James Cunningham
RFC, CEP, MCEP
Creator of the Family Bank
FAQ Equity Index Family Bank
Frequently Asked Questions about the Family Bank and Equity Index Policies
What is a Family Bank?
The family bank is a concept that James Cunningham developed years ago when he started working with fixed equity indexed accounts.
In the 1950s there was an author who wrote the book become your own banker. In the 1950s there were only whole life insurance policies. The great thing about this is the tax laws allows people to borrow from the policies tax-free.
There are two downsides to doing this using a whole life policy. First of all when people take a loan from a whole life policy it literally drains the policy by that loan amount.
The second problem with whole life policies is they have a fixed interest rate. This is typically around 8%. This interest is always being charged against the loan.
With the policies that CFG Consulting LLC offers it eliminates both of those problems.
First, the loan is literally collateralized against the death benefit of the insurance policy and the cash value still is wholly intact.
This is a very powerful concept that makes it very difficult because it seems too good to be true for most people to understand.
The second issue with the family bank fixed equity indexed policies is that the interest rate has a crediting to it meaning that if the policies are 10 years or longer there is no interest charged against the loan.
One of the other big things about the Family Bank is the fact that we have encompassed the idea of a complete strategic financial plan. This involves for business owners setting up the right type of business like an S Corporation or an LLC and also includes setting up a family trust and the family will etc..
The family bank, if you can picture in your mind is this huge vault wrapped around your finances that is 3 feet thick and is impenetrable. This is the concept of the Family Bank. The fixed equity index is the catapult or the impetus of putting everything together.
Why is a Family Bank better than traditional ways of handling my money?
The family bank is better to handle your money because of the liquidation factor. If you take any account a bank account, an IRA. A 401(k) etc. it doesn't matter. None of them allow you the power of liquidation that the Family Bank does.
The fallacy of most accounts is also twofold: first taxation. The vast majority of accounts are taxed when the money comes out or like a mutual fund is taxed each year on the gains.
The second problem with most accounts is the fact that it is liquidated and potentially eradicated when you access the money and this is a very difficult concept for most people to understand.
So let me give you an example.
Let's say that you have $20,000 in the bank account. And you decide that you need to buy a new car. Let's say the car would cost you $20,000. There are, let's say two ways to purchase the car.
You can get a loan for $20,000 from the bank or you can get a loan from the auto dealership. If you do that they will make you pay it back over say five years at a specific interest rate that happens to be 7%.
That would be a monthly payment of $393.73 for 60 months, or five years. At 7% interest that would mean that this individual would pay a total of $23,623.63. But that is not the real cost because most people will pay that payment with after-tax dollars so if they're in a 10% tax bracket as well in order to buy the car, they had to pay 10% tax on that $23,623 purchase. Now the $20,000 that was sitting in the bank account also accrued interest.
Let's say that the bank paid a whopping 1%. At the end of that five-year period the $20,000 in the bank account earning 1%, had grown to be worth $21,024.98. This obviously is not a good deal. The second way that the individual could buy the car is they could take the $20,000 out of the bank account, in other words completely drain the bank account so that they have nothing left and the car is free and clear, five years later the car still paid off but the bank account is still zero.
Now this option would be a better option than the first one because as you could see there was an upside down factor between the bank account and the purchase of the vehicle. Again keep in mind it doesn't matter what type of account it was if you drain money or liquidate money that money is gone forever and the potential interest could have earned is also gone forever.
With the concept of the family bank, when you have $20,000 of cash value in the account, you can then leverage or borrow $20,000 from the insurance company on your death benefit. That way you get to keep the $20,000 earning whatever the S&P 500 is going to earn in your Cash Value and that you never ever neither liquidate the $20,000 nor eliminate the potential compounding interest from the growth of the $20,000.
Why do I need a family bank?
Anybody that has any assets, a job, pays taxes, or is subject to mortality needs to have their assets protected. The Family Bank includes a will and the family trust. Anybody that has any beneficiaries, dependents, is married, has children, has grandchildren, or does not want to have the court's decide their medical fate in case of incontinence, incapacity, or hospitalization, needs to have the family trust.
