Episode 78: Your Net Worth Really Isn’t Your Real Net Worth: How to Create a Wealth Management Strategy and Estate Plan That Works

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Do you have a blurred understanding of what your true net worth or net wealth really is?

After digging into articles and resources across the web, it is clear that many Canadians have a misguided or incomplete understanding of what their true net worth or net wealth really is. 

If you’ve been following the basic formula of assets minus liabilities to calculate your net worth, then it is highly likely that the resulting value is inaccurate and ultimately useless for your financial wealth management strategy.

For those who have ever completed a net worth statement for themselves or for other investment or leveraging purposes, knowing your traditional net worth can be very misleading as you make plans for your financial future and wealth preservation strategy. By shifting the focus from merely accumulating more assets and less liabilities over time, we will share some other considerations that can help you navigate the “secret costs” including taxes and liquidation expenses to provide you with more clarity around your real net worth and how you can protect it now and in the future.

What you’ll learn:

• Gain clarity on accurately calculating your net worth, including often overlooked factors like taxes and liquidation expenses.
• Learn strategies for effective asset management and the importance of diversification to safeguard your net worth and overall net wealth.
• Understand the crucial role of tax implications and asset distribution planning in preserving and passing on your wealth to future generations.

By enhancing your understanding of what your real net worth is, you will avoid the common overestimation of your true financial and wealth management picture and ensure that you aren’t left scraping for cash flow in your later years.

Resources:

• 5 Myths About High-Net-Worth Estate Planning 
• Why this CFP says you’re thinking about net worth wrong – CNBC
• What Is Your Net Worth – Dave Ramsey’s (typical) oversimplification
• Dig into our Ultimate Investment Book List
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX.  
• Looking for a new mortgage, renewal, refinance, or HELOC? Reach out to Jon to share some options.

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting corporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

By hopping on a discovery call with Kyle, he will review your specific personal and corporate financial situation in order to determine if there are some quick wins available for you to minimize taxes personally or corporately, provide ideas for how you can increase your personal cash flow, and ensure that the net worth of your estate continues to grow in tandem.

Watch Now!

Detailed Episode Summary 

Net Worth, Liabilities, and Long-Term Thinking

Jon and Kyle discussed the concept of net worth, emphasizing that it’s not just about the sum of one’s assets but also their liabilities. They argued that many people overestimate their net worth, neglecting the fact that they have to subtract their liabilities to get an accurate figure. The discussion further highlighted the importance of long-term thinking when it comes to finances, as they aim to build a significant estate for the future that will provide for their families even after they’re gone. They also noted that this strategy can help ensure that their assets will continue to grow, providing more financial security for their loved ones.

Asset Management and Financial Planning

Kyle and Jon discussed the importance of shifting one’s mindset from net worth calculation to asset management. They highlighted the potential tax implications and other costs associated with liquidating assets, emphasizing the need to consider these factors when making financial decisions. They encouraged listeners to take advantage of their discovery call service at CanadianWealthSecrets.com/discovery to receive personalized guidance on their financial journey. They also stressed the significance of subscribing to their podcast for weekly episodes.

Calculating Net Worth and Asset Diversification

Jon and Kyle discussed the importance of accurately calculating one’s net worth, taking into account taxes and other costs. They emphasized that one’s primary residence, while typically not considered an investment, can have significant value due to capital gains tax exemptions, and should be factored into a comprehensive net worth calculation. They also cautioned against overinvesting in a single asset, such as a primary residence, and encouraged diversification among assets. The discussion highlighted the need to plan for future liquidation of assets, considering tax implications and the potential impact on net worth.

Tax Implications and Asset Distribution Planning

Kyle and Jon discussed the importance of considering tax implications when building wealth and planning for the future. They highlighted that taxes could significantly reduce the net worth at the time of death and emphasized the need to plan for the distribution of assets. Kyle expressed his desire to control how his assets are distributed, whether it be to family, charity, or himself. They stressed the importance of thinking about the second camp of individuals, who not only aim to accumulate wealth but also want to ensure their assets are distributed according to their wishes.

Transcript:

00:00:00:11 – 00:00:32:00
Jon Orr
Do you have a blurred understanding of what your true net worth or net wealth really is? After digging into articles and resources across the web, it is clear that many Canadians have misguided or an incomplete understanding of what their true net worth or net wealth really is. If you’ve been following the basic formula of assets minus liabilities to calculate your net worth, then it’s highly likely that the resulting value is actually inaccurate and ultimately useless for your wealth.

