The Key to Mastering Your Finances and Achieving Your Dreams. (#111) — Transcript
Updated: Oct 26
THE PICTURE OF WEALTH · EPISODE 111
In the sixth episode of this original miniseries, Dustin Serviss discusses corporate insurance structures and how financial decisions connect with longer-term business and personal goals.
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This transcript was generated from the episode audio and lightly edited for readability. It may contain transcription or speaker-attribution errors. Refer to the recording for exact wording.
Chapters
[00:00:03] Corporate insurance ownership and beneficiaries
[00:01:20] Disability insurance and accounting
[00:02:36] Investing in staff retention
[00:03:51] Benefits beyond a raise
[00:05:03] Creative compensation examples
[00:06:09] Retreats and corporate investments
[00:07:39] Asset location and taxes
[00:08:59] Investment fees
[00:10:17] Fee-based accounts in a corporation
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Transcript
[00:00:03] Dustin Serviss: Welcome to mini series episode six, the key to mastering your finances and achieving your dreams. So when you have a corporation being the beneficiary, you need to designate that. That is a is a special spot, either if you're doing an online app or you need... You know, when you're doing it with us, we would designate that. So make sure it is set up properly. So we got Lawcorp, pays the premium, is the beneficiary, and also is the owner. What'll happen is if if this particular person gets critically ill, the money will go into the law corporation. Now you've gotta get that money out.
[00:00:44] Dustin Serviss: So in in my case, in my holding company, that's where all my critical illness lives. My stance is that if I get sick, the money comes in, we likely wouldn't need, you know, x amount, x... Hundreds of thousands in one shot. You know? So the the theory is, well, wow. If you had to push out four hundred thousand of critical illness benefit, you're gonna pay, you know, two hundred thousand in tax. So why don't you just own it personally? Well, the reality is I could probably pay my wife and I say thirty thousand each a year. And so, you know, and make that critical illness policy last a long time.
[00:01:20] Dustin Serviss: So you're paying very minimal tax and you're splitting it. One comment I will make about disability insurance is disability insurance, we often, unless an account advises otherwise, we often have the disability insurance personally owned. So the disability is personally owned, and you pay for it personally. And again, talk to your account before you do this, but you can pay for the disability policy with your corporate dollars. But you have to make sure that your accountant does what's called a journal entry or a t four a adjustment for the premium of your disability insurance. Why?
[00:02:00] Dustin Serviss: Because if you don't and you collect on the disability, that disability could be taxable, which you don't want. And, again, you know, there's... You all have designated advisers across the country in your regions, and there's also designated planners that are in house at Lawyers Financial who can help answer that question. But your accountant ultimately is the best case for that. Bernadette mentioned it earlier. One of the strategies. So strategy number three is retention. Retention of your staff and keeping them, you know, engaged, happy, contributing, making an impact, not just doing the work,
[00:02:36] Dustin Serviss: is extremely good leverage for you to get more free time to go back to slide number one, which was slide number two, which showed my son and I out quadting. Again, your company, your staff need investment. That is just... You know, I could have another bucket actually on the spending accelerator that's called staff. And so however you wanna make that a great experience, you can design that. You're the controller of your business. Lawyers Financial offers two things, one, a pension plan called DBplus and employee benefits. Again, these things are... You know, create tax breaks for corporations.
[00:03:13] Dustin Serviss: And the employee benefits, sometimes what we will do is we will put an employee benefit plan in place, and then we will do a webinar somewhat like this, where I will meet the staff and we'll say, hey, what's going on? I will give the staff tools to use, so then you look like the good person. You look like the person that introduced us and help them. Again, for many, you know, we have many, law staff. So law staff who have access. Adult children of lawyers or of lawyers can access lawyers financial. So if you say to your your admin assistant, hey. You know, you just got a mortgage. Did you get that mortgage life insurance?
[00:03:51] Dustin Serviss: Then they say, oh, yep. Yep. Got that handled. Well, if they got the mortgage life insurance at the bank, ninety nine percent of the time, it is more expensive than a simple term policy, a simple term that they could buy from Lawyers Financial and save money. So all of a sudden, you haven't given them a raise, but you've put more net money in their pocket, and they will be thankful for that. And that starts to build culture. Strategy number four, we're into the bonus kind of area. I would say, whisper strategy. You can call it whatever you want. But this is this is this is things that are maybe a little more creative.
