How To Maximize The New 7702 Tax Law Changes - YouTube

There's never been a better time  to convert to tax-free strategies.  

In this episode, I'm going to address the  question. How to maximize the new 7702

tax law changes? Now, if  you don't know what that is.  

Get ready. Because I don't want you to miss out.

So, my name's Doug Andrew and I've been  helping people optimize their financial assets  

and minimize taxes now for more than 48 years. One of my favorite vehicles that I recommend  

that people accumulate and take tax-free  retirement income from is what I call the  

laser fund and I would recommend that 40-60% of  your income in retirement not even show up on your

1040 tax return because it's tax-free.  

And so. I wrote a book, it's book  number 11 called the laser fund

and I'm going to gift you a copy of that. I'll pay for the book. You contribute a nominal  

amount towards the shipping and handling and I'll  show you how to claim your free copy at the end  

of this episode. But get ready, because I want to  show you that in over 40 years. We have never had  

a better time than right now due to new tax law  changes with section 7702 to be able to accumulate  

access and transfer your money totally income tax-free. So, let me explain what I'm talking  

about here when people say what is the laser  fund. Well, the laser fund is a max funded  

indexed universal life insurance contract that  is structured to be able to be used primarily  

as a living benefit for retirement income that's  tax-free rather than just a death benefit. Now,  

this was actually the brainchild of EF Hutton.  They were not an insurance company back in 1980.  

They were a brokerage firm and they realized that  even if people earned 12% average rates of return  

which most people don't in the stock market.  But that's what they were trying to do.  

I had over 3,000 clients in 13 western states  that I was responsible for and we were trying to  

average 12% with their mutual fund portfolios. If  we could average 12% that meant a million-dollar  

nest egg at retirement could generate $120,000 a year of income.

But EF Hutton realized if they pull out 120,000  they're only going to net about 80,000 after  

paying tax. Because most people pay about a third  in taxes between federal and state tax during  

retirement. So, you pull out 120,000, you pay  40,000 in tax, you only net 80. Well, many asset  

managers charge at least one percent in asset management fees. That's another 10,000.

So, people are only netting 70,000 to buy 

gas, groceries, prescriptions,  and golf green fees.

All EF Hutton said was, "Wait a minute. Some  of the best money managers in the world are the  

multi-trillion dollar insurance industry. Those companies that manage and they do it

conservatively and so, why don't we  just tell a lot of people who want to be  

conservative and safe during retirement  to be able to have predictable income,  

to transfer their money into the insurance  companies." But instead of trying to get a bunch of  

life insurance for the least premium which  you do when you're trying to buy insurance  

to protect you in case you  die, you do the opposite.  

You take the least amount of insurance the IRS will let you get away with and you put in the most  

money or premium the irs allows and it turns  into a tax-free cash cow. Why? This is what

EF Hutton realized. Ever since 1913 in the  internal revenue code insurance and I'm talking  

about life insurance, in particular, is the  only vehicle that I'm aware of that allows you  

to accumulate your money tax-free. All the  interest dividends and everything you earn  

under section 72(e) is tax-free. Under  section 7702 you can access money out 

of that insurance contract totally tax-free.

You don't have to pay tax when you take out money even on the gains and when you ultimately die  

and it blossoms to a death benefit  that is also income tax-free. So,  

nothing else does that in the internal revenue  code. You can accumulate your money tax-free.  

You can access your money tax-free. When you  die it blossoms and transfers income tax-free.  

But what they did is they said, "Let's  take the least amount of insurance  

that the IRS will let us get away with and put  in the most money", so we had people back in  

1980. Because I looked at this and said, "Wow,  this is incredible", and so, I had clients putting  

in 100,000, 500,000 or more. Let's say you put  in 500,000. Now, you can put in 500 a month,  

you don't need a whole bunch of money. But  they could put in 500,000 and back in 1980  

these insurance companies were earning eleven and  three quarters to fifteen and a half percent on  

their general account portfolios. So, let's just  say 11. The insurance company is earning 11%.  

