What happens to your corporation and family when you die?

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​​Today's episode is different. We're not going to talk about how to grow your wealth whatsoever, but more about what happens when you're actually gone. And I promise you, if you're an incorporated business owner in Canada and you haven't had that conversation with any professional yet, well, what you're about to hear is going to change a lot about how you think about everything you've built. So, when you die in Canada, it's as if you sold all your assets at that time. [music] So, the tax is now due with no estate plan. Business owners or estates will end up paying upwards of 70% tax. [music] My family would only keep 30%. Your kids have paid say 25% tax to get the shares in the business. If I want to get that money out of the company and actually spend it, well now they can pay upwards of 53% tax again.

And the kid basically said, I knew that I wasn't going to get any money. I just didn't want my brother to get any money either. The lawyers take all the money and and there's no money left. Rate of return is not the most important thing here. the impacts are far uh exceeding rate of return. Family is the most important. Don't lose sight of my work. [music] So, welcome to Beyond the Bottom Line. I'm your host, Joey Lon, and this show is about pulling back the curtain. How the ultra wealthy actually protect and grow their money uh taxfree without the gatekeeping or the complexity. Today's episode is different. We're not going to talk about how to grow your wealth um whatsoever, but more about what happens when you're actually gone. And surprisingly enough, myself included, we don't plan enough for that.

Um and I promise you, if you're an incorporated business owner in Canada and you haven't had that conversation with any professional yet, well, what you're about to hear uh might have the same effect it had on me and it's going to change a lot about how you think about basically everything you've built. Um, my guest today is Robert Trasalini, co-founder of Safe Pacific Financial Based in Vancouver. Robert is one of Canada's top estate planning specialist. So, he's ranked top 100 financial adviserss in the whole nation, top 30 in Western Canada, and he's a member of the CLU, which is the most advanced estate planning body in the Canadian insurance industry. So he's also keynoted the advocates estate planning summit twice standing in front of rooms full of lawyers and accountants showing them the standard approach to protecting business wealth at death which often time make things a lot worse and and not better.

So with that said Robert excited to dive deep into your knowledge and educate the audience today. Welcome to Beyond the Bottom line. Thanks for having me. Yes sir. Yes sir. Robert let's cut right to the chase. Okay. I want to start with a scenario that perhaps many business owners in Canada right now watching this might be in. Okay. So, let's say I'm an incorporated business owner in Canada or whatever province. I've built my company over the last 20 years and it's worth now $5 million. I've worked my my tail off to get to that and I die unexpectedly, right? An accident that happens. I'm 50 years old. I have a whole family behind me. walk me through what happens when that event happened because I'm sure you've you've had those scenarios happen throughout your career.

Um, and most specifically on the financial side, so we all know the emotional side is terrible, but we don't think about the financial impact of it. What does my family will have to face in those first 90 days? Yeah, outside of the sadness of you, you know, you've been gone and obviously you you'd have a big impact on your family and everything like that. But yeah, from a financial perspective in Canada, we don't have is estate tax like they have in the US. So you hear a lot about estate tax in the US. We don't have that. Um, what we have in Canada is a deemed disposition when you die. So when you die in Canada, it's as if you sold all your assets at that time. So you have your cost base of what you paid or what what that business is worth and what it's valued at when you die is it's as if you sold it.

So and all your other assets. So the tax is now due and so they're figuring out what's the business worth now that now that you're gone and what is the tax what what was the cost base a lot of for a lot of business owners that's a dollar. And uh so now on that $5 million asset uh it's a deemed disposition of your shares and there's going to likely be a capital gain uh on that. So now your your your beneficiaries would now own your shares after they pay the tax. Um that's that's there. I hope does that answer hopefully answer your question. Yeah. I want to I want to dive deep into that cuz that's such a crazy concept for me and I think nobody really understand that like myself included like when I got started we don't we don't get taught that right um and it's like so just to be clear whenever you die it's as if I would have sold everything right now uh without me planning for it basically right without me trying to get mo the the best deal out of it and the CRA essentially is trying to get the best deal out of it on their end.

Yes. Yeah. and and and like I was saying before whether you're a business owner or not that that's the scenario is you've sold everything um whether you know and now there's obviously nuance here right like I'm going to I'm going to oversimplify things but you know the nuance you say for an average person their RRSP can go to their spouse without any any any big tax implications but let's say both people die the RRSP is going to be fully taxable right um so there there is there's obviously always nuance but uh In short, it's as if you sold everything. And for business owners, there there's even, you know, more estate important need for estate planning um than say the average person. Uh because what ends up happening is most business owners, it's not only their shares that uh or the value of their business, there's they've also usually built up a significant amount of net worth within their corporations as well, within their holding companies.

Um, and so that's going to add to the value of the business, which is fine. There's going to be a but there's going to be a significant tax due in order for the your next ofkin to actually own that business. And then the challenge there's a huge challenge is where now that next of your kids want have paid say 25% tax to get the shares of your business and own the assets but now they're in in a similar situation to a lot of our business owner clients where they're saying how if I want to get that money out of the company and actually spend it start a business or do something well now they can pay upwards of 53% tax again. So, a lot of people think, "Oh, I'm going to pay, you know, highest marginal tax rate is 53%." Well, actually, for business owners in with no estate planning, they're not going to pay 53% tax.

That'd be great. They're actually going to pay higher than 70% tax in most instances. So, this is why I say like estate planning for business owners is so crucial because if with no estate planning and and there's been some great articles on this like you know I'm I'm not inventing this uh uh there's great articles that outline that business owners will estates will end up paying upwards of 70% tax if if they don't uh implement strong financial planning or estate planning. So, are you saying that let's say again that scenario where I've built a business $5 million and I die um that means that 70% of that 5 million would go to the CRA and my family would only keep 30%. With poor planning. Yeah. So, if you own With nothing. Yeah. With no plans at all.

