Episode 57 - Optimizing Life Insurance for Wealth & Legacy with Vince Cardella
Powered by RedCircle
In our first episode of 2026, Nicole, interviews Vince Cardella, a seasoned financial advisor and co-founder and Principal at Promerita Group, about the vital role of life insurance in estate and business succession planning. They discuss the differences between term, whole life, and universal life insurance, the importance of disability coverage, and strategies for managing tax liabilities. Vince shares practical advice for business owners and families, emphasizing the benefits of proactive planning and trusted professional guidance. The conversation offers clear, relatable insights for Canadians looking to protect their families, preserve wealth, and plan for the future.
Nicole Garton 00:00:02 Hello and welcome to Your Estate Matters, presented by Heritage Trust. Your Estate Matters is a podcast dedicated to everything estates, including building and preserving your legacy. If it's estate related, we'll be talking about it. We're having the conversations today that will help Canadians protect their families, their assets and their legacies tomorrow.
Vince Cardella has over 30 years of professional experience in the financial services industry, and is a co-founder and principal of Promerita Strategic Wealth Planning Practice. Vince was a member of a major insurance companies product design team, where he helped to price and design the company's first Universal Life insurance product for the Canadian marketplace. He also led the training and development of financial advisors across Canada. Vince has his MBA, his CFP, and his Family Enterprise Advisor designation. Vince is the past president of the State Planning Council of Vancouver, and advises several charities and foundations on any life insurance policies and issues that arise for them. Vince has been on the board of the Vancouver Open Society for over 20 years, and has his advanced certification in wine, and in January will be involved in the first ever cohort of the Diploma of Wine Tasting with participants from all around the world.
Nicole Garton 00:01:29 Vince, thank you so much for joining us on Your Estate Matters. It's a pleasure to have you.
Vince Cardella 00:01:33 It's an honor to be here. Thank you very much for inviting me, Nicole.
Nicole Garton 00:01:37 Yes. And we've known each other for, I think, 20 years, many years.
Vince Cardella 00:01:41 A little more than 20.
Nicole Garton 00:01:42 So maybe tell us a little bit about. You've started at Standard Life. You're with RBC. I think you co-founded Promerita. Is that how you started Promerita?
Vince Cardella 00:01:51 Correct.
Nicole Garton 00:01:52 So tell us about you and how you got to where you are.
Vince Cardella 00:01:55 I have to say I'm a little fortunate in that I was unemployed and sitting at home. Way back. And there was an opening for an interim product manager at Standard Life. And I went in for the interview and they really liked me, but I didn't get the job. But a few months later, another opening came up and the interviewers really liked my style. So I came back in and I got that job. It was an interim product manager that lasted until a person came back from sick leave, and then right away I went into the re-engineering team that developed their first Universal Life product.
Vince Cardella 00:02:27 So we're talking the mid 90s when Universal Life came into being, and from there I became the lead trainer. So I had to train the entire brokerage and agency on the use of the product and how it solves people's problems.
Nicole Garton 00:02:43 Maybe tell our listeners: what is a Universal Life product?
Vince Cardella 00:02:46 It's a product that was a result of the market screaming for, I want to have more control of the elements within my insurance product. So there was a term back then called yuppies and yuppies said, “I can do it better than they can do it. So give me access to the different features inside an insurance product so that I can manage more of it.” People have realised that it's a lot more than they thought. So the pendulum swung from the old product whole life to Universal Life, and pretty much the pendulum has swung back, because Universal Life does require management and people just don't have time for it.
Nicole Garton 00:03:22 And what is a whole life product?
Vince Cardella 00:03:24 A whole life product is a black box. You actually don't know what's happening inside and you probably don't want to know.
Vince Cardella 00:03:29 But the insurance company experts are managing the investment component for you, and they have the ability to do things that you can't do in Universal Life, which is smooth the returns year over year, which is hugely impactful for the performance of the product. Secondly, they pay you a dividend on your anniversary, and that dividend buys you more insurance without you having to go through another medical. So it has features that Universal Life does not have. The unfortunate thing is the sticker price. It looks more expensive than Universal Life at the outset, but it's because the investment component is forced upon you.
