The concept of using “other people’s money” is a tool many real estate investors are familiar with. But how can OPM be used by real estate investors, medical professionals, and business owners, be used to build wealth while saving saves at the same time? In part 2 of my interview with insurance expert, Brian Laundry, we guide you through a proven tax planning and insurance planning approach that can help you achieve just that. Join us as we delve into the intricacies of this strategy designed to save taxes, defer income, create wealth, and secure a lasting legacy. If you’re eager to gain a deeper understanding of how you can supercharge your financial journey while saving taxes at the same time, keep reading and watching to find out how OPM tax planning strategies can help you. And, if you’re wondering why more Canadians don’t know about these strategies, we talk about that too.
If you haven’t yet, we encourage you to watch or read part 1 of this video series as well.
Once you’ve seen that, we recommend watching the Case Study that goes through numbers in detail.
Video Transcript: OPM tax planning strategies to build wealth & save taxes – Part 2
George Dube:
Wow.
This started off to be kind of a 30, 40 minute discussion with Brian Laundry and myself on how to use other people’s money to save taxes, defer, create retirement income, & legacy; address the multiple group of other topics that are related to this.
And as Brian and I started talking, one thing led to the next and we’re well over an hour. But now welcome to part two.
I’m George Dube, saving the world from tax one bow tie at a time.
What about liquidity and OPM tax planning strategies?
So one of the objections initially that people will toss out and whether again that’s a business owner, real estate investor, other investments, alternative investments, traditional healthcare practitioners, et cetera. But while term insurance seems to be relatively inexpensive, permanent insurance is significantly more expensive and I don’t want to lose my liquidity. That’s a lot of cash that’s required for some of this planning. So while, I mean, how do you like to initially address that question? I’m sure you receive it virtually every time.
Brian Laundry (01:22):
Well, I mean, I’m no different than everybody else. I also concern myself with liquidity. I often comment that last time I leased a car, it was a four year lease and after two years I’ve started to get antsy. I want to add my lease, I want something new. And here I am. Or here my industry is showing people projections for 10 years, 15 years, a hundred years. That’s really hard to get your head wrapped around. So if you were to Google all the things wrong about whole life insurance, liquidity would be right up there. So somebody would make a video about here’s all the things that are terrible about whole life insurance. And liquidity is absolutely one of them.
Brian Laundry (02:05):
First off, we have to make sure we’re having the right discussion with the right people. But second, when we build structures, because these product designs, we do have some latitude on how we can create structure with costs that’s understood and not onerous, but allowable deposits, which is significantly more that are optional. So it’s vitally important, if nothing else, during the process we might be able to identify where insurance fits with your reorganization, where the money’s going to come from. It looks wonderful. But we design our products based on the next 10 annual reviews that we’re going to do. And the measurement is more of a function of “don’t do things that put people in a financial situation that would be uncomfortable”. And that is more of an art. It is a science to be honest, but you’ve got to make sure liquidity is always a paramount concern. Again, I don’t want to go to somebody on their anniversary date or the policy and say, geez, I need a check for X dollars. And they go, I don’t know where that’s coming from and that makes me uncomfortable. So that’s the wrong number. So there’s a lot of time spent on the psychology and the math of that number. I’m not sure if that’s the best answer, but that’s sort of the approach that we take.
George Dube (03:32):
And it still goes back to in part one of the points you brought out earlier, just as plain and simple as it’s not an either/or if you’re going to leverage that policy. Not that leverage is the right answer for everybody. But as you indicated, real estate investors, that’s what they do every day, practically speaking. Other business owners, there’s very few that don’t have leverage. So it’s not necessarily that either/or decision.
And again, I’ve seen through the meetings and including my reviews that you’ve done for me in the sense of, yeah, what are those comfortable numbers? And it’s not just George, it’s George and Robin, where there are spouses involved. Maybe the spouses have slightly different opinions. And I like the way you go through that to ensure everybody’s on the same page and comfortable.
