Amplifying Philanthropy with Mark Halpern| E031

Enabling philanthropy through insurance and other strategies.

In this episode of Financial Planning for Canadian Business Owners, Jason Pereira, award-winning financial planner, university lecturer, and writer, interviews Mark Halpern, CEO of WEALTHinsurance.com. Mark Halpern is a well-known insurance advisor in Canada that has differentiated himself by focusing heavily on philanthropy. Mark talks about how business owners can enable their philanthropy through the use of insurance and other tactics. 

Episode Highlights: 

● 01:05 – Mark Halpern describes the kind of work he does. 

● 02:25 – Where do conversations typically go when people come to Mark Halpern about wanting to engage in philanthropy? 

● 11:11 – What are some of the opportunities that come from philanthropy? 

● 14:15 – What are the tax shelters that are left in Canada? 

● 22:00 – Spend. Save. Give. What are you going to do with your money? 

● 26:13 – What can people do to maximize the value of a life insurance policy? 

● 31:38 – Mark Halpern describes the various kinds of people that like to give. 

● 35:11 – You can’t just be a product peddler. You have to be a problem solver. 

3 Key Points 

1. Mark Halpern has almost 30 years in professional practice. He is a certified financial planner, a trust and an estate practitioner, and also a master financial advisor on philanthropy.

2. Financial planning around philanthropy involves making sure the client isn’t going to run out of money, crystalizing what their tax bill is going to be now and during life expectancy, 

3. With COVID-19, people are much more aware of their mortality and are inspired to do something more significant with their money in a charitable fashion. 

Tweetable Quotes: 

● “I do estate planning, and that is really looking at things from 30,000 feet up, making sure that people’s financial architecture matches up with their financial furniture and that it changes over time.” – Mark Halpern 

● “Tax minimization strategies using tax exemption products that most people don’t know much about. We provide that educational wisdom.” – Mark Halpern 

● “Philanthropy, helping people create legacies and also help them convert taxes into charitable donations, and we do this with business owners and entrepreneurs and corporate professionals. We have some sports athletes as well.” – Mark Halpern 

Resources Mentioned: 

● Facebook – Jason Pereira’s Facebook 

● LinkedIn – Jason Pereira’s LinkedIn 

● FintechImpact.co – Website for Fintech Impact 

● jasonpereira.ca –  Website 

● Linkedin – Mark Halpern’s Linkedin 

● wealthinsurance.com – Website for WEALTHinsurance.com

Transcript:

Producer: Welcome to the Financial Planning for Canadian Business Owners podcast. You will hear about industry insights with award-winning financial planner and entrepreneur, Jason Pereira. Through the interviews with different experts with their stories and advice, you will learn how you can navigate the challenges of being an entrepreneur, plan for success, and make the most of your business and life. And now your host, Jason Pereira. 

Jason Pereira: Hello, and welcome to Financial Planning for Canadian Business Owners. Today's show [inaudible 00:00:38] Mark Halpern, CEO of wealthinsurance.ca. Mark is a well-known insurance advisor in Canada that has differentiated himself specifically by focusing very heavily on philanthropy. And I brought him on the show to talk about how business owners can enable their philanthropy through the use of insurance and other tactics. And with that, here's my interview with Mark. 

Jason Pereira: Hello, Mark. 

Mark Halpern: Hey Jason. 

Jason Pereira: Thanks for taking the time today. 

Mark Halpern: My pleasure. Nice to make the time. 

Jason Pereira: So Mark Halpern of Wealth Insurance, tell us about what it is you do. 

Mark Halpern: So I'm almost 30 years in professional practice. I'm a certified financial planner, a trust and estate practitioner, and also a master financial advisor in philanthropy. And what I do is sort of three things. We do estate planning, and that's really looking at things from 30,000 feet up, making sure that people's financial architecture matches up with their financial furniture and that changes over time. 

Mark Halpern: Second thing is tax minimization strategies, using tax exempt insurance products that most people don't know much about. So [inaudible 00:01:40] that education [inaudible 00:01:41]. The last area we're involved with is philanthropy. Helping people create legacies and also help them convert taxes into charitable donations. And we did this with business owners and entrepreneurs. I incorporate professionals. We have some sports athletes as well, and we work with wealthy Canadian families. 

Jason Pereira: Excellent. So I brought you on the show specifically, because we've covered off a number of areas of estate planning in the past. But one area we haven't tackled as heavily is the facilitation of philanthropic desires through your estate planning specifically when we start talking about insurance. So let's just say, I'll give you a scenario. I am a business owner. I am what's called in my 50s. I am charitably inclined. You have a conversation with me and discover this. How does that conversation go? Where does it lead? 

