Mike: Hi I’m Mike Gassewitz, head of Member Solutions here at MD. Joining me today is Jeff Blain, lead of our Insurance Practice, and we’re here to learn more about insurance and how it can really benefit our clients and their wealth planning. Jeff, when folks think about medical practice and insurance, they think about malpractice insurance. But really, insurance has a lot of other applications as well.
Jeff Blain, National Insurance Lead, MD Insurance Agency Limited
Jeff: Absolutely Mike. While most of our clients do have malpractice insurance, what we’re doing at MD in financial planning is using insurance in several different ways. Not only in terms of risk mitigation and protection in the event of a catastrophe or loss of a loved one, but there are so many other things we can do when we’re considering someone’s financial plan. And at MD we like to dissociate the product from the sale right away, what we’re trying to do here is really work through a client’s pointed life, their financial goals, and it’s only at that stage then that we’re going to find the right solutions to put in place to help them achieve those goals.
Mike: So I love the solutions approach; give me some more details on that.
Jeff: Well a lot of our clients are actually using their insurance plans to help them build wealth. Through all the financial planning that we do here, we’re doing a great job helping them not only accumulate assets but then we help them through retirement de-cumulate those assets and ultimately create vehicles for transfer of wealth when it’s time for them to pass to the next generation.
Mike: Can you give us an example of maybe a specific mechanism.
Jeff: Certainly. So many of our physicians across Canada are incorporated, and one of the mechanisms that we have inside the corporation is a Capital Dividend Account.
Mike: OK, sounds complex, what is that?
Jeff: Well it’s not really that complex, it’s really a notional account, it’s a tax account which allows money to pass out of a corporation tax-free to the shareholders, ultimately to the beneficiaries of the doctor, of the physician, and see that pass through to them without paying tax on those dollars.
Capital Dividend Account
- Special corporate tax account giving shareholders designated capital dividends, tax-free;
- Account not recorded in corporation’s accounting entries;
- Capital dividends taken from paid-in capital, not from retained earnings;
- No taxes paid on these distributions.
Mike: Sounds powerful, sounds good. (Jeff: Absolutely) What are some other techniques we’re using to help physicians grow in the long-term?
Jeff: Yeah, well permanent insurance is de facto a tax-shelter in it of itself and when we deposit additional dollars into a life-insurance plan, we’re actually seeing those dollars grow tax-deferred which allows the magical compound interest to take that money to the next level, allowing for greater amounts for the estates or even for supplementing retirement purposes down the road.
Mike: It’s great to see we have these solutions but we really do offer a customized approach because it really does need to be tailored doesn’t it.
Jeff: Absolutely. So we’re talking a lot about insurance but of course at MD we’re talking about the client first. We’re talking about their financial plan, then their financial goals. And it becomes quite a sophisticated thing to do. So it’s important for clients to come in, see their financial consultant and talk to them and the team of specialists that surrounds that consultant so that they can work through a full financial plan, understand where they’re looking to go and then put the solutions in place that are really going to give them the best outcomes they’re looking for.
Mike: Jeff, thanks very much, it’s good see we’ve got such a strong insurance practice here at the firm. And again, appreciate you chatting with us.
Jeff: My pleasure, thank you.
To learn more, contact your MD Advisor or visit: md.cma.ca/insurance
INSIDE MD - Tax Efficient Strategies for Incorporated Physicians
Mike Gassewitz, Executive Vice President, Member Solutions, MD Financial Management Inc.
MD Financial Management: CMA Companies
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MD Financial Management provides financial products and services, the MD family of mutual funds, investment counselling services and practice management services through the MD group of companies. For a detailed list of these companies, visit md.cma.ca. The MD family of mutual funds is managed by MD Financial Management Inc.
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