Brian Laundry (04:26):
Interestingly enough, it might not be a liquidity specific response. But it goes back down to things are expensive, insurance is expensive. I think you even commented on it.
So if we’re going to nod our heads and say there’s a cost to insurance that’s premium, which I acknowledge and that’s very important. We understand what the costs are. The costs are different than what you can put into the policy as a deposit. There is a major difference.
But if we’re going to have that conversation, then we need to at least acknowledge the cost of the tax that you’re currently paying because again, the system is designed for you to weather that storm to accept it, right? So if I had a choice between cost over here to tax and cost to premium, I’ve already made the argument I’d rather pay premium for my family and tax benefit than to CRA.
So it is a real balancing act because you need to spend a lot of time educating. I mean, I know where we end up, but not everybody understands where the tax bill is hitting them. And we have to spend a lot of time to uncover that, to demonstrate the real value and the real actual cost of these things, which is not often worse than any tax that you’re paying.
George Dube (05:37):
I think that’s an awesome point. It’s so easy to look at the cost of insurance and say, that’s too expensive, this, that, or the other thing, but what’s the cost of the alternatives?
Brian Laundry (05:48):
Right? I mean, geez, we can go on all day about the different tax costs. That’s a big part of, I’m sure you have lots of videos that are going to go through all of those, but you’re right, premium is premium as a cost, but I think certainly it’s well worth the price.
Example planning scenario: 4 options
George Dube (06:04):
Why don’t we use a little bit of an example, and I know we’re going to have some follow-up videos that go in a lot more detail with a couple of examples, but let’s just play in a scenario where we’ve got a business owner, investor, healthcare practitioner, hula hoop factory owner, whomever. Right now today, if they were to be hit by that proverbial bus and holding hands with their spouse because the taxes from an income tax perspective are triggered in most cases when the second of the spouses passes away, let’s say that bill today is $2 million. So statistically speaking, let’s pretend that’s going to be a $10 million number when that bus has my name written on it. What should we be thinking about with the policies in terms of what are we doing today to address that ultimate that tax bill? And what are we thinking with the insurance policy there?
Brian Laundry (07:10):
I love simplicity in this example because there’s really only three ways this can go, maybe four, it’s that simple.
Option 1: Self insure – pay your own cash
So we have a $2 million problem, the default option, the one of which everybody by default does is your self-insured. You don’t have insurance. So for somebody to grow a portfolio to become net 2 million net tax, you need pre-tax, I don’t know, 2.8 million. So you need to save to get there. You have to self-insure. We can’t ignore the fact that, well, when you invest in a corporation to save, you’re paying tax along the way. We’ve already talked about that. And what if you don’t live it that long? And then if you don’t live as long, you’re going to have a shortfall. So again, it goes back down to the default option is pay tax, and it’s not a very attractive one, it’s just the default.
Brian Laundry (08:04):
Option 2: Buy some life insurance
So then an insurance person like myself would say, well just buy some life insurance. This is the premium, the outcome is $2 million, and I will be able to justify using corporate dollars to fund it. And it comes out tax free. And the numbers really are great. I mean, they are, but nobody does it or very few people do it because nobody wants the expense. That is life insurance, certainly when it’s not tax deductible. So there goes two of your options.
Option 3: Buy a cash value policy
The third option is we implement structures that we’ve been referring to these cash value policies. Certainly the IRRs are great, we have an investment component, and that solution looks wonderful from a tax perspective and an IRR. But again, it comes back down to George, I don’t want to write a cheque for this amount of money every year. I want to go buy real estate.
Brian Laundry (08:54):
I don’t want to give up one for the other. I love my kids, but they can just deal with it.
Option 4: Implement tax planning and insurance planning to provide OPM tax planning strategies
And the fourth one, ironically, has to do with financing the insurance, whereas we implement a structure and then borrow the money immediately back. So we get the life insurance. Then we borrow from the life insurance to secure your real estate. So, your net outflow is only the cost of servicing the debt less those deductions.