They need one of those percentage  points for them and so the net was 10%.  

People put in 500,000. They started taking out 10%  their growth each year which was 50,000. They pull  

out 50 grand a year it's tax-free under section  7702. Sounds pretty great. Many of them are still  

doing that. Well, the IRS came in and said, "Oh, we think you're overstepping the bounds.  

You might be abusing this." Who pays $500,000 for a dinky amount of life  

insurance and Ef and said, "Our clients do."  So, they went to court. Now, EF Hutton won,  

they weren't doing anything wrong. But the  IRS went to congress and they said, "We've  

got to change the definition of tax-free under  these three sections of the code".' So, in 1982,  

under the tax equity fiscal responsibility act  it spells the acronym TEFRA. They dictated that  

there must be a minimum amount of life insurance  death benefit based upon your age and gender  

and your health in order for it to not move out of  the tax-free section of the code over into taxable  

investment section of the account. They didn't  know what they were doing and they had to sort  

of redefine it two years later under the deficit  reduction act DEFRA. Simply put the TEFRA, DEFRA  

corridor dictates the minimum amount of insurance  based upon the person's age, gender, and health.

But they gave it parity. Meaning, it doesn't  matter if you're a 22-year-old athletic  

marathon running female or a 60-year old or  a 78-year old that I'm thinking of that had  

three blocked arteries, adult-onset diabetes,  prostate cancer episodes, six sisters'  

predecessor, and three brothers. He was able to  squeeze down the death benefit for his 500,000  

and I'm just using 500,000 as an example. That's not a magic number. But he gets the  

same rate of return. He can earn 11 and  net 10 because the cost of insurance  

is the same for him as the 22-year-old. The  22-year-old has to have more insurance than the  

80-year-old. Does that make sense? And so,  this is TEFRA & DEFRA. Now, 7702 says, "Hey,  

you want to take tax-free income?", and so  people could just put money in one fell swoop  

until 1988 June 21st to be exact. Under the  technical and miscellaneous revenue act.

The brokerage firms and the banks the credit  unions couldn't compete. These were safer.  

They paid higher interest. They were tax-free  and they blossomed when you died. They couldn't  

compete but they didn't want to kill these because  this is where they put a lot of their money.  

Did you know when you put money in a bank or credit union? They'll take 30-40% of their tier 1

assets and put it into these into insurance  companies BOLI, bank-owned life insurance.

What they wanted to do is slow the flow. So this  is what happened under TAMRA under 7702. They said

if you want to take tax-free income you cannot put  in all the money all at once. If you do, it'll be  

tax-deferred. But when you go to access money it  will be taxable like an IRA or 401k or an annuity.

If you want to have tax-free income  you have to comply with TAMRA.  

Well, from 1988 until December 28th of 2020  

what that meant was. If you had an indexed  universal life policy which is my favorite.  

This is like a bucket. You want to put in as much  money as you would like, you can decide that. 

I've been using examples of 500,000. But let's say a male age 60 wanted to put in  

a $100,000. You don't have to put that in. That's the most you can put in.

And so. the minimum amount of insurance  under TEFRA and DEFRA would be 250,000.  

You can buy way more life insurance than that  with that much money. That's not the objective.  

That's the least amount the IRS requires  under TEFRA, DEFRA. But TAMRA said,  

"You can't put in all 100,000 all at once or it won't be tax-free  

when you take money out of the bucket." So, they  said, "Oh, you can only fill up about 20 percent  

if you're over age 50.", let's use that. So that would be 20,000. Another 20...

and then finally, the fifth payment can be 20. In actuality, you can fill up  

the account as fast as 4 years in one day.  Because the first day of the first year  

you put in the first 20% or 20,000 in this example  and finally, after four years and one day into  

the fifth-year you can put in the last 20. What  happens now? You're grandfathered. Everything that

grows will not only be tax-free. But anything you  take out in income will be tax-free forever after.  