Planning. Yeah. Yeah. I would only keep 30%. Great articles on this. Um there's a really great um uh estate planning uh specialist at at CIBC um Jamie Golenbeck. He's written some fantastic done some fantastic research on this. Um there's some really really good uh good if if for your uh light reading if if any of the listeners want to do some light reading there's some really awesome I think it's really cool estate planning research that is done and and broken it all down. But yeah, the the short the long and the short is yes uh that that is the the the outcome. Yeah. What what's the biggest horror story that you've uh that you faced like a business that like the news that came to you and it like no planning at all and what was the the damage to that that was the most surprising for you?

So taxes is one thing right the 70% is bad right obvious 70% tax is bad but where we see the worst estate issues is is with litigation with um family breakdown. So when siblings divorces divorces sure but when actually what's worse on the estate side is is when um uh brothers and sisters don't get along. Yeah. Who takes who takes the business? Who takes the wealth and stuff? Exactly. And you know, we've heard horror stories where, you know, cut trying to cut out family members. Yeah. Out of the will. I don't want my one kid to have have the money or drug addiction. So, one one family member, you know, has drug problems, gambling problems, that sort of thing. So, maybe you don't want to give give the money, you know, you don't want to give $5 million to a child that has drug addiction, but they want to litigate and have access.

So anytime there's tax and then there's litigation and lawyers are getting involved where one a brother is suing a sister. Yeah. Because there's uh seen as no no fairness. It things get messy fast. And so if you say government 20% lawyers take 30%. Um there's not left. And and so to go back to your horror story side of things, um you know, we've heard of of stories where one family one one the the daughter was suing uh the estate from their their other family member. And the lawyer is basically saying racking up the bill and saying, you know, we're getting to a point where, you know, after all the legal fees, there's not going to be much there's nothing left. And the kid basically said, "Good." I knew that I wasn't going to get any money.

I just didn't want my my brother to get any money either. And so eventually ends up happening is the lawyers take all the money and and there's no money left. And and it's it's very sad, right? It's very sad. Yeah. Yeah. Yeah. I mean, you work all your life to to to do that most of the time for your family and then when you're not there anymore, there's there's this this whole thing happening like everybody's trying to get a piece of that. So I think that's the other huge benefit of planning for that is that yes of course taxes is in one part but you get to decide beforehand where the money is going to flow so that you prevent the whole family they're going to feud against each other. Right. Totally. And and this is where control is so important.

Um, so a lot of times like you're talking about before, you're talking with having conversations with business owners about, you know, how do you get the best rate of return or how do you make the most amount of money or where a lot of the conversation like it seems like that's important, you know, getting a 10% or 20% rate of return instead of a 7% rate of return. But when you start looking at the estate side of things, it's it has nothing to do do with that. and you start realizing the impacts um uh are far exceed rate of return. And that's that's where why I what always drew me to that this side of the business which is oh you can do things that have far more significant impact than chasing return and that's that's what's kept me sort of interested in in the side.

Hey, it's it's it's interesting because again like I I always take my perspective as a business owner like you we want to play offense most of the time. So like we're trying to see okay what's the most we can make with what we already have which okay we look at investments rate of returns which market to invest. My financial advisor helped me with that. But again, like you said, especially in Canada in countries where it's super high tax, it's like your biggest rate of return will be how well can you optimize to keep more of what you get right now and for the future and for whatever event that's going to happen. Why do you think it's such a hard concept to grasp as a business owner? Because you meet with a lot of business owners all the time.

Yeah, I this I think it like exactly what you talked about. They they've only focused on their business. They want to make as much money as possible and no one no one teaches you h what to do once you've have you've made a lot of money. Why? Most people don't have a lot of money. So why are you going to talk talk about that in school? Like it's it's not like there's a course in in in school where it's like you cashed out you sold your business for $50 million. Now what? I mean, that'd be a great course, but I I mean, in Canada, we're talking about 1% of 1% of the population. Yeah. Now, if you look at the at the tax code, it just keeps getting bigger and bigger and bigger because there's more nuance and depending on the way you look at it, but that that nuance is really for these individuals, right?

And there there's yeah, more and more planning that's that's needed when the more and more money you have. But when you ask like why doesn't the average person know this? It's like well the average person doesn't make that money. Yeah. And and the average person, you know, most people aren't business owners. So, you know, scrap, you know, what 70% of the population. Yeah. Most business owners aren't successful. So, scrap out of those 30% or whatever that are business owners. Take maybe the top 10%, maybe 5%. And most people don't have exits in their business as well. So, we're talking maybe 1% of business owners. So um it's it's really a small percentage of the population. So you're you're you know the advice it's not being blasted by the banks or you know mainstream media. So that that's that's probably you know realistically why you know this doesn't come up.

Yeah. No I get it. And it's a paradigm shift that you have to make as a business owner one like at one time or another that you have to use different strategies than the people around you or the mainstream advice that you're getting from your accountant or anything. Um you have to seek and I think that's where people like you guys firms in Canada that that specializes in business owners or works with ultra wealthy people that can then pass down that information because it's all information is out there. if everybody everybody would read the tax code, they would know, right, what's available, but no, nobody does that. That's why there's professionals that do that for them. Um, that's interesting. And and again, I want to ask you more of a um maybe a personal opinion question.