So what’s interesting to me, I mentioned before, I think there’s three and a half, maybe four solutions. The last option there requires using other people’s money, bank money and the collateral that we’ve talked about.
The alternative goes back to number one, when you don’t have enough money to create liquidity and you haven’t had enough time to self-insure, you’re going to sell assets, which is exactly what we don’t want to do or didn’t want to do while we were living.
Brian Laundry (09:55):
So guess where you’re going to go right. Back to the bank?
And unfortunately now you have perhaps distressed assets because you just lost mom and dad who were the primary business owners. Maybe we’re dealing with probate issues, equalization problems, legality issues. I mean, you have a liquidity event and now we’re relying on the banks to provide other people’s money at the absolute worst time to negotiate that deal. So that’s it. That’s the lay of the land. We have those three and a half options, and I think it’s important to do the math in all of them.
Why do people think that whole life insurance is terrible?
George Dube (10:33):
So why do people think that whole life insurance is terrible?
Brian Laundry (10:35):
Well, again, if I’ve done lots of meetings where I’ve Googled why is whole life insurance terrible and we’ve watched videos together or read articles together and I’ve been able to refute the points.
Let me tell you a story. Okay, maybe not making me look like the smartest person in the world, but a couple of years ago I decided to replace my truck with a Camaro. Now, Camaro does have four seats, but the backseat’s pretty small. I have three children, I’m a family of five. My son is gigantic. Now, do you think that was a suitable purchase? It didn’t take me long before I got rid of the Camaro and got myself a new truck because it wasn’t suitable. There was nothing wrong with the Camaro. It wasn’t the Camaro’s fault. It wasn’t the person who sold me (the car’s) fault. I made a decision that was not suitable for my circumstances.
Brian Laundry (11:26):
So when people have an opinion that’s negative about whole life insurance or insurance in general, because they don’t know what they bought, they no longer speak to the person they bought it from, and often it wasn’t suitable. And again, from an insurance person perspective, we go through the front door and say, here’s all your insurance options, and as a consumer, you choose the one that you want. That’s how we do things. But when we work together in tandem with a tax team, the plan and the tax structure dictates the insurance need. So it’s a long-winded answer, but the people who don’t like whole life or have a bad experience of life insurance just haven’t had the privilege of working with real professionals.
Why an insurance specialist vs any insurance advisor?
George Dube (12:16):
So perhaps piggybacking on that to a degree, why shouldn’t people just go to their own insurance advisor or someone that they’ve heard of, seen the advertisement for, et cetera, why should they go to someone like a Brian?
Brian Laundry (12:36):
Well, I will openly say that Canadians are vastly underinsured. So, if every Canadian were just to call somebody that they knew who was licensed in the products of which I sell, whether it be Brian or otherwise, they’d be better off to do something than nothing because the vast majority of Canadians don’t do anything.
So that being said, when you are talking about more affluent clients, more complexity, people who work with professionals, financial advisors, CFPs, CFAs, obviously accountants, tax experts, you’d rather surround yourself with professionals that are aligned with those professionals. It’s a better collaborative approach.
So in my view, I’ve seen a lot of insurance work that some of your clients have sent me, and I often say, there’s nothing wrong with this. This is great stuff. It’s just you’ve outgrown what you have, no different than your corporate structure. You’ve just outgrown it. You’ve matured past it. Let me show you some alternatives. Let me go down a rabbit hole of some tax plan that you don’t know exists and how we can do these things.
Look, it’s like anything, George. You become experts over thousands of thousands of thousands of hours of practice and time. And there’s not that many life insurance people out there, much less ones that can call themselves experts. It’s not a very big industry in that respect.