Mark Halpern: Yeah, I wish I could tell you that people come to me and say, "Hey Mark, I want to give away $5 million to charity. How do I do it?" We have had those conversations, but generally speaking, it's really looking at things from 30,000 feet in terms of a very holistic approach and finding the money and finding the desire for individuals. Many Canadians are very passionate about charity and that's two thirds of their giving is predicated on that. But when they find out that there's a tax advantage as well, suddenly that gets them to think more greatly about what they can do and how they can impact a lot of change. And the reason that we do this is that a lot of people have done investing and they've become very, very successful. But what they haven't done is a lot of planning. Planning is sort of making sure they have a check mark that they're never going to run out of money based on all the assumptions and that also it helps to crystallize what their tax bill is going to be now and what it will be at life expectancy. 

Mark Halpern: And then what they do realize, Jason, is that they're going to have more money when they die than what they have today. So while they're sitting there as the custodian or trustee for the next generation, what they're not aware of is that they're also partnering with the tax department. So if we can show them how we can take some of that, never-spend money that they're just paying taxes on and use it instead to create a whole bunch of money for their family to preserve their estate or create a whole bunch of money for charities, is that something they'd be interested in? And most of the time they would agree. 

Jason Pereira: Yeah. I mean, it's interesting. I've had several cases where we finished the financial plan and they see this large number at the end and they're like, "I'm going to leave how much money to the kids? I don't know if that's a good idea." Or "Maybe I shouldn't. That's like, I'm going to..." And then of course the second part of that is, "Wait a sec, why did the line go from this high, to this high? Like you're saying, I'm dying with this much money, but then I'm left with this much to give them, I'm not understanding." 

Jason Pereira: It's like, well, your secret partner has finally come to collect their share, right? And that secret partner being CRA. And they look at them, the numbers enough to sometimes make your next snap back. And that number might increase very shortly depending on what happens in the next budget. But the question of, well, how do I reduce that always comes up and yeah, charitable inclinations. That's the great thing about charity, is that not only can we do good, we can also reduce our tax bill. 

Mark Halpern: Yeah. And really people think that if I give money to charity, I'm basically cutting off my children as beneficiaries. But I like to say giving money to charity is like adopting another child. Your kids are going to get exactly what they're supposed to, but now you've adopted somebody else into it. And I have had situations where people have said, "No, let's face it. Charity begins at home. I want to give all my money to the kids, to the grandchildren." If anything, remember Jason, this is like freedom 55, right. Is the great [inaudible 00:05:15] life slogan. But freedom 55 today is when your youngest kid is 55. It's like in other words, it's gotten where we really need to plan, not just for our own retirement and life expectancy, but also for our kids as well. 

Mark Halpern: But there is something very special about adding charity to your estate planning because there's a big difference between being somebody who donates money to charity and somebody who is a philanthropist. And the good news, you don't have to be Warren Buffet or Bill Gates to become a philanthropist. It just requires having a discussion around the efficient use of your assets and how you can convert those into beautiful charitable gifts. 

Jason Pereira: And I like the way you just put that, there's a difference between being charitable, meaningful, anthropic, and we're all inundated with just this death by a thousand cuts request for 50 bucks here, a hundred bucks here, ride to conquer this, a lottery for that. And so we are just, the charitable apparatus is trying to get as much money out of us in for good purposes. Fine. But do you think about death as it presents a unique opportunity or unique time and place and at the end of one's life where the incentive system completely shifts. It's no longer about you having enough. It's about what do you want to leave behind? How do you want to be remembered? And also again, that tax bill, right? So, and then that's where charity pops up and helps deal with a number of those issues potentially. 

Mark Halpern: Yeah. And I call that going from success to significance, right? I've had people cry in our conversations where they've just been so focused on making money and building a business, but they really had not spent the time around that significant part. Like if you look at a business owner, I'm a business owner, it's something that consumes you 24 hours a day. I'm just grateful I had something called the Sabbath. At least I can take 25 hours off once a week, but it really is something that is on people's minds because not only are the charities definitely affected now, especially with COVID, it's in this huge drop of billions of dollars, but people now are much more aware of their mortality and they realize that the time or the runway is shortened because of COVID and now they really are inspired to do something more significant because they realize that if they're not around, those options fall off the table. So it's a great time to be speaking to clients about it, but it has to be part of every conversation 

Jason Pereira: And as for the... I'm going to just get to throw in there about your comment, about life being short on COVID. Well, the honest truth is you look at the actuarial data that's come out to date is indicative of almost two years being wiped out of life expectancy across the globe. Right? So that kind of makes it resonate a little bit more. Yes, it could happen to you. It could happen to anyone, but really, I mean, whatever you thought you were going to live with, as long as this is around shave two years off of that is where they're going to look at. 

Mark Halpern: Well, I'm sure it's going to affect, it's going to affect actuarial tables and the cost of insurance and getting insurance and all that sort of stuff. Look at, I didn't think that we would be so heavily invested in the philanthropy space. I grew up in a very charitable family and always been involved with volunteering, present of a nonprofit, I'm on some foundations, but I didn't think from a business point of view, we would go that deep. But now our corporate objective as a company is to create a hundred million dollars of new charity every year. And that's either... Yeah, and it's not, it's not some sort of aspirational, impossible sort of breaking the Roger Bannister four-minute mile. 

