean? Well,  

for the same death benefit you can put in more  money and you can put it in faster. Which means  

it will grow better. So when you're looking at  this after the law was changed you now can put in  

more money and you can put it in faster 107,000  a year whereas before you could barely put in  

not even quite five hundred thousand and you could  only fund it eighty two thousand a year. It took  

actually five years in one day to get all your  money in there. Well, you can reason with me. If you  

can put in more money and put it in faster it  will do better. Now, people say, "Well, what if all I  

wanted to do was put in 500,000. How does it work?". When you look at this whole comparison and  

how you can put in more money but if you don't  have more money you can then actually fund it  

sooner. The costs are less and so by using section  7702 taking out a new universal life policy today  

you can cut the cost. You can probably get your  money in there in maybe three years. A younger  

person can get it in two years in one day. With the  changes in 7702 the costs are less from 20 to 50  

percent less. You can get away with less insurance.  The cost of the insurance go down. You can put in  

the money faster this thing makes universal life  zing like never before. I mean, I'm here to tell you  

this has been my favorite vehicle now for more  than four decades and it has worked like a charm  

but now this is like supercharging it. With 7702  changes you're able to be able to cut the cost  

get away with less insurance keep it cheaper put  in money faster and be able to have it perform. 

So that the rate of return it all boils down to  internal rate of return. I've been mentioning that  

for years I've been able to earn an average of  let's say 11 and net 10. But sometimes during the  

early years if I earn 11 I'm netting nine it takes  a few years of putting the money into the policy.  

You sort of have to fill up the bucket  or like a five-story office building.  

TAMRA said yeah we'll only let you lease out one  floor of that five-story apartment building. One  

floor a year and if you'll do that for four years  in one day we'll let all of your rental income in  

that apartment building be tax-free forever after.  Now, that sounds silly but I would do it in order  

to have tax-free rental income. Now, they're saying, "Well, will only require you to take three  

years to rent out your five-story building."  So now I can have tax-free income sooner.  

I can earn greater rates of return and I can cut  my costs. So, if this is resonating with you and  

tweaking your interest I would strongly recommend.  First of all, you subscribe to this channel because  

I have over 500 educational videos that you can  search and find out more. Click like post a comment  

share this with somebody. But if you subscribe  to be able to be notified click the little bell  

and I post at least five new educational videos  every single week, I don't want you to miss out.  

But here's what I want you to do second. I would  recommend first of all that you read or listen or  

watch and learn. I will gift you a copy of my most  recent best-selling book called the laser fund.  

How do you claim your free copy? You simply go  to laserfund.com click on the link below. You  

contribute a nominal amount towards the shipping  and handling I'll cover the rest of that cost. 

Don't pay $20 on Amazon for this. I mean if you do  thank you but I'll gift it to you. Now, why should  

you get this? It's 300 pages that contain all  kinds of charts and graphs and explanations but  

it's actually two books in one. This is the left  brain side this is the right brain side. This is

about 100 pages 12 chapters with 62 actual  client stories that talk about how the laser fund  

helps people not only diversify and create  the foundation for a tax-free retirement.  

But they can use it as a dream solution like a  financial swiss army knife for college funding  

for their kids and grandkids. It's better than a  529 plan way more flexible earns higher rates of  

return real estate management working capital  accounts for your business emergency funds.

Why would you put your money in a bank when you can  increase the safety by six notches higher and put  

your money where your bank is putting your money  into insurance companies for greater safety and  

rates of return. So, you can learn about that in  this book you can read both sides it's 300 pages.  

But there's options there for the audiobook and  also up to an 18-hour masterclass if you want  

to learn but you'll be notified every time we  do an in-depth educational webinar which we do  

on a weekly basis and I want you to learn how  this can help yourself for your brighter future  

and be connected to an IUL specialist if you want  who can help you design and fund it correctly.  

Because you have to go through a licensed  individual and I would rather point you to the  

ones who understand how to do it correctly because  too many people who don't have it done correctly  

end up kicking themselves five seven years  later when they could have doubled their money  

and instead, they barely made a rate of  return because the advisor was not proficient. 

That's the number one reason why people do not  achieve the rates of return that I talk about  

on this very channel. So, here's to your  brighter future claim your free copy and  

we'll see you on the other side as you  begin to become enlightened by learning.