00:00:32:00 – 00:01:09:22
Jon Orr
Financial Planning Strategy. For those who have ever completed a net worth statement for themselves or for other investments or leveraging purposes, knowing your traditional net worth can be very misleading as you make plans for your financial future and wealth preservation strategy by shifting the focus from merely accumulating more assets and less liabilities over time. We will share some other considerations that can help you navigate the secret costs, including taxes and liquidation expenses, to provide you with more clarity around your real net worth and how you protect it now and in the future.

00:01:09:24 – 00:01:22:17
Jon Orr
Let’s go.

00:01:22:19 – 00:01:27:20
Kyle Pearce
Welcome to the Canadian Wealth Secrets Podcast with Kyle Pierce and John Oliver.

00:01:27:21 – 00:01:41:16
Jon Orr
We are recovering high school mathematics teachers and education consultants whose entrepreneurial spirit led us to begin multiple businesses in real estate investing, digital courses and coaching and consulting after the bell rang at dismissal time.

00:01:41:20 – 00:02:02:07
Kyle Pearce
Fast forward a decade later where we’ve grown our portfolios and our time freedom to the point where we can now help entrepreneurs, business owners and investors to grow their wealth into a legacy that lasts generations through hidden investment and tax secrets. Your financial advisors won’t believe our true.

00:02:02:09 – 00:02:22:02
Jon Orr
All right, let’s get into this episode and let’s kick this off when we talk about net worth, because I think when we talk estate planning, we start to think about how much we have, how much are we worth? How much is our estate worth? How much of my worth? And I’m sure there’s a time in your life where you’re like, Let me calculate my net worth.

00:02:22:05 – 00:02:39:17
Jon Orr
Let me see, am I a millionaire? How much am I actually is in my portfolio that I can call my net worth? And I think we’re going to talk about kind of surface level thinking about net worth. But the big idea here that we want to share with you the secret sauce is that we think you’ve been thinking about net worth wrong.

00:02:39:18 – 00:02:49:04
Jon Orr
We think you’ve been thinking about in terms of that surface level and you’ve been overestimating your net worth. And we’re going to shed some light on that net worth here today.

00:02:49:06 – 00:03:08:05
Kyle Pearce
I love it. I love it. Yeah. John So we’re going to talk and take a deep dive here. And actually we’re going to be going into this maybe a little deeper than you might expect, because if you were to Google Net worth, John, you did a Google search and you found some really interesting things, like we were trying to figure out, like who’s talking about what we were going to dig into on this episode.

00:03:08:05 – 00:03:27:21
Kyle Pearce
And it was hard for us to find anything out there. So this is definitely a bit of a Canadian wealth secret. But what I found in terms of what was coming up was maybe a bit surprising and maybe surprising that some of the people who are listening to this particular show, because I actually don’t think that people are misunderstanding it from a basic level.

00:03:27:21 – 00:03:51:07
Kyle Pearce
And what I mean is something that came up there was like a CNBC article, John, that you had dug up. It said, why this CFP says you’re thinking about net worth wrong. And I was thinking right away you were like, hey, I think somebody else was talking about what we’re going to talk about here today. And then you dug into the article and you found that like they weren’t there was like misconceptions that your net worth is just like all of your assets.

00:03:51:07 – 00:03:57:21
Kyle Pearce
So all of your assets added up and that is it. Which is not actually the case. Yeah.

00:03:57:21 – 00:04:22:08
Jon Orr
I think when you start to like go down and Google your net worth and what does it look like? It gives the basic calculation that your net worth is take all of your assets of any rental properties, any of your home, maybe it’s your cars, any any sort of asset you have. It’s your investment portfolio. You take all your assets, you got to subtract your all or all your liabilities, like how much you owe, you know, because if all of a sudden I say I’m a millionaire, but I also have $1,000,000 in debt, I’m broke.

00:04:22:08 – 00:04:39:24
Jon Orr
I have no money, I have no net worth here, even though you have a ton of assets. And when I looked on these articles to kind of just go down some rabbit holes to think about what are other people saying about net worth thinking that they also are going to tell, you know, the reader that they’ve been overestimating net worth in the way they did.

00:04:39:24 – 00:04:56:08
Jon Orr
They did say you’re overestimating your net worth. But what they said was most people right now are thinking that their net worth is just their assets and are forgetting like, Oh, I have this and I have that and I have that, Add it all up and I forget that I have a mortgage in my house or ever forget that I have a car loan.