Mark Halpern: The way we're doing that is working with our existing clients or working with generous donors of the nonprofits that we work with, or educating allied professionals, lawyers, accountants, insurance, investment, people who are really the gatekeepers of their clients' wealth to help them understand how easy it is and what they should be doing. Because it's not only an opportunity, but it's a huge responsibility. The statistics say that 81% of the advisors say they have a philanthropic conversation with their clients. And then they interviewed those same clients and the clients say that only 13% of advisors were talking to them about it. So it's not about- 

Jason Pereira: I'm in a 13 for the record. Okay, [inaudible 00:09:19] 

Mark Halpern: Jason, we're going to move you up okay. By the time we're over. 

Jason Pereira: There we go. 

Mark Halpern: But it's not about being a lawyer and you get to the part where you say, "Uh, would you like to leave on a gifts to charity?" That's not having a philanthropic conversation. So, so the way to do it is either learn about it yourself, which is very rewarding, or collaborate. Find somebody, work with somebody on a collaborative basis. We talked earlier, Jason, that we're in a very, a world of hyper-specialty right now. You can't be all things to all people. So you're hyper specialists. Then you have a bench strength, like a baseball team that you bring in people for the specialists in that area. And I think that's the only way to get this done. 

Jason Pereira: Well, yes. I mean, if you go to one person who can, who claims to do it all themselves, you're dealing with someone who's being fraudulent. Because there's no way. There's just too much to know about, it's like the same thing I say about lawyers. I never hire a do-everything a lawyer. I always say, if there's more than two specializations, you better start to [grinch 00:10:13]. Because it's just, there's too much to know. There's just so much to know. But as a planner, I think there's unique opportunity or perspective to have that. Just a couple of questions will change... A couple of things you do can help you assess that. I mean, like in my own practice, in our onboarding questionnaire, there is a question about clauses and charities and initiatives that matter to them, right? And some people will fill that out and then others, will just go looking at their tax returns. 

Jason Pereira: Like, is there a charitable, the other terrible contributions being made. Where those charitable contributions may be made. Sometimes you find repeatable ones of reasonable size to one specific institution. And maybe you didn't, you ask the question around why and you find out there's this deeply personal reason why they want to support that institution. Right. And then being able to open up and have a deeper conversation about what we can do for that institution is just, that conversation just changes... No one wants to talk about sharp ratios and everything else, but they'll share a sec, want to talk about what, how they want to be remembered. 

Mark Halpern: Absolutely. I'd say, there are two things I'm going to just bring up, I think, in terms of opportunities. One way I find that the whole philanthropic conversation as part of the estate planning makes, there's an intro, which is the emotional part. Then there's the technical stuff, which is all these different apparatus or apparati that you can sort of structure. And then there's an emotional part to close it. But one of the first questions you should tell people is that each one of us has three possible beneficiaries to our estate. You have family, you've got the tax department, and you have charity. And each one of us can only pick two. Which two would you pick? Most people would say family and charity, unless they're big socialists. Which again, we live in an amazing country that needs tax revenues, but there's only so much tax. The second thing is- 

Jason Pereira: I think it's kind of... if I may, I think it's... the choice between tax and charity is a choice between directing your legacy and leaving an undirected legacy of some degree, right? 

Mark Halpern: Excellent, yeah. 

Jason Pereira: Because yes, because the government's going to spend it, how they see fit. And it's going to be a lot of good social causes funded through that. But there's something that matters more to you than the general pool. You can voice that. 

Mark Halpern: It's like, do you like the idea of the government investing your money, your legacy money, or would you rather direct it yourself to the charities and causes that you care about the most? 

Jason Pereira: That's a classic line about estate planning too, is like, you don't have a will, so are you happy with the will that the government's drawn up for you. 

Mark Halpern: Right. Right right right. 

Jason Pereira: That's it. 

Mark Halpern: So the other thing that I think people have to be aware of, and this comes back to education and knowledge and Jason, I'm sure you see this also in your world, the lack of knowledge around taxes or general taxes is beyond beyond. So I would suggest that the greatest opportunity for advisors and even for people who are listening or just regular folk, is if you're a single, widowed or divorced, you need to have this conversation more than most. Because if you have a spouse and you die, all of your assets, roll over, tax-free through a spousal tax, free roll over to your spouse and taxes are not due until the second you die. But if you're a single widowed or divorced, you're one incident away from a huge tax disposition. Jason, isn't it amazing how many people have RSPs or rifts and don't realize that 54% of that money is going to be going to the government? 

