How To Start A Private Family Bank
If we learned anything from the Silicon Valley Bank collapse, it’s that we cannot depend on the banks to keep our money safe. It’s time to start your own private bank.
But, how do you start one?
There is no shortage of social media posts and 60 second TikTok videos about becoming your own bank, also referred to as “infinite banking,” but these posts often leave readers feeling intrigued but ultimately frustrated by the lack of concrete guidance.
That ends here.
In this article we’ll break down how to start your own private bank.
Let’s start with the first common question…
What is a Private Family Bank?
First and foremost, let’s get the language right. Technically, just know that the way to refer to this if you want to use accurate language is a “private family reserve,” because in a legal sense, this is not actually a true bank. But for the sake of this article, we’ll use the commonly accepted term of private family bank.
The 2nd thing you need to know is that there is also MASSIVE MISINFORMATION about the core structure of the private family bank. I’ll share more about that in a moment, but for now, let’s talk about why people call it a “bank” if it’s not actually a bank.
In the simplest form, a private family bank is similar to a traditional bank in function, in the sense that it serves as a holding place for your money. The obvious primary difference is that YOU own it, but there are other really important advantages that a private family bank offers you when structured properly, such as:
- It allows you to maximize your ability to mitigate taxes to the full extent of the law
- It allows you to have full control over everything while personally owning nothing, which eliminates the liability risk of any of your cash, assets and other business holdings being subject to lawsuits brought against you personally
- After your death, it can be passed down to YOUR family for generations, in the form of a Private Family Office (we’ll discuss the family office structure in another article)
There are several other benefits of having your own family bank such as you never have to worry about your personal credit score, being denied, having creditors, the IRS or anyone tell you what to do with YOUR money, and your family will be taken care of for GENERATIONS!
You are the bank.
Now, here is where people tend to think it begins and ends
Step 1: Find an experienced insurance agent who specializes in “infinite banking” policies:
These are not your typical off the shelf products, most life insurance agents don’t even know how to do this. You need to find a specialized agent who is a specialist in setting up “non-direct recognition whole life insurance policies” (see Step 2) and sets you up with a policy that gives them the least amount of commission for your benefit.
Step 2: Have your agent create a non-direct recognition whole life insurance policy
for your specific needs. Non-direct recognition refers to a type of whole life insurance policy that allows the policyholder to borrow against the cash value of the policy without affecting the dividends or cash value growth.
Step 3: Put a lump sum of money in your policy
i.e. $50,000-$100,000+ and have the ability to borrow against your policy within as little as 30 days sometimes sooner. This is how it works, you can borrow up to 90% of the cash value in your policy. The money in your account can continue to grow with interest as if you never touched it because it’s in a “non-direct” policy meaning they don’t recognize when you borrow against the policy.
Step 4: Use the money.
Preferably into a business/asset that can create a new revenue stream so you can pay the loan back to increase your borrowing capacity or if you don’t pay the loan back it will be subtracted from your death benefit.
BUT little do people know that’s only one small piece of the puzzle, especially if you want to truly create a private family entity structure that gives you full advantage of tax benefits and liability protection.
Have you ever heard the saying own nothing but control everything?
Well that’s how the wealthy do it and this is what Ross Bruson does for a living. He structures his clients family banks in a way that sets them up for generations to generations.
He has a bulletproof system that he has done for the last 30 years securing the legacies of countless families. Below is a snapshot of his unique 4-entity structure to safeguard your assets, money, taxes, and create a legacy of multi-generational wealth for families, inside of one generation
Here is his 4-Step Entity Structure Process
Step 1: Create a S-Corporation – Management/Holding Company For LLCs
Step 2: Create a Limited Liability Companies (LLCs) – Operating LLCs & Asset Holding LLCs
Step 3: Create a Limited Liability Limited Partnership (LLLP) – Private Financial Reserve
Step 4: Create a Living Trust – Grantor Self-Settled Spendthrift Trust
This chart is impossible to describe in writing, it must be explained. Ross was featured in a Mindset To Money Masterclass and gave an outstanding presentation on how this 4-entity structure works and how to protect your assets to save you thousands and millions of dollars in taxes. It’s a must watch to truly understand how to create your own private family bank.
To access the Masterclass click here.
He even went in-depth about the Rockfeller’s and how he patterns his structure after them.
The Rockefeller’s are famous for structuring their private family bank and here is an example of how they have passed wealth down to generations
They used a very strategic approach and their family is now worth billions.
Here are the steps the Rockefeller’s used to create their own private family bank
- Parents setup a family trust
- As soon as a beneficiary of the trust is born, (a child), the family trust takes out a cash value life insurance policy for the maximum amount of insurance a company will offer
- Then as trust is setup for each child in the family as soon as the child is born. The trust is named the beneficiary of the life policy
- The child can learn about and have access to the capital found in his own life
- The child can make deals with his parents or grandparents, whereby the parents or grandparents will make the child a loan from their policy’s cash value should the child need funds greater than what has built up in the child’s policy
- This money has to be paid back. If it is not paid back, the parents or grandparents have the cash values building up in the child’s policy they can take therby maintaning the survival of the main family trust.
- Restrictions are placed on how much a child can borrow from his or the main family trust. If the child is not able to pay the loan back in full, the trust can be made whole again by the child’s life insurance policy
- When the loan is paid back, the interest on the loan is NOT getting paid back to the government or to a banking institution, but back into the family bank, keeping the family and the family bank strong.
- The parents acting as a board, can setup a model so that the children can only borrow a certain amount or even a specific number of times, depending on the assets in the trust. The board can use something called a statement of purpose – an extended family mission statement that will govern their decision and make sure the money is put to good use.
Everything you thought you knew, you may need to think again. This is not some DIY project you should think of taking on yourself.
This process must be understood enough to even have a conversation of what you want and need.
To get a better understanding and see the exact 4-entity structure that Ross recommends to safeguard your assets and your money, save double-digit percentages on taxes yearly, and create a legacy of multi-generational wealth for families, inside of one generation then this is the masterclass for you. Click here to access.
Will you be the one to take on the responsibility to create the STRUCTURES for generational wealth to begin in your family?
Frequently Asked Questions
Can you create your own private bank?
Short answer, no. Creating a life insurance policy involves working with an insurance company and a licensed insurance agent who can guide you through the process and help you select a policy that meets your financial goals and needs. It’s important to carefully consider your options and consult with a financial professional before making any decisions.
How much does it cost to open a private bank?
To determine the cost to open a private bank varies. You will need to consider factors such as your age, health, the amount of coverage you need, and the length of the policy term. You will also need to consider any fees or charges associated with the policy, such as premiums, administrative fees, and surrender charges.
It is best to contact an insurance agent or company directly to get a personalized quote for a non-direct recognition whole life insurance policy based on your specific needs and circumstances.
Is private banking profitable?
Private banking can be profitable but it depends on your individual financial situation and investment goals. Private banking typically guarantees a fixed rate of return on the cash value component of the policy, which can provide stability and predictability in your long-term investment portfolio. Additionally, the death benefit can provide a tax-free source of income to your beneficiaries upon your passing.
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