For the same reasons one would want to have life insurance to protect their beneficiaries and their business just in case they met a premature death. In addition, if one is a business owner you need to have the correct structure to protect yourself from lawsuits, creditors, and to eliminate unnecessary taxes to the government.
The same question could be why you need insurance on your car when statistically you may not get into a wreck today. You get insurance and that protection so that just in case life happens to you, you’re protected but the Family Bank offers the added borrowing power.
Why is it urgent for me to start a family bank?
I can think of two reasons why is urgent for people to start as quickly as possible. The first one is the fact of time value of money. If you were to wait and delay setting up your financial strategy, one runs the risk of never being able to set up a financial strategy simply because they can't, they die, they retire, they become incapacitated or disabled and then it's too late.
There are millions of Americans that retire only to find out that the phrase "I should of" is nothing more than a fleeting empty wish.
Why would I want to put this on my front burner?
The truth of the matter is that people will only put their highest values or their highest priorities on the front burner. If an individual does not value money for money's sake or financial independence for independence sake just like many who know they should save but never do. It will never happen.
The obvious reasons that I have stated so far are people will put this on the front burner only when they realize that some event in their life has struck a chord.
It is like the individual who dies from cancer but never had a cancer screening and the doctor tells the individual or the family if only they would have come in for screening we could cut it in time.
It's at that moment that the beneficiaries or the loved ones realize how simple that preventive care could have been and then they themselves go through the screening.
What are the benefits of the Family Bank?
All the benefits of the family bank are the six steps that have talked about:
Number One: Protect what you have.
Number Two: Learning how to take control of your cash flow.
Three: Investing wisely and learning that there are ways that you can invest money earning great rate return without any risk.
Step Number Four: Manage taxes, most people work and tell mid-May to pay all the taxes that they have to pay to the government without realizing that there are legitimate and easy steps, especially for business owners, to minimize the tax burden.
Step Number Five: Save for retirement, which is women talking about.
Step Number Six: Leaving a legacy. Leaving a legacy includes getting the proper amount of insurances as well as establishing a family trust and will.
Once I have a Family Bank How is that going to make me feel more confident?
Once an individual has taken the proper steps and appreciate those steps there's tremendous peace of mind, security and knowing that your retirement nest egg is safe and free from market volatility. If anything happens to you and your family your beneficiaries your loved ones are taken care of.
If you do live a normal life, one of the biggest advantages and feelings that one would have is a tremendous self-sustaining worth that their financial independence or at least a promulgated revenue stream is inside their fixed equity indexed life insurance policy.
What are the benefits of the Family Bank? Why would it make my life more enjoyable?
Exactly for the reasons just stated, peace of mind, security, and what is important to note is that peace of mind safety, security etc. has no price tag even though we're talking about money.
What would you pay to know that your financial security in your family's financial security is guaranteed and intact for the rest of your life?
What are the features of a Family Bank?
Features are the encompassed financial plan and strategy. The six steps.
Once my Family Bank is established how easy is it to manage my Family bank account?
It's actually very easy to manage The Family Bank because the insurance company issues an annual statement.
Even if you do not have an advisor it's just a phone call away to take loans from the policy and of course it's as easy as writing a check to add more funds to the policy.
The Family Bank does include a family will and a family trust. Those issues need to be re-reviewed annually with a competent advisor or someone who is an estate planner. A certified estate planner or an estate attorney. This insures you are kept up to date with all of your matters.
If it is involving setting up a practice, then obviously these issues are involving an accountant or someone that can help work as a CFO if you will and that is an ongoing task as it would be normal for any business owner to do so.
What if I desire to withdrawal money from Family Bank Equity Index account?
Just as when you take a loan from a bank you take a loan from the insurance company. However there is only two pages to request the money. Once a request is made it typically takes about 7 to 10 business days. For the many people who are retired they can just establish a loan where they take out a specific dollar amount each quarter or each month.
How easy is it to make deposits into my account?
As easy as writing out a check and mailing it to the insurance company or doing the wire transfer.
How do I open a Family Bank Account?
