35. Corporate or Personally Owned IBC Policies in Canada (Infinite Banking)

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So Happy Friday to everybody who's tuning into Wealth Without Bay Street. And I'm joined again by my amazing colleague, co host, the one and only Richard Canfield coming to us live from Chilliwack, B.C. in the WAC, also known as the WAC in British Columbia. Richard, good to be with you. Happy Friday.

Happy Friday to you, Jason. I'm excited about us doing, you know, we've been doing so many interviews lately and sometimes we just don't get a chance for just you and I to have a good chat. You know, we certainly have those all the time on the telephone and on multiple zoom calls throughout the week. But having a chance to have a conversation with our listeners and talk about some things that I think people are constantly asking us questions about. And what we find is people have common questions. They're similar across the board. And so one of the advantages of having this kind of a forum to communicate with everybody is we get to tackle and discuss them a little bit and everyone has a chance to see that resource. And hopefully if you're watching this on the Facebook Live, we might not be able to see your comments coming in on this podcast, but we can come back to them later. So go ahead and chime in with some questions and some comments. We look forward to seeing those and that sort of thing. So our topic today is going to be around who should own the policy. You know, that's a common question that we get for people, especially in business. So, you know, Jason, you work with a ton of business owners, you work with a lot of professionals who have professional corpse, you know, doctors of different styles and dentists, etc. So maybe walk me through how that comes up for you in conversation. Sure.

That's one of the most frequently asked questions when somebody is, you know, they're researching a process, you know, whether it's becoming your own banker, the infinite banking concept or they have some other, you know, objective in mind that they want to achieve and they understand that based on, you know, changes to the tax rules. And you know, we, we had a great podcast interview here recently with Frank Abate, who's an amazing extension of our team. He's a chartered accountant by trade, trust and estate planner. And so we bring him in when we're dealing with corporate owners who have very legitimate questions about what would be the best way for me to structure this, knowing that my corporation is going to pay the premium, my corporation is going to own the policy versus someone personally who says, you know, I really want to implement. Becoming your own banker. The infinite banking concept. What we want to address is one of the most frequently asked questions that comes up around tax. And I know that on a Friday afternoon.

The word tax can make some people spontaneously self combust, especially considering everything that's been going on, regardless of political leanings. Rich, you know that. So the government is creating a very significant deficit. And now there are a number of programs, of course, that are, they're required and helping people to be able to sustain themselves financially. But there's also.

A lot of spending that's going on that is going to create a significant bill and the money has to come from somewhere to pay it.

Yeah, I think I just saw another, an additional 37 billion being pushed out into the marketplace. And it's not, you know, it's not really like that money is there. It's a, it's, it's a pledge. It's, it's basically a mortgage on, on the, on the feet, on the future taxpayer to try to recover that, you know, and so the reality is, is that people do need assistance right now and that's one way that they're receiving it. But, you know, it's, it's not free money. Right. It has to be, it has to be accounted for in some method. So there's, there's going to become a point in time where the bills do. And so, you know, coming back to the people who want to have a policy and they have a corporation, maybe they're, you know, maybe they're a contractor or a truck driver or something and they've got a single corporation, but they're an owner, operator. You know, really the business is them for the most part, or them and their spouse. They don't necessarily have any employees or they have maybe one employee, but they're just a, they're, they're providing a valuable service. They have the corporation to receive, you know, income, but but ultimately, they're pulling a lot of that out anyway so they can service their needs. They have the corporation doing some things kind of for them, et cetera. And they're always looking to say, okay, well, how can I leave money in the corporation so I don't have to take it out and have some additional tax hit, you know, and ultimately the tax is going to exist one way or another. It's just a matter of when you're going to pay it. Are you going to pay some of it now or are you going to pay it at a future point? Because in general terms, there's always going to be a requirement. You know, sooner or later you're not going to be here, which means for a lot of folks, the business kind of goes away then also, or it has to transition to someone else. And so there's always going to be a taxable consequence when that takes place. Either the business is gone because you're gone, or it gets transitioned to someone which has a similar impact to basically you exiting the business, which means there's going to be a taxable consequence.