George Dube (14:03):
And I think that was one of the things that caught me off guard a little bit when we started working on some of this planning. And I was chatting with an advisor in BC and I gave your name, Brian, and one of your colleagues, Dan. And by using your first names, they immediately knew exactly who I was talking about. And so then you have to ask the obvious question, well, do you go to the post office? Are Brian and Dan on the most wanted list? Or is this okay? Type of thing. And there’s obviously a very positive conversation, but because you’re working with really the advisor’s, advisors, that says something.
Brian Laundry (14:54):
My business model’s a bit different in that I parachute in as an expert to other life insurance licensed financial advisors. I mean, I can tell you late last week, I met an advisor’s client, one of the best clients, and this advisor’s proficient in insurance. She understands what she’s doing, but when a corporate structure and an org chart was put on the screen, she just kind of said, I don’t know. And she asked for my involvement, and I’m very happy to say after the meeting, she called me right away saying, that was the best meeting ever. Thank you so much.
Look, it’s just the next level. But it’s enjoyable. It’s fun to collaborate with other professionals. And if you don’t learn from somebody who’s better than you, then you never learn. And I’ve been really fortunate to be around some really smart people to learn a lot. So that’s all. I mean, that’s why a big part of what I’m doing personally and professionally is mentoring the next generation of advisors. I mean, it means a lot to me to pass down this knowledge and collaborate with these professionals across the country. So anyway, it’s certainly a passion of mine, which I’m sure you can hear with the enthusiasm of which I speak about it.
George Dube (16:05):
For sure. And it comes across, and obviously a number of clients that have decided to use other advisors in terms of whether it’s a couple of organizations in particular, and I mean being nice about it. It’s not that there’s not other advisors out there just as it’s not like there’s not other accountants out there, but there’s often an enormous difference in terms of those advisors.
Brian Laundry (16:34):
Yeah. Well, and the same is said about you, George. I mean, I meet a lot of clients, as you can imagine. I am referred financial advisors’ and accountants’ best clients. So I do a lot of meetings every year as a specialist. And not every investor, real estate investor or otherwise, has great leadership on the tax side. I’ve made very good headway in my business starting with tax and structure because it’s a gap that people have. Experts are hard to find and you hope to be referred or introduced to the right ones and then get in their network. And I like to think that you and I have created a pretty strong network, so I’m really happy.
George Dube:
Absolutely.
Can I be too old, too young, too ill for this type of insurance & tax planning?
Again, one of the questions, and having heard you answer it numerous times now, but I think for people watching this, it’s a great question in the sense of I be too old for this insurance, perhaps even the opposite, can I be too young. How do you like to reply to those types of questions?
Brian Laundry (17:44):
Yeah, I think a lot of people put objections into their own planning that are based out of emotions, right? I’m too old, I’m too young. I was sick once before, I used to have cancer, therefore I can’t do this. It’s a very complex business. But right now, I mean, I’m booking a meeting this week. We were just doing it before we started this discussion today with a couple that are 76 years old and 73 years old, and the numbers look phenomenal and they’re approved and everything’s fine and the numbers look great, and we’re doing some really wonderful planning amongst two additional generations.
I’m now doing another structure for a business owner who’s 36. Now, I’m 44 right now, so younger than I. But as you can imagine when it comes to insurance planning, when you get in, when you’re young and you know what you’re doing and you have the cashflow and the expertise around you, the numbers are just insane over the long haul.
Brian Laundry (18:44):
I mean, they’re just remarkable because the cost of insurance is much lower. Ultimately, I don’t think it’s wise for people to exclude themselves from this discussion because it doesn’t always mean it’s true.
And I’ll say one more thing. When we talk about using other people’s money to use insurance to buy real estate and what have you, when we talk about deductions, and I’m not going to get into detail, but there is a tax deduction that we talk about in our meetings about a portion of the cost of insurance. Essentially, you get to deduct a portion of your mortality expenses. You can’t do that with any other loan. The older you are and the not as healthy as you are, that second deduction gets pretty significant. It actually can make the numbers look better. And again, nobody who’s watching this video would know that that’s what Dan and I do. We grind out a lot of math. So I hope people watching don’t have this aversion, this idea that they don’t qualify or disqualify themselves. It would be a shame.