00:04:56:10 – 00:05:19:02
Jon Orr
And those are the things that you have to subtract because if you sold everything that you’re saying, this is what my value would be. You know, this is what everything balances out. So these articles, even though you think you’re going to get some really inside info, are well, secrets about what your net worth is. They have this surface level understanding of net worth that it’s your assets and then they go on to show you it’s more than just that.

00:05:19:02 – 00:05:35:20
Jon Orr
You have to subtract your liabilities. Here’s a scenario, here’s a scenario, here’s a scenario. And I’m like, Well, isn’t that a no brainer, guys? Where’s the real inside info here? And some of them will give you some advice. Go like, Well, if you want to grow your net worth, then what you want to do is add assets and subtract liabilities.

00:05:35:22 – 00:05:52:03
Jon Orr
So that makes a lot of sense. And if you’re going to add a liability, add a liability that gives you an asset or it can pay for that, your asset can pay for that liability. So those are some of the well, secret. Some of these websites were sharing, but I think ours goes a little deeper than that.

00:05:52:05 – 00:06:15:06
Kyle Pearce
Yeah, absolutely. The other one that I’ll pull out and I like to bring up this individual, this is on Dave Ramsey site. It says, What’s your net worth? Really? What is your net worth? And they have some misconceptions. And some of the misconceptions include that your net worth is actually your income, like your annual income, which of course I know people in this audience are probably with us on this and they’re going like, I got this, I got this.

00:06:15:08 – 00:06:57:11
Kyle Pearce
But what we were a bit surprised to find is that actually nobody out there seems to be talking about sort of a hidden part, a hidden part. And it’s sometimes you wonder, is it like Trudeau and the crew that’s like paying off these media outlets to not talk about this aspect. Because here’s the thing is what we want to talk about today is when you’re thinking about your net worth, actually thinking about if you were to hit the liquidate button on everything and you were able to just sort of like go poop and sort of turn the game off and turn it all into right now, it’s going to be in dollars likely rate Canadian

00:06:57:11 – 00:07:19:15
Kyle Pearce
dollars for us Canadians. But hey, maybe one day it’ll be bitcoin. Who knows? Whatever it is, you hit the jackpot and you’re like, Here’s all of this cash or whatever is the most liquid form in transfer of wealth. So we’re going to use cash for now. Is your net worth actually the same as the amount of money that will be in your hand?

00:07:19:17 – 00:07:42:14
Kyle Pearce
And the reality is, is the answer is actually no. And if we think about this for a second, doing a net worth calculation is a nice easy way for you to kind of go, yeah, it’s going to you know, I’m going to have about this or have about that. But I think that oftentimes we actually sort of stay at that level and we think about net worth.

00:07:42:14 – 00:08:04:13
Kyle Pearce
And of course, the goal is I mean, I feel like I’m making progress if that number is going up, of course I want that to be going up, meaning my assets, my overall assets are outpacing my overall liabilities. And that’s obviously a positive. But really, if I was to hit that eject button, where am I going to truly be at?

00:08:04:13 – 00:08:28:02
Kyle Pearce
Because if I’m not going to be at that same number, My question then is what is that number actually good for? Right? In general, it’s great. But like, let’s be honest here, if I’m buying an asset and that asset is going to grow over time and then I could buy another asset and let’s say they in a perfect world, they both grew at the exact same rate, right?

00:08:28:02 – 00:09:10:14
Kyle Pearce
They grew whether one was maybe income generating or one was a capital gain. If we don’t worry about that for a sec, they both grow. But if one has a different outcome, a different amount of expenses associated with the liquidation of that asset, that can sway your net worth calculation quite dramatically. Now, the first one that we’re going to talk about, and there’s actually a number of them that I think is important for us to note, is thinking about what are the actual tax implications, because I think that’s one of the biggest expenses that we may have to pay on certain assets held in certain containers right now.

00:09:10:14 – 00:09:33:22
Kyle Pearce
And why we say that, of course, is because, hey, listen, if all of my assets are in somehow my TFSA, my Max, my contributions, and I next my tax free savings account somehow and I’ve got this massive amount in there. Well, guess what? If I hit the liquid a button and assuming it was something that doesn’t have a high cost to liquidate, then I’m in pretty good shape because my tax bill.

00:09:33:22 – 00:09:54:00
Kyle Pearce
Zero. Right? That’s awesome. My net worth doesn’t actually change. However, on the other hand, if it’s something like an RSP that I blew up and I blew it up to a huge number and I want to hit the eject button. Here’s the thing though. We don’t get to nitpick here. We’re not talking about like hitting the eject button and then leaving it in the RSP.