Nicole Garton 00:04:07 But that said, a lot of people had just ended up buying term. Isn't that right?
Vince Cardella 00:04:11 A lot of people buy term. What people don't know is term is a fabulous product. I sold some to myself because I needed a lot of insurance when my children were young and dependents.
Nicole Garton 00:04:21 I think you've sold some to me.
Vince Cardella 00:04:23 Yes, it's very inexpensive, and the reason it's inexpensive is it doesn't pay out very often, right? Historically, about 95% of term insurance doesn't pay out a death benefit because the person lets it lapse before they die, or they convert it to a permanent product when they have the financial means to do so.
Vince Cardella 00:04:41 So it's not term when they actually pass away, it's permanent.
Nicole Garton 00:04:44 So tell me a little bit about your current role at Promerita. Like my understanding is it's insurance but you guys do real estate…you do other stuff too. Isn't that right?
Vince Cardella 00:04:53 Correct. I started the company in 2007 with Ernest Lang, and Ernest was a really understood insurance, but he had other passions. And so at a certain point in time, we decided that to let Ernest do his passion and I'll do my passion. So the company actually has two components. One is a real estate advisory and investment component, which I do not dabble in. I'm an investor on that side, but I don't make decisions. They don't ask me for any input. And on the life insurance side, I've built up a team and we strictly do insurance planning and a little bit of insurance type products like annuities and occasionally segue funds.
Nicole Garton 00:05:30 Tell me about people that you help, like what is a typical client profile that someone that you would assist?
Vince Cardella 00:05:36 Our team is built up with different personalities and my personality deals well with business owners.
Vince Cardella 00:05:42 So business owners from the net worth scale from low to extremely high. Now some of these business owners have tax issues to deal with, and some people consider it to be a first world problem. It is a problem nevertheless. So if you have an estate that's going to attract a very large tax liability, dealing with that tax liability requires you to deal with it before you actually pass away. If you don't deal with it, you're going to have to sell assets to pay their tax liability. And those are corporate assets. And you've got to pay your taxes with personal dollars. So it's a conundrum. Life insurance is the only component that lets you pay and buy it with corporate money. And it comes out of personal money through something a very special tax credit called the Capital Dividend Account. So if we did not have that in Canada, we'd be dealing with issues that we couldn't handle. Life insurance is the only product that lets you do that.
Nicole Garton 00:06:44 So lay that out for me. So you've got a business owner.
Nicole Garton 00:06:47 They've built a business from zero. It's worth, I don't know, between $10 and $20 million when they die. There's going to be a large tax bill. Because for our listeners, when you die, the Income Tax Act deems that you've sold everything you own at that time, and that can trigger a significant tax bill. But if you've got, you know, liquid assets like real estate or corporate shares, it can be really difficult to come up with that money. So what are they doing? They're paying the policy with before tax dollars inside the company. When they die, the insurance pays into the company and what? They can take out the money personally through this capital dividend account? Is that how it works?
Vince Cardella 00:07:27 Pretty much. You almost nailed it. The only part is that it's after tax corporate dollars paying the premium. Okay, so but the corporate tax rate inside most of these companies is a lot less than your personal marginal rate. So you're getting away with paying with an 85 cent dollar instead of a 50 cent dollar, okay?
Vince Cardella 00:07:44 On the premium. So that's a huge benefit right there. Secondly, all the cash value inside life insurance grows in a tax shelter. Thirdly, when you pass away, it's instant cash. And that creates the capital dividend account that allows the surviving shareholders to flush the money out of the company tax free. This is a huge benefit that no other product can do. So it's very advantageous to do it that way.
