Wealth and Legacy: A Deep Dive with Vince Cardella
When most people think of life insurance, they see it as a safety net for their loved ones in case of unexpected events. But what if we told you that life insurance could be one of the most powerful wealth-building and tax-saving tools available?
In this episode of The Wealth Multiplier Podcast, host Laurent Munier of Safe Pacific Financial sits down with Vince Cardella, Principal of Strategic Wealth Planning at Promerita Group, to break down how life insurance can be leveraged for tax planning, business succession, and legacy creation.
If you're a Canadian business owner, investor, or high-net-worth individual looking for strategic financial planning that goes beyond traditional methods, this episode is for you.
All text below is a summary of the topics discussed in the podcast.
Why Life Insurance is More Than Just a Death Benefit
Most people think life insurance is just about providing a lump sum payout to beneficiaries when someone passes away. But in reality, permanent life insurance policies, such as whole life insurance and universal life insurance, offer several advantages beyond just a death benefit:
- Tax-Advantaged Growth: The cash value inside a whole life or universal life insurance policy grows tax-sheltered, making it a powerful tool for wealth accumulation.
- Access to Cash Value: You can borrow against your policy using policy loans or collateral loans from a bank, allowing you to invest in real estate, business expansion, or other wealth-building opportunities.
- Business and Estate Planning: A properly structured life insurance policy can help business owners manage risk, fund buy-sell agreements, and ensure a tax-efficient wealth transfer.
- Corporate-Owned Life Insurance (COLI): For incorporated professionals and business owners, holding life insurance inside a corporation can offer significant tax advantages while building long-term wealth.
How Life Insurance Helps with Tax Planning in Canada
One of the biggest financial concerns for high-net-worth individuals and business owners in Canada is minimizing taxes—both during their lifetime and at death. Vince explains how life insurance can be a strategic tax tool in multiple ways:
- Capital Dividend Account (CDA): If a corporation owns a life insurance policy, the life insurance death benefit creates CDA credits, which can then be paid out to shareholders tax-free.
- Estate Freezes & Succession Planning: Business owners can use life insurance to fund estate tax liabilities when passing wealth to the next generation, ensuring a smooth transition without forcing the sale of business assets.
- Tax-Efficient Retirement Planning: Certain policies can be used for Insured Retirement Plans (IRP), allowing business owners to supplement their retirement income in a tax-advantaged way.
Should You Borrow Against Your Life Insurance Policy?
One of the most powerful wealth-building strategies is using life insurance as collateral for loans—but should you borrow from your insurance company or a bank?
Policy Loans (Borrowing from the Insurance Company)
- Pros: No credit check, fast approval, and flexible repayment terms.
- Cons: Slightly higher interest rates (4% - 7.5% in 2024).
Collateral Loans from a Bank
- Pros: Lower interest rates, access to larger loan amounts, and structured loan options like Immediate Financing Arrangements (IFA).
- Cons: Requires financial underwriting, more paperwork, and minimum premium requirements.
Vince emphasizes that choosing the right lending option depends on your financial goals—whether you need quick access to capital or a long-term financing solution at a lower cost.
What Business Owners and Investors Need to Know
Vince and Laurent discuss some of the most common mistakes business owners and high-net-worth individuals make when it comes to life insurance planning:
- Waiting Too Long to Get Coverage – Life insurance premiums are based on age and health. The earlier you set up your policy, the lower your costs and the greater the tax benefits over time.
- Not Understanding Corporate vs. Personal Insurance – Holding life insurance inside a corporation can be far more tax-efficient than owning it personally, but it requires proper structuring with an accountant.
- Failing to Use the Capital Dividend Account (CDA) – Many business owners don’t realize that corporate-owned life insurance can generate tax-free capital dividends if structured correctly.
Contact Us
At Safe Pacific Financial, we specialize in helping Canadian business owners, incorporated professionals, and investors structure life insurance for maximum wealth protection, tax savings, and business growth.
If you would like to discuss whole life insurance or investments, we’re happy to chat and see if we can be a good fit to work with you. Fill out our contact form and we will get back to you within 24 hours on business days.
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