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Why Insurance Dedicated Funds are Perfect for Investors

by in News

Investors – let’s talk insurance dedicated funds.

How it works is fairly simple – a client purchases a private-placement life-insurance policy and the insurance company invests in alternative assets like hedge funds. Any profits would normally be taxed at a capital gains rate, but because it involves an insurance company, the money can grow tax-free. Beneficiaries get their money when the insured person dies. Garza & Harris structures everything in a way so there won’t be any levies on death benefits.

No one really talks about IDFs because investors don’t feel like “sharing the wealth” so to speak. Many major banks haven’t commented on IDFs either.

While these tactics can be used for estate planning purposes, the main advantage is really letting the value of your investment accumulate without paying taxes. Even with the Internal Revenue Service’s strict guidelines on IDFs, stating that policy owners can’t try to influence the investment decisions of account managers, as well as insurance companies being prohibited from investing in certain assets, investors can still save an incredible amount of money over an average of 40 years.

Let’s talk actual numbers – “If a 45-year-old, non-smoking man were to contribute $2.5 million to an IDF for four years, the investment would be worth $113 million within 40 years with a 6.5 percent internal rate of return. The account value would be $48.8 million if the investor paid taxes, the document shows.”

Experts are bashing the use of IDFs and general use of tax-avoidance plans among the wealthy, because it widens the gap between rich and poor. However, there are plenty of tax techniques available for the middle and lower class as well, be it not as many as there are available for the wealthy. This resistance has the IRS keeping a close eye on IDFs that look like they could be breaking the rules.

If you are an investor, an insurance dedicated fund could be a great solution to keeping more of your money in your pocket. As with most opportunities, the more you are able to invest in the beginning, the larger the profit could be when everything's said and done.

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