Um like again in Canada if people don't really know how to optimize everything um and they see like again 50% tax 70% tax and they see where the politics is going and and how it's not uh that much beneficial for them what is there still a way out to stay in Canada and make a lot of money and optimize for not paying as much taxes or cuz I feel like nowadays a lot of business owners like yeah I mean there's nothing we can do so we we have to look somewhere else. We have to relocate the whole family. We have to leave the country. But I'm sure there's ways to to to still live a good life. Like, how do you balance that? Um, staying in Canada and trying to optimize for that or people thinking because I'm sure you get people all the time come to you and say like, "Robert, should I leave?

Like, if I make that much money, should I stay here?" What do you think about that? So, over the last few years, we've been we've been hearing that more and more and more. It's really uh it's it's sad. It's sad to see and and yeah, there there's been a lot of challenges or poor management I'd say in Canada to be politically correct. Um and and yeah, I think I think more and more business owners are looking elsewhere of you know what can we do uh because the the system is not not benefiting us. Yeah, we don't want to pay 70% tax. But what I would say is one like like we were saying before that the tax code is designed to help support these people and there it's still incentivized to start a business in Canada, sell a business in Canada and and and and there are we we hear a lot of the tax incentives that are are based in the US just especially now with the internet like most of the the media that's coming out is is is you know based on US tax and as Canadians we hear about all these great things that that we can't do, but there are still a ton of um really uh advantageous things here in Canada.

And like I was saying before, we don't have an estate tax. They do have that in in in in the US. There's lots of loopholes around it and and ways of dealing with it. But uh in Canada, we have that, too. And there are options. Now, since 2017, a lot of those options have been removed, but there are still options. Like again, with proper estate planning, you're not paying 70% tax. you're going to pay significantly less significantly less less in tax. And with with with proper planning, when you sell a business, you aren't going to be paying as much as you as you think, right? So, [gasps] um like we have uh the lifetime capital gains exemption, which is $1.25 million. So, when you sell a business, you can sell for up to $1.25 million taxfree.

But there's ways of multiplying that where you can get that number up significantly higher. Um, so there are strategies and there are things that you can do in Canada where you don't have to leave the country and the question goes and again this is sort of another debate outside of estate planning but where do you go right we have clients that went to Dubai and they are regretting it because as they're sending videos of bombs going off in in hours right um there's people that you know you go to other places. Like there's there's pros and cons with with with with every option. Um and there are some benefits. Yes. As bad as Canada's gotten. Um there are still some some pros of staying and and if with proper advice, you don't have to leave the country.

Mhm. Yeah, that's true. That's really true. And and again on on a personal level as well, I've I've went through this whole uh thinking through okay uh the the Dubai thing uh going to the US and again it's it's all pros and cons. At the end of the day, it's all pros and cons and um with proper planning everywhere, there is a way to make it work and that's what I've learned through uh talking to a lot of experts like you, especially in Canada. Um so like there's a lot of solutions. Now again if you had to explain like we know the problem is there now if we had to explain that to someone in very plain English understandable language cuz I think that's where it gets complicated with the ice type planning and this and this and that.

Um what's the fix like how do we make it so that we don't pay that 70% tax and there's not that financial burden along with the emotional burden whenever a passing comes through. Yeah. So, you know, it's it's hard to the the answer I'll say that we'll talk about a few um there's a lot and it can get complex and so I want to simplify it obviously for the listeners and also you know if you have 10 million or 100 million or a billion the the I'd say like the the layers or the levels um and complexity will increase but I'd say sort of lowhanging fruit easy option One of the best benefits in Canada that people I think it's it's it's starting to get more traction is life insurance. And it's such a a valuable tool within a corporation.

And and why I you know I don't we don't recommend life insurance because we love life insurance. We we recommend it because in in Canada life insurance is is taxexempt. And for a corporation Yeah. It's a tax tool and for a corporation what it does is it it creates what's called CDA which is a capital dividend account. So, this is one of the greatest tools or one one great tool in the tool belt for estate planning that I think is often overlooked and that uh business owners have to look at especially since 2017 where a lot of the other estate planning uh tools or planning especially around trusts were removed um and and gotten rid of by by the Trudeau government. So that's what actually has started a lot of this panic or fear around estate planning was really in 2017 and um it it was our finance minister was Bill Morno and he actually owned a a life insurance company.

So Morno Chappelle uh it it was a a benefits company. Um he ended up selling it for a few billion dollars to Tellis Health, but um Bill Mornau got rid of a lot of the tax planning and a lot of the uh estate planning around trusts and um all that was well not all that was left but a lot that was left was life insurance. And not saying you know if it benefited him directly even though he owned a company that offered these products. Um but coincidence coincidentally coincidentally [laughter] it greatly benefited his business his family business that was started by his grandfather. So but what that did was it it accentuated the benefits of life insurance within corporations. And so like I was saying before life insurance is tax exempt. It pays out taxree.

It increases what's called CDA which allows those funds from a corporation to flow out all taxree. So this is something that's often overlooked and that can deal with one life insurance can deal with that initial deemed disposition tax because that tax d is due right away and so and deemed deemed disposition just to be clear that's when that's when you die and the CRA is now deemed disposition is the sale of your assets. Sell of your assets. Okay. And they and they want their their tax dollars now. Yeah. So that's where life insurance is provides that liquidity. So when we're talking about estate planning, some challenges that that people have is is liquidity. Well, I have all these assets, but they want we need to pay the taxes on them now. Well, we got to sell the real estate or we got to leverage them.

You know, it can be challenging to leverage assets when it's in um uh it's it's going through probate or or you know, the the estate hasn't been settled. So liquidity is crucial and that's where life insurance can help on the estate side and then the creation of CDA which is what we really want to do it deals with the 50% tax of you know where the challenge I was saying before which is we got this steam dis disposition issue which can be solved and then we got this how do I get the money out of the corporation issue which CDA that then solves and so we can take that 50% % 70% tax and reduce it by a a a very large margin uh with life insurance and and the way the way I see this so is that because if you start making contributions to life insurance so you're basically transferring your money let's say from your bank account right which is fully taxable to now a life insurance in a life insurance bank account that grows uh at a guaranteed And then instead of so if you would have keep kept it in your bank account, let's say you have a you have accumulated $2 million in your bank account versus accumulated $2 million in your life insurance policy in your $2 million, you would have paid the highest tax rate that you can pay with CRA.

