There once was a time that it made sense for the business owner to use what is called a Sweep Account. One primary account was set up by the business as a checking account where money flowed in and out to pay for goods and services, payroll, insurance and all other cost associated with doing business. A second account was also set up at the same financial institution or bank and that account paid some interest on the money that was held there. The bank and the business owner would come to some agreement as to an amount that should be in the primary checking account. When that amount was exceeded the bank would automatically transfer the excess into the interest paying account. If or when the business owner needed excess funds to purchase equipment, pay an unexpected bill, buy extra goods or inventory a call was made to the bank, money was transferred from the Sweep Account to the primary checking account and the funds were immediately available.
This is a good system and made sense from many different views but in recent years the Sweep Account system has lost appeal. Why?
Before 2008 money held in savings accounts at a bank could be expected to receive 3% or more. After the bailout to the banks and the decline in interest rates banks are no longer motivated to offer a good rate of return to those who save. In fact there is even mention and in some countries the reality of a negative rate of return on savings. Who would want to put money in a savings account and have to pay to have it there or at least receive .5% return? It just isn’t worth it!
As usual at Henderson and Floyd Financial we think there’s a way for a business owner to implement the Sweep Account strategy. In fact we think that your money can do even better than the old Sweep Account Strategy. How can it be better? That money still has to be accessible and it is. What if earnings in the account were not reportable or taxable by the IRS? What of money in that account were not subject to litigation? What if money in that account were leveraged many times over if the business owner were to die?
At Henderson and Floyd Financial we suggest to our clients that there is an alternative. It is specifically and specially designed, dividend paying, Whole Life Insurance. Cash values receive guaranteed increase! Dividends are also paid by the policy. The companies that we represent have paid dividends every year for over 100 years. Using a strategy of placing the secure, safe portion of your investment in Whole Life Insurance allows the investor peace of mind as the riskier portions of their portfolio ride the stock market wave.
Let us be perfectly clear when we say Whole Life Insurance, we are not talking about Indexed Universal Life Insurance, or Universal Life Insurance in any way. There is a clear and distinct difference in a Universal Life Insurance and a Dividend Paying, Whole Life Insurance.