Build charitable giving into your business succession plan

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We were able to reduce that $4 million tax bill down to about $350,000. That's interesting. You have three places where you can send your money, your legacy, your your estate, whether it's now or in the future. And you can send that to the CRA, you can spend that on yourself, or you can spend on a charity. And so you have these three options, but you can only really choose two. Choosing charity doesn't mean you're disinheriting your children. It means you're disinheriting the CRA. Most business owners think of philanthropy, myself included, as just writing a check to a charity, but you're describing it like a completely different way. Oh, unfortunately, that is the most common example. And then everybody's like they're pressured and they're under stress and they're making emotional decisions. So, he reads his own obituary and the obituary reads merchant of death, doom, and destruction.

He's passed away, killed more people more quickly than anyone ever in the street. That's interesting. And so, he had a chance to say, "Is this how I want to be remembered?" We have a $5 million legacy donation going to a charity that he really cares about. Elise, you have a philosophy that I've never heard anyone articulate quite this way. You talk about redirecting CRA mismanaged tax dollars to build a legacy for your family and your community as a business owner in Canada. Most business owners think of philanthropy, myself included, as just writing a check to a charity, but you're describing it some like a completely different way. Um, what do you actually mean by redirecting tax dollars on on your own judgment, right, that you decide as a business owner to build yourself a legacy, right?

So, so the way that many people interpret it, a lot of people just write a check or they, you know, use their credit card. Um there you can think of it this way. You have three places where you can send your money um your legacy, your your estate, whether it's now um or in the future. And you can send that to CRA, you can spend that on yourself, or you can spend on ch that on charity. And so you have these three options, but you can only really choose two if you want to optimize this. And what people don't realize is that choosing charity doesn't mean you're disinheriting your children. it means you're disinheriting the CRA if you do it right, if you have enough planning. Um, and it means that you're adopting a cause that you care about.

So, it's it's a really great way really to you're not um essentially just giving money to charity and now all of a sudden you still owe the tax. You're completely eliminating your tax if you have enough planning, if not significantly reducing it. And if you've planned really, really well, sometimes you're even able to uh increase the estate and increase what you've given to charity. So, it's a real win-win. Hm. Interesting. Like when I think about charity, obviously like I think of those billionaires in Canada, right? That that that's just that's just for them. Um when when is the entry level for that? I mean, you really anybody can give. Uh we're we're used to working with people who are are they probably have tax bills that look something around $50,000 or more. Um, and that's really where it starts to become more impactful.

But, but even somebody who has, you know, $25,000 that they can give, we can start to do something pretty impressive with that. Um, and I'm I'm sure we'll tell kind of some some stories and some anecdotes as we as we move along, but there's there's a lot of situations where um small amounts annually can make a difference, but also we can make really really big impactful um moves with life insurance and and larger requests. um and donations of of private shares of companies. So, so it really runs the gamut. And does that like impact am I going to keep more net basically at the end of the year or at a at a at a liquidity event because that that's what I'm that's what I want, right? End of the day, like a business owner, you want to keep more net, right?

So, if you give charity away, it has to make sense financially that like I'm going to keep more net. Am I when when am I seeing the impact of that? Okay. So, that's a good question. So, it depends on the situation. Are you going to keep more net? Of course. Um, so from an estate planning perspective, usually you're going to keep more net. Again, as long as we've had a good runway to plan. So, so I say as long as we've had a good runway to plan. And we're talking a lot about um, you know, selling your business or a transition in business. That's kind of how we started this conversation. Yeah. What a lot of business owners don't realize is that you need two, three, four, five years to prepare properly for any kind of succession or transition period of time.

So if we have that amount of time, then to answer your question, we can usually get you to a situation where net you're better off or at least the same as you would have been. Right? And when I say better off or the same as you would have been, this all starts with the foundation of best practices for business tax planning. We're not just throwing out all of those best practices and replacing it with charitable uh or philanthropic strategy. We're we're starting with how are we going to use all of the tools that we have at our disposal um to to lower your tax bill as much as possible to increase your estate to grow your wealth. And then we're going to say, hey, we couldn't do all of that. You still have this tax bill here.

Would you rather pay that to the CRA or would you rather carve some or all of that out and direct that toward a cause that you care about? So, um, as long as we have enough time on on, uh, on our side because sometimes what happens is people, uh, they they wait till the last minute and now all of a sudden they weren't able to purify their corporation in time and so they're going to miss out on, you know, lifetime capital gains exemptions. That's a really common, unfortunate thing that happens. Um, yeah, that's interesting. And again, I think uh like I I I think I'm not the only one that might think that philanthropy and charity is for the billionaires or when you're paying millions of dollars in taxes. So, it's it's very interesting that you can use that as a tax strategy um when you're you're only paying $50,000 in taxes.