That's very true. And when you have a corporate owner who has surplus money inside the business and is making a decision, do I want to take this surplus money and do I want to invest it somewhere where it's going to trigger passive investment income? And if that occurs, then the tax rate on that is going to be 50%.

At minimum.

Again, we always share this with folks. Richard and I are not chartered accountants. We're not providing tax advice or anything of that nature. We're just sharing with you the real conversations that are happening. And thankfully, we have designated expertise where you have one chartered accountant talking to another. But the conversation typically goes something like, okay, your money must reside somewhere. And so if you choose to, if you think about it, this is your business that you're operating. And if you're taking money out of your business to invest it in someone else's by investing in stocks or whatever that is, that's triggering this passive investment income versus taking that money and putting it inside a corporately owned insurance contract. And that insurance contract is not captured by the passive investment income rules. And the daily cash value accumulation inside of that insurance contract is triggering zero, zero tax. Well, if we believe that tax rates are going up in the future to take care of this massive bill, we're going to create a deficit that hasn't been seen since World War II. And so the money's got to come from someone insane.

By the way, just saying that statement out loud is. I mean, it's crazy that that's the case.

And so if you think about this, if we believe that tax rates are going to rise, then tax free becomes instantly more valuable.

Right?

And so it boils down to money must reside somewhere. If we put it inside the policy and we know that we're getting daily growth that is uninterrupted by pandemic, it's uninterrupted by government intervention, it's uninterrupted by a bad economic cycle. It just keeps growing on a daily basis. We now move the conversation from, okay, as a corporate owner, I see life insurance premium as an expense versus now we shift it over to the asset side of the balance sheet and we still provide the corporate owner with complete control and access to money so they.

Can keep growing the business.

Right? And so take the capital, put it inside of an instrument that's growing, but the benefit of that growth is working for you and the capital stays in the business versus, hey, I run a really successful operation, we sell widgets. But I'm going to take all my retained earnings out of the business and I'm going to go invest it in Amazon. You should be redirecting that capital back into your own business and expanding it and growing it, because the business is the entity that needs the money the most. And when that day comes and a death benefit is triggered, that gives rise to a whole other suite of tax advantages as it relates to the capital dividend account and how that's credited and how that's dealt with. So corporate owners pick up on this very, very quickly and chartered accountants pick up on it very, very quickly because chartered accountants typically think in terms of tax code versus the corporate owner thinking in terms of capital. When we bring those two conversations together and we represent all the advantages.

It.

Falls into the no brainer category very quickly.

Yeah, absolutely. And even for the folks that maybe they're just kind of beginning or starting in business and they're still trying to hit their stride and get to that stage where they're really able to kind of ramp up and they, and they're, they're always feeding the beast, they're feeding the machine, which is, which is the business. A lot of people will say that the business is like your baby. Well, I heard someone else share with me the day. I thought I was, I thought it was a better analogy, is that, well, actually it's more like a conjoined twin because you're literally connected to that, the business. You know, you eat, sleep, live the business. And so, you know, it comes home with you and all those kind of things. That's, that's very common. A lot of times it's operated out of your home, right. So you know, you can own the policy personally and you can still access capital from a personal policy. And your business is a captive customer of yours. So you can also fund money to the business and then create arrangements where the business has to return that capital to you as the, as the owner. So there's advantages to both of these scenarios, right? Depending on the size or level of your business and how complex or convoluted your, your financial junk drawer is might determine how that structure is built for you. And so there's an even. For folks that have, you know, they've been well established, they have an extremely successful business, maybe they have, you know, 10 to 100 employees. Like they're, they're, they're growing. Well, they're in a, they, they have advantages in having, yes, corporate policies, but they, they often still end up seeing and getting the advantage of the personal one as well by taking enough already, you know, income out of the business anyway to support their lifestyle that they're usually quite good at managing in their internal family budget. And so they have an allotment available for that. And so we can put that to work in two locations. Now you're creating a hedge that's even more beneficial for all parties because maybe you have business partners or there can be some ancillary risk there and you're looking at holding companies. Whereas if you're just looking at the nucleus of the family, you know, Nelson would say that the you and me level, well, you know, you, you get some of your highest advantages around some of the, you know, creditor protection related elements of these types of policies because, you know, the, the advantage of it being tied to an insurance vehicle is that in the eyes of all these, you know, the creditor realm is that, well, the purpose of that is for the insurance is to support, you know, an influx of an infusion of capital in the event that we lose a primary income earner who no longer has the ability to support the family. That's, we're looking at replacing all this future income potential that can be truly devastating, you know, in a family's life. And so as long as the beneficiary designations are matching in a, in a way where they're under what we would refer to as a protected class, you know, in general terms that's, you know, the sideways. So like a spouse, kids and grandkids and parents, it's typically the track of what would refer to as a protected class beneficiary. There could be some additional advantages there. So we find that often there's reasons to look at having policies at both scenarios. To have the corporate one as you're growing or as you grow, and to also have the personal one, Many people, as they're starting out, we start at the, at the UNME level because there's a protectionary need that hasn't been solved yet, right? So, yes, we're doing the banking scenario, but, oh, by the way, like, your family's, like, pretty poorly protected. We should also fix that at the same time. Let's do that. Right? And then, boom, as your, as your trajectory grows with the business, then we can either add on or at the same time, we're adding on this, this other asset. So you have the ability to create the asset in both, both, both scenarios. You maintain control over the whole circumstance.

