Infinite Banking in Washington

Infinite banking in Washington means using a properly designed participating whole life policy as your own source of financing, so you can borrow against cash value that keeps compounding. For Washington households with boats, small firms, orchards, and tech paychecks, a reserve that does not depend on a bank's approval can be a useful part of the plan.

The Idea in One Minute

You fund a whole life policy with a large paid-up additions rider at a mutual carrier rated A+ or better by AM Best. Cash value grows on a contractual schedule, and dividends, which are never guaranteed, may add to it. When you need money, you take a policy loan from the insurer. There is no credit check, and no one asks what the money is for.

A properly structured policy may let you reach as much as roughly 90% of cash value in year one, and the accessible amount typically climbs every year. While a loan is outstanding, the full cash value keeps earning, so the money works in two places at once. An unpaid loan reduces the death benefit, so a repayment plan still helps.

Why Washington Households Look at This

Washington has no state income tax on wages, which can make the federal rules on policy loans and distributions the main tax question for many people here. That does not remove the need to plan. It just means your CPA's attention is on how the policy is built and kept in force.

Here are some of the people who ask us about it:

• Tech employees in the Seattle and Eastside area with stock-based pay and a wish for a stable asset next to it.
• Owners of marine, aerospace supplier, and construction businesses who buy equipment in large steps.
• Orchardists and farm families in the Yakima Valley and across the eastern side of the state, where income follows a harvest.
• Dentists, physicians, and attorneys in Spokane and Tacoma who finance practice buy-ins and upgrades.

What they share is a preference for control over timing. Borrowing from your own policy lets you set the repayment schedule, and paying yourself back keeps the cash value working.

Washington Details to Raise With Your Advisors

Washington is a community property state. If you are married, ask your attorney how that affects who should own the policy, who should be named as beneficiary, and what happens at death or divorce.

Washington also has its own estate tax, separate from the federal one. The threshold and rates have changed in recent years, so check the current rules with an estate attorney. A permanent death benefit that generally passes income-tax-free can be one piece of a plan for paying those costs without giving up a business or a family property.

State law also addresses how creditors may reach life insurance values and proceeds. The protections carry conditions and limits, so a general summary is not enough to rely on. The Washington Office of the Insurance Commissioner, at insurance.wa.gov, explains how to verify that an agent is licensed in the state. Cornerstone is licensed in Washington.

Policy Loans and the MEC Line

The favorable treatment of policy loans depends on the contract staying out of modified endowment contract territory and in force. A policy funded too aggressively can cross that limit, and then loans are typically taxed on gains first. Good design keeps premium under the line and still puts most of it into paid-up additions.

Before you start, ask for an illustration that shows year one, year five, and year ten cash value at more than one premium level. Then have your CPA look at it.

Questions to Ask Before You Start

Two policies with the same premium can behave very differently. Industry estimates suggest fewer than 2% of life insurance agents understand how to structure a policy for this purpose and hold contracts with carriers that support it. Ask:

1. How is the premium divided between the base policy and the paid-up additions rider?
2. How much cash value could I reach in year one and in year five?
3. Is the carrier a participating mutual rated A+ or better?
4. How will the policy stay below the MEC limit?

Where to Go From Here

If you are new to the idea, start with our overview of the infinite banking concept, then read how a whole life policy loan works without a credit check. The Infinite Banking strategy hub pulls it together, and the whole life insurance page covers the policy underneath. When you want to see real numbers, schedule a conversation with Scott and the team.