And again, I think you made a good point there that it's not just about keeping more net for yourself, but also to decide where your money is going, right? So, if you're not that in line with where the government is spending the money, right, your 50% or whatever you're paying in taxes, well, at least you can direct it even if you're not making more net, you get to decide where your hard-earned profits is going, right? So, I guess that's another benefit. And I think that I think that's exactly it, Joey. Like, I'm not against taxes. I know that sounds weird to say. I'm I help people reduce their taxes. I think a lot of Canadians are not against taxes. there. We like we we want to support each other. We want health care. We want education, but that's not necessarily what we see our government doing with all of the tax dollars that we send their way.

Right. So, yeah. And we had a conversation with another Canadian uh financial adviser a couple weeks ago and we talked about that that like the first step is understanding where like what is your better plan, right? like, oh, because if if the government were to spend the money back in your family, back in your kids school, uh, or like directly to that would benefit you directly, right, all the time, you'd be more than happy to pay more taxes. But the problem, the reason why most business owners wants to save on taxes or pay less is because they don't necessarily agree. So, where like the first step is knowing where you want to spend your your taxes better than the government. And then once you know that why, it gives you a bit more hitch, right, to want to uh to solve that problem.

Exactly. Exactly. That's interesting. Can you walk us through like a specific example u maybe a business owner who was about to sell or just had a really big tax bill and didn't know really what to do and came to you and how the design or exit on purpose approach kind of changed their outcome? H. So, I'm trying to decide which which example to share. I'm gonna I have two that that you just made me think of because one is one is more when someone comes and they have a liquidation event and it really wasn't as planned. I'll save that one because it's pretty good. Okay. So, so one where there was more of a runway. Okay. Um we we have a business owner. He he's actually going to be passing his uh business on to his children, but he's looking about three to five years.

So really perfect window. The planning really um really added up well. So the the business is worth about 12 million. Um we're working on this this case right now. So the numbers are okay pretty accurate. Business is worth about 12 million plus. He has a portfolio and we are talking about about big numbers I guess in this case, but you can really scale this up or down. Um so so he has a tax bill currently um of about $4 million. Best practices, again, we're starting with best practices. We're going to look at a freeze. Um we're going to get those um we're going to going to basically crystallize his his tax bill now because otherwise the growth is going to continue. That tax bill is just going to get worse and worse down the road, even though he's passing this on to his children.

So, with that freeze, now all of that future growth is going to be in the tax in the hands of his children. Okay? So, we're locking in that initial $4 million tax bill and then we're going to see what we can do to get it lower. Um, and part of what we ended up doing with this strategy is uh we we took those preferred shares because a lot of people don't realize you can actually donate preferred shares or or preferred shares of a private company to charity. So we took some of those preferred shares and we donated those or we will be donating those um as estate. Uh and we also opened a life insurance contract for him. So between the life insurance which is going to be replacing the the value of the share donation and the shares being donated, we were able to reduce that $4 million tax bill down to about $350,000.

we're able to increase the net corporate asset estate value um by about $3 million, just a little under three million. And we have a $5 million legacy donation going to a charity that he really cares about. So that's a perfect example. I think exactly what you were asking about earlier. Is there a net benefit plus I'm reducing my taxes plus I'm giving to charity? Doesn't always work out that beautifully. This one is a really really nice one. Um, but that's it's a good example of what can be done if enough forethought is given. Yeah, I guess it's in it's in the preparation, right? And I guess that's what people miss out on the most. They're really in the day-to-day all the time and then they get an offer and then they sell. Is that the the most common example?

Oh, unfortunately that is the most common example. And then everybody's like they're pressured and they're under stress and they're making emotional decisions and um yeah, that's but that is more common than not for sure. We talked about the the the the theme of of this episode, right? This is the tax strategy that lets you fund your legacy instead of a CRA waste. Um I think every Canadian business owner has that moment, myself included, once you get your first uh 50,000, $100,000 tax bill, right? Or whatever it might be for you that it stinks. It hurts, right? Especially knowing where the politics is going right now and all that stuff. You might agree, you might not agree. Um, but like what are my next best steps to pay less or at least have more control on where that those dollars is going?

Like how can we get tactical for that that business owner that had that big paycheck that wants to know what's available for them in Canada right now in 2026. So the the first thing I would say, this is kind of step zero. I'm going to get tactical in a minute, but step zero is thinking through like you have that moment, right? like we start to think what is that legacy I'm going to create thinking through what does it mean like what does a legacy mean to you in the first place so um Alfred Nobel do you know who Alfred I don't if people guess it would be like you know he the Nobel Prize the Nobel Prize yeah makes sense so I don't I don't know if you've heard this story before um but he had like one of these monumental doover opportunities in life um because he wasn't always known for the Nobel Prize So he was actually known for uh being the inventor of dynamite.