Nicole Garton 00:08:08 So, you know, this is part of a larger issue with succession. And, you know, I think the data shows the majority of Canadian GDP is people working for small to medium sized businesses, largely of which are family owned. And they say in the next ten years most of them are going to transition. But unfortunately nobody's planning. Like, how do you get these business owners at the table to start thinking about this?
Vince Cardella 00:08:37 It's not easy. It always takes a team. So I'm working on a couple of files right now where I am emailing and constantly in contact with the lawyers and the accountants for the family businesses.
Vince Cardella 00:08:50 It's not done in a silo, because there's no advantage to surprising people with some solution that you drop on the table. I want them involved in the planning process because it requires some planning as to who's going to own and pay for it. Where does the money have to end up to pay the tax liability? So tax liabilities for wealthy families come from two major assets shares in a private corporation, which is an illiquid asset, as you know, its private shares. And the other one is real estate, which is a huge component in the Vancouver market. Both of those attract a large tax liability. A simple example is the growth is quarterly taxed. So if the growth is 5 million you've got about a $1.25 million tax liability. So there's four ways to deal with that tax liability. You can start saving. You can do nothing you can borrow at time of death. Or you can get life insurance if you calculate the cost of those for life insurance will win every single time. If you can get a standard offer on the life insurance, meaning your health is relatively normal.
Nicole Garton 00:09:54 So we are in a challenging economic market. Productivity is declining. The cost of living is extremely high. Food housing in Canada, our tax burden is high. How are you selling people on dealing with something? Now that's sort of a later problem when people are struggling to make ends meet.
Vince Cardella 00:10:17 It's not easy. Life insurance doesn't have the best reputation in the financial services market. It has to do with underqualified people representing the product. It used to be that way and that they sold products that they didn't understand. And statistically, your career lasted less than two years in a life insurance industry. So you factor all those three components together. You figure out why life insurance has a bad reputation. The key is to talk about what is the cost of doing nothing, comparing that to doing something else. Making a decision to do nothing has a cost, and that cost will be basically, how are you going to come up with the cash at time of death to pay the tax liability such that you can maintain the assets that you want? So I've dealt with files where the person couldn't get insurance.
Vince Cardella 00:11:09 They were unhealthy, so they had to sell assets. And the assets that people want are your favorite assets. So it's not a good time to do that. An example would be you own nine buildings. A person passes away. You got to sell 3 or 4 to keep the other five. It's not something you want to do in any market, let alone the Vancouver market, because we're placing that assets. Not going to be easy.
Nicole Garton 00:11:32 That's interesting because we have an estate right now where a gentleman passed away. He owns ten buildings. He was not an organized guy. So none of the planning is done. And the difficulty is we have a seven figure very heavy tax bill with totally illiquid properties and probably one of the most challenging real estate markets ever to sell. So, you know, it's interesting at Heritage Trust, like we often get the really messy files where unfortunately people haven't planned. And there's enormous tax burdens. You know conflict litigation. We see very much unfortunately what not to do. How can you like I think they say like half of Canadians don't even have basic estate planning documents in place.
Nicole Garton 00:12:23 Like I think the human inclination is like we focus on our day to day and, you know, we invariably procrastinate things that are hard or stressful or that we perceive or complicated, like how do you help people push back against that and do the important things they need to do.
Vince Cardella 00:12:41 Well, they might not listen to me, but they usually listen to the accountant who I call the financial doctor, and the lawyer who can explain things a little better. So, like I said before, it takes a team. You don't do it in a silo. I could be crass and say, just throw cash at the problem. That can cause its own problems. That's why you need to prepare how this is going to be structured so that it solves the problem that you have. In today's market, the average person is having trouble making ends meet. But as you move up, unfortunately, the net worth scale, the people don't have the same issues. They have other issues that they've got to deal with.