But in that life insurance bank account like what's what what the difference there? Yeah. So say and again there there's nuance of like structure and all these things of course. Yeah. A properly structured we're going to keep it we're going to we're going to keep it uh well there then then there's you know life insurance shares and and there's there's lots of ways that you can really take it to the next level but let's keep it simple. Um your corporation Yeah. What what you're essentially doing is you're take like you said you're taking that money and you're wrapping it under a life insurance contract. Why? because now it's grows tax tax uh deferred or taxree and when it pays out it pays out taxree and it creates CDA. The the difference is if that money wasn't just say in in a regular account then or in real estate or whatever it is then when when you pass that money again deemed as position your share your kids now get that $2 million.

When they want to take that $2 million out they're going to be paying 53% of tax, right? up to that amount versus ver versus that $2 million gets paid out as life insurance. The $2 million now creates $2 million of CDA and can now be pulled out of the corporation all tax free. You're saving 53% in in tax there. So, and and so that that really solves that 53% tax and then there's ways around again through complexity that you could start tackling the the other 20 uh 20% tax of of that deemed disposition of of capital gains. Yeah. So like if for business owners in Gata that are accumulating at least half a million dollars a year in retained earnings or more, should everybody all of them have some sort of life insurance in their business or is there some cases that it's not recommended for them?

Uh there's there's a question of like do you care? So we I mean there are some people out there where they don't care. They're like, "Man, I don't care about what about what happens when they die or their kids or anything." And they want to leave a mess. And you ask them like, "Yeah, you know, does it does does estate planning matter to you?" And honestly, I know it sounds crazy, uh, Joey, but uh, we've we've run into people where they're like, "Actually, I really really don't care and I really really could care less if my kids get any of my money or it goes." That's not our audience. Hopefully that's not our audience because we don't want like who [clears throat] shouldn't do it. Um Yeah. Yeah. Or you know, no kids and no Yeah.

No kids, no care. That that's that's that's going to be an issue. But otherwise otherwise outside of those people Yeah. Which is a majority I guess have kids and like they like their family in a certain degree. People that like their kids and don't want to leave a giant mess in a tax nightmare and create litigation between family members. um they should definitely be looking at estate planning in general and should be looking at usually if they want to look at mitigating taxes on the estate side, life insurance will likely make sense and if if they can get life insurance and so that's the other question we see is often estate planning is left too late. Yeah. So we're talking we do talk to 70 year olds, 80 year olds and I mean that makes sense, right?

That's when you start really thinking about, you know, what happens when you pass. Yeah. Um and so that's where the challenge when I mentioned life insurance can be can be a challenge. Um is when when we're looking at working with 80 year olds or something like that. So yes, I I guess that's a long So you think everybody Yeah. But I guess I think the big the problem with that, which is annoying, but I don't know if there's a way to fix that, but it's like like there's nothing. You don't get a notification on your RBC account uh whenever, hey, it's maybe it's time to start your estate planning or you don't get an email by, oh, maybe it's time to do that. So like that's I think we as business owners, we don't really know when is the right time.

Is it when I make my first million? When I make my first 100 grand, when I make my first 10 million? So like when when is it the right time for for us actually seek estate planning? I think anytime you have assets and you start caring about those assets usually that happens when you have kids and uh then you start being thinking I mean I think early on in your life right you don't think about passing away you know I'm I'm I'm not I'm still think of myself as being young but I think you start seeing it now for me personally I start seeing people getting sick like people that are young in their 30s right getting sick have with young families and you start going oh crap like this. This doesn't have to happen when I'm 80 or 90 years old.

So, I think when you have a kid, right, you start getting a will. And this is where our industry could be better. I think um the there's a lot of amazing estate lawyers out there. But that's usually the first conversation is when you have ch children and you start saying, well, what what happens when something happens? Who's going to look after my children? Um yeah, if I'm no longer here, who's going to look after them? And then what what money is there to back that that care, right? Um so I think the beginning of estate planning usually happens hopefully but happens is when people have kids, but you'd be shocked how many client we talk to, every single client we talk to, we ask, "Do do you have a will?" Uh [clears throat] you know, every client we say, "Do you have a will?" And I'd say it's probably 50/50, maybe less.

And regarding I I sometimes I know I find that the more money people have the less likely they have a will. U so uh yeah that's sort of the beginning conversation I would say is when we're looking talking about estate planning do you have a will and a will is not just one document. Yeah. You know a will is a will but you that's what happens when you pass but you want a representation agreement and and a power of attorney as well. So there's really three documents that everyone should have. Um and it's sort of the basis of your estate plan. Yeah. So you say um um a POA. What are the three other doc the two other documents? Uh representation agreement. So POA is who's going to make financial decisions for you if you're incapacitated or you can't have them.

Yeah. Right. Representation agreement is who's going to make health decisions for you if you are incapacitated uh and you're you know who's going to decide how you're treated from a health perspective. Do you need to go to a home care facility? Uh what what sort of medication, etc. Um so th those are and you can't make them after the fact. So yeah. So you're incapacity, you don't die. There's other documents that are needed now. Your will is you died. Now who's going to be your executive? Where what assets do you have? Where are they going to go? What are your wishes? Um and yeah, so so that those three documents are are crucial um when you're when you're looking at estate starting the the estate planning conversation. And then you say, okay, well, corporate structure.