Okay. So this so the story goes anyway his his brother um he passed away and the story goes to the newspaper that um or or the the newspaper gets this this information and and posts an obituary thinking that Alfred was actually the one who passed away. And the obituary reads, you know, merchant of death, doom, and destruction, passed away, killed more people more quickly than anyone ever in history. So he reads his own obituary, and that's that's kind of the legacy that he sees being left behind. And I know we're talking financial legacy, but legacy is more than than just that, right? For sure. And and so he had a chance to say, well, what am I is this how I want to be remembered? Um, and so I think starting with how do I want to be remembered and what matters to me is a really good step zero.

And and that's like a societal how do I want to be remembered? He turned everything around and he, you know, donated all his money to this this Nobel Prize and this organization that that values interesting humanity, but how do we want to be remembered by our children and our grandchildren? Do we how many of us remember our great grandchildren or great grandparents' names or what they value, what they care about, right? Yeah. Um and that's something that you can do with your legacy. Um money is a tool. So in terms of creating that legacy, what that's step zero is what do you want it to look like before you figure out where you're going to um to to put that money based on your charitable goals or your philanthropic strategy. But then you asked about what kind of tools are there?

Yeah. Now, what are the tools? Okay. So, there are so many. So, there are donor advice funds are one of the best. Um, and we'll we'll talk about that because I have a really good example that I think you would like. Um, life insurance is versatile. Life insurance is underutilized, but it can be so life insurance can be donated. If you already have existing life insurance, you could purchase life insurance to to um essentially make your family whole. If you make some kind of donation uh where you get an immediate tax refund and you want to kind of replace what would have gone out the door to the charity down the road, it gives you an estate benefit. It gives you CDA credit. There there's all kinds of great things that you can do with life insurance.

So, there's life insurance. There are um donor advised funds, flow through shares, which are really really interesting. Uh a really interesting way to give for pennies on the dollar, but really really complicated and probably deserve their own show, so we probably won't go into that. Um that's good. Uh using using some different leverage strategies. It's it's those are probably the big ones. Having a foundation is an option, but you asked earlier um if these kind of concepts are for like the ultra wealthy, foundations really are for people who do have quite a bit more money. Probably five five million or more is what I would say. A donor advised fund can accomplish almost the exact same thing. Um have you heard of a donor advised fund before? No, I haven't. Break that down. What does that actually mean?

Okay, so uh a donor advised fund they they can come in every different size. Um, but let's say Joey, you want to start your own donor advised fund. You can start contributing. It can be a small amount. It can be an annual amount. Maybe you have some kind of liquidity liquidity event like you're talking about and you have, you know, $500,000 that you put into this donor advised fund. Okay? And you do that because you know as a business owner if you've learned because you've uh you've learned a little bit about it that that $500,000 isn't just a tax credit to the corporation. It's an actual um tax deduction. So you're writing off $500,000 from your your corporate revenue. Right. So you're getting that tax uh deduction and then inside the fund you are investing just like you would let's say in a non-registered or a tax-free savings account or anything anything that you can invest in.

There are there's a fund or funds within there that's professionally managed. It grows and then you get to decide how much you want to contribute or donate every single year. You can do all of it at once. You can do small amounts here and there, but now you have this fund that's growing tax-free. Um you got your tax deduction and a lot of people will use this as almost like a little foundation of sorts where they can where they can enact whatever they care about. um they can you know business owners are really good at solving complex problems. You see all the things that are wrong in our community. You see all the things that are wrong in in Canada and and business owners are probably uniquely positioned to take those funds meet with the different foundations and say like what can we do with this?

How can we come up with some solutions? And and you have a lot of control to do to do those sort of things with with this the money that's in this fund now. Hm. So, donor advice fund and I don't have to be a multi-billionaire to do that. I can start right away. I think I think 25,000 is about the the the smallest amount you can put into a donor advised fund. I don't quote me on that, but I think that's about it. But a lot of community foundations, for example, um most most communities in Canada will have some kind of local community foundation. You can start to set up small deposits to a donor advised fund. Um, and as that amount grows, they'll they'll kind of give you your own your own pool. But 25,000 tends to be about the the smallest I think amount that you can do in one in one start.

And that's one way that you're saying that could already uh start deducting some tax payments or just redirecting at least at the very least from the CRA to something that I care more about. Right. Exactly. Actually, do you want to see an example of that one? Please. Please. Yeah. Okay. So this is this is a really common situation and I think it actually speaks to kind of exactly what you were asking about. You have some kind of liquidity event, some kind of injection of of uh of capital in this scenario. Let's say um something we see commonly, someone's just sold a large real estate investment that's part of their portfolio in their corporation, right? So they've got a million dollar tax bill. They also hold stock in their portfolio and um many many of our clients lately have highly appreciated stock being held in their portfolio.