Vince Cardella 00:13:21 And one of them is the legacy of the family. And the other one is how do you treat everybody fairly? Fair is not equal. And if you've got a family business, sometimes some people are geared to run that and others are not. Sometimes. Sometimes nobody is geared to run. So you have to hire managers to keep the company going if you want to maintain ownership. So it takes a long time. It's a process. As you know, bringing in someone early in the process helps in terms if you identify a situation or I see one of my roles as raising the antennae on accountants and lawyers to be able to identify situations where insurance might work, it might not be what they want to do, but it can work. And so bringing someone in and introducing the idea of life insurance, I mean, it's not the nicest product. You can't hug it, you can't taste it, you can't drink it. It's sedentary until it's needed and it's needed. It's very important when the event happens.
Vince Cardella 00:14:24 I mean, I've delivered estate checks that can change lives. We're talking, you know, 50 to $100 million in life insurance, death benefits. It was bought for a reason to solve a problem. Let's make sure it solves that problem and doesn't cause other problems. I want to bring in probate as well. So one of the advantages of life insurance is it can bypass probate. And probate is a nuisance tax. In B.C. it's 1.4%. But in some of the families I'm dealing with, that 1.4% represents close to $1 million in probate. So having life insurance bypass probate for most people, $1 million is a lot of money, and you bypass $1 million of probate with the use of life insurance. That's a huge gain in and of itself.
Nicole Garton 00:15:14 Are you talking about segregated funds?
Vince Cardella 00:15:16 No, just life insurance. Bypassing the estate because you're a direct beneficiary. Okay. That is, you know, that's something to consider. It's a nuisance tax, but it ends up being big dollars in large situations.
Nicole Garton 00:15:29 So I practice law for 25 years, helping people with estate and family issues.
Nicole Garton 00:15:35 And as a lawyer I often did raise insurance. So in a family context, we often ensured support. And in an estate context, life insurance helped with tax issues, but it also was a good equalizer you mentioned. What do you do in a family where you've got a really valuable business and one child is going to get that business? How do you make sure maybe another person is working in healthcare or academia? They're still hard working and stuff. It's, you know, how do you equalize that one child is going to get presumptive millions of dollars of wealth. How do you find more equal distribution? And I saw life insurance as a potential option for that.
Vince Cardella 00:16:13 But it is. But each family is going to be unique in terms of the value that they should get for cash for an asset. They don't have to really manage like a business. So it becomes a very complex discussion and the input of everybody involved is important. You don't want to leave someone out of the discussion that is going to benefit from the planning that's being done.
Vince Cardella 00:16:34 Bring them in. Find out what the family feels in terms of how to deal with that. And life insurance is definitely a solution to that. Equalizing or taking care of the estate and sharing it fairly.
Nicole Garton 00:16:47 Let's talk about some other things. There's critical illness and something I've heard of, but I haven't seen very much in practices insuring long term care costs like tell us about. And then of course there's disability.
Vince Cardella 00:17:00 Those are the four.
Nicole Garton 00:17:01 Tell us about those options.
Vince Cardella 00:17:02 Okay. Let's start with the simplest one disability. It's been around for a long time and it replaces a percentage of your take home pay. So that percentage usually maxes out at about 65% because they wanted to send you to get back to work. So disability replaces take home pay until your regular retirement age is 65. If you are disabled, you make a claim and then you get paid. While you're getting well. It's fairly expensive because if you take the statistics, a male 35 is six times more likely to be disabled for more than a year than actually die, so disability is not inexpensive.
Vince Cardella 00:17:40 Next one is critical illness. So critical illness is a product that's a one time pay rather than replacing your income monthly, it's a one time pay for if you have one of these 24 critical illnesses and you survive 30 days, they will pay the amount out. Tax free. You can do whatever you want with that. You don't have to go down to the Mayo Clinic and get yourself well. You can buy a boat if you want. It's a one time pay. Usually you've been diagnosed with something. It's serious because it's a critical illness, but there are critical illnesses that people don't even think of as severe burns and things like that. So a lot of companies jumped on the bandwagon. A lot of companies have done away with that product. They don't offer it anymore because it's just too it doesn't make sense financially for the insurance companies. So a lot of companies have fallen off on the wayside, unfortunately.
