Leon Williams

Not only is the average american unable to save money but there is a serious negative savings rate taking place that is piling up the debt owed in this country at a pace that is mind-boggling. These families are spending huge amounts of money to finance debt on the largest purchases such as, homes, major appliances and autos.

During a lifetime the interest paid on these purchases can add up to hundreds of thousands of dollars. Infact 34.5 cents of every dollar is being spent on interest to finance our american lifestyle through banks and finance companies.

It is possible to recapture the principle and interest that you're paying to banks and finance companies, thereby putting that money away for the future. This can be done by creating your own private bank using cash value life insurance, which would enable you to take loans from this private bank. As you repay the principle and interest, it's going back into your policy, where it is growing tax-deferred and can be taken tax free for your financial future.

To Create Your Own Private Bank...

To create your own personal private bank, the goal is to stuff as much money as you can, as quickly as you can into a good participating (dividend paying) whole life or universal life policy. You will want to funnel the money into the whole life or universal life policy for five to seven years by over-funding the policy to just below the MEC (modified endowment contract) guidelines. Now this is where it gets good. Every time you need to make a big purchase, you can borrow the money from your personal bank, instead of borrowing from a commercial bank or credit card company, etc.

Now, you pay the loan back to yourself, plus the interest you would have paid to the commercial bank. You are now making the big profits on your money, that the bank would have made.

The misconsception is by paying cash for your purchases you are escaping the whole debt-interest conundrum. The point that is being missed is, you are either paying interest to someone else or if you pay cash for your purchase, you are giving up the interest you could have earned on that money.

Why Use A Participating Whole Life or Universal life Policy?

The reason you use a participating whole life or universal life policy is that it offers several unique benefits, the other investment vehicles don't offer...

It builds a liquid cash reserve of safe money. Generally, it can be accessed within 5 to 10 business days.

With the right strategy being used, Cash Value Life Insurance guarantees your investment principle, and offers you minimum growth guarantees for the life of the contract.

You can put in as much money as you want... limited only by the size of the whole life or universal life policy, which you can make as large as you need. (Not so, with qualified plans)

All of the money you put into a cash value life insurance policy builds tax-deferred. You avoid paying income taxes every year, so your money builds faster.

You can borrow the money from the policy tax free, without having to qualify for the loan and without contractual withdrawal penalties.

There are no early withdrawal penalties from the Federal Government. (Not so, with qualified plans or annuities)

Loans against the policy come from the general assets of the insurance company, and not from the policy cash values. In many cases, you can actually be earning more on your money than the loan is costing you.

The policy is self-completing, because you have a disability waiver of premium rider (available in a lot of policies) that will continue to put the money in for you, if you ever become disabled. (Only life insurance offers this unique benefit)

Life insurance provides a death benefit that gives your family the money you intended to save; in the event you can't be there.

In most states, life insurance is not attachable by creditors.

Life insurance cash values don't count as an asset when applying for college financial aid.

WORD OF CAUTION!!

There are many insurance agents and financial planners trying to do this for clients. Very, Very few of them have been trained on how to do this properly. Most of their clients think that they are getting something that they are not because the Life Insurance Contract was not setup and structured properly to do what you want it to do. There are a small number of people that I know of that have been properly trained on how to do this. Please make sure that you are dealing with a qualified professional that has been thoroughly trained on the proper way to structure Over-funded Life Insurance Contracts.

Even though an annuity is sold like securities by insurance companies, they are much different from insurance policies. The best way to explain annuities is to imagine a hybrid product that combines the advantages of long-term investments with the advantages of life insurance. With an insurance policy you typically pay monthly premiums, whereas an annuity generally has you making a lump sum payment upfront to guarantee a periodic payout immediately or starting at some future date that you choose.The exciting part is these payments continue as long as you live.

In case you are thinking you do not have a large lump sum there are some annuities that will allow you to deposit a modest upfront say $500 to $2500 and allow you to pay into it like you would your 401k or IRA.

The length of time people are living is getting longer and longer and this is creating financial planning nightmares for financial planners and their clients. Outliving savings has become a major source of distraction around the typical financial planning model. Investing in an annuity will allow you to save for retirement and ensure that your money lasts as long as you do.

Annuities generally fall into two categories, deferred and immediate-income.

A deferred annuity allows you to save money for retirement on a tax-deferred basis until you start withdrawing money from the account. A deferred annuity comes in 3 flavors; fixed,variable tax-deferred or equity-indexed. We will call these flavors, "strategies". Even though the variable annuity allows you the option of withdrawing money from your annuity at whatever amount fits your needs, it is not for the faint of heart. With a variable annuity your money is actually in the stock market and will go up or down in value accordingly. A fixed annuity will guarantee you usually a much lower interest rate and allows you to convert your annuity into a "fixed" monthly source of income over your lifetime. Your age at conversion determines the monthly amount of the payments to you.

A better flavor other than variable or fixed, in my opinion, for most people is an equity-indexed annuity. This type of annuity gives you the best of both worlds. It allows you to ride the gains of the stock market without participating in the losses. With an equity-indexed strategy your money is not actually in the stock market so it is not subject to the tumultuous whims of our financial markets. With the equity-indexed strategy you are guaranteed a nominal floor but are capped on the highs.