So for business owner, again, for regular people, that might be the end. Yeah. Right. Um [snorts] corporate structure is really important. So do you have a family uh trust? Do you have a holding company? Do you have a corporation? And so something that because most people on here are business owners, what we usually recommend or what you know lawyers will usually recommend is to have two wills. You're going to have a personal will and then you're going to have a corporate will. So for all the listeners that own businesses that have corporations with significant earn wealth, they they should something that they might have is a will, but they might not have a corporate uh will. Um so that's something to consider as well. Yeah. Yeah. Especially if you have business partners too. That's when it becomes again even more important I imagine uh to separate that the right way before you something happened.

Yeah. So that's actually you touched on something really really important uh which is your shareholders agreement. So there's more documentation. So again we're talking like simple person you know you work a job. It's very specific specific to your situation. That's why there's not one sizefitall strategies right. Well, there's layers to it. So, there's we're getting into the layers of it. You're the business partner. Now, we're talking about shareholders agreements, right? And then we're talking about corporate wills. And then you're talking about do you want depending on the on the value of your business. Are we setting up family trust? Are we involving kids? Um, so then there's a lot of charitable charitable strategies as well. So we're talking about estate planning. Are are we looking at is that c important and you know are we looking at charitable giving?

So yeah. So yeah there's layers and and this share your owners agreement is crucial crucial crucial document as well. If you have a business um I hope you didn't incorporate yourself and you have business partner. I hope you uh talk to a a good business lawyer. You have a shareholders agreement. It's going to outline in your shareholders agreement hopefully what happens when you die and what happens to your shares. Uh who's buying out your shares? Uh does your are you now in business with your spouse sorry your business partner spouse or are you to buy that person out? Um so hopefully again just like a will hopefully you and a um prenup maybe is what all these documents are doing they're outlining the that worst case scenario. Yeah. What happens when this bad thing happens?

I mean with estate planning it's going to happen. I mean it's it's a terrible you know it's just a it's a reality. It's a reality. We're all going to die. But the challenge is most people, everyone assumes I'm going to live till 95 and I'm going to die in my bed and everything, you know, great. Um, but, you know, really when you were talking about like when should you look at this estate planning conversation, it's, you know, well, when are you going to die, right? And I I I think you put it like to me that that really struck a chord. It's like when you actually start caring. Um, and I I think it's different for everybody. Like for for me personally, I remember when I started my business fairly early at at 20. Um, and uh I remember like early 20s, it's like reckless, right?

I just I want to make tens of millions of dollars and forget about anything else and just be me me and make make money make money make money. Uh, [snorts] but now I'm 26. Uh, got engaged this year building a house and stuff, planning for family and kids. And you're 26. Yeah, I'm 26 now. Yeah. You're still you're still young. That's crazy. I'm still young. I'm still young. But for me, I'm saying that like for me this year, it's like now I'm starting to think like, all right, well, maybe the goal is not to make, let's say, $100 million, right? Maybe it's to make whatever is good for me. And most importantly, make sure my legacy can still live um even if something happens to me. Like now, I have a wife. I'm going to have probably kids.

I have my my family if I die before my family. I want to make sure my wealth is distributed properly. Um, so and and like for me it's this year that I start caring, right? After six years of recklessly just trying to scale my business and make more revenue and make more money, but like at some point you have that click of like maybe life is short, right? And you don't know what can happen and it's like what's what's going to be the aftermath and how can you leave your loved ones? Because at the end of the day, at least for me, a lot of business owners and probably for you, it's like you do this you do this for your family. You you want to be the provider. As a business owner, we have that provider mindset.

Want to provide for everybody around us um and do the right thing. And I think it's when that dclick happens. I think you said it very very well. So it's when you start when it start to matter like when losing everything would be more hurtful um than than just making more and more and more. Right. So that that that was that was really what well put. Yeah. No. And and I think the other thing is sometimes people think, well, I'll just make more and more money. I'll just make more and more more and more. It'll be fine. But what we see is, you know, it's that attit more more money, more problems. And and that's it's it's true. You actually are just making making it worse [laughter] from the planning side often and it causes more conflict.

So, and then you so you're going to have more and more epiphies, I think, as you get older and uh which is like when you have multiple kids, you start looking at that relationship of your children. I know I I have young children, but as they get older, you kind of see how they kind of turn out and every child's going to need something different, right? Depending on on how they are. So, you know, and yeah, you work with some pe people with and this is where again layers of estate planning. If you have kids that are disabled, right, then your estate planning becomes a lot different because again, you're not necessarily giving your ch children this the same amount of money or you don't want to just give them a lump sum because of money that they can't manage.

So, this is where, you know, there there's different trust structures that make a ton of sense for for people that are disabled and it and it can get uh yeah, quite quite complex, but there are specialists in in Yeah. that that that really you want to bring in and and oftentimes I'm bringing in specialists like I'm not a lawyer. I'm not an estate lawyer, right? And and there are some brilliant brilliant uh estate lawyers and tax lawyers that I'm fortunate I feel very blessed to work with um because they are just truly brilliant u when it comes to uh these sorts of things. My job is usually being able to identify when we need to bring in and what level of complexity we need to bring in these uh these really really Yeah. specialized people.

Yeah. Yeah. Because most of most of the time again it's you that's going to have to come to those conclusions. It's not your current accountant most of the time that's going to recommend that for you because again they they they stay in their lane and that's it. Same thing with maybe a lawyer that could but at the same time they have other stuff as well. there's a bunch of different facets and uh that a lawyer can specialize in. Um so it's really up to you and through education and through looking at episodes like that and seeking advice from firms like your like yours that you can get that proper that proper guidance. Yeah, I think our industry can do a better job of actually referring within and help helping within where um I I I get it though like people are in their practices like accounts are in their practices.