George Dube (19:45):
And I wanted to reemphasize one point that you made there a little earlier in the sense of, one, have the discussion, but it may not even be that 76 year old or whatever it may be. It may be that next generation or I think you said two generations that you’re working with. So it can be that extended family. And then from a tax perspective, I mean there’s pros and cons, but perhaps it’s not a perfect solution to have the next generation only in that maybe it’s a partial solution. Well, partial solution’s a whole lot better than no solution. So again, I love that answer in terms of, yeah, let’s look at the family situation. Let’s not start discounting what might be possible.
Brian Laundry (20:34):
I love that you led with “potential solutions”. There are solutions that we can at least identify and present. And whether or not anybody decides to proceed with said solution is besides the point. Our job is to be proactive as best that we can. Right?
Is this the same as infinite banking?
George Dube (20:55):
One of the questions I get a lot, Brian, and you’re well aware of this, is this planning, this idea of infinite banking. So a number of people have heard of the concept and laypeople will, I’m sure you can appreciate. Why have a challenge distinguishing?
Brian Laundry (21:16):
So infinite banking, let’s be clear, is the acquisition of a whole life insurance policy, which you can tell I’m fairly bullish on. I like the asset, and so do banks. Okay, so that is the same as what we’ve been speaking about. You’re acquiring a high-quality asset that the banks like to leverage against.
What’s different is that infinite banking is on the premise that we don’t get a third-party loan. We aren’t using a loan as collateral from Scotia Bank or a major institution. The insurance company will give you a loan. So if you don’t want a credit check or you have a short-term requirement for cash or you want to buy a car, the principle would be put the money into the policy for all the reasons we’ve been talking about, be your own bank and then borrow from the policy to secure these vehicles and what have you, because the interest that you’re paying ultimately leads to the rate of return that you’re earning, right?
Brian Laundry (22:12):
So I love the idea. I’m not against it. I just think it is a stepping stone to something larger for affluent clients because we don’t get tax deductions. The big misunderstanding about infinite banking is this: it’s a heavily promoted strategy or concept in the United States. They have different tax treatment than we do.
So what would be called infinite banking in the states, Dan and I refer to as finite banking in Canada, because there is a point where if you take enough of the loans out, all of a sudden we create a tax issue each year, and that doesn’t exist in the United States. So I think it’s more of a function. It’s wonderful. I certainly show the idea, but you have to work with people who understand tax to really guide you through that decision making.
George Dube (23:05):
Yeah, so I think just the quick summary as I interpret it is to say it’s not that infinite banking is bad. It might be part of the solution, but it’s not the solution in a lot of cases. Is that fair to say?
Brian Laundry (23:18):
What’s part of the solution, George, is the whole life insurance policy as an asset has a tremendous amount of power. It’s a very attractive vehicle that can do a multitude of different things at different points of time in your life. So infinite banking is just an idea that is available with existing policies. I have a policy now I can get a loan, a policy loan, like infinite banking from my policy right now by submitting a form. There’s no credit check, there’s no negotiation. It’s very simple. Hey, that’s wonderful. It’s just nice to have options when clients call you and I, it’s nice to have tools in our tool belt that we can at least point at and say, is that a good option, Brian?
Why a combination of permanent and term life insurance ?
George Dube (24:06):
So the policy that you put in place for myself, I’ve seen your policy. I’ve seen a number of mutual clients that we’ve put together, and maybe I can’t say all of them, but for sure the vast majority, and yours and mine, you have a split between term insurance and whole life that makes up part of the solution that was ultimately implemented. Can you describe in a little detail why you do that?
Brian Laundry (24:37):
Yeah, it’s actually a really wonderful question, and it’s unique to one major insurance company. Whole life insurance is the asset that we want, is the ones the bank want to lever against. So we need an element of whole life insurance as the base of the policy, the chassis if you will.