They've got some tech stock, right, that's just been booming lately. So if they want to pay that million-doll tax bill, what do they have to do? They've got to liquidate something within their portfolio. So in order to pay that million dollar tax bill, so in this scenario, okay, this is not really not unheard of. You have stock that's valued at say 4 million and a cost base of a million. So, it's grown by three million. That means you have a capital gain on that of $3 million there. So, if you wanted to sell some stock to pay the CRA a million dollars, you need to liquidate 1.23 million. Yep. Right. There's the $230,000 capital gain. And it's going to give you though a CDA credit. So, a CDA credit means that's that's an amount of money you can now take out of your corporation taxfree.

So, not all capital gains are bad. They do come with some perks at least. Yeah. Um, but that's option one. Option two, you take $2 million and you of that appreciated stock and you donate it in kind to a donor advised fund. When you do that, we have a lot of really really um beneficial rules in Canada for anybody who wants to donate um or who is charitably minded. So when you do that, you wipe out the capital gains completely. So anyone who has highly appreciated stocks, this is beautiful. So, you wipe out the capital gains completely and that full that full capital gain is actually credited to that CDA account. So, now you have a $ 1.5 million CDA credit. And you might be saying, okay, well, yeah, like your question earlier, Joey, like, am I going to be ahead net?

Yeah. 2 million compared to 1.23. 2 million is still more. So, you've still reduced the but you also came up with that extra CDA credit. So, down the road, it is kind of it starts to balance out a little more. um you have right $500,000 more in personal tax. You've eliminated that tax bill that you had and now you have this $2 million fund and you have this donor advice fund. You've already figured out what it is that you really care about. Maybe you have children. Maybe you want to start um teaching them about your values about giving. What a lot of people do because now this two millions in this donor advised fund. growing 10% a year, right? Um, taxfree. So, you've got an extra $200,000 to play with and you can kind of keep the principle intact within this fund.

Now, you guys are deciding as a family, how am I going to donate this money every year? And you can amplify it. So, you can take a hundred,000 a year. You guys can say, "Hey, what matters to me?" Now, you're imparting your values onto your kids and you can take another $100,000. So 100,000 to charity, h 100,000 you buy a life insurance policy within this donor advice fund. You can do that, right? Yeah. So now you are moving let's say $100,000 a year for 10 years into this life insurance policy, right? You still have the two million in the fund. Now you have a hundred or a million dollars in the cash value at the 10 end of 10 years. You've got about four million in life insurance. And when you pass away one day, that donor advised fund is going to balloon to, you know, $10 million or more.

And you're passing that on. We talked about how are your grandchildren and great grandchildren and all of that going to remember you. You're passing that on to them. And that's real legacy. So, you can give the CRA 1.23 23 million. Or you can do option B where yeah, it's going to cost you a little more, maybe a few hundred,000 in this scenario, but really not much, and you've just created a $10 million legacy for yourself. That's very interesting. Thank you for putting that visually. I think that really helps. And eventually like there is all the like over a long period of horizon will it net out or it would still be like you still technically pay a bit more but in this Yeah you have the control right? Yeah. No in this scenario you're not going to net out it.

This is like a an immediate liquidity event. No planning was done. Yeah. Okay. We're just trying to kind of redirect some of what would have gone to CRA. Where you're really going to see a a scenario where it nets out or goes to your advantage is when you have time to plan. But so often people come to us and they haven't planned and especially real estate's the most common example, right? They just sold something. Um, and now they have this big tax bill and it it's really painful to give the CRA a large amount of money. It's not as painful to pay a couple hundred thousand dollars for a $10 million legacy fund. No, that's what I want to say. It's still very interesting like at least if you're if if you think you could do better with that money, then you should do whatever you can.

Like you're you're paying so much in taxes that there's a lot of room to do a lot of things, a lot of strategies. So, and I think that's one thing that I've I don't know, I've heard that from in my early entrepreneur days that money just amplifies who you are, right? So the more money you have, like if you're a greedy person, you're just going to be more greed. Or if you if you're a u a generous person, you're going to be more generous and you're going to give it give out to anybody. So knowing that even with a smaller amount, you can still um if you if you think that you're a generous person, you have a cause that you stand for, values in your company that you want to uh put some money behind it, not just put a a nice little word on your website and that's it.

I think that's a great I think that's a great way to do it. So that's great. So the donor advice fund. That's it. Got it. Got it. Okay. Interesting. Um in terms of like the you talk about the the the MFA philanthropy designation, right? The master financial adviser philanthropy uh which again fewer than 200 adviser has in Canada. Why does this designation exist and what do you know about that strategic philanthropy that most financial adviserss don't? Uh I think it exists for exactly kind of what we we just talked about. There's peop adviserss who specialize in this this space this this corporate planning space. We all uh we all know the best practices the best strategies that can be used and no two situations are the same. Um and so it takes a team. It takes working with the accountants and the lawyers and everybody has their area of specialization.