00:09:54:06 – 00:10:11:22
Kyle Pearce
I’m talking about getting it in your hands now so that you could do something with that net worth. The reality is, is what comes out of that RSP is going to be significantly different than what the net worth calculated and would have given you just moments before.

00:10:11:24 – 00:10:34:20
Jon Orr
I think this is where some of the secret sauce that we have to consider. This is why I was saying that we’re drastically and I’m going to say drastically overestimating our net worth because this liquidation idea. Right. Like if you just liquidate it, it doesn’t take into account the taxes that you are going to have to pay. Because if I just take assets minus liabilities, boom, there’s my net worth statement.

00:10:34:20 – 00:10:50:23
Jon Orr
But I mean, do we automatically want to subtract 50% of that? If I have a million and then I have a half a million in liabilities, I’ve got a half a million dollars. But I’m like, wait a minute, No, if I liquidate that and it’s in my RSP, I have to pay tax on that. And it depends on how much I’m pulling out a certain time.

00:10:50:23 – 00:11:07:07
Jon Orr
But if I’m pulling out a lot and I want to liquidate it, I’m going to have to pay the highest amount of tax on that liquidation. So I’m going to lose half of that money. It’s going to be gone and you have to pay that to someone. Now, that’s an overestimate on the taxes, because if I’m no one’s really liquidating it all at once.

00:11:07:09 – 00:11:39:11
Jon Orr
But when we do need to think about this piece, these taxes that are going to come off off your net worth, and that’s the important part about calculating your net worth, because most people are calculating their net worth going, what is the right number? What number am I aiming for? And, you know, some of us who are investors in business owners and entrepreneurs, which can you only just adding to that And we’re probably not doing a lot of calculations, but think about the fire movement and the people who are reaching for financial independence retire early and they’re calculating these numbers.

00:11:39:12 – 00:11:54:15
Jon Orr
I mean, what is the number that I need so that I don’t have to work anymore? Like I need my passive income to pay off my expenses. And so I’m going to calculate my net worth and go, look, how much does my investment account actually have to have? But then are they considering all those taxes that are going to have to come into play?

00:11:54:15 – 00:12:10:14
Jon Orr
And I think there are lots of other things, right. Catholics that we have to think about in terms of when we start calculating, adding to our net worth. Like if I want to add a property, if I’m looking at adding a new property into my portfolio, I’ve got my mortgage to consider, like I’m putting my down payment down.

00:12:10:14 – 00:12:25:21
Jon Orr
But that and then negotiated soon as I buy my property. Do I just get to add that much to my net worth? Like, no, you have to do that calculation. And how much calculation do you have should fit in? How accurate do you really want to be is also the question that you need to kind of answer for yourself.

00:12:25:23 – 00:12:57:17
Kyle Pearce
100%, 100% without even going into some of the liquidation costs themselves, which may not be nearly as high as the taxes. You may have to pay on things like capital gains or the income you’ll receive. So let’s talk RSP for a second. If I took $1,000,000 out of an RSP today and I’m going to get taxed at the personal income level and that is going to shave off about half of that amount in terms of all of that money coming out.

00:12:57:17 – 00:13:18:21
Kyle Pearce
And that’s like not even considering, say, capital gains, not even considering anything like that. You’re basically just going, you know what, take that number and chop it in half. Now, why most people wouldn’t do that is because you probably don’t plan on taking it all out of your RSP today. You’re going to do it over time. But the reality is, even then, over time, you’re going to be paying some tax on that.

00:13:18:21 – 00:13:37:07
Kyle Pearce
Right? Unless you are taking out the basic minimum amount each year, 15,000 out of there. And then you’re going to be paying some tax on there. So that million isn’t really a million. So when I plan to take money out, some of that money goes away. It’s not yours. And that’s really important for us to be thinking about.

00:13:37:09 – 00:13:54:12
Kyle Pearce
I want you to also think like, let’s imagine even I mean, our tax free savings account. That’s why that bucket is so important and it’s so beneficial. Now, maybe some real estate investors might say it’s less beneficial, like it’s not as beneficial to me because I’m not a big time index.

00:13:54:16 – 00:13:56:22
Jon Orr
Investors, right? It’s also cap for.

00:13:56:22 – 00:13:57:09
Kyle Pearce
The reason.

00:13:57:13 – 00:14:02:04
Jon Orr
We don’t watch you putting all your money over there because we want your money to come over here to us, says the government.

00:14:02:06 – 00:14:25:12
Kyle Pearce
Exactly like we want you to just have enough so that you can feel like you’re winning and we’re just friends, right? And so that’s something really important to think about now. So the RSP is a tough one because when it comes to net worth, if you’re the type of person you lay out all your assets, one asset that’s amazing that a lot of people would argue is like, again, Matt Bigley used to always say this on the early episodes.

