E103: Ray Poteet Shares How to Build Generational Wealth Easily

Founder Ray Poteet joins Holly and Nate to share his wisdom on building generational wealth using infinite banking. Specifically, we’ll dive into how parents can benefit their children and grandchildren by creating a private family financing system.

With time on his hands, Ray has dug deeper into the meaning of private family financing. Today, you gain his insights into how this can help your family across many generations; it’s not just about today.

He also addresses a vital focus with infinite banking: this system’s living benefit vs. the death benefit. Most people only focus on the final benefit of a whole life policy. As is explained, the living benefit is so much more.

Generational Wealth Topics Discussed:

    • An overview of Ray’s family banking structure
    • Why the death benefit is a much less interesting aspect of whole life policies
    • Keeping money within the family (instead of going to the banks)
    • The more creative and flexible options private family finance provides
    • What it means to recirculate money within a family
    • When the death benefit does come into play and what it means

Episode Resources:

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Podcast transcript for episode 103: Build Generational Wealth Easily

Nate: In this episode, we welcome back our founder, Ray Poteet to discuss how a family can benefit from infinite banking generationally. Specifically, how the parents can benefit their kids and their kids can benefit their parents by creating a private family financing system. She’s Holly and she helps people find financial freedom.

Holly: He’s Nate. He makes sense out of money. This is Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Nate: Hi. Well, welcome back to the show. We were so grateful for all of you who continue to listen to us. It really does help get the word out. If you’ve been blessed by this show, if you would go ahead and click, give us a rating or share us on social media or leave us a review. All those things really help us promote the podcast and get it to new people. But we do have something special for you today. We have our founder, Ray Poteet back with us in the studio to discuss something that he’s been wanting to share, something that’s near and dear to his heart. And so, Ray, welcome back.

Ray: Well, thank you. I’m looking forward to today.

Nate: Yeah, and so we’re here recording this in September 2020. I don’t know where you’re at, still may be in quarantine or social distancing or whatever it’s called, but we’re having fun here in Lawrence, Kansas. But that being said, Ray, you wanted to share some things that have been close to you, and Holly as well has some things to share, really on how the generations can take advantage of infinite banking. Where family units can work together essentially to create wealth that they know will last, right?

I think that’s the main gist of it is, instead of each individual piece, the parents and then each of their own children starting their own little family and just separating the wealth into all these bits and pieces, essentially what we’re going to talk about today, at least I think from what you’ve told me, is more in light of how can we all work together to keep money in the family that normally leaves, that benefits everybody both today and in the future. I’m excited about it, Ray. What exactly is it that you wanted to talk about? Or how did this come about?

Ray: Well, it came about from me just reading Nelson’s book again, and just thinking about my own situation, what was happening every month. And especially since COVID, I’ve had more time, I’ve done more banking and thinking about things, and I just saw the multiplication and the growing of our family bank. And it was just amazing to me because of the number of loans that I’ve done within the family and within my client structure that how much there was going to benefit the family currently and in the future.

Nate: Tell me, what was your vision for the Private Family Financing system? How can this system benefit the generations? Not just through the death benefit, which I think a lot of people assume is the main part of what we’re talking about. I think it’s going to be a part. The generational aspect is not just the death benefit one day that will pass and be a big one. But I think that is a big part of it. But how else are we mingling this system in with families?

Ray: Well, I’m glad you brought that up. I really don’t want to use the death benefit just yet, Nate, since it’ll be on me and-

Nate: You don’t want to die yet?

Ray: … [crosstalk 00:03:38] doing that, so I’d like to first talk about what I saw was right now and then what the future was, okay?

Nate: Sure.

Ray: And so right now I have multiple loans to my children and grandchildren and family members that are being paid monthly to what I would say, Nana and Papa. That’s pretty much what we go by in my family. And that all of a sudden, I saw the most valuable dollars that we can have are today’s dollars. My children and grandchildren and family members are paying me and Nana today’s dollar, so we have today’s dollars to use. We have the most powerful dollars that are available to use personally.

Now, I don’t need them. But if I did, I could be using those dollars today, and my children and grandchildren don’t mind paying us because they would be paying somebody. That money is staying in the family being used at the maximum efficiency that it can be right now, right today, by both Nana and Papa.

Nate: In other words, the kids were great. They were already going to go borrow money?

Ray: They were.

Nate: They needed money. They got to buy a house and get my car. They needed money they didn’t have. I’ve been in that boat. I’ve been one of those that have borrowed the money, so I know exactly. We need the money, okay, and we needed to do some things we want to do and we’re going to go with some place. There’s a reason, as a family, why it can make sense to stick together. That’s what you’re getting at.