Yeah. But things are getting more and more complex and as we kind of just pointed out when you can minimize the taxes as much as possible which many advisers can do and and the whole team kind of can help with that but when you can then use the tools that a lot of people aren't using to then say okay we've done as much as we can now how much do we want to disinherit the CRA here are the strategies for that a lot of a lot of advisers I don't know if it's because it's more it's it's complic complicated. It's complex. Um I don't know if it's because they feel uncomfortable having that conversation because they might be under the impression like so many people are that uh if if they have a conversation about charitable giving about philanthropic giving uh strategy then they are actually going to be reducing uh what the net estate looks like and that's of course not what any of them want to do.

So, um I think that's probably maybe more than anything why why the conversations aren't having happen happening. But, um having that designation, it also really opens you up to a whole network of professionals in the nonprofit space in the or even other professionals who are working in this space, accountants and lawyers and and um uh companies that that help with with sale of businesses. there are people who specialize in that and working with them uh having the MFAP designation definitely opens doors to working with them more closely and uh I don't know easily. Yeah. Yeah. No, that's good. It's just it's an extra tool that you have that again other people or other firms might not be able to to help you out. And I think what makes a good financial planner, financial adviser from my uh experience of of meeting with a lot of you guys is is again how well can you understand the situation of the of the person in front of you and then how wide of a network or tools can you really build something super custom and personalized to that person.

So I think that that that sets you apart in a lot of ways. Um, so that just to be clear, uh, the donor advice fund, do you need to have that designation to, uh, to put that in place or anybody can really do that? No, anyone can do that. Having having the MFAP designation is really more a knowledge set than anything. So, it doesn't give you any kind of special ability to set these things up. It just gives you the the understanding and the connections to be able to easily identify what's needed and then yeah, put the strategy in place. So going back to what I've asked earlier about okay like the the first steps right you get that big fat bill and you don't like where your money's going. We talk about step zero, right?

The mindset behind it. Like how understanding where you want to what you want to be remembered for, for your family, for the population, for for whoever you care about. Uh which I totally agree with that. Second step is might be looking at a donor advice fund, right? Looking at charity to at least even if you're not netting, uh you have control over where you're directing your money, which is by itself a huge win in my opinion. Um what would be the the next best thing after that? The next best thing is making sure that you plan ahead and that goes back to just just the preparation. Just accountants are really good at looking at the the day-to-day making sure that this year goes well figuring out what they can do for what happened already in the past.

Where we come in and what you can do in terms of the next step is stepping back and and looking at what you want that big picture to look like and then really putting the plan in place so that you can be in a situation that everybody is hoping to be in where, like you said, your taxes are as low as possible, your wealth has grown, everything is protected, and you can now build this legacy without disinheriting your children in any way. maybe even having a bigger estate as a result. Yeah. No, totally agree. That makes sense. And again, I think that's that's the hard thing with that that I've seen is that like there's there's not a lot of urgency like inher like inherent into like paying taxes, right? You never know when you're going to sell, when you're going to die, and all that stuff.

So, you kind of drag it out and you kind of have to um understand or I don't know the wakeup call of like, okay, well, the the quicker I prep um the the the the more the more I'm going to end up on the winning side whenever something happens, right? Whether it's a it's a death or it's a liquidity event uh or whatever might happen, right? Um we hear a lot about corporateowned life insurance. A lot of guests has been talking about that on the Canadian side. Obviously there's big stigma about insurance especially like uh when you get started and again a lot of the rich people use insurance to their benefit like what is corporate owned life insurance like by itself and why is there a stigma around it? Oh I wish there wasn't a stigma around it.

There there have been so many situations also that I've seen like I gave you an example of that family where we did the freeze and we had the preferred share donation like and what a great benefit that was. We have another another person that we worked with fairly recently and we gave them that same scenario. We said scenario one, scenario two, scenario three. One was you keep doing what you're doing. You you just liquidate whatever you need to liquidate to pay your tax bill at the end of the day. Um, scenario two was you get some life insurance and you know you're still you're better off at least than than not. And scenario three was you have this charitable component to it and you're even more better off. Um, they were actually not nearly as as impressive as the example I gave you, but there was a slight difference.

And um even though there was a clear benefit to strategy two and three, they chose not to enact the insurance and they chose to um you know just pay their tax bill at the end of the day. And I think that just comes down to like a baggage issue like uh some people just have a really negative view of insurance. They see it as a a liability. They they equate it to um car insurance, right? Right. Or or home insurance or something. Right. Right. Um and more and more people are starting to realize certainly like as you alluded to more more wealthy um families know this. It's an asset and accountants are starting to realize it as an asset to be seen on a balance sheet. They didn't always necessarily agree with that. So, so you asked me first, what is corporate owned life insurance?