There are couple parts opening up the family bank and not every client ops to take advantage of the different functions to establish or will or trust. This means filling out the forms and deciding how you want to establish that with a certified estate planner or at an estate attorney.
Establishing a company as a business owner has the same issues as you would use an attorney or an accountant. The Family Bank fixed equity indexed policy is a procedure that is just like any other life insurance policy. One takes the physical, completes the application, submits it to the insurance company and lets them underwrite the policy.
What do I need to apply for a Family Bank Account?
To apply for the Family Bank depends on the situation. To complete the application for the life insurance policy it is a matter of about 15 to 20 min. about the same for the physical. The rest depends upon the situation.
Once I apply for my account what is the process involved?
Once you apply, you take the physical and it takes several weeks for the insurance company to underwrite the application.
Can I have more than one Family Bank?
Yes, many clients open up multiple policies. Many people open up multiple businesses but you only need one will and one family trust as long as it's updated.
Why not just use Traditional Bank Accounts? I mean something that is FCID?
A traditional bank account is completely separate and does not follow the advice of the quote unquote family bank.
Why is the Family Bank a good Investment opportunity?
The family bank is a good investment opportunity because you were investing into your own future with no risk.
What kind of Interest can I earn on my money?
The rate of return earned on a fixed equity indexed is based upon j a major index for example the S&P 500. The rate of return that you will earn is based upon the performance of the S&P 500. However if the S&P 500 has a negative year the investor or policy owner is guaranteed to earn a minimum rate of return for two half percent to 3%, depending on what state they live in. So if the index takes a dive you are guaranteed a minimum return which is very powerful.
Also the individual has a choice to not follow the S&P 500 and can get a simple flat rate of return of 5%. Or you can get a mixture say 10% of your money guaranteed to earn 5% and 90% of the money following the S&P 500 index. The great thing is even if the S&P 500 stays negative for 20 years the client still gets a minimum of 2 1/2% 3%, depending on what state you live in.
How long will it take for my money to double?
This is an interesting question. Normally the rule of 72 which is a mathematical formula developed by Albert Einstein commonly known as compounding interest dictates that whatever rate of return we earn divide that rate into 72 and that will tell you how many years it takes for money to double.
An example would be if you earned a 6% rate of return. Six divided into 72 is 12. Therefore it would take 12 years for your money to double.
But in the family bank concept let's say that you put $5000 into your policy the very first year since you have the ability to take a loan after the first year.
Let's say that you borrow $5000 against the death benefit and receive that check in the mail without draining or liquidating your cash value of $5000. You can then put the money right back in on top of the original $5000 and therefore it doubles in one year.
Think about it and if you have questions feel free to contact us.
If I have a financial win fall and desire to put my money into a Family Bank are there any tax advantages for me to do this?
Yes there are tremendous tax advantages to doing this in the family bank because you can conceivably put the money in 100% tax-deductible, and take the money out in the form of a loan 100% tax-free.
In tax-free out tax free. What could be better?
Exactly what are the tax advantages for me in having a Family Bank?
There are three tax advantages. Tax deductions, tax deferred growth and tax-free withdrawals. Oh and the life insurance policy when one passes away is 100% tax-free when passed on to the beneficiaries which is part of step six: leave a legacy.
I already have a Family Bank. What other great Investment Opportunities do you have that I can take advantage of so that I know my money is working for me?
The great thing about establishing a family bank is when other investment opportunities do arise you have the ability to take advantage of them.
For example an investment in real estate or you think you're going to buy something or this wonderful stock goes public etc. You can keep your money in the Family Bank then take a loan tax-free from the Family Bank and allow that loan to be risked on your investment but not the original principal.
How long is it going to take to get my Family Bank up and Running?
From start to finish can typically take somebody a couple weeks to couple months depending on your particular situation.
How does the Equity Index account differ from other similar accounts I may have heard of? Why is it the best way to go?
First, is the guaranteed factor? Millions of Americans have experienced over the last few years the emotional losses as well as their portfolio losses because the stock market has risk in its volatility.
A fixed equity indexed account allows a person to protect their cash value from market risk which is step number one; protect what you have.
