THE VAULT: Asset Protection, Cash Alternatives and Life Insurance – UPDATED

Asset Protection | THE VAULT: Asset Protection, Cash Alternatives and Life Insurance – UPDATED

In the week ending august 14th another 24 Billion dollars left the securities market for the relative perceived safety of cash. These billions  of dollars simply added to the trillions of dollars already allocated that way because of fears of instability in the securities and real estate markets. 

This large liquidity position has not gone un-noticed, unfortunately many of those who noticed are those who would like to separate you from your wealth. They see an opportunity for litigation in your liquidity.   


Their timing couldn’t be worse, especially if you are like most successful Americans who have lost huge percentages of their net worth through home equity loss, stalled or negative investment momentum and decreased profits or compensation.




The “Vault” was developed out of a need to have additional options for clients who:

-Are unhappy with their current cash returns (earning less than 1% and getting taxed on even that);

-Have concerns about the stability and FDIC insurance limits on banks and various govt. bonds given the debt crisis     (See this article on bank solvency Risk in the Wall Street Journal) ;

-Have a need for Asset protection due their net worth, visibility and professional liability, or some combination thereof;

-Understandably have larger than normal cash positions because they are afraid of both R.E. and securities                             (See this article on “Why Investors Should Worry About Money Market Funds: the Wall Street Journal) ;

-Like having additional death benefit (10 to 20 times deposit amount if something happens to you);

-Like relying on the statutes in their state or the well proven operation of law as an additional way to hedge risk;

-Had an absolute desire to have a true, fully liquid cash alternative.



Q: Why haven’t I heard of this before or through my local advisors?

A: We have been using this strategy for a number of years and it was developed as part of our narrowly focused practice in the area of Asset Protection and wealth preservation. Most financial advisors are (rightly) focused on turning nickles into dimes (growth). Our clients are typically affluent and successful and while they value growth make loss prevention an even higher priority. They understand that the current economic environment makes KEEPING existing dollars even more important than chasing new ones.

Q: Can my advisors do this?

A: Only if they  have access to the specific, specially selected policies, knowledge and legal structures we describe and use. These policies are designed and chosen to benefit the client and provide maximum liquidity and protection based in the law, not to benefit the advisor and their bottom line and commission. Most advisors DO NOT even have the ability to use the best policies this way, its takes special permission and qualification.

Q: My advisor says he has something just as good. 

A: Our search for viable alternatives and options for those we work with has been exhaustive. He’s most likely selling you what he has on his shelf and not disclosing the features that his version is missing which are often fatal to your planning. We are working with specially qualified and trained advisors across the country and can get you the best informed help.


Note: this article originally appeared in WORTH magazine,

you can see the original here:

“What is an alternative to my current cash position that will protect my money from litigation?”


In our current economic environment, all clients want their money both safe and liquid.

When most people consider “safe” and “liquid,” they immediately think of their bank. However, what most people do not know is that their checking or savings account is unprotected from a very real threat: the exposure to an increasingly hostile and predatory litigation system. Consider this:

There are tens of thousands of lawsuits filed each day in this country. The average legal cost of defending a frivolous lawsuit is $91,000, plus the settlement amount itself. The number of lawsuits increases in tough economic times as people look to your wealth as an additional source of income.

Our team often takes commonly used tools and redesigns them to provide protection of client assets, while allowing clients to retain control and liquidity. This where the sciences of Financial Planing and Asset Protection meet. The situations below demonstrate the benefits of a strategy we are using in which we take a universal life insurance policy and design it to provide 98 to 102 percent cash surrender value in the first year.

Current Situation—Cash in the Bank: A healthy 45-year-old male client has a bank checking account with $1 million. He rarely uses this account, but he keeps his money there because he likes to have a certain amount of funds liquid in case he needs to access it quickly.

Here is how a regular, personally held bank account works:
· The account earns about 1 percent interest per year, with income taxable as ordinary income.
· If the client is sued for any reason and loses, the judge can require the transfer of the assets from the client’s checking account and into the plaintiff’s pockets.
· If the client dies, the named beneficiaries will receive the $1 million minus the taxes due.
· If the client needs to use the money, he is able to take the amount needed.

BETTER: Creditor-Protected Cash Alternative:
The strategy our team has designed allows the same client to place the $1 million into a specially designed universal life insurance policy by paying a premium amount of $500,000 in each of the first two years.

The policy will provide the following benefits:
· The account will earn a net interest of about 1 percent annually invested in the policy’s fixed account, and the gains are allowed to grow tax-deferred. If the client is sued for any reason and loses, the money in this account is 100 percent creditor-protected from day one.
· If the client dies, the named beneficiaries will receive a death benefit of $10,624,682, the face amount associated with this specific example, free of any estate taxes.
· If the client needs to withdraw all or part of the money in the account, he is able to do so at anytime with no fees or surrender charges, and he will have access to the money within a week. To Summarize the benefits again:

– Creditor Protection

– Wealth Multiplier Effect of 10X (in this illustration)

– Liquidity and borrowing options with no penalty

– Death benefit of $10MM plus that passes outside the estate and free of estate tax

My thanks to Insurance and Investing Expert Jeff Christenson for his help on the technical details of the insurance policy. Together we implement this strategy for clients and advisors nationwide.

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