Jason Pereira: Yeah, potentially. Yeah, honestly. It's and the old, I love the old, okay, so how do we reduce that? So you can either spend it all while you're alive and you're still, they're still going to get their 54%, or you can start talking about giving it to someone other than the government. 

Mark Halpern: Exactly. So there's different ways, of course, giving that cashflow to a charity, in which case it kind of negates the tax now or leaving it as a beneficiary designation to a charity, in which case the charity gets the money and not the tax department, but there are a number of other ways that are really creative, where your family can actually get 50% more than what they were going to get on a net after tax basis. And you could be leaving a whole whack of money for charity, right? And this is where I get in the conversation about tax-efficient investments in Canada lies. There are really only four tax shelters left in Canada that are really, one of them is your principal residence. 

Jason Pereira: For now, for now. [inaudible 00:14:22] specified, this is August of 2020. We do not expect all of these to be the same in five years, [inaudible 00:14:28] 

Mark Halpern: Let's put a little asterisk beside that. 

Jason Pereira: For now, yeah. 

Mark Halpern: We should encourage people all the more sort of look after these things, because often these things are grandfathered, but surely principal residence, you buy a house and you sell it, no tax on that. Although they're looking at changing that. 

Jason Pereira: Don't count on that forever. 

Mark Halpern: TFSAs. You [inaudible 00:14:46] tax free, but again, it's only a minimum amount that you put in every year. Lottery winnings. Don't buy your tickets in the States. In Canada, lottery winnings are still tax-free and the last one is life insurance. And other than these four things, there's somebody waiting from the CRA to be a partner in any of the gains you've made or any of the values. And they want anywhere between 27 and 54% of that money. So if you knew that life insurance is one of those tax efficient structures, wouldn't it make sense to find out what it does as opposed to what it is? And that's really where we've created some amazing ideas like CPP philanthropy. Are you familiar with that? Jason, how that works? 

Jason Pereira: I know where you're going with this, but it's your show. You go ahead and tell us. 

Mark Halpern: So if you're a wealthy Canadian family, a husband and wife, and you turn 65, one of the rights of our country is you receive CPP, which works out to about $26,000 a year between a husband and wife. If you've got lots of money, $26,000 does not move the dial. You know what I mean? You're taxed on it. You reinvest it, and you're taxed again. So what if you're a charitable person. That couple could take their CPP, the $26,000 and buy a one-and-a-half million dollar life insurance policy with that 26,000 as the premium. If the policy's is owned by a charity, now that $26,000 of CPP is considered a charitable donation, there's no tax on your CPP. And you've created a million and a half dollar gift, or alternatively, take the CPP money, buy the policy, don't have the tax break now, but make the beneficiary of the policy at charity upon when you die. 

Mark Halpern: Now, the charity gets a million and a half, saves your estate $750,000. Unbelievable. And then the third way, which is the one I like is if you go to your accountant, they'll generally say, if you're taking money out of your rift, let's say take the minimum. Because if you take any more, you're going to be taxed on it. So you're taking out 5%, you're making seven. So it's really a deferred tax bill that's coming down the road. Why not take that CPP, buy the million and a half dollar insurance policy and make your children the beneficiary of that and donate your registered money to charity. Now, the charity gets the full amount of your registered money without any tax considerations. And your kids got about 50% more all by using something as simple as CPP. And again, if you really don't want to use the charities, just use the CPP, buy insurance. This way [crosstalk 00:17:06] 

Jason Pereira: There's two points I want to address. Two points I want to address here. One let's be clear. Unfortunately, in Ontario, we have the lowest credit rates for charity in the country. So unfortunately you don't get credits for 54%, but you get pretty close. Right? 

Mark Halpern: 50 point something, yeah. 

Jason Pereira: Yeah, so exactly right? And then the second piece is that what I like about the way you frame these things is that you're using something known as mental accounting, which is a behavioral finance kind of cognitive issue or a trick, which basically says that people don't necessarily in an academic world, money is fungible at all times. And no money is different and should not be different any people's minds, but we don't do that. People think of, this is their retirement fund or this is their cottage fund. Like they do use mental accounting, create these little buckets. And this is actually proven to be a very effective way of getting people to visualize their retirement savings versus other savings. 

Jason Pereira: Now, what you're doing is you've taken the same structure and helped people visualize these cashflow streams that, yeah, you know what, it's, the CPP money is no different than the money in their bank account, it just came from a different source, but it's tangible to them just because it comes from a certain source. And you're taking that and matching that with the strategy. And whereas the academics and everybody else just say, well, it doesn't really matter, it's all just money, to people, they are able to wrap their heads around that concept a lot easier because of it. And I'm sure that that leads to a lot more traction than just the general conversation about, oh, let's just buy insurance to make you wealthier because of whatever situation. No, let's take this one thing, tie it to this other thing, and here's the end result. 