[00:04:25] Dustin Serviss: And, again, talk to your accountant. They are your they are your ally. I always do this. I'd say to my accountant, hey, fitness and health is important to my staff. What happens if I pay for my staff's gym pass? One thing that we did was a was a big one, was cell phones. So, you know, when when a staff was asking for a raise, they're asking for net... More net money in their hands. And so when you start thinking of it like that, I'm saying, okay. If I'm gonna look at it, like, from your standpoint, you want net more money. If you get a raise, I I haven't figured out the math, but you think a person wants a raise of a few dollars an hour,
[00:05:03] Dustin Serviss: and you say, okay. But then you gotta pay CPP, you gotta pay benefits, you... Or EI. And so then... And it was like... And your payroll goes up, so maybe your WCB goes up. And you say, okay. Well, what about if I give you a hundred dollars towards your cell phone? Or, you know, for some sole practitioners, and and in my case, I could add them to my plan. And so I'll say, I'll pay your cell phone bill. What is it? Oh, it's eighty nine bucks. I'll pay up to a hundred dollars a month. So now I've got a write off. I got a write off for a cell phone because we are remote sometimes.
[00:05:33] Dustin Serviss: So my staff can be remote sometimes, and they need their cell phone because we use Zoom for our phones, and they're... They get calls right through to the Zoom app on their phone. They're calling the office. So it's justified. But that now is a write off for me at a hundred, and they don't have a cell phone bill anymore. And they're happy because their net cash flow goes up. Again, there's other creative things. I put the picture of the boat. Maybe you have a, you know, a really big yacht or a fancy boat. Ask your accountant. What happens if you take your staff out for a day of fishing on the boat? Can your law corp rent your boat for a day
[00:06:09] Dustin Serviss: to take the staff out? If you've got a... Maybe a recreation retreat, you know, I saw some people from Vancouver. You got a place at Whistler or the ski hill. Can your law corp put on an employee and spouse retreat at your at your chalet, and can your chalet rent that out to your law court? Again, everyone needs to talk to their accountant, but just try and get the, you know, the ideas flowing. We're switching gears now a little bit to investment order. And now we're talking about investments inside your law corp. So for any of you who have a law corp or are thinking about getting a law corp and you are...
[00:06:48] Dustin Serviss: You know, you've heard or read, you know, should I do investing? And I'm talking about investments, stocks, bonds, funds, ETFs inside your law corp. There's a real subtle thing. Here's a law corp and a person, and this person has growth stocks in their TFSA. Okay? So you have a TFSA that has growth stocks or an RRSP, so that account is personally owned. In the law corp, you have an investment account, a non registered or what they call open investment account. And they have fixed income in there because they're kinda being a little more conservative. Because you wanna be, like, you know, conservative with the investments.
[00:07:39] Dustin Serviss: If you look fixed income inside a corporation, so even a GIC, a bond fund, you know, say... Use a GIC. At four percent is the GIC in the investment account in the law corp. That attracts fifty percent tax on that growth. So the net is only two percent. In this particular case... And, again, talk to your accountant, talk to your adviser. But we could switch we could switch the allocation. So for some people, having a little bit of growth stocks and having some fixed income make up a good balanced portfolio. So when you look at not just the individual accounts you have, and often, you know, advisors will just say, oh, well, you're balanced.
[00:08:22] Dustin Serviss: We'll just have all of your law corp, your RSP, your TFSA. We'll just put it all in the same fund. If you wanna get a little bit more strategic, you could look at all the money you have. So let's say in this case, you want it to be fifty fifty. You're like, I'm kinda up the middle. I want some fixed income, and I want some growth. But I'm fifty fifty. I'm a balanced person. Okay. So on a million dollar account, you would have five hundred in fixed income, five hundred in growth stocks. In this case, we could flip the fixed income and put five hundred fixed income into your personal accounts, like
[00:08:59] Dustin Serviss: your RSP or TFSA, then we'd have five hundred in growth stocks inside your corp. And what does that do? All of a sudden, you've now created capital gains tax in your law corp and isn't attracting fifty percent tax that the fixed income is getting. On the same vein of investments in in fees, it's important to hot topic a few years ago, What I would talk about is making sure... Or if you've got... Again, in this... I will preface, and I'll make this bigger in a second. I will preface that the fee based accounts usually... The doors start to open above about three hundred to five hundred thousand. That's the reality.
[00:09:40] Dustin Serviss: That the truly fee based where you get an invoice for the the the investments that you have, usually, it's three to five hundred thousand. Now what is it? Well, a mutual fund invested in your law corp, the fees are not tax deductible. The fees are buried in what's called the MER or the management expense ratio. So for... Just to back up, if you if you don't know that or you have mutual funds or you're thinking about them, mutual funds have a management expense ratio. And what that means is if you get, say, on your statement, you see a seven percent return and your management expense ratio is
[00:10:17] Dustin Serviss: two, you actually got a nine percent return and they took two percent off for the fee, and you saw seven. But it's it's in the fund. It's it's not a secret. They tell you about it. They have to disclose it, but it is more sort of buried in there. If you have a law corp and you're, you know, able to get a fee based account, Lawyers Financial uses Fiera Capital. Again, you can look them up, on the line. But for a privately managed account, if you can get this fee based in your law corp, the fees are tax deductible. So, again, on smaller accounts, this isn't a huge advantage.
[00:10:55] Dustin Serviss: But once you're talking three, four, five hundred, a million, two million, this tax savings becomes material.