Geoff Carter of O'Farrell Financial Services Inc.
Geoff started his craft talk last week by providing members with a brief refresher on the history of his membership with the OXA. He first joined the OXA in 1993 under the classification of education & training as LearnQuest Education and then again in 2006 as Freedom 55 Financial. He then reminded members of the road he has travelled over the years from his graduation from Western University with an Economics degree in 1980 through his nine years in the insurance business with London Life, Royal Life and Paul Revere Life to his move in 1989 to the National Capital region with his family and then to his move last December to become a partner at O'Farrell Financial Services.
Geoff then introduced Dermid O'Farrell owner of O'Farrell Financial who provided a brief overview of the company. In 1997, Dermid and Donna Lee O'Farrell founded the company out of their home with a belief that when relationships are strong, people will have the confidence to act on their plans. Recognizing that financial security planning would be deeply valuable to the people in their community and surrounding area, they set out to build a company that would provide clients with an experience of quality advice, professional discipline, and compassion; something that their clients could believe in, something they can trust.
From the beginning, the company has grown steadily each year and has proven that their belief was one that was shared by their clients. While it wasn't without challenges, and wasn't without hardship, Dermid and Donna Lee put in the tough work that is required to build any meaningful business. Now, 13 years later, they've attracted a team that shares their commitment to relationship and their desire to help clients plan for their financial future.
Geoff introduced his fellow O'Farrell Financial colleagues (Rick Lewis, Matthew Felker, Keeley Mouré and Samantha Joudin). He then shared with members an estate planning and tax minimization strategy called "Insured Asset Transfer". This strategy works best for people who have maximized or have hit a certain contribution threshold within their tax shelters such as RRSPs. People who are in strong financial shape typically put excess cash into fixed income investments such as GICs and/or bonds. These types of investments are extremely safe, but are also highly taxed. Geoff demonstrated to members (using his example couple Cliff and Freda) how permanent life insurance can be used to shelter investment income and build significant wealth. He showed how it's possible to accumulate growth tax free, providing you with the ability to leave it to family or a charity of your choice completely tax free. Because the Insured Asset Transfer concept is based on a joint second to die life insurance contract it is not a short term strategy. In the early years this is terrible as a pure investment.
This concept gives investors the flexibility to access their savings within the insurance contract, in later years, through a collateral loan assignment therefore allowing them to always maintain control of the cash value in the Insured Asset Transfer account. No proceeds are turned over to family or charity until both parties have passed away allowing them to live the life they have envisioned during retirement. Many clients feel that this is the ultimate scenario. Leaving a financial legacy, minimizing taxation to CRA while still maintaining control of their assets.
Many business owners also find this concept appealing because the corporation can hold the contract and can be the beneficiary. This is called a Corporate Asset Transfer strategy and it provides a significant enhancement to the amount available for transfer to surviving shareholders than traditional taxable investments. The corporation retains control of its capital in a tax-advantage life insurance policy while perserving more of the business assets for transfer to heirs than traditional investments where income is taxable every year. This is also a great vehicle to help eliminate the situation where a business has retained earnigns as passive income. Excess cash or retained earnings inside a holding company can fund the policy and grow tax free inside it. At death, it can be paid on top of the death benefit into the capital dividend account of the corporation and paid out on a tax free basis, minus the adjusted cost base to heirs of the owner or 2.5% max.
For those wondering where assets for this type of investment are held, the answer is, in a Participating account which is primarily held in fixed income investments separate from the operating funds of the Life Insurance Company. The Participating fund has a mixture of government bonds, corporate bonds, commercial mortgages and private placements and has been returning a consistent average rate of return over the past 30 years.
If you know of any business owners or professionals looking to retire comfortably while minimizing taxation and looking to create a financial legacy please refer them to O'Farrell Financial Services Inc. For more information about Insured/Corporate Asset Transfer strategies and if they can work for you contact Geoff Carter at
(613) 258-1997.