Nicole Garton 00:18:28 What happens if you've bought a policy and.
Vince Cardella 00:18:30 They keep it on the books. They just don't sell anymore.
Vince Cardella 00:18:34 Long term care also is a product that many companies joined and have taken it off their shelf, and long term care basically pays you a monthly stipend depending on if you're in a facility or if you want home care, there's a difference and you can choose those. That is also something to consider. Largely, the people who buy long term care are women because statistically, women outlive men, their husbands, and they want to be taken care of. They want to make sure that they can live in a place that they feel safe and comfortable. So long term care, it isn't that prominent in the market.
Nicole Garton 00:19:13 So say, you know, you're a 50 year old business owner, you own a glass company or electrical supply or any of the really important businesses, construction, whatever it is. And you're thinking about, you know, what succession might look like. Nobody's really thought about this. Like, what would be that individual's first step to start getting organized and thinking about it?
Vince Cardella 00:19:38 Well, there are no more tax shelters for corporations except life insurance.
Vince Cardella 00:19:44 So if you have passive income or passive assets inside any holding company or operating company, they're taxed heavily. You put that inside life insurance. It's tax sheltered. So right away you have an incentive such that you could actually build up enough cash value inside your insurance policy that is corporately owned, such that the tax savings exceeds the cost of the insurance. The government's paying for your insurance policy.
Nicole Garton 00:20:12 But that sounds really fancy. Like this is an individual that's like getting in their truck, driving out to job sites, working like crazy. Maybe they've got aging parents, they've got teenagers at home. They just want to get started. Like, what's there? Like, you're getting fancy right away. Like, what is that? That person's got limited time. They want to do something. What's their first step? What should they do first?
Vince Cardella 00:20:34 The first step is to find out what the picture looks like without them in it. What if something happened to you?
Nicole Garton 00:20:40 Like. With who? Like, is that an accountant's office? Is that in a lawyer's office? Do they go to a financial planner? Like what? How do they do that?
Vince Cardella 00:20:47 Well, in my practice, I'm virtually introduced to all my clients through centers of influence.
Vince Cardella 00:20:54 The accountants and the lawyers. Right. So I meet them with the accountant lawyer who's bringing me in. And we've had a discussion already as to what the issue is to deal with the basic problem of what would happen to your family and your business if you became ill, or if you suddenly passed away in an accident or something, and trying to solve that problem. The largest risk, as you said when we started, term insurance is very inexpensive. It won't make, you know, you'll still be able to afford your groceries. Get some term in place. Solve the drastic situation. Now what about disability? Disability is more likely to happen than death, but death is more tragic. Are they insurable? Do they have a job where they can get disability insurance? There are certain occupations that are very risky and it might not make sense to buy insurance. You may be better off self insuring. Putting money aside for the rainy day or this situation that comes.
Nicole Garton 00:21:54 So what are the jobs like? What are the jobs that it's hard to get insurance for?
Vince Cardella 00:21:58 Anything where you're lifting, using your hands. sawmills, mines, anything where you're physically at risk. Let alone, you know, some activities that you have in your leisure life that can cause issues such as parachuting and bungee jumping and paragliding. And all of these were. These are all things the insurance company needs to underwrite the risk and figure out if it's acceptable.
Nicole Garton 00:22:23 I'm hearing consulting easy, logging hard?
Vince Cardella 00:22:27 Absolutely. If you apply for disability, there's basically four levels of risk, right? A four is a person who's sedentary. They're not lifting boxes. A one is someone who's doing physical labor. So it's a different product, different risk. So I understand your question. How do we deal with the regular or the bulk of the market out there are people who just need basic insurance to cover the major risks. Obviously, there's a plan for everybody. We do not want to make anybody insurance rich and cash poor. We don't want you to hate the premium when it's coming due every year.