They're they're like right now we're we're in tax time right now and uh you know I talked to my my accountant and he's just you know they're not they're just they're grinding right now, right? They're working 12 hour days and they have families and they're they're just trying to meet deadlines, right? Um so so I get it and they're not always necessarily having that the conversation. They're they're they're trying to just get the get the filings done. So it's it's not easy, but I think as a as a business community in general or as a financial community in general, planning community, we can be better at bringing in experts, right? Um whether that's experts in life insurance or that's experts in uh the legal or or tax side of things. U because there are these kind of call them snipers, right?

There's each every profession has sort of their sniper or specialist that you want to bring in in in certain areas and I think there's a huge value there. What's an estate freeze? I've heard through my research looking at like what you do and stuff and I know you talk you did some keynotes about that and stuff. What's an estate freeze? Yeah. So oftent times it's it's transferring value of a a business from one generation to the next the the next which is when an estate freeze is is going to be uh implemented. So what you're essentially doing is freezing the shares of the value of the company. So let's use your example um of your uh business owner client. He built a business. It's worth $5 million. his son is coming into the business and is going to take over over the business over the next, you know, 20 30 years.

Uh business owners looking to ultimately retire at at some point as well and and sort of transition the business. What what you can do is you can freeze the current value of of that business into a class of shares. you freeze the the value at say current value is $5 million and you create a new class of shares that can be held by your son or a trust family trust and those new class of shares will capture the future uh growth and value of the business. So why that's beneficial from an estate planning perspective is because we know exactly what the tax burden is on the dad say he's 60 70 years old or 60 years old and we say okay well there's a going to be we know we we've frozen the value of your shares and so we know exactly what they're going to be and because they're going to maintain this value uh moving forward now all the future growth is on the sun all the future value is on the sun and that value if he takes the company from 5 million million to 50 million.

Well, though that that growth is going to be in his hands. So, when the dad passes, it's going to be only that $5 million tax burden that that's going to be there. And that helps with planning because we know exactly what's owing. We know, you know, if the business goes to 60 million, that's not a concern. Father passes, business is already in the hands of the son. That $60 million tax uh liability isn't going to be paid until the son passes. So what we can actually what you can do is defer that uh or that that growth can be held in the next generation's hands rather than let's say the example you don't do the estate freeze now that $5 million business is going to be worth 60 million it's held in the hands of the father he passes in 20 years now that $60 million tax bill is due right so you've transferred and when you've frozen the shares and you've transferred the value onto the onto that next generation.

Um, so it can be a very valuable tax planning tool. Does that kind of make sense? I'm again trying to simplify. No, it does. So it's basically prevents like any backfires um or again to it it protects that that that 70% tax on a larger number. So again, it's it's all about keeping more of what you earn. Yeah. And allows you to do that. Deferring. Yeah, a lot of tax strategies in Canada, you you can defer you can defer like RRSPs, even the corporation, right? What are we doing? We're deferring tax. We're deferring tax. Um, so oftent times if we can defer tax for longer periods of time, that that's that's a a strategy to resolve that. So, um, that often makes sense when there is a family member again, a successor. An successor. Exactly.

where often estate freezes can make a ton of sense. And uh yeah, your your son or daughter is is or both are going to be coming into the business and they're going to take it and grow it. And estate freeze can make a lot of sense. And in most cases, where where is the first time or when's the first time that a business owner will first hear about an estate freeze? Would it be their accountant or would that be someone else? Yes. I'd say nine times out of 10, it's going to be their accountant. um because they're going to go to their accountant and they're going to say, "Oh, I think I'm going to sell my business or uh yeah, the these sorts of conversations start, my son's in the business." I'd say most business owners and and most studies will show that they're getting their advice from from their accountant and ultimately their accountant would be structuring the estate freeze.

Um their accountant with the business lawyer, so they're the ones that are going to be doing the work. They're the ones that are going to be billing. um where it helps on our regard and why we're often recommending an estate freeze because when we're looking at estate planning side of things, we can now it it's super beneficial to us because we can now freeze that value and it's and it provides clear clarity on what that tax bill will be because the challenge as well when we're planning for people if they're going to keep their business say until they're 80 and 90 and die with their business, what's the value going to be in 30 years, right? And so how do we track that? How do we figure that out? And when are they going to die with those shares, right?

So do they live to 80? Do they live to 75? Do they live to 90? And when they die, what is the value going to be? So we're honestly you have to sort of guess, right? You can project out, but you're you're trying to figure that out where with an estate freeze can make it very clean. We know boom, we know exactly what those value that value is. We know what the cost is going to be when you die. we can now solve that cost and plan for that cost. Well, okay, now what's the best way to cover that tax? We know what your tax bill is going to be when you die. Easy. Easy. And there's ways of grinding. Again, there's complexities to this where we can actually like reduce um some some of those tax burdens as well uh in in other ways.

But yeah, again, life insurance can be a very good tool. You just say, "Great, tax bill is going to be 2 million bucks. Well, let's buy a $2 million life insurance policy that's going to solve that." and and and move move on. So estate planning essentially is basically just planning for when a liquidation is going to happen or when you die and how can you keep or how can you get as much control of where those dollars will go. Yeah. I I estate planning is planning for your death. What happens when you die? How much tax is G? So looking at two parts which is like how much tax is going to be paid and how do you make sure the money goes to the next generation without as little conflict as possible right what do you want that money to be used and it gets complicated because we are dealing with family dynamics like I was saying before do you have a disabled child do you have a child with drug addiction do your do the siblings get along uh do they run do the two siblings Are they taking over the family business?