Mark Halpern: Absolutely. You're spot on and I like that. It is psychology. People like to have a box, a check mark in that box. This thing is a little [crosstalk 00:18:40] after. But if you were to go up to this family and say, "Hey, you can buy a million and a half dollar life insurance policy for $26,000 a year. Are you interested?" They're not going to say they're interested. 

Jason Pereira: I'm using that voice? I'm using that voice, they're going to say no. 

Mark Halpern: Whenever I do these things I always have to make that voice of that, just so you differentiate between me and a possible client, but somebody is not going to be able to direct $26,000 of cashflow towards insurance. It doesn't make any sense. But if you, as you said, can direct it towards creating a million-and- a-half dollar legacy gift. Actually asked earlier Jason, about how to tie it in with regards to family and children and all the rest of it. And I mentioned about adopting new kids. We're living in very, very difficult times. We grew up Jason, I'm a little older than you, but we grew up at a very idyllic time. Life was very idyllic. You spent your whole afternoon playing road hockey and you didn't have people worry about being abducted and yet you didn't have play dates. We were just all over the place. 

Mark Halpern: And it's changed a lot as have the sort of the values and we've gone to so much technology. So I look at, and that philanthropy is kind of like, the apple doesn't fall far from the tree. You've heard that before. That's when the weather conditions are perfect. But if it's very windy, the apple is far from the tree. And if it's like a hurricane Laura, the apple doesn't even know it came from a tree. So we're living those kinds of times. I believe that either religion or charity are two ways to pass along that moral muscle, that values muscle to our children, that they should see that there is a responsibility to give back, that their social impact, that they have to be somebody who's a giver. And if you do that, the happiest people in the world are givers. 

Mark Halpern: And if you can create a structure for them utilizing philanthropy, either setting up your own private foundation or setting up a private foundation through one of the community foundations or the banks, or where the Toronto Foundation [crosstalk 00:20:33]. 

Jason Pereira: [inaudible 00:20:33] funds. 

Mark Halpern: [inaudible 00:20:33] Vice funds. You're going to be giving them an ammunition to really build that muscle and carry on the good work that you've always wanted to do. But more so it's about our grandkids. Like, we lived their life so to speak and I got hopefully another 50 years to go. And our kids are also close to the tree, but it's really the grandkids. Those are the ones that I'm really nervous about. And I think that the charity is just a wonderful way to engage them. I know that some of my clients, including myself, I'll tell my daughter, listen, you can give away a thousand dollars to any charity that you'd like this year. You give it away on the condition that you have to research the charity. Tell me all about the charity and why you want to get involved with that charity. And then I've got the money sitting in our family foundation. I'll send a thousand dollars. It's got to go there. But now there's meat on the bone. 

Jason Pereira: And I've used that exact strategy when talking to people about donor-advised funds. It's, hey, you know what? If you want to talk about a family dynamics way of teaching your kids philanthropy and responsibility for the community, this is a wonderful way, right? Gets them to, they can give it to what... they're responsible for distribution, but they got to come to you as to why they want to distribute to there. I'll actually share with one with you. And you may have seen this before. I'm not sure if you have, and this goes back. This goes even to way younger. And my kid, my five-year-old has one of these. You ever heard of the moon jar? 

Mark Halpern: No, I haven't. 

Jason Pereira: It goes by a couple of different names, but whether it be three different jars or one jar with three different slots, there's a, basically, it's a three piece, three point piggybank and you can put money into three different slots. The first one says spend, the second one says save, and the third one says give. And the entire idea is that is they have them receive some sum of money regularly and tell them, "Okay, you have a choice, which one of the three does it go in?" And you have to do something in each, right? So you're teaching them that from day one that is almost like a required choice. It's definitely it's on the table from day one. And then the real way you add fuel to the fire of this is that you have to reinforce each of the decisions. So the first one, spend, is simple. That's reinforcement itself, right? You get to enjoy that off the bat. Save, right, my son is currently saving for a Lego Batmobile, which is going to be a while because he picked the biggest one he could find. So that will be reinforcement, but he's learning to delay gratification. 

Jason Pereira: And then the last one, which is still [inaudible 00:22:46] challenge at his age is the gift. So it's, this is not for you. This is for something else. To date, his favorite charity's been his sister when she goes shopping. But one day it's going to change to understanding that that money has to go. If he saw a commercial for kids, for dogs in a shelter that he felt sad about, that is his mechanism for dealing with that. Right? So it's a wonderful little strategy. We actually give these as gifts to clients, but it's a good way to really start early if you want. 

Mark Halpern: Absolutely. No, I think that's, that makes a lot of sense. It's a great idea. I want to tell you about one thing that we just, that we've been involved with, which again, some of your listeners or advisors should be aware of. And that is some of the older Canadians who have been in business are doing their estate planning right now. They're doing an estate freeze or they're doing a thaw and a refreeze. They may have set up a family trust to maximize the lifetime capital gains exemptions. Great. Let's just put that aside for a second. Let's say they're charitable. Let's say they've done this freeze and they've got this money sort got these preferred shares and they pass along their common shares to the trust or to their kids and spouse. So now they've got this money. What are they going to do with it? 