And being in a position of control.

It'S very peaceful. And if you think of the things that, the struggles that many families, many business owners have been dealing with these past several months, and we've spoken to a countless number of clients who have been preparing for this and who've had money growing and accumulating inside of these policies, personally and corporately owned, and they're telling us, literally, I wish I could reach through that computer and just wrap you in a bear hug because we're okay. We're going to be okay. The money was available when it was needed, and we know that we're not interrupting any of the daily growth of our own capital. We're accessing policy loans without question, without any gatekeepers, without any hassle, and we're able to take care of our family and our business. We're keeping the doors open, we're keeping people employed, people who rely upon the business to provide for their own families. And that is just, you know, it's really unfortunate that we've had to experience a pandemic event during our lifetime. But, you know, when we're shouting from the rooftops that these policies can't lose value and the pandemic came on. Well, gosh, you know, I'm positive many people were skeptical. Like, is this really the truth? You know, could my insurance policies be at risk here?

There's always someone telling you to get off the roof.

I hear that all the time. Jason, get down from there. You don't have to shout anymore. You can use Facebook and YouTube.

Right?

But the sense of relief and the elimination of stress Gosh, you can't put a price tag on that. You just, you simply can't.

And yeah, that doesn't show up in an illustration.

No, not at all.

And that's one of the components of the Totally unseen that Nelson would talk about. Absolutely. And you know, I remember, you know, going back to, he told us that story going back to like it was like 2011. There was all that, that shenanigans going on in Greece and in Cyprus, you know, the country of Greece was basically going bankrupt. Yeah, he was traveling to Austria, watching the news, having coffee with a friend. He's oh well, last night my cash values went up. You know, that's that peaceful, stress free way of life that he was able to experience. And by the virtue of us having the true blessing to, to find his book, to meet with him, to learn from him directly, to really recognize just how impactful that is. And hey, I think to consider myself still a pretty young man and I've only lived a period of time on planet Earth and so there's so much more living yet for me and the learning is only starting and I don't have the timeframe in history of being alive, taking air into my lungs to recognize and the awareness of these financial upheavals in the way that a guy who was 88 years old did. He saw it, he saw it all. He lived through a world war. And so he had this frame of reference of this, this historical experience that is really unmatched by many. And he got to understanding the Austrian economic cycle and knowing about the business cycle. He was able to reference these things that transpired throughout that period of his own history and, and then relate them to us. And you know, I'm just so grateful to, to have to be learning and knowing and hearing stories, true, true stories that stem right from the life of a person who's lived. Because that's a, that's an awareness for me. And I think that, you know, being, being blessed by Nelson's message and having the ability to share his book and his work with others, people are kind of seeing that they can see through his history what's happened and then what might happen coming forward and how they can be protected by utilizing these types of policies.

That's a very, very good point. Absolutely. And you know, I think it also contributes to people having the ability to maintain a positive mindset through, you know, circumstances that we find ourselves in.