First off, the fact that we go to you to borrow the money can actually help you out by having this payment stream come in that would have gone to somebody else anyway, but it’s going to stay here in the family. That you guys get to use the money right now in today’s dollars. That’s a benefit. Okay, got it.

Ray: That’s totally correct. That’s totally correct. What I saw more than anything was today’s dollars, because that’s become a really big thing to me and so I just totaled up the loans that I have to the family members on mortgages and car loans. What it came to was almost $13,000 a month, so about $150,000 a year, which is not bad, added to my social security which would make it $200,000 a year. I’m pretty good shape for an individual that if he had no more means of income than that, we could live off that very comfortably compared to what’s going on in America today.

Nate: Yeah, absolutely.

Ray: And that number is only going to get larger, not because of inflation, but because of the line of the life insurance policies get larger every year as time passes because of that perpetual compounding that goes on within the policy itself by design. I’m designed to have an inflation factor on money that the family is paying me. Even though their dollars didn’t increase, my dollar is do because of the policies. Now, they are designed to work for the individual while they’re living. Not while they’re dead, but while they’re alive.

I plan on doing that as long as I can. I don’t need the money right now. I’m just putting it back into the policies, or recycling it to the family through the loans that they would be taking through third parties that they don’t need to because the family has the money in-house.

Nate: Got it. We’ve got an idea here of the benefit to, what we’ll call the matriarch or the patriarch, the head of the family, a lot of times the ones with the most money. But Holly, you’ve been in a situation where you’ve needed money, as have I, and I’ll let you take this one. We’re going to talk about the death benefit, Ray, in just a minute, but is there a value to borrowing from your dad, from Ray, or from someone in the family as opposed to going to the bank? Just on its face value, do you find that that has a value in itself?

Holly: It does have a value, Nate. There’s two things that led to the mortgage that we borrowed with my dad, Ray. And the first one being, I was basically a brand new insurance agent and I didn’t have a commission statement for more than a year, and actually really two years, so it was harder to get borrowed money from them. I didn’t qualify, number one.

And number two, the amount they were willing to loan was less, but I had a higher interest rate. It made sense to go with Ray and do that because of how the loan is designed. And I’m going to be honest, I have no problem writing a check or giving money to… It’s a lot easier to give it to somebody in your family, in my opinion, than it is to know it’s going to the bank never to be seen again. It’s a lot easier knowing you’re giving that money back over to create wealth, generational wealth, for the future, whether that be my family in the future or your family in the future, anybody’s family that’s part of that system that you are literally growing generational wealth for.

But the second part is, when I borrowed the money, I was starting a brand new business. I’m going out on my own, doing a business, and I didn’t have the money really to pay my mortgage for three months, really three to six months. Let’s just be honest and say it was going to be tight and a stretch. And I could never have gone to the bank and said, “Hey, let me not pay you for six months or five months or even three months, and I’ll make up those payments at the end.”

What I was able to do by having the loan with my dad was saying, “Hey, can I use the money I was going to use for the mortgage to set up my business, and I will pay you… It’s a hundred and some extra dollars for the 30 years on the mortgage.” And we just added that money in future-wise and increased what I would pay. But then I didn’t have to pay my mortgage for three months, so it was quite nice.

Nate: Yeah, so you’re saying that the flexibility is so much better through the family. I would also make a mention too, that it’s not like Ray just says pay me whenever. There’s certainly a system about it.

Holly: Yes.

Nate: What I guess I’d just throw a caveat out there is we’re not encouraging family members to lend money and just, “Oh, whenever you have money, go ahead and pay it back.” That’s how bad things can happen. There’s a systematic way. [crosstalk 00:10:32] Yeah, there’s systematic things you’ve got to have in place. And I think everyone knows in the family that Ray’s not lending us money, that Papa’s not lending us money because he likes losing money.

Holly: No [crosstalk 00:10:46].

Nate: We’re all in the same team, not trying to take advantage of anyone. That has to be in place, I really do feel like for the family unit to work together. But when it does, life is a lot simpler when you don’t have to go to a bank to get a loan. You jump through all these hoops. If you miss a couple payments, your credit scores ruined or you’re foreclosed on. There’s a lot of the things in a family that you can do just on its face value that will benefit you. The matriarch and patriarch, the ones that have the money presumably and are the ones being able to lend it down to future generations, they’re going to receive a value in the payment stream and the interest that’s being earned; and the younger generations receive benefit and not having to go to a bank, having a lot more flexibility.