So without getting complicated, the income tax act says something to the effect of, if you would like to make additional deposits into a life insurance policy, i.e. create larger contribution limits every year. It’s the more life insurance you have, the more contribution room, that’s the association. But as you alluded to, whole life insurance is quite a bit more expensive than term insurance. So we build a whole life structure, but we can add this inexpensive element of term insurance to the policy from the same contract. And what happens is we can substantially increase our deposit capability in any given year in our lifetime for a relatively low expense.
Brian Laundry (25:42):
So not to get into mathematical examples, but put yourself in this mindset as a Canadian. If the government came out at the next budget and said, folks, we know the maximum RSP room has been $30,000 for a hundred years, but if you give us this much money every year, we’ll give you a $100,000 of contribution room. What if that was only a $1,000 a year for a $100,000 of contribution? I suspect a lot of Canadians would pay the cost to acquire that tax benefit.
So that’s the parallel I draw. So it’s a very, very, very important structure that promotes the flexibility that we spoke about earlier. It is vital, important to design a product that gives us that sort of ability to adjust on the fly.
What are the risks in this insurance planning?
George Dube (26:39):
We’ve painted a lot of rainbows, lollipops, all about this insurance planning. What are some of the risks involved? What are the gotchas?
Brian Laundry (26:53):
Well, one of the risks involved, I mean I wouldn’t even call it a risk. I think it’s just more of the journey. I think people are sensitive to wanting to have a nurse visit and ask medical questions. It’s more of a nerve-wracking thing for some people than an actual risk. In my experience, the experience of securing a life insurance policy is significantly better now than it once was, which is great, but I wouldn’t necessarily refer to that as a risk.
There is no tax risk that I think is on the table.
And certainly from an investment perspective, the banks have confirmed by giving us that loan to value. There’s not a whole lot of investment risk.
I think the risk largely comes with suitability and the professionals that you’re aligned with. Again, when it’s suitable and it fits, it’s absolutely wonderful. I think the biggest risk people have in any walk of life, you get kind of enamored with buying something off the shelf because you just feel like you should buy one. And to me, I think in my view, that’s the largest risk.
Perhaps the only other risk would be if you have existing policies, you risk a lot if you don’t have people servicing your policies. I’ve seen so many existing contracts that have incorrect ownership structures and tax risk because nobody’s got their eyes on it. So that’s some risk. But I’m not in the risk business, George. I am very risk adverse. In fact, I don’t believe what I’m doing carries a whole lot of risk.
Do rising interest rates pose a risk?
George Dube (28:36):
The last little bit as Canadians, and not just Canadians, but that’s what we’re focused on. We’ve seen interest rates increase, and so should people be nervous about, wait a minute, we’ve been perhaps rudely reminded that interest rates, they don’t sit at near zero forever.
Brian Laundry (28:57):
Right. Well, I have a couple of ways of approaching that anecdotally. First, I’ll say this, the underlying performance of these whole life investment accounts is very much correlated with interest rates.
If you can imagine back in 2010, the dividend scale amongst most insurance companies was seven. Well, since 2010, we went through a historical drop of rates, as we all know, and the dividend scale amongst many of those same insurance companies got as low as 6%. So, in a prolonged historically low interest rate environment, we lost a hundred basis points over the course of a decade. It’s not very exciting. It’s very safe and risk averse, which is again, why the banks like it so much.
I have been speaking with clients and accountants like you since 2010 about this in that environment. And the tax treatment is still so drastically better than the alternative that the dividend scale reductions still didn’t have a huge impact on the ultimate tax result, which is 50% savings. So that’s one observation.
So, this is the first time in many, many, many years, certainly since I’ve owned my own company, I’m actually seeing a dividend scale increase on these policies.
Brian Laundry (30:21):
So, what’s happening is we’re now climbing up. We went from six to 6.1 to six and a quarter to 6.35. So we’re actually seeing the benefit of the rising tide. So that’s great. And again, when you have a near cash investment, you’re going to get positive outcome when it comes to leverage.