Based.

On what's happening with COVID 19 and there's an advantage to being able to navigate your way through a crisis like this and be able to maintain a positive mindset versus, you know, being in a situation where you're just. You're in a position of not being in control. And so naturally, that would create stress and that would create anxiety. And, you know, we've had those discussions with people who have said over the years we've shifted away because we've changed the way that we think. We've shifted away from handing money over to other people to invest it in mutual funds or stocks or anything like that, which there's nothing wrong with that. Those are financial tools, and those are things that people can invest their money in. But for those who have changed the way that they think and they've moved away from that and they've got money now flowing into their own system.

They recognize now through this crisis that we were speaking the truth the entire time. Their policy values just keep going up. And the reassurance comes with that frequent, that effective communication that you're having with clients.

Because, again, you're impacted. You're influenced by the people that you're surrounded by. So if you're doing something that your peer group isn't, and they can influence your mindset, they can influence your perception, they can influence the course of action that you take. And so that's why it's important to remember you're not a lone ranger. The Wealth Without Bay street platform was created to provide people those ongoing reminders of just how incredible this process is and the advantages that it represents. And bringing in all these different guests that reinforce the message. It creates that sense of community where people feel like, okay, I belong here. And for those of us who are just joining us on the Facebooks or the youtubes or I think we're only live on Facebooks right now. But for those who are joining us, subscribe to Wealth Without Bay Street. Not only do you get to hear from Rich and I on a regular basis, which is a treat in and of itself.

So good. Who wouldn't want more of that? It's like going to the ice cream store every Friday.

Well, we also bring on just incredible guests.

And I'll take two scoops of Knowledge, please.

You want that on a waffle cone?

Yes. Can I get it on a policy? Do you sell the policies here? No, sir, we don't. Now we need to have. Which we haven't had in a while. Rich, the big sell moment. The big sell moment is this book, Becoming youg Own Banker, authored by the late R. Nelson Nash. Dear friend, mentor, who's had an incalculable impact on our lives, both personally and professionally. We would wholeheartedly encourage you to add this book to your library. Now, there's a link that's embedded in all of our YouTube videos. So if you hit the Wealth Without Bay Street YouTube channel and you can look in any of the show notes, you'll see the link there. You can go and get yourself a copy of this. We also have an amazing masterclass which expands and educates on the process of becoming your own banker. The infinite banking concept. We've invited Bill Morneau and Trudeau to take that class. Now, they haven't responded to our invitations yet, presuming that they're rather busy doing other things. However.

Could you imagine for a moment what life would be like, what life would be like for Canadians if we didn't have to worry about government intervention as it relates to how we provide for our families and how we employ people in our businesses and how we take care of things? Regardless of political leanings, whether you're Conservative, ndp, Liberal, doesn't matter. If you can work with money in a never taxed environment, if you're structured properly, if you're advised properly, if you're taking the right steps in the right course of action, what would a person prefer? Where would they want their money to reside?

A lot of people like the idea of working, working with like as an example, a co op or a credit union because you get some money back for supporting that organization. And it's, it's owned by members. It's, you know, you get a membership and there's advantages to the membership and you're supporting essentially like a little micro community of people that all share in that. You can go shopping at a co op store and you can go there on a Monday and someone else is there every other day of the week. You may never bump into that person. Right. You're all part of that same community, that you're all connected to that organization. And ultimately the general premise and kind of overall theme of mutually owned whole life insurance is that by being a participating owner, that's the only way you can own a part of that pie. And we all share in the advantages of what that pie is producing and how it's managed. And if we're all, you know, you go back to the grocery store example, Jason, you know, we both owned a grocery store. We were in business together. We owned a Sobeys. Yeah, well, I don't know about you, but my wife and I, we're gonna go to the Sobeys. That you and I co own now, you're gonna see the advantage of me shopping there. And if you and your family, you got a bigger family, I'll see a bigger advantage because your family's got more kids.

Your family shops at the Sobeys. Right, Right. And we're not taking our money outside of that system. It's coming back in to the business that we co own. Well, if we just added 100,000 more bodies into the co ownership of that business and then we're all supporting the same store, isn't that going to be a very profitable store?