An immediate income is essentially a contract issued to you by an insurance company that turns a single lump-sum payment into consistent payments (i.e., monthly) over your lifetime. You can even have these payments made over a specific number of years.

Not only do most annuities offer payment features that cover your spouse after you die, but depending on your situation you can opt to receive full or reduced joint income.

Annuities are sold by most life insurance companies but be selective when choosing a professional to help you determine which annuity is right for you. My advice is to look for a professional who takes a "Total Asset Optimization" approach in considering which product is right for you. Unless you look at "Total Asset Optimization" you are possibly putting a bandaid on your finances instead of coming up with the diagnosis and solution.

Leon C. Williams
Financial Strategist
LUCA Financial Services
leon@lucafinancial.com
916-489-5822
blog: http://leonsblog.leonwilliams.me

leon@lucafinancial.com

Annuity Pros(Advantages)

One of the largest benefits touted is that annuities offer you tax-deferred income, as annuity income is taxed only when you elect to receive it. So you can avoid taxes on annuities if you never want to use it, however that usually is not the objective. It is taxed evenly no matter when you put the money in if it is annuitized ("flip the switch" and start taking income from the annuity). If you take it out some other way i.e. IRS rule 72t, withdrawals etc. then it is taxed LIFO (last in first out). The purported advantage to this is your tax rate is usually lower after you retire, however in my experience your tax rate is lower if you did not do a good enough job of planning for retirement. Somehow the whole concept of planning to have less money bothers me.

Because annuities offer you a guaranteed payment for life, it is insurance just in case you outlive your savings.

Although the timing of the payments might vary, depending upon the type of annuity you've selected, the payment amount is guaranteed. This locked in payment amount makes planning for retirement a much easier endeaver.

Annuity Cons (Disadvantages)

• Only a portion of what the annuity cost you goes toward investments.
• You will not get the full potential of your annuity payout if you die early.
• The fixed monthly payout that most annuities offer is not adjusted for inflation.

Sales fees are high when you purchase an annuity and a portion of the purchase price goes toward a life insurance policy on you.

Leon C. Williams
Financial Strategist
LUCA Financial Services
leon@lucafinancial.com
916-489-5822
blog: http://leonsblog.leonwilliams.me

Leon@lucafinancial.com

Life Insurance policies are absolutely critical to an Estate Plan and is one of the first things that a Financial Planner will check when working on an Estate Plan.

There are four critical areas of the Estate Planning process that make Life Insurance a crucial component to Estate planning:

Wealth Accumulation. Life Insurance can be used to increase your family's wealth after the death of a family member.

Debt Retirement. Experiencing loss of income from a deceased family member can be catastrophic to a family budget and wreak irrevocable harm.

Income replacement. Funding an income stream for your family after death can be accomplished from the proceeds of Life Insurance policy.

Estate Liquidity. Debts and owed taxes left by the decedent have to be paid whether the Estate is large or small. And if there is a closely held business you are going to need cash to keep the business operating during probate and to pay an allowance to surviving family members during administering of the Estate.

Leon Williams
Financial Strategist
LUCA Financial Services
http://leonsblog.leonwilliams.me
(916) 489-5822 (ofc.)
leon@lucafinancial.com

Valuations on gifts when talking about intrafamily transfer's can be extremely dificult to prove satisfactorily to the government, especially when they involve a closely held business. There are four specific sections concerned with how to value intrafamily transfers within the gift and estate tax codes. Those sections are 2701, 2702, 2703 and 2704.

Section 2701 applies to transfers relating to corporate or partnership interests when there is no established market for such interest.

Section 2702 applies to transfers in trust or term of interests. It's good to remember that Term interests include any interest that will last only for a specified amount of time or a lifetime.

Section 2703 applies to restrictions on the right to acquire, use or sell property at less than fair market value or in a buy-sell agreement among business partners.

Section 2704 applies to liquidation issues.

Sections 2701 and 2702 of the IRS code are the passages to pay attention to for help in determining just how to valuate lifetime transfers. The question becomes what makes this type of activity legal (so you don't go to the pokey Al Capone style). When doing these transfers there are really three situations that must exist for the intrafamily transfer to be legitimate:

The transfer must be a gratuitous one, which is any tansfer of property other than at fair market value.

Ownership interest in what is given away must be retained by the donor or a member of the donor's family.

Donor and donee must be related. (I am not sure if kissing cousins count)

The rules of Sections 2701 and 2702 cannot be used if the transfer involves a sale, a transaction between strangers, or the transfer of the donor's (and/or all applicable family members') entire interest in the asset.

When the donor gives only a part of his interest in the asset, you have to subtract the value of what the donor has retained from what he owned prior to the transfer. The IRS under certain situations can rule this method, which is called the subtraction method, valuates the property at a zero valuation. If they do this you will have to pay gift taxes on the entire value of what was owner prior to the transaction.

Make no mistake about it, the government pays very close attention to these types of transfers because of the valuation games some taxpayers have played and the penalties can be high if you don't value these gifts the right way. I suggest that you seek professional advise before attempting to do this.

Leon Williams
Financial Strategist
LUCA Financial Services
http://leonsblog.leonwilliams.me
(916) 489-5822 (ofc.)
leon@lucafinancial.com