Vince Cardella 00:23:05 We want happy clients, so we're not going to put anything in place. Now, if you do something completely against our recommendations, there's a letter you need to sign to say they offered me what I should have got, but I declined it. So just that's our CYA. And I'm sure in your industry, if somebody doesn't follow your recommendations, you have something similar. So there are basic plans out there. I have a young associate that just joined my team. He's 30 years old. He's going to work through that market probably a lot more than I will at my stage of my career.
Nicole Garton 00:23:35 Okay, so now we've got that business owner and they're 65 and they've worked incredibly hard, you know, been smart, had some luck. And now this is a, you know, $15 million $20 million business. It's maybe industrial piping or rebar or something like that. What are some of the interesting or sophisticated options that might be available to that individual to help transfer wealth to the next generation and mitigate tax hits?
Vince Cardella 00:24:06 Well, I usually want to get a picture from the accountant and the lawyers to let's take a balance sheet shot right today.
Vince Cardella 00:24:13 What is the business worth? What is the tax liability today? What are your plans for the business? Is it to sell to arm's length. Is it to sell to family? Is it to wind up? Each of those has a different ultimate requirement for a need for cash. If you want to keep everything in the family, there's going to be taxes to pay and where those taxes are going to come from, they have to be paid with personal after tax dollars. The easiest way to do that is obviously with life insurance corporately owned and paid for. It's a slam dunk. If you take the components, the elements of life insurance and you break them down to, you can pay with corporate dollars. Everything grows tax sheltered, it creates cash when you need it, and it can come out of the company tax free through the capital dividend account. We've got our cake and eat it too. It's just what's the right solution for you, Mr. or Mrs. Business Owner? Each situation is going to be different, and the accountants and lawyers have a lot of say in these solutions.
Vince Cardella 00:25:19 so I always take a back seat to what everyone else the advisors feel is the right amount, the right structure, and the right way to do it. Who owns and pays for it and everything else.
Nicole Garton 00:25:32 So yeah, so for the listeners, like there's not a lot of tax avoidance strategies left. But one of the things business owners often do is what's called an estate freeze, where the lawyer and the tax accountant were together and you effectively freeze the value and the founders hands. And then new common shares are issued, which often go inside a family trust that the next generation will be beneficiaries of. But the problem is, every 21 years, those trusts have tax events you've got to deal with. But if somebody's doing an estate freeze, how does insurance interplay with that planning?
Vince Cardella 00:26:11 Good question. So when you do an estate freeze you've basically locked in your taxes. Sometimes the freeze is just going to stay as is. Sometimes it's called a wasting freeze, and the wasting freeze is when they're going to redeem the shares over time to support their retirement income.
Vince Cardella 00:26:28 For all the wasting freezes I've seen out there, very few get wasted. The person who is the business owner who has frozen basically says I have enough to live on. Don't force more income into my pocket. I've been right there at that conversation. So we know the tax liability. It's known so we can deal with that. That's possibly a non-moving object. It's known for the shares that are being passed on to the next generation, usually through a family trust. As you said, the clock ticks from that point on. And one day they'll probably take the shares into their personal name. The trust is good for planning and getting their lives in order once they take those shares back. The tax liability has been growing for 21 years, so they've got a tax liability. It depends on what their plans are for the business. We're obviously talking about a business because that's what you would do a freeze on. Is the business going to stay in the 2G3 the third generation and onwards. Then we've got tax liabilities to deal with.
Vince Cardella 00:27:25 Now it's easier to deal with the tax liability early in your life. You're usually healthier and definitely younger. So both of those reduce the cost of the insurance. Oddly enough, the internal rate of return to life expectancy doesn't change that much over a person's lifetime. If you buy insurance at 65 or 35. The IRR, the internal rate of return is about the same. The issue is the dollar cost is a lot more at 65 than 35. So it's better to do it when you're younger and you have more time to let it grow. So you don't have to start right where you need it. You can always add term insurance to make it inexpensive and cover the tax liability from day one, and let something like whole life grow such that it meets the target by the time your life expectancy comes. So life insurance is very important for estate freezes depending on the plan, I deal with a lot of estate freezes and dealing with the tax liability that is known. And so it's fixed and we're dealing with it that way.