00:14:25:12 – 00:14:34:06
Kyle Pearce
He would say, your primary residence isn’t an investment, but it is an asset. Okay. So his point was, it’s like you shouldn’t be putting your stock.

00:14:34:06 – 00:14:35:08
Jon Orr
You would say no.

00:14:35:10 – 00:14:58:00
Kyle Pearce
Yeah, yeah, exactly. He calls it straight up liability. But the reality is here in Canada in particular, we have this beautiful thing where we get no capital gains taxes on the sale of a primary residence. Right. So there is some benefit there where it’s not very good as a let’s say I’m over contributing to this thing, so I’m mortgaged to the max.

00:14:58:02 – 00:15:16:05
Kyle Pearce
I’m buying this property. And that’s like my only investment strategy, not necessarily the smartest move ever. Right. Because again, sure, you’re going to get that capital gains exemption, but it’s probably not you. It’s going to be someone else down the road who gets it right. Maybe your estate, who’s going to benefit from that because they’re going to liquidate that after we’re gone.

00:15:16:05 – 00:15:34:24
Kyle Pearce
Right. So it’s still something worth considering. But you just got to be cautious about how much of your net worth is tied up in, say, your home, because now that’s dead equity or how much of my net worth is actually tied up in, say, my RSP. So there’s some people right now who might be thinking to themself, right?

00:15:34:24 – 00:15:53:14
Kyle Pearce
And you go, I have most of my net worth other than my primary residence, which is also tied up. It’s not going to be taxed, but you need to live there. And maybe you didn’t have a plan to say take a loan against your house later in life. I think it’s actually an amazing idea to do as long as it’s done responsibly.

00:15:53:16 – 00:16:15:03
Kyle Pearce
But when we think about the RSP, imagine a world where someone’s looking and they go, okay, I wrote down my asset, I got my primary residence. Cool. That’s great. That’s good Assets go up and hopefully the liability is much less than what it’s worth and eventually it’ll be worth nothing or the liability will be zero. Great. Then I look to my RSP and I go, That’s where all of my other assets are.

00:16:15:03 – 00:16:42:11
Kyle Pearce
And you think about that and you go, Wow, I have a net worth of this amount. But when you actually consider that RSP, that RSP amount, when it contributes to your net worth, if we hit the liquidation button, your net worth goes down by a substantial amount. Right? So imagine a world where, let’s say you had $1,000,000 of net worth in your home and let’s say you had $1,000,000 of net worth in your RSP and let’s say you didn’t have any other assets.

00:16:42:11 – 00:17:01:19
Kyle Pearce
There is no other assets there. Even like a vehicle. Sure, you can tie in a vehicle, but let’s be honest, it’s an asset today, but it’s a depreciating asset that will lose value each year. So it’s actually not going to gain any value for you. So I don’t even like thinking about the cars. So if you got a $100,000 Tahoe, don’t even put it on the chart, right?

00:17:01:19 – 00:17:26:13
Kyle Pearce
Like just take it off the check because guess what? In ten years it’s not 100,000 anymore. So when I look at this, I go, okay, I’ve got a million in my house and I’m talking net. Let’s say net, I own $1,000,000 of this house. Amazing, awesome stuff. I look over here, my RRSPs got $1,000,000. Amazing, awesome stuff. My net worth is $2 million on paper according to the typical calculation.

00:17:26:15 – 00:17:43:24
Kyle Pearce
But in reality, if I hit the eject button, not only is it going to cost me 5% for realtor fees on the home, the other things I had to put some whatever, We’re not going to even worry about that here. You got a million there and then you’ve got around 500,000 from your RSP, your networks really like 1.5 million.

00:17:43:24 – 00:18:00:24
Kyle Pearce
It’s not 2 million in that particular scenario. Whereas the guy that took that limited tax free savings account and ballooned it ten X and got to a million, which I’ve yet to meet someone who’s done that. So by the way, so for those who have reached out to us, I’d love to talk to you, but let’s say you did with the tax free.

00:18:01:04 – 00:18:18:24
Kyle Pearce
Your net worth is 2 million. Your net worth is truly 2 million because you don’t have to pay any taxes when you hit the eject button on that tax free savings account. So you’re in a much different spot. I mean, those are two buckets. But then think about some of us like you and I, John and Matt, who we have quite a bit of real estate.