Um, so it's essentially it's it's life insurance that's owned by your corporation and we think of life insurance as having that death benefit, which it does, but it also has in it an investment account and that can be a whole life product which um has a bit more uh certainty around it, dividends um or it can be a universal life insurance product where there is an investment component to it. So, what's really cool about the way life insurance can work is that you're paying your premium and you can also overfund these these policies. So, yes, you're paying for some life insurance, but you're also growing wealth within the policy and and it gives it a wrapper. So, insurance companies have really great lobbyists. So, they can go to, you know, the government and they can get some pretty good tax rules enacted and they just so happen to have done that.

So, what you're able to do within an insurance policy is you're able to grow wealth and shelter wealth within that policy that otherwise would have been growing in a non-registered account, for example. Right? So, I don't know if I explained that well, but that's more or less what you can do with with corporate held life insurance. And the other thing I'll add on is we mentioned CDA credit earlier in the conversation, which basically just a a wonderful extra that allows business owners to extract money from their corporation on a tax-free basis. Whatever CDA credit you have, you can you can use um to to pull money out. Insurance also gives you a CDA credit. And uh that's one of the real big benefits to having the insurance. Yeah, I think uh well the the episode with Mike Sidu that we did a couple couple months back, he talks about it as the the TFSA on steroids for business owners, right?

because the FSA there is a there's a contribution limit on a personal side that you that you cannot uh max out or you cannot go over but with that like using life insurance again not seeing it just as a death benefit which is already pretty good as well as an asset but uh just seeing it as a like just like a TFSA right but for your corporate account there's no contribution limit there is it no there's no contribution limit subject money there whatever I mean as long as you're underwritten for it. Absolutely. Yeah. Yeah. So that's the way that's the way a lot of the rich business owners in Canada use it by again overfunding it and spending more money there because they know that they it's an asset they can take loans against it taxfree.

Um and whenever they die, death benefit, all that stuff like that's there's all the benefits to that. Correct. Correct. Yeah. And and it I'm glad you bring this up because it's also a tool that um in some situations again with enough advanced planning you can actually finance the premiums that go into this life insurance policy in the first place. And when we talk about um strategic philanthropy that makes it it really moves the needle and it really is one of the things that helps to get us into that net neutral or positive position um when we are doing philan uh strategic philanthropy. Um, so, so knowing that, yeah, there's this really great product and also there's all these strategies that wrap around the product, right? That's good. And, uh, okay, so we talked about the philanthropy.

Um, so the the the donations, there's the the corporate owned life insurance. That seems like those are the two most accessible one, right, to get started. Is there any other other that you kind of see coming through as well depending on the cases you get in front of you? Yeah. Well, I'll say the other thing we we kind of talked about life insurance being held in the corporation and and kind of starting a new policy or owning a policy, but you can also donate current like let's say you have some life insurance that you don't want anymore. Um you can also donate that and you can get a pretty uh impressive tax credit that way. Um, you can hold life insurance not corporately, you can hold it within like we said a donor advised fund or a charity can can own the policy and you can get the tax deductions for paying the premiums annually.

So again, corporately owned or not, the insurance itself is the product I guess. Um, flow through shares are a really interesting option that can be incorporated. That's more into the uh that that's not going to give us our our legacy impact in terms of long-term estate planning. That's going to give us our um our tax savings now. So, um and and that's not going to be something that we use if we have appreciated shares. That's something that we're going to use if we have some cash and we already are philanthropically minded and we want to make some kind of donation rather than writing a check or using a credit card kind of like you talked about earlier. There are so flowth through shares are a way where you can essent essentially oh I don't want to get too into it.

You don't you donate the shares or you donate the cash to a flow through share company. this company is then going to use it for exploration, mining exploration, all sorts of things in Canada that we need, right? And um they're then going to sell it back to you at a discount, you're going to instead of buying it yourself, donate it to a charity. And ultimately what that looks like is instead of um you know 50% deduction, you're looking at something like a 90% deduction at the end of the day or you know 5 cents on the dollar rather than 50 cents on the dollar. So it makes charity or phil um charitable giving a lot more efficient. Understand? And and where does like a firm like yourself or like other financial professional comes into the picture?

Because I guess all of that stuff, the corporate owned life insurance, the the theation, the the flow through share, it's not something that you can DIY, right? Like do it yourself. You need to have professional advice for that, right? So where where does where does a firm like your like yours that's been there for obviously decades and and other financial advisors that help come in? Like why is it so uh what's the added value to have to to seek out help like that? I think I mean I think that the the biggest issue the biggest added value is kind of having that that quarterback that person that that is looking at the big picture with you um and is is throwing it out to all the the needed professionals, right? So you have again we have your accountant, we have your lawyer, we have the the flow through share company, we have the community foundation.

when you're working with a um with a philanthropic adviser, um they're going to make sure that they understand your needs and then they're going to connect you with the right people. So, so working with a firm like ours, we have all of those people um that were that are either in our network or that are here at our firm and we are saying, "Okay, we understand client, we understand your big vision, we understand where you're at now and where you want to be and we're with you every step of the way." So, um, you just had a liquidity event, unexpected. We know what the next best step is for you. You, uh, have a plan for where you want to be in 10, 15, 20 years. We know how to get you there, how to set up that, you know, those bones and how to put the right people in place and how to call on them at the right time and make sure everyone's working together.