Now, now we talk about some interest rate sensitivity. Dan and I, we created this scenario two years ago, three years ago we were doing math saying the armageddon scenario. And this is when prime was at 2, 4, 5. We were saying, well, what happens if prime jumps to five and the dividend scales go the wrong way?
Which again, I just said it doesn’t usually happen. It usually goes up.
And the numbers were still wonderful.
What we’re seeing now is this, yes, we have higher interest rates to finance the life insurance. But a couple things are happening. And the most important one of which is that these policies that used to take 10 deposits are now taking eight. So you might be having a higher, slightly higher rate on what will be a lower loan. Ultimately that’s a good thing.
And second, the tax deductions are greater, you pay more interest, but it’s tax deductible. So your net cost is still negligible relative to the cost of tax.
So again, you’ve got to look at the benchmarks here. We’re talking about in the neighborhood of 50% tax savings for many people even at current rates, less deductions. I mean, the numbers are quite remarkable.
What about tax risks with OPM tax planning strategies?
George Dube (31:59):
And if I can go back to the tax component and feel like I’m doing my job, I guess. So it’s not that we can say with a hundred percent certainty the tax rules won’t change tomorrow. But given the long history of where they’ve been and the nature of what’s going on, one, it’s hard to imagine them changing. And I guess if they do change them, in that unlikely possible theoretically event, hard to imagine them not grandfathering the rules. Is that fair?
Brian Laundry (32:30):
I think that’s very fair. And remember the last change we spoke about that was eight years of consultation. We knew it was coming for eight years. So not a surprise. Nothing fast.
I mean, so no, don’t, again, I’m not a risky person. I am ironically in a very risk-averse business. So I tend to agree with the notion that unless something drastically changes, there’s nothing on the radar at CRA. And certainly if there was, my association would be very clear communicating that to me and us. It certainly doesn’t seem to be something that we’re talking about.
Why isn’t everybody implementing OPM tax planning strategies?
George Dube (33:08):
So perhaps a silly question, why isn’t everybody doing this? Or at least more people.
Brian Laundry (33:17):
I mean, I think there’s a real knowledge gap amongst investors. I think all of us at some point graduate above our advisory team. I think at some point your wealth grows and the complexities grow and you kind of just get comfortable with the professionals that you work with for all the right reasons. I’m certainly not begrudging trustworthy relationships, but if I can only tell you how many financial advisors across this country, and accountants, source out my firm and my services to look at structure and planning, you’d be shocked that the insurance persons identifying these opportunities from a tax perspective and they aren’t. So I just think it’s very difficult to know what your professionals know and don’t know. And I don’t really have an easy answer to that because there are some wonderful tax planning teams out there and teams similar to ours. I’ve met them, they’re wonderful. I just think a lot of people aren’t getting that leadership because I don’t think the people that are leading them have the complexity or the knowledge, and they’re actually in a lot of ways scared to bring it up. They don’t want to look silly.
George Dube (34:33):
And I think, at least speaking on my own behalf, where it’s not like I was setting the world on fire letting everybody know about this until a couple of years ago, that stigma with the insurance, there was an impact. And I’m not saying that I shouldn’t have gotten through it, but rightly or wrongly, I think it’s fairly clear or wrong. There was a barrier and now we’re trying to get through the barrier.
Brian Laundry (35:06):
Well, I will say this, to get over that barrier, you and I have done something that a lot of people can’t say they’ve done. We’ve done it ourselves. George, you’ve helped me with my tax structure, I’ve helped you with your insurance. We have a lot of very similar planning, slightly different circumstances obviously, but I will hopefully show people what I’m doing because I think it’s important to realize that it’s not just this dog and pony show. It’s real, it’s very important. And converse and talk about strategic planning is a discussion that I think a lot of people who are watching this video wish they were a fly on the wall. We go down the rabbit hole a little bit, we nerd out. And I think given that we’ve both done this for all the right reasons and we understand it so well. It brings a lot of conviction.