00:18:18:24 – 00:18:25:21
Kyle Pearce
Well, the reality is we’ve got capital gains coming totally. If we hit that eject button.

00:18:25:23 – 00:18:44:17
Jon Orr
Totally. And I think maybe many of you who are let’s say you’re tracking your assets on a spreadsheet and you’re saying like, this is the equity I have in that rental property, I’ve got ten rental properties and here’s what they’re worth, here’s what I owe, boom, My net worth is this much money. It’s not because capital gains are going to take.

00:18:44:17 – 00:18:47:07
Jon Orr
Well, depends of how much you cash in. You know, if you at.

00:18:47:13 – 00:18:54:22
Kyle Pearce
Tens, when are you cashing in? Now. Are you cashing in July this year? Because guess what? That bill was going to be different then.

00:18:54:22 – 00:19:23:04
Jon Orr
You’re going to be paying that two thirds tax and it’s all of a sudden it’s like, no, now you’re going to pay tax on two thirds. So you’re not factoring that tax in. And that’s really the secret sauce we’re trying to convey here is maybe you’re like, guys, that’s a no brainer. I was already factoring in tax, but I’m going to guess maybe some of you right now are like, why I wasn’t I wasn’t thinking about the how much tax I’m going to have to pay on all the assets that I have and where that comes from, how I want to move into thinking about this same idea.

00:19:23:04 – 00:19:42:02
Jon Orr
But now moving into estate planning, thinking about I want to like, build my assets up. I have this net worth, and then we think about passing that net worth on to the next the next generation. And we got to think about the same way. Is it even more it’s like, Oh, I got $10 million of net worth by the time I kick the bucket.

00:19:42:04 – 00:20:04:13
Jon Orr
Does my heirs get 10 million? Did you think about like that whole liquidation idea? When you die, sometimes you’re like, okay, if I die, I got to pass this on. It feels like all of a sudden it’s in dollar mode. And then I’m like, Well, how much gets passed on? Like, is it all assets get passed automatically. We got to like when there’s does it go through, you know, like you’ve got your wills that start distributing what asset goes where.

00:20:04:13 – 00:20:11:09
Jon Orr
But if there’s probate, you know, fees going in here and you’re like, oh, give me what’s going on here. How much should we now think about our our net worth?

00:20:11:11 – 00:20:29:01
Kyle Pearce
Well, all of a sudden, as soon as you said the word estate planning, John, all of a sudden this gave one of your. It is scary. You know, like I don’t I don’t love the thought of that. But I think what bothers me more and maybe I’m lucky in this way, some people are very fearful of death. That’s not something that keeps me up at night.

00:20:29:01 – 00:20:48:24
Kyle Pearce
But you know, what does is thinking that you and I and Matt and others that are listening to this episode, I’m guessing, are of the sense that it’s like, okay, you’re kind of usually in one of two camps, right? You’re in the process of like, I want to put myself in a position where I can live the lifestyle I want to well beyond the years that I want or have to be working.

00:20:48:24 – 00:21:13:06
Kyle Pearce
That’s like one camp. We, I would say, are shifting from that camp into this other camp. The second camp is I want to continue doing this work because I enjoy doing it and I like the idea of building something. We love building businesses. We love building. Investing is like a business. We like this idea. And what keeps me up at night is not the actual thought of death.

00:21:13:08 – 00:21:38:20
Kyle Pearce
It’s the thought of my estate value going down significantly at the day of my death or the day after my death. And that’s something that actually if we go back to something you said, you said it’s not like we’re ever going to just hit the eject button. Well, guess what? What I think you meant to say is we’re not going to openly and willingly hit the eject button on all these assets, but there’s going to be a day and time that the universe hits the eject button for you.

00:21:38:22 – 00:22:01:18
Kyle Pearce
And guess what? When you hit that eject button, whether you wanted to or not, there is going to be taxes that are taking place. Right? The biggest one that takes the biggest hit is going to be that RSP. Now it will pass on to your spouse. Right. But then when the spouse moves on as well, then that will be taxed as income in the year of your death.

00:22:01:19 – 00:22:21:04
Kyle Pearce
Right. So that’s going to be like if you got a million in that RSP. And John, you unwillingly hit the eject button because it’s your time, that money. And if your spouse also is gone as well, that money is going to be I mean, assuming it’s a large amount, if there’s a large amount in there, you’re going to have that amount right there.

00:22:21:04 – 00:22:44:04
Kyle Pearce
And that to me is like something that I’m like, I’m going to spend time and I’m going to spend effort thinking about how to not allow that to happen. Because not only do I want to make sure I can live my lifestyle while I’m here, I also want to make sure that as I accumulate assets, as I build wealth and this quote unquote, net worth, that I’m not doing it in a game.

