Tax Alpha in One Step

Advisor-applied VUL, or Double A VUL, solves the advisor’s dilemma. First, Double A VUL is fully tax free. Tax-free income. Tax-free growth. Tax-free death benefit. No alternative minimum taxes. And, especially important for wealth planning, tax-free cash access.

Let’s be clear this is not “tax deferred” as is the case with retirement accounts, variable annuities, or education-funding plans. This is tax free, just like an institutional investor enjoys.

This means that any investment gains full tax-free status. Interest payments. High turnover strategies. Dividends from non-US stocks. REIT income. Here are a couple points about tax-free investing beyond the obvious importance of putting these tax inefficient investments in the Double A VUL portfolio.

Every tax dollar saved is compounded back into the portfolio. For this reason, high-growth equities greatly benefit from being in Double A VUL because, even though the capital gains rates are lower than income tax rates, reinvesting the taxes when they are realized at higher rates of return generates substantial extra dollars compared to keeping these equities in a taxable account.

And, let’s revisit the point about muni bonds. With Double A VUL, any investment gets the same tax-free treatment of a muni bond . . . and more. There are no capital gains taxes and no alternative minimum taxes. This allows you to move past the low-yield muni bond offerings, along with worries about default risk, into investments with a much more attractive return profile that you manage in a fully tax-free structure.

Putting this all together, Double A VUL is a tax alpha program in one single step. Wealth is preserved by saving on portfolio taxes and, at the same time, wealth is created because the tax savings compounds.