February 22, 2022

I also cover this in a YouTube video. Click here to watch!

Why are you giving away so much money to Revenue Canada in personal and corporate taxes? 

By the end of this blog, I’ll have given you enough tips and tricks on financial planning mistakes for consideration, so you can stop making Ottawa one of your beneficiaries each month.

So often when my team is hired to build a financial and retirement plan for our clients, we uncover huge opportunities to save personal and corporate taxes.

The Ownership, Structure, and Features of your Risk Management Products are key to making sure you not only protect yourself and your family, but ensure that you are not throwing money away in taxes to put this coverage in place.

One client I am currently working with has nine Insurance Policies in place – from Life, Disability, and Critical Illness on himself, as well as his spouse and children. Seven out of the nine policies have either been designed with the wrong features, or there are ownership issues which is costing him extra money. 

He has not one, but two Whole Life Policies on his life and he is spending $129K a year in premiums just for these two policies. The policies had been designed for a dead person! Not for someone who’s alive. During 2020 he came to me because he had this great opportunity to purchase a commercial building, but he was tapped out of cash. So he signed some paperwork so that I became the Agent of Record on his policies which allowed me to put in a formal request into the insurance companies to see how much cash value was available in his two most expensive policies. He was five years in and he had already handed over $600K in premiums… but there was only $25K in cash available inside the two policies. 

It was designed totally wrong – he would not have access to the cash for at least another 10 years. He was vexed when I told him the news. 

But I had a solution for him. 

It required him to walk away from what he was currently doing and invest in a policy that would give him immediate access to cash. Now, by designing the policy correctly, he would write a cheque for $125K on a Monday and then he would have access to $110K of cash value inside that policy on a Tuesday – designed for while he is alive, and, of course, upon his passing to protect his family.

Too often I see policies that have been designed wrong. Take his Critical Illness policies on himself and his spouse, for instance: both are personally owned and he didn’t know that there was an option to make them corporately owned – this would have saved him 30% on the premiums. But it gets worse, it is a Term 75 with an ROP on death or surrender. But guess what? Again, it was designed wrong. The only way he could get his money back was to surrender the policies at age 75 or die. 

He is 52-years-old and he had already been paying premiums for five years, so he still has to make another 23 years of premium payments to get his money back or die to get his money back… but then he would be dead! There was a missing feature in the design of the CI policy. 

For those of you who have watched my two YouTube videos on Critical Illness and Split Dollar Critical Illness, you will know that you can add a feature called ROP 15+ years. This means that 15 years into the policy, as the owner of the policy, you now have choices. So, 15 years in, he would have been age 62 in my example, and he could surrender the policies at that time, while he’s still alive, and get 100% of his money back. 

But no. I had to tell him he had to make another 23 years of payments or die to get the money back… a worse situation for his spouse. She does not have any employment income and she is age 40. She would have to make another 35 years of payments, or die to get her money back. And what happens if her husband dies first? Then she is on the hook to continue making those premium payments for another 35 years.

The whole thing was designed wrong. Both from a feature perspective and an ownership perspective, paying for the premiums personally means driving up your personal income taxes – making Ottawa happy, and you very unhappy.

Fast-forward to the end of this particular client’s story, which I presented and received approval from his accountant; it left just the nine existing policies in place, but changed how he paid for them. I could save him $13,400 a year in premiums and over the next 15 years I would have saved him $215,000 that he was overpaying to the insurance companies.

Now, just by correcting these two Whole Life Policies and putting the correct one in place, I was saving him $10K a year in premiums, AND I was giving him immediate access to cash inside the policy. So now he could fulfill his goal of purchasing that commercial property.

If you’ve made it this far through my blog, I ask you two questions: do your insurance policies have the correct features in place? And have they been designed for while you are alive, or upon your death?

If your answers are “no” or “I don’t know,” then I highly recommend that you contact me via the information at the very bottom of this blog and apply to become my client.

Your Financial Planner owes a duty to you to make sure that they put a plan in place to protect you and your family. It has to be aligned with your goals in life and not just because they want to make a big commission.

By designing the Whole Life Policy properly – meaning the client would have immediate access to cash inside the policy while they are alive – means I am paid much differently. However, it is what’s in the best interest of the client, which is what’s most important. 

Another client example

This client has a corporation and wants to purchase rental real estate, however, rules are in place that won’t allow him to own the properties inside his existing corporation. So, what was he doing to purchase this rental real estate before he met me? 

He was taking the money out of the corporation, paying personal taxes at a 40% rate, only to then have the money to purchase the properties. The math is, he was keeping 60 cents on the dollar, but the remaining 40 cents was being paid in taxes. This is money he would never see again, only making Ottawa richer. 

I thought this was the wrong way to do this. So I spoke to his accountant, only to find out that it was the accountant who recommended that he purchase the properties this way! So the reasonable solution was for him to interview for a new accountant that knew what they were doing.

Now that the new accountant is in place, we are able to purchase that rental real estate in a separate real estate holding company AND we have access to 99 cents on the dollar instead of the 60 cents result he was doing before. Even better under this new structure, we are able to set up a Family Trust to protect the assets and implement some estate planning at the same time.

Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.

For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos.  The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.

By John Moakler, BMath, CFP, CLU

President and Senior Executive Financial Planner

Moakler Wealth Management


1 416 840 8544