Brian Laundry (35:58):
I mean, I’m certainly not the guy who should be making hair club for men references, but I mean the same idea about I’m a customer, I guess I’ve done it myself. It’s a very real statement and it’s shown to me to be very effective in being relatable and a peer and a peer-to-peer basis. I am every bit like a lot of the people who we meet. And so are you. We’re business owners. We have multiple businesses in many cases, have a family trust, we have a family, we have to deal with operational challenges, bookkeeping, our own planning. We’re all the same. So being relatable I think goes a very long way.
Does tax planning and insurance planning need to happen at the same time?
George Dube (36:36):
So from the tax planning side of things, often, of course I’m going to be, and whether myself or colleagues, team members, we’ve identified some things that we want to see reorganized, whatever it may be with a client’s scenario and a number of cases. We’ve also then introduced the, I think I can say it now safely, the insurance planning versus the OPM planning. But does it all have to be done at the same time? Do we have to do this whole shooting match all at once? And I’ll let you take off from there.
Brian Laundry (37:24):
Yeah, I think that’s a very good question. The way I see it is the corporate structure to me is often the leader. I mean, we need a great foundation of our house to build on it, and insurance is what’s building on it. So there are a lot of instances where as great as insurance might look, if your structure’s not appropriate, I can’t proceed because of some of the tax issues, which I won’t get into. I will say a lot of it is very much simultaneous. If you choose it to be the corporate structure on its own. Beautiful. That’s a project over here. We need some multiple wills. Go to my lawyer. And that will is a project. Insurance in of itself makes a lot of sense. We start with tax and liquidity and risk. That’s a project that moves ahead. If you want to look at financing the insurance and using leverage, well simultaneously, we can work with the banks.
It is a large project. I think all I can say is my team has spent a lot of time saying, okay, let us take the pain away. So we try to play that quarterback role with you and your team because certainly it’s very difficult to always gather all the tax documents. And we do our best to take the pain away and transpose information to other carriers and banks as required.
So look, just like you and me, it’s another project, but the longer we wait, we’re just paying more tax. And honestly, we’re just getting older and the insurance is getting more expensive and maybe more difficult to get.
George Dube (39:04):
And I’ll toss in, and I like to use the analogy at times where the longer I have that tax planning in place, a family trust, for example, the IFA planning, the longer I have for the advantages to percolate and accumulate to something much larger than what it would be in a shorter time period.
So it’s not to say don’t do it even down the road, but imagine the benefit if we’d done it five years ago.
Brian Laundry (39:34):
Well, you don’t want to be the person that said, geez, I wish I listened to you five years ago. I mean, we’ve all heard it.
I love the expression that you said, create a structure of where you’re going, not where you are. And I never forgot you saying that.
And a lot of the stuff we’re talking about insurance, if we just start with risk and just start with the basics, that need isn’t going away. I mean, if you have debt and you have liquidity problems, if something were to happen to you, that’s not a problem. You’re not going to outrun. It’s just deferring it. You’re procrastinating. So at the end of the day, we just need to move the ball forward every day, right? Yeah. I mean, I’m obviously very passionate about these things, but I also recognize everybody’s busy.
Conclusion: OPM tax planning strategies
George Dube (40:21):
We’re going to get a little bit more technical and a couple of future videos. We’re going to look through some specific example. So what’s the best way for people to get ahold of you Brian?
Brian Laundry (40:30):
Well, if you’re not email introducing me, I could be reached at a very simple email address, brian@brianlaundry.ca. I would encourage anybody to go to my website, which is brianlaundry.ca.
George Dube (40:43):
So overall, thank you Brian for sharing time and expertise with us. And thank you everybody. And look forward to seeing you in our next video.
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-End transcript for OPM tax planning strategies-
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