Are they does one of them live in the United States? That causes talk about grenade in in a estate plan. Um there there are so many different variables and this is where the fun part comes in in our world which you know first thing is figuring out what those variables are and then kind of checking them off. If it's simple, it's, you know, both my kids get along. Um, I want this money to be divided equally among them and I want the sale to happen and and we're I'm just going to want to give them cash or, you know, or do we want the family house there or do I want to create I don't want to give the money to my kids. I want it kept in one entity and they can borrow against it and that's meant to be used to for the grandchildren or you know so all these things are are variables and and yeah but the short answer your question is estate planning is what happens when you die let's play the scenario uh Joey you're you're dead what happens and you can do the math again nothing you don't do anything Joey 70%'s gone this is how it's going to work.

This is what happens. You don't have a will. You don't have nothing. It's these are all the problems, pitfalls, the liabilities. Okay. So, how do we go through and make sure that you know all these pitfalls and all these problems don't happen? Well, you know, get a will first thing maybe, right? [snorts] Um, yeah. So, we we just run through that nice worst case scenario. And the challenge with again younger people is well, I'm not going to die anytime soon, right? So, why do I really need to look at this? But as you get older, it starts to be more and more of a pressing concern. [snorts] And uh again, if we if you're okay to be transparent in that area, cuz I think one part that prevents maybe people from doing this is cost.

Like, okay, am I going to pay $50,000 to to build an estate plan? Like what? And I know cost can be different. Is it like only transferring money from account to another account? And like how do you guys make your money if someone were to work with you guys? it whenever like by the structure and and whenever something happens like how how would it work in in terms of cash flow and and deploying cash in order for me to okay like I want to make I want to make sure all of that is in place. Yeah. So that's that's a good question. So I mean to your point complexity definitely matters like I mean so we have situations where we're getting referred by an accountant and they they say great we're doing an estate estate freeze.

It depends who's kind of pushing pushing leading things. Account accountant comes to us says we're doing a safe reason on the client. The tax bill is going to be X. We need a life insurance policy. You know, they might just bring us in as the life insurance experts. Okay? So, we're not billing the client for planning. We're not billing the the client there. We're we're making money off the and and we get a commission from the insurance company. Client doesn't pay us very directly. That's sort of an easy oneoff. Um we do have uh sometimes we will charge uh clients depending on complexity like financial planning fees. So often those can be 10 20 uh,000 to to actually build out the plan. Then there's going to we're going to be bu bringing in oftent times lawyers and accountants.

Again estate freezes sometimes they can charge 10 $20,000. Setting up trusts, family trusts, etc. that can be yeah around 10 $10,000 to set up a family trust restructure. Again, that's from an account and legal perspective. Um and then the complexity can get um higher from there and there can be that would be hundreds of thousands of dollars. Um but really our bread and butter is on the wealth management and u insurance piece and we'll do a lot of the structure and planning and bring in the pieces if we're if we know that um we're going to earn on the life insurance side because we tend to be compensated quite well from uh setting up the life insurance or managing the wealth management piece. Uh that uh yeah then on bringing in our experts that we know can help on on the with legal and accounting um bu leverage our network for for the clients.

Again, being able to spot those opportunities where we're talking to a client and we're going, "Oh, well, you need you're going to need to speak to a estate lawyer that specializes in US tax." Say for example, daughters living in the US, you need a crossber uh specialist, right? bringing those people in. Yeah. That's going to have have a cost, but it's going to save you, you know, a significant amount of money. Yeah. And that's where it's like, you know, if the if the cost doesn't make sense, then don't do it. But I'd say nine times out of 10, the money that you spend on estate planning, the return is 10 10x, you know, on the back end. I was going to say that. Yeah. It all depends of course per situation but at least that's I think a lot of people don't understand that but for insurance um it's like it's no it's it's not money up front.

It's just putting money from in different buckets that you already have to optimize what you have and then you guys get paid for uh for planning that and making sure it's it's structured properly. I think it it's when the planning comes and when you it actually makes sense like okay well let's say you build a $10 million business you would pay $7 million of that in taxes $20,000 to make sure you don't do that it doesn't matter right so it it depends on the situation um and again it's whenever you think you're ready and you that you care enough that you have something to lose um and it's all about projecting the the pro like it's it's like any other initiative right it's the ROI I think that your your analogy is great it's it's sort of Yeah, you're right.

It's like a lot of what we're doing is just organizing things effectively in buckets. We're just saying you have you have this pile of money. How can we organize it so that it goes where you want to go, want it to go, and that it goes tax efficiently. So, we're really just exactly that, shuffling money, organizing money. Um, but you'd be surprised. Uh, sometimes, you know, business owners, they want to deal $20,000 upfront today. It's just uh it's still a cost and and they still got to pay it. If I asked you to pay 20 grand today, you you'd still care. You'd still care. Yeah, of course. Of course. It's going to save you again. Yeah. You're still you're Yeah. It's going to save you millions of dollars, right? So, yeah. Um you came you came to Canada in 2007, right?

No, no, no, no. When when did you arrive in I think born and raised in Canada? Your family is Italian? Uh yeah, my my grand my grandfather came my grandfather and grandmother came to Canada in the 50s. Okay. Okay. Yeah. And they they had my my dad was I think six months old when they after they landed. Okay. Okay. So born and raised in Canada. Yeah. Yeah. Yeah. Yeah. So uh uh Yeah. So So sorry. My dad was born six months after they landed. Yeah. Born and raised in Canada. Um born and born and raised in Vancouver, which uh Yeah. Okay. What got you to pursue um estate planning more specifically and become again in the top 100 of financial advisors in Canada? So that that's a that's a good question. I like I kind of touched on a little bit before there one I loved working with business owners.