Mark Halpern: So we just had a situation where two brothers sold their business for $150 million. And basically after taxes, et cetera, they both are sitting there with about 75, 70 million dollars in each of their holding companies. And they did a freeze. So we did the analysis on one of them and he's again, a very charitable person. And basically there was going to be about a 7 million dollar, let's say a terminal tax when he goes. 7 million dollars. So we did something called a private share donation strategy, which I'm sure you're familiar with Jason. 

Jason Pereira: I've seen it, yeah. 

Mark Halpern: So it's a way to actually donate your private shares to charity. Now, of course, how do you redeem them? Use insurance? Right? So I'll just tell you what the net net was. He had a seven-million-dollar tax. Instead we reduce that tax down to $335,000. He's going to be making a 14-million-dollar charitable donation. And at the end of the day, the icing on the cake is it's also going to create for him a seven- million-dollar tax free capital dividend. That's going to be able to be distributed to his children and grandchildren and that $14 million again of insurance that was going to be a donation would now offset the taxes that were due on that ultimate windup. So it was a beautiful, beautiful thing. We reduced the taxes. We created CDA, we created a $14 million donation, and then to make it even nicer, we used a financing strategy to acquire the insurance. So all that stuff, it's all- 

Jason Pereira: I was going to ask you about that. Because I've seen this a couple of times now. Yeah. 

Mark Halpern: There's no cookie cutter here. Every single situation is very unique, but that was not something he came to us with. That was something after going through a discussion around his planning, that we were able to find on his behalf and his bankers all on or the accountants on board. Again, it's not for everybody, but that's where the differences between investing in planning. We really do believe in the planning side. 

Jason Pereira: Absolutely. And there's one other strategy I want to make sure we hit upon before we wrap up and we're not wrapping up yet, but I want to make sure we don't miss it. And I know you and I have both done a little bit of work with the people over at SickKids in Toronto. And there's a particular strategy that comes to mind specifically when a business owner just doesn't want to keep a policy anymore. Say there's a partner's insurance in place. And they're like, I no longer need this or I don't care. I just, whatever is left is going to go to my kids. And there's really no desire to keep this policy or keep paying for it. What can they do to maximize the value? 

Mark Halpern: Jason, I'm so glad you brought this up. 

Jason Pereira: [inaudible 00:26:23] an article about it. 

Mark Halpern: But let's start from the high end. Believe it or not in Canada, there's seven billion dollars of term life insurance that falls off the books on an annual basis. That means this policy is no longer needed. Perhaps they're not needed for a shareholder or a buy sell agreement anymore because you sold the business or they just became too expensive. they renew every 10 or 20 years, very expensive or somebody doesn't want to convert them. They can't afford it. So they basically want to lose the policy. That's one approach. Or are they have an old policy that's sitting around. I know you need to get a multiple policies in your life. I have a hundred thousand dollar North American life policy, 151. I mean, you have different policies and they might not move the dial any longer on my own family's health planning, but maybe is there something I could do to actually do something nice for charity and also save some taxes. 

Mark Halpern: So let me give you an example. I had an individual who was an alumnus at Bishop's University. We go back. And he had a $300,000 term life insurance policy that he didn't want anymore. He didn't need, he was willing to donate it to the university, the foundation there, and he'd become uninsurable. He'd developed Parkinson's a number of years ago. So what he did was he converted that policy to a permanent policy. 

Jason Pereira: Which by the way, he never would be able to get another policy. Because he was now uninsurable, right? 

Mark Halpern: Correct, and here we could cover any term policy. [inaudible 00:27:46] late 75 can be converted. So he converted the policy without any medical evidence. The policy because of his Parkinson's is worth $175,000. That's based on a independent actuarial analysis. 

Jason Pereira: Let's just be clear on this, if I may, I just want to make sure, because people, this is an important part people will not understand. So if I set up a new policy, technically, as of right now, it's worth nothing, right? It's just, it's worth the promise in the future. However, down the road that policy might be worth something. Why is it worth something? Because basically I have to look at what I'm paying for that policy versus if I was to replace it. So simple point, if that gentleman was insurable and was able to get a new permanent policy, that policy would be worth nothing, but because he is now uninsurable, the difference between what realistically he would pay for a policy, if he could be insured versus a healthy person, present value that under $50,000, that's where we get it from. 