Absolutely. If we're all walking out the front door and not only paying retail, but putting a little bit of extra money into the cash register as well.

Right, that's right. And so that's the kind of way that Nelson was trying to explain it with the grocery store example. He we're just looking at, okay, let's actually add some scale to that. We actually, if you really think about it and you think, okay, well how many people are co owners in this business? Well, they're all over the country, right? There's people all over Canada that own, you know, own a piece of a mutual insurance company. And the only way they can do that is to have parole, life. And this depends on how much they're depositing into it. You know, if you have a bigger plan, okay, great. If you have a little plan, okay, great, you just have a prorated portion of that pie. That's it. Right.

But you are a part owner and you know, this isn't anything new. I mean these, these carriers in Canada have been operating since 1847. And I'll share a quick story with you. I was at, this was back in 2013, I was at a.

Leadership conference in San Francisco. And at this conference there were of course folks that had been in the business for several decades. And there was this dinner that was happening on the first evening. And San Francisco is a beautiful city by the way. If you ever have an opportunity to, to you know, visit that, you know, once the borders open up and stuff, it's, it's a beautiful, beautiful city. And so when you say in the.

Business, you mean people in the, in the financial industry?

Yeah, yeah, exactly. In life insurance in particular. And so, you know, there was this beautiful dinner and reception and I was standing there speaking to a gentleman. He's been in the business for about four decades and he lives and works in Ottawa. And this young guy kind of comes into the conversation, he leans into Michael and he leans into him and he Says, hey. He says, did you hear that? Par Dividend paying whole life is making a comeback. Did you hear that? And he's just bursting at the seams, excited, right? And Michael just puts his arm around this young chap and he leans into him and he says, son, it's never gone anywhere.

And it was just, it was one of those moments where I'm standing there watching this and I immediately thought to myself, that's absolutely correct, that's the truth. And it's just that as a society, you know, we again, we tend to sometimes lose sight of. If the minority of people in the world are accumulating and controlling wealth, why do we do what the majority do financially? Something to think about.

We have, I mean, I was chatting with someone the other day and unfortunately they had, they had gone through their entire kind of, you know, the bulk of their financial life up to that point, doing what they were taught to do and what they thought was the right thing. And they were following a model that is very common. It's the buy term and invest the difference kind of a format. And they thought everything was going to work out well. But the reality and not the case for everybody, but certainly it's been the case in a lot of people I've spoken to where they've kind of lost all the time because now they're 20 years later. They thought they would be in a position where they would no longer need the insurance and they could get rid of it, they could let it go because the price was about to go up and they would be, you know, self insured. Well, they would, they would have been self insured in a taxable account which eventually, if they did pass away, all of that account would be taxable and their family would get less money. And more importantly, that didn't work out that way because, well, life happened and life happens to everybody all the time. It's happening globally now because of this, this pandemic scenario. But you know, people, the economies adjust, people lose jobs, they temporarily unemployed, they, they, they just get tired of the career they're in and they want to change careers. There's retraining, there's costs associated. They dip into those, those other saving or investment resources and they pull the money down to do that to solve immediate financial problems that exist. And the reality is they weren't, they, they're not, you know, investing the difference, they're spending a lot of the difference. And so the pile of capital they anticipated or thought they'd have 20 years ago just isn't there. And unfortunately, we hear that a lot. And so now we can't make up the time. And so that's why Nelson and many of these individuals you talked about, the story of this fellow in San Francisco.

These individuals who've understood the power of par, is that it's so consistent. It's just like a rock. And you know, you go. People go to the mountains and they often. They like to go to the mountains because I just feel so peaceful when I'm there, you know, and, well, that's kind of like what par whole life is in your financial life and stuff will happen, but you can always rely on par always, right? And it'll get you through the tough times. It's been doing that for over a hundred years. So, you know, it's. It's just interesting to see and you hear these stories. We meet with people all the time, and it's unfortunate that that's happened for these individuals, but they're ready to. They're now, see, you know what? This hasn't been working. We need to do something else, right? And they're ready to get started, which is great because you end up. When's the best time to plant a tree? 20 years ago. The second best time is today. Right?