So um my background like classic Italian background most my family members are are in the construction industry and most of them run their own businesses in the construction space. I was kind of uh pushed to go in that direction and I I I didn't want I I wanted my to build sort of my own name and my own reputation in a different space and then I started learning and then I thought I was going to go more on the wealth management side like really really push on the wealth manage management side and and again I was young I was in my 20s and what are you focused on right making building wealth making the most highest rate of return kind of like we were talking about before that's the exciting stuff but um I started And I started really enjoying working with business owners.

I love the entrepreneurial entrepreneurial nature, you know, how they how they do things. And uh I started learning that there's a whole different set of rules and tax codes and planning for business people. And that wasn't taught, you know, like we were just talking about before, that's not taught in anywhere. Uh, and I started looking at the impacts that tax planning has um, and certain strategies have on business owners where I'm going, oh, it rate of return is not the most important thing here. Like, why are we taking all this risk in the market when the business owner is going to make the most money in their business? And you don't have to take all this risk and you can through tax and planning and structure, you can impact the peri a business owner's financial life way more.

Uh and I and you could kind of see where the wealth management pieces can can get commoditized as well. So wealth management sort was less appealing to me because when you're working with business owners you can have way more of an impact on planning with planning than often u you know getting again like we're talking about before 8% return versus 12% return or whatever that is right so um yeah so I I just was drawn to that from right from the beginning actually um and I think people and there's not a lot of younger guys that were doing it at the time and people are going why are you uh why are you going on that on on the more on the planning side. Yeah. Yeah. No, that's good. That's good. Yeah. I mean, it's cha chasing impact, right?

Like I think it's you we've talked about that this whole episode. It's probably the biggest thing, especially in Canada, it's planning for your estate. That's where the biggest bill will come in your entire life. So, if you're not ready for that and you're able to help business owners at least eliminate the financial instability um whenever an event like that happens. So, I respect that. That's that's that's very powerful. Yeah. And I think after the planning, it helps them stay in the country and and that helps that, you know, that's important to me. And one, I want to help business owners because I think they're the backbone of of of the Canadian economy. And if we can help them, you know, show them that they're not, you know, all their money is not going to go to the government and that they're being treated fairly or help them get treated fairly, then then they're not going to leave, right?

So, um, yeah, that matters. H and Robert, again, you said you're a dad. You've got young children. Uh you help families protect what they've built. Uh business owners more specifically. If a business owner watched that, they learned more about estate planning, why it matters, when is the right time to do that, um why it's probably the biggest ROI activity they can make whenever it starts to make sense for them at different stages of life. What's one thing that they could do this week right after watching this if they have again a at least 1 to$10 million business? Um what's a conversation they need to have an action step they need to have uh that would at least get them a bit closer to that planning and that uh peaceful state of mind for that for that matter.

Oh like an easy one go get a will. I mean, go go go talk to a sale lawyer. Have or I would say before you go and just talk to a state lawyer and get a will, sit down and say, "What happens to my money when I die?" Have that thought. I I say most people go through their life, right? You don't think about what happens when you die. And so, just I say sit down and have that thought. What happens when I die? What happens to my kids? What happens to my money? I built all this. What do I really want? And it can get a little bit philosophical. It can get a little deep, but that's a good thing. And uh you know, why why are we doing this? What what is this all for?

Uh yeah. So, I think for a business owner, we can just focus on making money. And so, having a thought every once in a while is like, why am I doing this? Uh you know, more money is it's, you know, you just keep making more money, but what's the real purpose? And and then that that's going to help your your business too, right? It's gonna help your vision of like again why am I doing this all? Yeah. Yeah. Yeah. Because it changes every year. It changes every year. A lot of things happens in the world. Uh some priorities change. Uh family and stuff. Joey, I can't wait till you have kids, man. I can't wait to [laughter] change. I think it's going to change view things for sure. 100%. 100%. I I want to I want to ask you a final question, Robert, and then we're going to wrap it up.

Uh, and this is the the the legacy question that we like to ask every guest at the end of the show, which is if this episode were to outlive you, right, and your grand grandkids would would watch that, um, and they were starting business in in Canada, what's the one thing you would want them to remember or to understand? Um, and even any Canadian business owner watching this about again protecting what they've built and protecting their family. Yeah. your f I I would want my kids and something that was important to me is is like family is the most important and so you want to keep your the family together. So you want to keep your family together. You want to grow something significant but don't lose sight of why we're making money like yeah you know don't lose your values you you why again like that I was talking about before why are you doing this um why are you making all this money?

Are you doing it to satisfy, you know, uh, uh, because you're self-conscious or are you trying to help support your family? And I think family is the most important for me and I would hope that my children, I impart that on on my kids, which is, you know, we're doing this because we want to keep the family together and we want uh, family unity and we want to look after each other's health. We want to look after each other. And that's what's that's what's important to me and that's what I I hope I I can impart on my children. So, uh, yeah, if they're listening to this, my great-grandchildren, I hope they have the value system, a strong value system still, and I hope that that trickle down to them. And, uh, and I through these conversations of wealth accumulation, but also estate planning, um, we're ultimately doing this for for for each other.

So, yeah, that's the important part. That's good. That's good, Robert. Well, again, thank you so much for your openness and and your willing to share and I think I can personally relate to a lot of of the values that you have uh which is great and uh again, thank you so much for for spending the time to to discuss. I think that's going to have a great impact on business owners uh hopefully in Canada and uh help them self-reflect on what's important for them. Um I think that's the most important thing there. So, um, and if you're a business owner watching this, the only thing we're asking to is to, [music] uh, like this video and share that to another business owner that could, um, need this self-reflection as well. Um, and we're going to be there every Monday, so you can you can tune in back [music] next week for that.

So, again, thank you for watching and we'll see you on the next one. Thank you, Robert.