Take shelter! How a tax shelter will help you protect your money

Frightened man protects himself with an umbrellaUncle Sam is going to take from you every dollar he’s entitled to collect in taxes. That’s a fact, and it’s never going to change. If you’re like most Americans, you probably haven’t focused too much on how much you’re losing in taxes – because you can’t control the tax liability aspect of your financial planning.

Correction: You can control the tax liability aspect.

The use of a tax shelter to protect your money from Uncle Sam is not just reserved for the ultra-wealthy. Anyone who is sick and tired of the government taking and taking from them needs to realize that the ultra-wealthy don’t build their wealth by paying taxes; they build wealth by avoiding paying taxes. And you can too! Let’s explore the three most effective solutions for establishing a tax shelter that can help you protect your money:

Tax Shelter Strategies

Solution 1: Real estate
Real estate has incredibly lucrative potential as a tax shelter. When you invest in real estate, you don’t deduct the full cost of your purchase all at once, like you would if you bought office supplies or a photocopier for your business. Instead, real estate is a capital asset in which you spread out your tax deduction over multiple decades. In other words, you realize tax benefits consistently, year after year. As you lease or rent out your investment, these tax benefits essentially offset your taxable income. The brilliance of this strategy is that you report your real estate investment as a business expense to the IRS, but in reality, it’s your steady source of income.

Solution 2: Whole life insurance
Whole life insurance is a highly effective way to protect your money from Uncle Sam. When you purchase a whole life insurance policy as an investment and structure it correctly, the money you invest in the policy is not taxed. And as the value of your policy grows, it grows tax free. That’s because when you buy whole life insurance through a mutually owned insurance company, you’re entering a private contract, which means the government cannot tax your dividend payments as long as you reinvest the dividends as paid-up additions. Most people think of life insurance as death insurance, but it has important living benefits that outweigh its “payable upon death” value. The tax shelter aspect is just one of these benefits.

Optimal solution: Whole life insurance + Real estate
When you take out a whole life insurance policy, you can take advantage of the cash value of your policy to buy real estate (your whole life insurance policy will retain all of its other benefits). In essence, this means you’re taking advantage of two tax shelters at once! Here’s how it works: Properly structured, whole life insurance has a cash value that you can borrow against at any time to fund anything you wish. Thus, you essentially become your own bank, lending yourself the money necessary to finance your real estate investments. This is a circular strategy for investing, and as you can see, it’s also an extremely sound, logical way to invest.

Most of us view paying taxes as an inevitability, but it doesn’t have to be. The best ways to reduce your tax liability are to invest in whole life insurance and then use the cash value of the policy to invest in real estate. Your financial portfolio will thank you for delivering this one-two punch to Uncle Sam.

To learn more about using whole life insurance and real estate as a part of your wealth building strategy, check out or webinar, Practical Uses of Life Insurance.

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