That's TAMRA, that's 7702. Well,  guess what happened? In the wee  

final hours of the year 2020 as part of  a big legislative package. They changed  

this for the first time since 1988. What it  means is this. For the first time, since 1988,  

you can put in more money faster under 7702.  It means somebody over age 50 instead of going  

four years in one day can get their money  in three years and one day. It means that  

people in their 30s can get their money in two years in one day. When you can get the  

money in faster and at a larger amount the fees  get cheaper sooner. Because when you fill this up  

this counts as part of the originally required  death benefit and so the insurance gets cheaper as  

you get older. Because pretty soon this money will  exceed that. Have you ever seen a life insurance  

policy that gets cheaper as you get older?  Then you haven't seen one of these done right. 

What the new tax law under 7702 allows  people to do is put in money faster  

more money and that reduces fees and so  that if you could earn 11 and net 10. Now,  

you can probably do that sooner and maybe  by the 15th or 20th year. If you're earning  

11 you could be netting 10 and a half.  Right now some of mine that I've had for  

30 years. If I were to earn 11 this year I would  net 10.9. They get cheaper as you get older. So,  

here's the message. So, with the new changes that  have not happened since 1988 with section 7702. 

It has to do with when you access money out of one  of these insurance contracts for tax-free income. 

For years, many thousands of clients  that we've helped implement these  

strategies have been able to accumulate  a million, five million, ten million.

But every million dollars can generate 60,000, 80,000, 100,000 a year of tax-free income  

for as long as they live. Nothing else holds  a candle to that that is generally offered  

in the financial services industry. Those  are usually tax-deferred IRAs and 401ks.  

If this is intriguing you, I would recommend  you subscribe to this channel. Because I post  

an in-depth answer to a financial question almost  on a daily basis. It's free. Click on the bell,  

post a comment, share this video with somebody  who you think ought to hear this message and then  

at the end, I will show you how you can claim  a copy of my most recent 300-page bestselling  

book called the laser fund. How to diversify and  create the foundation for a tax-free retirement. 

So, let me show you why it's my favorite vehicle  for retirement and a lot of other financial goals.  

I call a maximum funded indexed universal life a  financial swiss army knife. A lot of people use  

it for retirement but it's actually the dream  solution for many financial goals. Yes, a lot  

of people will use it for death benefit and for  retirement planning because it knocks the socks  

off of IRAs or 401ks that you have to  pay tax on sooner or later. But this  

will create predictable income using  indexing where you participate when  

the market goes up but you don't  lose when the market goes down.  

You need to learn about that. But see,  this can also be used for college savings.  

This is way better than a 529 plan. You can use  it as a working capital account for business. Many  

business owners use this. Real estate management. We talk about emergency funds. Why would you put  

your money in a bank with a drive-up window  and they credit you less than one percent?  

When the bank is actually taking a lot of your  money and putting it in these. Just bypass the  

middleman and you can get the money just as  easily with an electronic defense transfer  

phone call. You don't need a drive up window  down the street. You're giving up a ton of rate  

of return that you could be earning. Lump sum  capital transfer. If you have a large lump sum  

coming in from something a settlement or  what have you. We have estate planning. 

People use it for pension maximization if  they're a school teacher, a police officer,  

a firefighter, and also for just general tax  reduction. So, again, if this is intriguing you,  

I would recommend you claim your free copy and  you'll be blown away when you read this book.  

It's called the laser fund. It's two books in one. The white covered side is about 200 pages  

14 chapters and it has all the charts and graphs  and explanations. If you learn more by stories  

and metaphors you flip it over to this side  and that's the orange covered side and this  

is 100 pages 12 chapters with 62 actual client  stories and so it's a right-brain, left-brain

type of a book. This will teach you how to  diversify and create the foundation for a tax-free  

retirement. Just click on the link below or go to laserfund.com. You contribute a nominal amount  

towards the shipping and handling. I'll pay for  the book and fire it out to you. There's also  

options there if you want to listen and learn or  watch and learn. Here is to your brighter future.