So, it eliminates that that mental load and it makes sure that you don't have to second guess anything and leave any money on the table. Yeah. Because again, every situation is super different. So I guess that you need for this these types of stuff. It's so much so regulated obviously that you need to have a professional to look at your situation kind of like a doctor uh and see what prescription makes sense for you, right? Because you might be different from your neighbor that might have the same exact thing. Um no, that that that makes total sense. Um I know that we talked about as well a bit before the show that there that you focus mainly on three things simultaneously. There's a tax efficiency part, the wealth growth and the protection, right? Which pretty much what we talked about kind of covers those three things.

Uh, and also legacy legacy impact. Most advisers focus on on one of those, right? Um, at at the at the best. Uh, so why why does integration matter so much for business owner? That's a good question. Um, so you're right. A lot of a lot of adviserss do focus on just one or sometimes they just focus on even worse one product. Um and we see that often, right? We see somebody who comes and they say, "Oh yeah, know I have this life insurance policy for example uh in my corporation." And it makes no sense, the specific amount of life insurance that they have or where it's held. it's not held properly because if they had zoomed out and seen the big picture, they would know that they should have it in a holding company over a year because this company is about to be sold in 3 years.

Um they would know that the amount of insurance isn't appropriate or that it wasn't set up in the proper um in a proper properly structured. So so that's I mean a really prime example of something we see often. Um and and same with investments, right? So sometimes investments are held where they're not supposed to be held. Um, so when you have an adviser or an organization that's that's integrating all of those things, you're always going to get the best outcome because it's never about the product. It's always how the product or the tool is going to uh is going to make the the overall plan as effective and as efficient as possible. So yeah, it's just so making sure and again everybody can make that assessment right now looking at their current team and see all right are you getting the tax efficiency, the wealth growth, the protection, the legacy and the impact.

If you're not getting all five, then uh well either ask more questions, right, to see if they can help you or seek out guidance to to get those because it is possible to get all five, right? Yeah. And and are you busy playing the quarterback yourself? like are you the one kind of being the intermediary between because maybe you do actually have a team but are they talking to each other? Are they are you the one talking between them and you're playing telephone and things are getting missed which again we even in the some of the best case scenarios that's really what we're seeing. So yeah, we see that a lot. There's the gap the I call the three gaps in Canada or even in the US. There's the communication gap of your team, right?

You might have an accountant but they don't talk to your lawyer, they don't talk to your investment advisor, they don't talk to anybody and then everybody do their own thing which is problems of itself. There's the licensing gap, right? which a lot of the problems why you haven't heard about insurance or haven't heard about charity um as a tax strategy is because you rely too much on your accountant for example where he doesn't or she doesn't have the designation to even talk about it right so whenever you're trying to talk about that they're always going to close you up because they don't want to get in trouble right which makes sense which makes sense and the third thing is um there's a communication gap the licensing gap uh and the the education gap right just not knowing that these things exist or are accessible.

Like even myself, I didn't know charity was available for when you're making uh when you're paying like a $50,000 tax bill. I thought it was just for when you're paying millions of dollars in taxes that now it makes sense. So like that's that's that's a good thing to u to bring up. Um, one of the biggest mistakes that you see from the business owners you see in Canada that you meet every day, uh, that tries to be charitable without proper strategic advice or guidance. Like, what does it cost them to do that? I mean, it looks it looks like using their credit cards because they can get some points for a vacation rather than uh rather than being smart with tax, right? So what it costs them is I mean we can use the the any of the examples that we used you know before.

Let's say let's let's dumb down 2 million into a donor advised fund to you know 20,000 right? Um that can look very very different if they had just donated appreciated shares instead. So they're donating 20,000 and and they're getting you know 50,000 or 10,000 back. Uh that could look like a lot like that that could look like uh getting you know $200,000 as a cost or $100,000 of a co as a cost. No no I went back up with my numbers again. So 20,000 donation that could look like something more of an actual net cost of you know $2,000 rather than a net cost of $10,000. So it really does make a difference. And how do you think you can as a business owner you can because it's hard to notice something that you don't even know that much about, right?