00:22:44:04 – 00:23:02:16
Kyle Pearce
And then once I hit like once the game’s over, it’s like you fell in the pit of despair and Super Mario Brothers and now it’s like you’re out of lives. It’s like, boom, you’re gone. I don’t want to just like, give up all of the points that I tried to achieve. I want it to go to the people or the things that I care about most.

00:23:02:16 – 00:23:23:08
Kyle Pearce
And that’s the second one that I think is really important is like this idea that it doesn’t necessarily have to go to children, it doesn’t necessarily have to go to like family. But I would rather be the one that gets to decide how it’s being spent. Right. Do I want it to go? Do I want this to go to charity instead of go in a specific charity?

00:23:23:08 – 00:23:42:03
Kyle Pearce
Or maybe it’s something later in life that you want to do yourself. And the reality is, is that the vast majority of people are so concerned about collecting all the coins in the game, Right? And you’re collecting the coins because, you know, you got to survive off the coins, right? That’s important. But then it’s almost like you get stuck in the habit of just keep collecting.

00:23:42:03 – 00:23:58:11
Kyle Pearce
Like, if I just keep collecting, everything’s going to be okay. But then you almost think about it and you say, like, I’m okay with when I don’t need these coins anymore. And I move on that I’m going to donate maybe a quarter of those coins to potentially half of those coins. And this is all dependent on, again, what you have.

00:23:58:11 – 00:24:20:13
Kyle Pearce
If I have a primary residence, of course, like that part’s not going to be taxed if I have all real estate and I haven’t been smart about where I purchase the real estate, if I maybe didn’t consider what trust for my family, if I didn’t do these types of things. But I then consider permanent life insurance as an option where instead what’s going to happen to you and me?

00:24:20:13 – 00:24:49:21
Kyle Pearce
John, because of the planning that we’ve been doing over this past ten years, is that as we continue to collect coins for us now in our lifetime so that we can live the life we want and we can live hopefully a financially stress free lifestyle. The reality is, is that the way we’ve structured things for ourselves is also going to ensure that the day we move on, that our estate is actually going to get a bunch more coins all tax free.

00:24:50:01 – 00:25:14:03
Kyle Pearce
So I’m still going to have to pay taxes on on the capital gain over here. And I’ve got to pay like my estate is going to have to do that, right? It’s going to have to pay the dues, quote unquote. But we’ve now structured it such that this other asset that we were collecting coins in and leveraging and using is going to essentially explode a bunch of coins that’s going to some is going to pay off the taxes, some is going to do this.

00:25:14:03 – 00:25:54:02
Kyle Pearce
But ultimately, at the end of the day, our true net worth when we hit the eject button on voluntarily, right or involuntarily, is going to actually be more coins for the estate. And in my head that makes me feel better that it’s like as I continue to do this work, that it’s not just for me, not just for Shawn till now, while we’re alive, that we’re actually doing it and we’re doing it in such a way that we’re not just thinking about today or the next ten years, we’re actually thinking about like the next 50 years and hopefully we can pass on some of this information and some of these strategies along to the next

00:25:54:02 – 00:25:56:11
Kyle Pearce
generation in our families.

00:25:56:13 – 00:26:10:09
Jon Orr
Yeah, I think that’s a big takeaway from the work that we’ve been doing for the last couple of years, and the thinking that we’ve been doing the strategizing is is thinking about using, say, whole life policies to.

00:26:10:09 – 00:26:11:07
Kyle Pearce
Build that.

00:26:11:07 – 00:26:35:22
Jon Orr
Coin collector and your cash has to go somewhere and why we want to dump it in there as much as possible is to do that exactly what you just said. It’s like when we used to sleep at night, but it’s like when you don’t sleep at night. When you think about where that estate is going to like all of a sudden drop, That’s the comforting part of knowing that we’re we’re moving all of our asset, your cash into this asset and then redeploying it.

00:26:35:22 – 00:27:06:09
Jon Orr
That move has allowed us to kind of rest easier that when the time comes or like when we’re actually building and looking at what our net worth is, then we’re factoring that through that asset. It’s like we’re going to look there first and then we look at the rest in terms of like calculating that. And then you also factor in like when that we go to pass on, when we go like boom, like I don’t have to all of a sudden subtract a bunch because it’s going to move.

00:27:06:09 – 00:27:12:10
Jon Orr
We can actually we’re actually have more. So I love that about the strategies that we’ve been putting into place.

