Infinite Banking & Family Banks

Infinite banking is a wealth-building strategy using a high-cash-value whole life insurance policy, while a family bank is the broader system of using that policy to finance personal and family needs, creating a family-owned financial ecosystem. The infinite banking concept is the methodology, and the family bank is the result.

Infinite banking (the concept)

Developed by financial expert Nelson Nash, the Infinite Banking Concept (IBC) is a cash-flow management strategy for becoming your own banker.

• How it works: You purchase a specialized dividend-paying whole life insurance policy, typically from a mutual company, and "overfund" it by paying more than the required premium. This money builds up a significant cash value over time.

• Borrowing: Once enough cash value has accumulated, you can take a loan from the insurance company, using your policy as collateral. Since you are borrowing from the insurance company rather than yourself, your cash value continues to grow uninterrupted.

• Repaying: You set your own repayment terms and schedule, essentially paying the loan's interest back into your own financial system instead of to a traditional bank.

• Purpose: This process allows you to finance major purchases, like a car or college tuition, without depending on commercial banks and while recapturing the interest you would have paid to them.

The family bank (the system)

A family bank expands on the infinite banking concept by creating a structured financial system for an entire family across multiple generations.

• How it works: The family creates a formal or informal structure—sometimes through a trust or LLC—that holds the overfunded whole life insurance policies. The capital accumulated in these policies can then be used to provide loans to family members for business ventures, education, or other approved purposes.

• Establishing rules: Clear rules and accountability are paramount for the family bank to function successfully. These rules, which are determined by the family, dictate when loans can be accessed and the repayment terms.

• Goals: Family banks are designed to:

  • Foster responsible money management among family members by requiring accountability for loans.

  • Keep capital within the family by recapturing interest that would otherwise be paid to outside institutions.

  • Create multi-generational wealth and a lasting legacy that can be passed down without the complexities of probate.

Differences between the two

Feature Infinite Banking (IBC)Family BankScope: Primarily a personal finance strategy for one individual.A system for managing wealth for an entire family, often spanning multiple generations.

Focus: Becoming your own banker to finance your personal needs and investments.Building a shared financial ecosystem for a family to achieve financial independence and foster entrepreneurship.

Structure: A single individual's whole life insurance policy serves as their "bank".Often involves multiple policies, trusts, or LLCs, with established rules for governance.

Access: The policyholder borrows against their own policy's cash value. Family members access funds according to the pre-established rules of the family bank.