Nicole Garton 00:28:22 So how do you see your industry evolving? Like you know it's interesting. We've got AI which does incredibly more sophisticated analysis of risk and what's new and what's changing with all this change in the economy.
Vince Cardella 00:28:36 Well, 20 years ago, we felt that the banks were going to take away the mom and pop tabletop market. And for a lot of that market, it has. You can buy insurance online. I get an advertisement on my phone daily, buy life insurance. You can qualify without passing a medical and all the stuff. It's very expensive, by the way, because once you do a medical, you're put in a pool with everyone else who's unhealthy, so it's usually very expensive. With AI, I think it's going to speed certain processes up. It won't replace the human element. Of course it won't. I tell people jokingly, I use AI. It's called authentic intelligence rather than artificial intelligence. And anybody who is dealing with issues surrounding their family, their mission statement, their business. They want to deal with a person that they know can give them the best advice, and will be around when needed.
Vince Cardella 00:29:42 The unfortunate thing with life insurance is that it's a product that usually lasts a long time. You might be paying for insurance longer than you're paying for your house. You want to deal with someone reputable and knowledgeable. I tell people there are three key factors for success in the insurance industry. One is knowledge, one is trustworthiness, and the other third one is likability. You have to have all those three. To be successful in this industry, and to be successful is to actually do what you say you're going to do and be around when things happen. Now, sometimes my clients are younger than me. I may not be around, but hopefully my successors will be AI. I co-presented with someone who used a lot of AI. He is getting some payback for the AI, producing letters and reports and statements and newsletters to his clients. It's a different market than the way I do it. I do a lot of in-person, high touch, high communication, but who knows? I mean, AI has replaced a lot of agreements that lawyers write up, a lot of things that accountants do.
Vince Cardella 00:30:48 They've had to change their business. No doubt we are changing our business as well.
Nicole Garton 00:30:51 What about under the hood, though? Like a company like, say, RBC insurance. And a lot of these are complex actuarial models and things like that. Like certainly they must be utilizing these technologies in their own modeling of risk and how they price products and things like that.
Vince Cardella 00:31:10 Correct. That's what they hire and pay actuaries for. They're very good at determining the risk. Life expectancy. Everything's based on those factors. How risky is this life. What's the life expectancy? If you calculate the premiums the average person pays on life insurance, it's somewhere between 30 and 40% of the death benefit. So how does that make financial sense? Or is the insurance company getting the money? They haven't got a printing press to print money. It comes from the calculation of taking the money, investing it, getting tax advantages on the investment returns that they get, and all the people who buy life insurance and don't stick around till the end.
Vince Cardella 00:31:53 So the lapses are supporting the good products.
Nicole Garton 00:31:56 So is that all the term insurance that people buy and then it lapses? I guess that's your word before they pass away.
Vince Cardella 00:32:03 Well, it has a shelf life. It has a best before date and the best before date gets away. By the time you reach Best before date, it's become so expensive. Prior to that, you've let it go. It has served its purpose. I had term insurance, but I kept both of them for 20 years. When the 20 years was up, I didn't need it anymore, but I always had permanent backing it up. So the permanent is going to help me pay my estate taxes? Absolutely. The lapses come from those products that people don't stick around for.
Nicole Garton 00:32:34 So what about in the future? I guess maybe this is, you know, I guess, the big brother thing, but there's, you know, people are going to have increasing data about their genes and, and about like, what's are we going to get and people are going to be able to do really in-depth modeling with greater data, like what is that going to look like with respect to vulnerable people or like, what's the future in that regard?
Vince Cardella 00:33:03 The life insurance industry has been very public in stating that they can't use genetic testing to underwrite your risk, so not yet.