And I think that leads us to the next point too, Ray. I think that we’re getting to is that because of the nature of infinite banking, Holly expects to receive pretty much all of the money that she paid you back, because we all know that that money is falling back through the policies and boosting the death benefits on Nana and Papa, and that’s going produce more wealth for the future generations. To us, it seems like it’s a win-win. We get flexibility during our life, and then we get the windfall at the end of yours. Is that also come into play, Ray?

Ray: It does come into play. It hasn’t yet, Nate, in the sense that neither Nana or Bob has died, the matriarch or the patriarch. It hasn’t come, but it’s come to play in that it’s built the values up in those policies that are being used as the foundation for our banking system so additional loans have been available. If you actually looked at the policies themselves, you would see multiple loans have been taken by different parties at different times because it was available to do it.

Yes, it’s a recirculation of that money. But what I’ve done with the children and the grandchildren, I’ve sort of guaranteed them that they’re going to get all the principal and interest back at the time of our death through the proceeds, the death proceeds of the policy. They built the policies’ values, therefore they’re going to receive that value back.

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Nate: You said you’ve kind of even tied it in your estate to the more that your kids have used the system, obviously the more they’ve generated in wealth for you that way they receive a bit of a different proportion than the others. Is that what you’re saying?

Ray: I am saying that. There are three daughters, and one daughter didn’t want to take the loans and got upset when she realized she wasn’t going to get as much as her sisters. And Nate, she wanted to know why. And I explained that they didn’t borrow any money. The problem is they didn’t borrow any money for 10 years and now they’re trying to make up that 10 year difference. There’s no way possible to do it in the time that’s left because they’re 10 years behind the schedule with everyone else.

Holly: Nate, I think too, I want to add one of the reasons I say it’s not hard to write a check to your family, and it is a system, I’m going to say if I don’t make my repayments, I know who’s going to come take my car or my house, right? He could definitely sell my house if he had to. But the reason it’s a lot easier too is, those payments, whether we realize it or not, it’s not just about the death benefit that I’m going to get in the future. It’s about the fact that it is growing in that policy, and therefore is giving even a better life to my mom and dad. That they have more to live on and to be able to use in their later years, even if they’re not working.

And so I think for me, the benefit is that I, as much as the loan is a blessing to my family and we didn’t have to jump through the hoops, on the same hand, it’s such a blessing to be generous back to them because it’s allowing them to never have to change their lifestyle. And like Ray said, $200,000 right now is a pretty good income if you had no other source.

Nate: Yeah, exactly. And for me personally, I’ve seen myself. My wife and I have three kids and she wants a big family, and so I do too. That’s just how it goes. I don’t know, we’ve talked about maybe having five, six kids. We’ll see what God provides and take it one kid at a time. But I know that, let’s just say, we do have six kids; and about 30 years from now, probably all six are going to be needing or have already needed mortgages and I don’t know what homes will cost then, starter homes will costs then.

Here in the Midwest, they’re not incredibly expensive now. Let’s say they need $300,000 per home. Six homes at 300,000, it’s about $1.8 million. Let’s just round up and say $2 million of mortgages in the family at that time on their first homes. My goal in the next three years would be able to hit the point where I could lend the money on those six mortgages. And if I was able to do that, I’d be getting a stream of payments back from my family of about $12,000 a month. That’s principal and interest. That’s not so bad for 30 years for 360 months.

But if I take that same stream of money and I have it go back into a policy for those 360 months, that $2 million is going to turn into about $8.5 million for the family by the end of that timeframe. That’s not so bad, and it could be more. It could be even more than that, but that’s fairly conservative what I think can happen. I didn’t have to go out of the family. I didn’t have to take much risk.

And the reason I say that is obviously there’s a risk that your children don’t repay you. But as Holly just mentioned, everyone involved knows that I’m not lending them money to lose money. Though I will be much more generous and merciful than a third-party bank, we all know if you lose your job and things happen, yeah, you can come move back in with mom and dad if you need to, but we’re probably going to need to sell the house and replenish the funds. But of course, it’s going to be a much more merciful situation than if they had Wells Fargo as their lender. They still might end up back with mom and dad. They may just have lost a lot of money.

Either way, that’s thoughts from my own life. It hasn’t accrued yet. I’m not really the patriarch of sorts yet, but I will be in that position and I want to be able to take advantage of private family financing in that situation.