It's like how do you know you're getting good or bad guidance when it comes to strategic planning and just charitable planning? That's a good question. If you uh if you find the answer to that, I would love to know as No. Well, well, honestly, because sometimes it it's got to be a really difficult thing for for people to work through because I I've had so many experiences with with business owners and certainly they're getting advice from other people. Sometimes maybe they're talking to their their friends, sometimes they're talking to another adviser and they're getting conflicting information and how are they to know that your information is correct and the other information is not. Right? So, the best thing I can say is to to rely on um if you can rely on people who you know are already working with them, word of mouth, people who have uh you know, if they're online, maybe they have um some good feedback and and some good um uh what the word like social yeah reviews and reviews that those sort of things.

Um and look look to see what their credentials are online that that is readily available. There are all too many people right now who are operating as business adviserss in in some capacity who they've been trained by multi-level marketing insurance companies and I won't name them but um that that is uh definitely becoming more and more common out out in the world right now. If if you're three to five years um away from a potential exit or you think that you would you would like one day to to to sell in five years your business, right, which is going to be most of the time your biggest liquidity event or your biggest in your whole life. So it's a big it's a big play. Um that window is when everybody like like everything gets decided right those next three to five years.

So, um what what are the like the strategies to uh to or like what's the first step to find out if they qualify for these strategies? The first step to find out if they qualify just have a conversation. It starts with a conversation, of course. Um and and being um having the trust to to be honest about where you're at. So, so show sometimes people are a little resistant because uh they're just they're not sure what kind of help they're going to get, but if you don't if you don't show me where you are, I can't I can't help you get to where you need to be. So, the first step is just trusting. Um now, a lot of times you're going to see that people have everything just in one operating company. That's a really common thing to see, right?

Um so, the first step is always going to be how are we going to organize that? how we're going to work with your lawyer for sure. We might be looking at some kind of restructure and we want to start getting that started sooner rather than later. So that now that we have the structure in place that we need, we can start moving things where they need to be, moving the pieces where they need to be, your accountant can make sure that everything is ready for the sale. Um, and your lawyer can make sure that you're structurally set up for the next step and for the next next step, which is, you know, the sale is next, but the the estate is, you know, down the road. Yeah. No, that's good. That's good. So, no, I think we we had some great points and I think the main thing is that look, there is probably more strategies out there that are available for you and and it's not the the pay your taxes and and and move on.

Let's that's like there there's more to that, right? you can either uh have strategies in place for the future where you can save a lot more and and even make a good net on it or at the very least control where those tax dollars are going to a better cause. Um, and I think that's the main takeaway that I got from that. And I think the first step is understanding again how you want to be remembered, which is going to guide your charitable movements and uh, seeking seeking the help, right? And there's no there's never going to be a perfect day to start seeking the help to a professional like you or or like any other advisers or planners out there. Um, but I guess the earlier that you start, the more you you're going to be able to get on the winning side of things.

So, um, those are my main takeaways from that. Is do you think is there anything that you you haven't shared so far that could be valuable for for business owners other than this? No, that was a really good summary. You're uh you're really good at listening and summarizing the facts afterward. Well, that's good. Well, we're we're 10 episodes in, right? So, I kind of got the gist of things. Uh hopefully we'll get a lot more in. But uh no, at least that was an amazing conversation. I want to thank you for being transparent and and and vulnerable in sharing some of the cases that a lot of like it's very hard to get that information online. I know when I got started like I couldn't get any information like that. So I think that's a big driving factor of why we want to get people like you on and share as much as possible.

Um there there's one more question that we ask every guest at the end of the show which is the the the legacy question. um which is if this episode outlives lives you at least right with with your all your experience what's the one lesson about strategic philanthropy exit planning or tax savings that you would like every Canadian business owner to uh to remember plan ahead plan ahead and do it with legacy in mind right because legacy is going to breathe uh purpose and meaning into the planning you're still going to slash the taxes you're still going to to do everything that we need to do to get those numbers down, but now it's going to mean something. Yeah, that's great. That's great. My my biggest takeaway there is is really a charitable thing. Like I think I've always looked at it as a way of okay, I got to be net positive.

Like I if I do if I put a strategy, I got to save a lot of taxes. But what if you're paying $500,000 a year, $100,000, a million dollar a year in taxes, like just controlling where that money is going to a better cause is a win, right? Absolutely. So I I thank you for thank you for putting this so visually uh understandable and I think that's a hard concept to to grasp. So I think that that was my basic takeaway but I want to ask the viewers watching now what was your takeaway from this conversation and any questions I know that probably sparked a lot of different questions just post them in the comments and uh me and Elise will be happy to answer and help you out there. Um and uh and yeah that that's pretty much it.

So again I want to thank you uh for your time at least. That was a amazing conversation. If you enjoyed it, just subscribe, like, comment, and and share it to another business owner that might not uh know about all that stuff that could get value from it. Um, and we'll see you guys on the on the next episode.