Mark Halpern: Exactly. So it has to be done with an independent actuary so that they provide the valuation based on your life expectancy and current costs for policy, et cetera. So the value was $175,000. He now donates that policy to Bishops University. It's a charitable receipt for $175,000, which basically saves them $87,500 of taxes, which he can use, whatever he doesn't use in this year he can carry forward for a five- year period of time. And going forward, they either, if he continues to pay the premiums, they're considered charitable donations. So he gets a receipt for that. He gets recognized for a big, big gift, right? 300,000 is not easy or like with SickKids or with a Bishops or other places. They look at that as a great investment in their foundation. And often we can find foundations that will actually pay the premiums going forward because they see what the internal rate of return is on that versus them putting it into a GIC or a T bill or something. [crosstalk 00:29:39] 

Mark Halpern: So anybody who's got an old term policy and they're uninsurable, or they've got an old life insurance policy that perhaps they don't need anymore. It's a permanent policy. Get a nice charitable receipt. And the beautiful part is to be, Jason, that charity is the only recognized current gift. give me cash, you'll get on the wall. Now they're recognizing plan gifts. So, you could do something that $300,000 gift that they recognize you for, even though it's not going to come for another 20 years potentially. But they look at that as a gift. And that's really nice for families who want to be recognized to pass along that good vibe to their children and grandchildren, that mom and dad or grandma and grandpa are really, really community motivated. 

Jason Pereira: And I just want to be clear because I think we want to be absolutely sure that people understand why this works. It is term policies when you are... the insureability has changed. So when you converted over to policy, you wouldn't be able to get in the market or permanent policies that are older simply because that premium you're paying now is based on when you were younger. Even if your health hasn't changed, there is a present value difference between what you would pay for a new policy versus what you're paying for that one. And that is worth something. So I actually wrote an article with the coauthor, Brian [Kabral 00:30:50], it's still available on advisory.ca for anyone wants to read that, but this is a lovely, lovely strategy. 

Jason Pereira: It's funny, I remember one conversation I have with someone who said, I think it was their neighbors parent got like a wing in a hospital or something like that. It was something, it was big, but it wasn't something like, it wasn't like the name of the hospital itself or something like that, [inaudible 00:31:09] hospital. But they said, yeah, he would say, "No, I'm never going to be able to donate that kind of money." And I looked at him and said, "Well, in theory you could." And I just explained the entire, insurance angle of this. And he's like, I just like, "Now you just have to decide if you want to." 

Mark Halpern: By the way, when you mentioned about buying [inaudible 00:31:26] is that [inaudible 00:31:28], that Brian? 

Jason Pereira: Yeah, he was a [inaudible 00:31:29] he was at GBL, which was one of the actuarial firms I would use back in the day. 

Mark Halpern: Right. He's a great guy, very, very smart guy and very good planner. Yeah. So that's one way, another way of using insurance is I see there are different kinds of people who, who like to give. Some people want to give and be completely anonymous. If you put their name anywhere, they'll never give you another cent. I like those kind of people. Second kind of people give because they want to encourage others to give. Third wants to give because they like their name on a building or on an elevator or something. And the fourth who likes to give is somebody who gives because they know it's good for business. It's really good for business to be philanthropic. 

Mark Halpern: So we work with a lot of young entrepreneurs and I'll tell you, one of the arrangements we did with SickKids was a real estate developer who's 27 years of age. And what we did was we created a $1 million gift of insurance that would be paid over 10 years to SickKids. But in this case, we made SickKids the owner and beneficiary of the policy from the get go, which means his $10,000 a year that he's paying over 10 years for a million dollar gift only costs him 50 because he gets a charitable receipt for each 10,000. So $50,000 gives over 10 years and now he's recognized as a million dollar giver to SickKids hospital. 

Mark Halpern: So they put him up on the JP Bicknell board, which is wonderful. But now he gets invited to all of the large donor events where those are people who normally write a check for a hundred grand and he's getting in for five grand a year. And now he gets to be around a lot of people which helps raise his profile and the real estate development business amongst people that he'd really like to meet with. So we've done these types of guests for people 27, 29, 31. It's a great idea. If you're really want to build out your business and you're charitable, it's great cachet for you and your business. 

Jason Pereira: It certainly does not hurt. And now I see a number of advisors thinking about doing the exact same thing. [crosstalk 00:33:20] The interesting thing is, and one of the funnier parts about this, and I say funny is that insurance companies will never publicly say it, but they hate these strategies. Because it just like, yeah. And as you said before, the amount of term insurance that drops off the map every year, because people stop paying for it. That's what's known as a lapse ratio, right? How many of those is a percentage of the total book? And that lapse ratio gets completely screwed up when you start doing stuff like this. So if this becomes super popular, we can expect premiums to go up. However, there's not, unfortunately these conversations are not being had as much as they could be. 

Mark Halpern: For the amount of business that's actually being done and charities, it is the tiniest little fraction. Remember there are very few people who are really talking about this strategic philanthropy. So I mean, there was a case out in BC, the BC finance people shut this down because they did have somebody who was doing this, they kind of called it, being in the insurance policy business, they've since come back off the ledge and said, again, if it was done properly, percentage charitable, you got to go through all those. And the insurance companies also are careful with that as well. We just don't want to get into a situation of life settlements or viaticals, which are still illegal here in most parts of Canada. 