Vince Cardella 00:33:15 But there may come a day where Vince, myself, and Nicole yourself have unique pricing for the insurance product that you're buying. It's unique to the risk you represent. I don't know when that's going to happen. I don't think you and I will be walking around at that point. Who knows how fast it's going to happen, but I don't think we're getting there. I mean, the entire industry of life insurance is pooling money. Pooling people's money. So you're pooling risks together, good and bad. So if you do that kind of thing, you're separating the pool aspect of pooling the risk. I don't think we'll get there anytime soon if at all.
Nicole Garton 00:33:57 That's interesting. So is there anything else you want to leave our listeners with about what are the important things they need to know about this option and what should they do in the next three months to make sure that themselves and their family are covered?
Vince Cardella 00:34:11 Don't be afraid of the product. Deal with someone who can explain the product so that you can make an informed decision.
Vince Cardella 00:34:23 There are only three life insurance products in Canada. It's not rocket science: term, universal life, and whole life. They each have unique features. Have a discussion with someone reputable who your accountant or your lawyer has introduced you to. Get to a point where you're comfortable making an informed decision. Sometimes you become saturated after five minutes. Sometimes it's an hour of discussion and making a decision that you feel comfortable with. Don't be forced to do anything you don't want to do. I've had people tell me I understand it, it's not for me. And I say, good. At least you're at that point where you can make that decision. That's great. If you change your mind. Come back. We can insure people right up to 85. Although it's very difficult at that age. Talk to your family. There's an old expression in the life insurance industry. You have to love somebody to buy it, because typically the windfall is you're no longer around if that's important to you. Leaving a legacy is important to you.
Vince Cardella 00:35:26 Leaving a business behind to your family is important to you. Helping a charity is important to you. We didn't really talk about charitable giving. I vet the life insurance policies for several foundations and charities. People use life insurance to benefit their estate, and you've basically got three buckets to fill your family bucket, your charitable bucket and your tax bucket. And you can direct your funds such that you can leave one empty. If you really plan well, you decide which one you want to leave empty. And usually typically people would want to leave the tax bucket empty and help charities and family. With life insurance, you can do that really easily. Even someone who's got public shares, its wealth that I own and control, I want to leave it behind. Well, if you donate those shares, you're going to get a tax credit. You're going to get possibly a refund. If you use the refund to buy life insurance, you're probably going to leave more money to your family tax free through the life insurance than you would have left through the shares.
Vince Cardella 00:36:29 And you've donated the shares to charity, so everybody's happy. It takes planning. You have to use knowledgeable people at the charity, and you need to use a really wise and understanding insurance adviser as well.
Nicole Garton 00:36:44 Yeah. So we talked about this before. We're both surprised that there's not more insurance used for charitable giving because there are a lot of really interesting solutions available.
Vince Cardella 00:36:56 There are. And we've just scratched the surface.
Nicole Garton 00:36:59 Well, maybe we'll have to have you back. Vince.
Vince Cardella 00:37:02 I'd be happy to come back.
Nicole Garton 00:37:03 Well, thank you so much for joining us. It's been really interesting and informative.
Vince Cardella 00:37:07 Very welcome. Nicole. Thank you for inviting me on your podcast.
Nicole Garton 00:37:11 This podcast is for informational purposes only and should not be considered individual, legal, financial, or tax advice. Make sure to consult the advisor of your choice to advise you on your own circumstances.
Nicole Garton 00:37:25 Thank you for joining us for this episode of Your Estate Matters. If you like this podcast, make sure to follow it on your podcast platform of choice.
Nicole Garton 00:37:33 Whether you're planning your own estate or you're acting as executor for somebody else's heritage, trust can help partner with Heritage Trust to protect your family, your assets, and your legacy. If you'd like more information about Heritage Trust, please visit our website at Heritage Trust Company. This podcast is produced by Podfather Creative.