Exactly. And the worst thing to inherit is taxable.

Accounts.

It's the worst thing you could inherit. And so, gosh, you know the theme. And thank goodness we really didn't, you know, do a deep, deep dive into the whole, you know, taxable events and the tax advantages of this process. And, you know, I think we don't want to make people feel, you know, stressed on a Friday afternoon. I mean, we want a great conversation with people and share, obviously, again, the benefits of implementing this process, which you can do both personally and corporately. And.

It'S been so interesting these past several weeks, in particular with people who are connecting and saying, we've watched.

A.

Bunch of podcast episodes, we have read books, we have tuned into webinars, which we have a webinar coming up on Thursday the 27th, 6:30 Mountain Time. And so that's going to be a great. That'll be a great session. Doing a bit more of a deep dive into the process of becoming your own banker. Looking at some real scenarios. It's going to be phenomenal. Just bounce on over. You can head on over to ascendantfinancial Ca. Click on the webinar tab, register, let us know that you're from Wells Without Bay Street. I think there's a way to do it through Wells without Bay street as well. I just don't remember how to do that.

I believe there'll be a link and when this, by the time this airs on the actual podcast.

Oh, it might even be the webinar might already be done.

Yeah, we might have to put a link to like to a replay.

Let's do that. So, so if you're tuning into this.

And it's not on the Facebook Live.

On the Facebook Live and it's after August 27th, we already did a webinar. It was fantastic. And there's a link included.

Feedback was amazing.

And you can go and get the replay on that. Thank you for that reminder, Richard, because we have so many podcast episodes on the shelf that are in editing with our amazing production team who do such great work for us. All we have to do is have all the fun and entertain and inform our audience. And our production team does an amazing job getting everything packaged up and posted. So any closing remarks, Richard, that you want to share with our listeners?

I think, you know, one thing I'd just like to share is that we're, you know, at the time of this recording, we're closing into the end of the summer months and people are going to be getting right back into that, the fervor of, of getting back into back to school mode and everything. And, and that's going to be different this year because back to school is just not going to be the same. And, and so it's going to have to, it's going to cause, it's going to automatically cause people to rethink what's going on in their life, their life scenario, how do they go about their day to day operational life because of the overall circumstance. And I think people have been, they've had time to ruminate on how their life was before pandemic and what their life will be during. And as we get into a post pandemic world. And so I think that I would just encourage you to really ruminate and think on, you know what, what could you be doing differently in your financial life that would serve you the best, give you the most control over what's going on in your world for your family and reducing the amount of control from third parties. Right. I believe that like our friend Caleb Gilliam says, is that you are your greatest asset. Yeah. And it's this thing between your ears, this squishy mass of brain power in between your ears that is the literally the most powerful computer on the planet. And if you think through the utilization of it when it comes to your money and you have the right kind of tools that you can work with to, to maximize what this brain power can do. You put yourself in the highest advantage. That's my opinion. And I would just encourage you to really think, think about that and to consider, consider starting this process or at the very least, just consider getting crystal clear on your budget, on how you're spending your money and how much of that money is walking out the door. How much of that money can you contain.

And keep operating in your family for more than your own lifespan? Right? That's really one of the powerful things that IBC allows us to do. And I'm just so grateful that we have the ability to do it.

That was wonderfully said. Thank you, Richard. And thank you to all of our listeners.

If we may ask you for a favor. If you smash the like button, if you leave a comment, maybe give us some feedback, let us know if you're getting value from the content. If you have an idea of a great guest that you think would bring value to our listeners, we'd love to hear that as well. We're always looking for fantastic people who come from a place of giving and who are servant leaders who really want to share. We would love to connect with those people and have them be guests on our show and we want to wish you and yours an amazing weekend and we hope that this episode finds you healthy and we look forward to connecting with you again soon. Richard, Always good to be with you, my friend.

Thanks for listening to the wealth with Elbay street podcast where your wealth matters. Be sure to check out our social media channels for more great content. Hit subscribe on your favorite podcast player and be sure to rate the show. We definitely appreciate it. And don't forget to share this episode with someone you care about. Join us on the next episode where we continue to uncover the financial tools, strategies and the mindsets that maximize your wealth.