Jason Pereira: Yeah. It's interesting. I think they actually, I haven't looked at it recently, but they've pared that, they've backtracked that altogether. Because I mean, a number of us looked at that and said, this is ridiculous. Like this is, I'm not sure who interpreted this on the [inaudible 00:34:47] what insurance company, but it went too far. The initial interpretation in my opinion went too far. They did backtrack it thankfully. So if you're in VC and these are tangible gifts, this is still a great strategy. So before we wrap up, any kind of final words of advice for business owners and advisors out there who are looking at how they can take what they have now, amplify it and be philanthropic? 

Mark Halpern: I'm going to take the very high road. The top end, the world has changed. Can't be a product pusher or a product peddler. In order to sustain yourself and be successful going to the future, you have to be a problem solver. So you can't be sort of a solution looking for a problem. And where that comes from is a lot of our clients, business owners, wealthy families, they're kind of like more offense. They like the offense. It's much more sexy and exciting to be on the offense side [inaudible 00:00:35:38]. But when it comes to the defense, they really don't have a very strong team there. I kind of equate it with hockey. I'm not going to talk about my beloved Toronto Maple Leaves because I feel like a loser there for, this is 1960s [crosstalk 00:35:51]. 

Jason Pereira: It's an abusive relationship Mark. You need to get out of there. 

Mark Halpern: I know. I was talking to two people about it today who said they're Montreal and Chicago fans. And I didn't want to admit that I still love the Leafs, but anyway, I hate them. But that aside, who are the teams that win the Stanley cup, Jason? It's not the ones that have the best goal scores. It's the guys who have the best defense men and the best goalies. Hot goalie. And that's the way that we look at our business. Our professional practice is we're the defense for those busy people. They all have what I call incompletions that rent space in their brain. They're not even, it takes away some of their energy and they need someone to look at things from this big picture. We have to carve out the philanthropy as part of an overall planning strategy for our clients and find out what they'd like to see happen, as opposed to telling them what they need to do, find out what they want to have happen. 

Mark Halpern: And that really to me is the most, the pure essence of what we're doing professionally ourselves, yourself as well, Jason. But that's also the future. So I would implore people to find somebody, sit down, have a 30-minute, 45-minute conversation. You'll be shocked by finding out all of those incompletions that really you should be losing sleep at night not having taken care of, but there's no greater feeling in the world when you go through this and you get those things all done. Now you can rest well at night and you can busy, building your empire and not worry about what can happen [inaudible 00:37:17] back, including being remiss by not having a charitable strategy in place for your family. 

Jason Pereira: Mark, thank you so much for your time. Really appreciate this. And hopefully this is, I mean, the simple fact that your company is focusing on creating a hundred million dollars per year of new charitable flows is just remarkable, like a kudos to you. And hopefully this podcast on a lesser level inspires a lot of other people, business owners, advisors, whoever else is listening, to start looking at some of these strategies of amplifying their philanthropic desires or their philanthropic efforts in order to basically hopefully make this a better world. So I thank you for this. 

Mark Halpern: Pleasure, Jason, I thank you very much. And I'm counting on you now with our hundred million dollar goal that I'm not, I'm counting on you for at least a fifth of that. Okay. So we'll... 

Jason Pereira: Oh, no pressure. 

Mark Halpern: No pressure. No, let's do some great things together. We can really absolutely do some amazing stuff. So I hope that we'll get [inaudible 00:38:12] future. 

Jason Pereira: Excellent. So, and lastly, where can people find you? 

Mark Halpern: You can send an email to me directly, mark@wealthinsurance.com. You can call my office number (905) 475-1313. You can go online to our website, wealthinsurance.com, or if you like to yodel, just open your window of your bedroom and scream out "Mark Halpern" and somehow it'll get to me and I'll be in touch. 

Jason Pereira: I'd love to test that theory. We'll see if that works. Thanks again. 

Mark Halpern: Thank you, Jason. All the best. 

Jason Pereira: So that was today's episode of Financial Planning for Canadian Business Owners. I hope you enjoyed that. I hope like I said, you were inspired to potentially look at greater efforts in philanthropy and looking at ways to amplify whatever resources you do have to create an even bigger impact. And as always, this has been Financial Planning for Canadian Business Owners. I'm your host, Jason Pereira. And if you enjoyed this podcast, please leave a review on iTunes, Stitcher, or wherever it is you get your podcast. Until next time, take care. 

Producer: This podcast was brought to you by Woodgate Financial, an award-winning financial planning firm catering to high-net-worth individuals, business owners, and their families. To learn more, go to woodgate.com. You can subscribe to this podcast on Apple podcast, Stitcher, Google play, and Spotify. Or find more episodes jasonpereira.ca. You can even ask Siri, Alexa or Google home to subscribe for you.