00:27:12:12 – 00:27:37:20
Kyle Pearce
Yeah, I hope you know a Canadian well. Secret that a secret source that some listeners can take with them is you know I think something that I’ve realized on the financial side is something that I think a lot of us are well aware of on the time side. And what I mean by that is we have a lot of people out there, especially in today’s day, we have inflation is high, like people are feeling it all over the place.

00:27:37:22 – 00:28:04:22
Kyle Pearce
So you’ve got a lot of people that are working really hard and that means oftentimes people are committing a lot of time and a lot of their energy in order to collect those coins, not only for now for their lifestyle, but also so that they can live a later life and feel like they are financially secure. But a lot of people will eventually reflect on and say that’s a big investment of time and energy and we only have so much.

00:28:04:22 – 00:28:35:22
Kyle Pearce
It’s a scarce resource right that time. So in my mind, if I am thinking about time and energy and that’s a finite resource for us as humans here on this earth, I also want to be thinking about if I’m going to be doing that work, because I think it’s important. I also don’t want to squander whatever I collected along the way at the end, because to me it’s almost like it’s like I’m trading in the time and energy now and my kids are young and my family and all of those things.

00:28:35:22 – 00:29:00:08
Kyle Pearce
It’s like you’re committing a lot of this time and energy. I don’t want to ever just give it up like it didn’t matter to me. And I think for a lot of people it’s like when you’re gone, it’s easy to go like it doesn’t really matter to me. But I’m like, Well, I mean, if I thought it was that important at the time, like now when I’m 41, as I’m recording this, then I should at least care about it later, even the day after I’m no longer here.

00:29:00:08 – 00:29:19:20
Kyle Pearce
So to me, hopefully that’s a secret source for some of you out there. If you’re listening to this podcast, you’re either collecting coins for the now for the future, but I want you to add this idea of like, how do you keep coins for when you’re gone? Or how do you make those coins actually grow in an easy, efficient way.

00:29:19:23 – 00:29:39:15
Kyle Pearce
And it’s just something that is easily overlooked. And it’s it’s often badmouthed all over the Internet, specifically Mr. Ramsey, who we picked on a little bit earlier here. But for those who are listening to this episode, this is the type of thinking that you need to start shifting your mindset towards. And hey, we’d love to do some of that thinking with you.

00:29:39:15 – 00:30:01:23
Kyle Pearce
You folks probably know by now, unless it’s your first time listening that you can hop on a call with us at any point. It’s at Canadian while secrets dot com forward slash discovery and on that discovery call we hear you out we try to find you the next best step for you. And ultimately at the end of the day, we try to stick with you and try to keep you on your path.

00:30:01:23 – 00:30:23:03
Kyle Pearce
That’s why we do the work we do and we love doing it. So I just had a call yesterday with a Canadian wealth secret seeker who hopped on a call and had a fantastic conversation. It was all about the RSP piece and trying to think about melting it down. And they were thinking, Hey, like where am I going to put this money afterwards?

00:30:23:04 – 00:30:42:18
Kyle Pearce
First stop was tax free savings, and then the next stop for them, actually, it made sense for them to start thinking about those coins and the coin multiplier for later in life, which is permanent insurance. So regardless of where you are in your particular journey, we’re here to support you and help you to take that very next step.

00:30:42:20 – 00:30:51:13
Kyle Pearce
And hey, do us a solid head on over to Canadian wild secrets dot com forward slash discovery and grab a spot in the console today.

00:30:51:15 – 00:31:08:13
Jon Orr
Do yourself a solid if this is the first time you’ve listened to the show, then we encourage you to subscribe so that you can get next week’s episode every Wednesday we’re putting out episodes have been doing that for about a year and a half now. I think it’s been a year and a half, almost a little bit more than that.

00:31:08:13 – 00:31:17:12
Jon Orr
If you listened to a few shows already, then we encourage you to hit that reading review button and leave a rating and review for others to find.

00:31:17:14 – 00:31:37:17
Kyle Pearce
All right there, Canadian Wealth Secrets Seekers. We will see you in the next episode.

00:31:37:19 – 00:31:46:23
Jon Orr
Just as a reminder of the content you heard here today is for information purposes only, you should act through any such information or other materials legal tax, investment, financial or other advice.

00:31:47:00 – 00:32:04:00
Kyle Pearce
Just as a reminder, John Rau is a mortgage agent with Brick’s mortgage license number m23006803 and Kyle Pierce is a licensed life and accident sickness insurance agent and VP of Corporate Wealth Management with the PAM Corp..

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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