Holly: And Nate, I’ll say too, even in the situation we’re in right now with COVID-19. And whether you got laid off or couldn’t pay your mortgage and you got to defer it kind of and do that, I think for me there was such a freedom knowing that either I can increase that and talk to a person that actually knows me, right, versus a bank and stuff like that. I didn’t have to contact my bank to say, “Hey, if I can’t make this mortgage payment, here’s what’s going to happen.” But I knew I had the freedom to say, “Hey, if I can’t make this mortgage payment, can we add it on,” over the next however many years, 20 years the mortgages is or 30 years, whatever those may be.

And I think that that’s a lot freer or there’s such an ease of being able to just communicate with somebody that you know knows you, versus a banker that you don’t know when you’re having to convince them of your ability to make the payment in the future really. I haven’t had to do that. But I knew that if it got really bad with COVID, we were still going to be okay with our mortgages and stuff because of who owns the mortgage versus the bank owning it.

Nate: Exactly right. Ray, what else? What else did you want to share in this world of generational using of the policies in the system?

Ray: I have parents, had parents, both my parents have passed, but as a child I would have had no regrets helping them. Other words, if they were the financier, paying them as opposed to paying another third party and keeping that in the family. Actually, I probably would have enjoyed it if I had that gift or that ability to do it, because there’s just the natural tendency within children to want to do for their parents what they’d done for them. I just see that.

The love of God and the understanding of family, I think as become very, very intimate because of the family banking. And I mean, intimate in a way of relationship is growing strong in various things and being honest. It is teaching discipline, at the same time teaching mercy and grace, and that’s really within God’s realm of what he wants to do for the family. And money is just one of the tools to use where it’s under the family’s control. The beauty of that, in the relationship of somebody being sick or hurt or off work, you’re not dealing with all the things that you mentioned, Nate, in that your credit scores or things like that. This is not reported, it’s within a family and it stays within a family. It’s very, very comforting and loving and understanding.

Nate: Yeah, exactly right. As we wrap up the podcast today, just to kind of rehash some of the benefits there. Ray, you’ve been thinking a lot on how the patriarch and matriarch can benefit by taking over loans that their kids would have already gotten in the first place, get all the principal and interest back that used to walk out the door, be able to use them today. But as long as it’s rolled back in through the policies first, it should be producing higher and higher death benefit amounts for the kids. The children can be excited about it because they know it’s going to help them receive a larger legacy from their parents.

But also, as Holly mentioned, the children will receive benefits even here and now by avoiding bank financing, which no one loves to go through that process. No one loves the rules and the restrictions and the fees and the penalties and the foreclosure and all the things that can go wrong there. And by keeping it in the family, we can help with that as well in a much more, we’re all in this together as we’re trying to build wealth on the same team, and that mentality can be very, very helpful.

Ray: I don’t want to drag it out, but I do want to say that not only is it today’s dollars, but upon the death when the windfall comes, the future dollars become today’s dollars to the beneficiaries of those policies because they receive them today. Therefore, they’re today’s values. They’re future values right now, but they become today’s values.

And that’s just something that has become very apparent to me as I’m getting older, as I’m thinking about death and the planning of what I should do and how I should do it, trying to seek the Holy Spirit to guide me and direct me. I am just absolutely excited about them being today’s dollars, the most valuable dollars they will have to work with at the time that it’s most important to have. I just can’t tell you how thrilled I am about the system working that way. Me getting the use of today’s dollars and the beneficiary getting the use of today’s dollars when they count.

Nate: Exactly, right. And Holly, before we go, anything else you want to add to it?

Holly: I just want to say that it is about the system and using the system. It’s not taking advantage. It’s about using the system that Nelson created. And that even within that system, you can borrow from the patriarch and matriarch or those who have it, but it extends out of that, and it’ll be probably another podcast we’ll do. But really how does it go past just mortgages, but becoming eventually in the future, where as a daughter, I can be in a loan with my dad, and we are loaning money and making money together. I think it doesn’t just stop with this one loan or just the daughter to the father or the grandchildren to the grandparents, but really then it can create future loans for you guys to create a loaning business or work together on loans that generate money for both of you.Nate: Very, very good. All right, with that being said, this has been Dollars and Nonsense. If you follow the herd, you will get slaughtered.

Holly: For free transcripts and resources, please visit livingwealth.com/E103.

Announcer: Dollars and Nonsense podcast listeners, one more thing before you go. Ease your worry and start your journey towards security today. Visit livingwealth.com/secretbanking. You’ll gain instant free access to this special one-hour course Holly and Nate [inaudible 00:25:50]. Again, that’s livingwealth.com/secretbanking.