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The 3 Certainties in Life: Death, Taxes, and the Need for Capital

Death and taxes are inevitable, but so is your ongoing need for capital. Learn how specially designed participating whole life insurance can help you address all three with confidence and control.

Jose Atencio

Jose Atencio

Founding Partner & Licensed Insurance Advisor

• 8 min read
The 3 Certainties in Life: Death, Taxes, and the Need for Capital

The 3 Certainties in Life: Death, Taxes, and the Need for Capital

You’ve probably heard the saying that there are two certainties in life: death and taxes. This well-known phrase, often attributed to Benjamin Franklin, captures the inevitability of these two aspects. However, there is a third certainty often overlooked: the need for capital. In this post, we’ll explore how a specially designed participating whole life insurance policy can help address these three inescapable realities.

Certainty 1: Death

“For he must reign until he has put all his enemies under his feet. The last enemy to be destroyed is death.” — 1 Corinthians 15:25–26

Death is life’s greatest certainty, often arriving unexpectedly and bringing with it emotional and financial challenges. According to Statistics Canada, approximately 800 to 900 people pass away each day. This number can vary due to seasonal changes, public health crises, or demographic trends such as an aging population.

The financial impact of death can be devastating, particularly when the primary breadwinner of a household passes away. Funeral expenses, outstanding debts, mortgage payments, and ongoing living costs can quickly accumulate, leaving loved ones in a vulnerable situation.

Certainty 2: Taxes

“Render to Caesar the things that are Caesar’s, and to God the things that are God’s.” — Matthew 22:21

There is no escaping taxes. They are compulsory, and oftentimes, excessive. Yes, taxes fund essential services like law enforcement, infrastructure, and other public goods. However, as a student of the Austrian school of economics, we advocate for significantly lower taxation, a smaller government, and free markets.

The Austrian perspective champions individual freedom, property rights, and voluntary exchange over government intervention and coercion. We believe that people can manage their finances more efficiently than a sprawling bureaucracy. Unlike anarchists, we recognize a limited role for the government as a God-ordained institution that should focus on maintaining public order and protecting private property.

Unfortunately, the current tax landscape is a far cry from this ideal. Taxes have been weaponized as a tool for income redistribution — a euphemism for taking from those who earn to give to those who don’t. These socialist policies essentially amount to legal theft. The more you earn, the more they take away.

If you are not convinced, consider the long list of existing taxes in Canada:

  1. Federal Income Tax
  2. Provincial/Territorial Income Tax
  3. Corporate Income Tax
  4. Goods and Services Tax (GST)
  5. Harmonized Sales Tax (HST)
  6. Provincial Sales Tax (PST)
  7. Property Tax
  8. Capital Gains Tax
  9. Payroll Taxes (CPP, EI)
  10. Fuel Tax
  11. Carbon Tax
  12. Excise Tax
  13. Customs Duties
  14. Sin Taxes (Tobacco, Alcohol, Cannabis)
  15. Land Transfer Tax
  16. Luxury Tax
  17. Hotel/Accommodation Tax
  18. Entertainment/Amusement Tax
  19. Health Premiums (in certain provinces)
  20. Education Levy (in some provinces)
  21. Municipal Surtax
  22. Dividend Tax
  23. Interest and Investment Income Tax
  24. Wealth Transfer Tax
  25. Inheritance Tax (limited in Canada)
  26. Estate Administration Tax
  27. Foreign Asset Reporting Tax
  28. Import/Export Tax
  29. Insurance Premium Tax
  30. Mining Royalties and Taxes
  31. Resource Revenue Tax (oil and gas)
  32. Transportation Tax (e.g., airport tax)
  33. Vehicle Registration Tax
  34. Provincial Fuel Levy

It’s a never-ending list, and every year new ways are invented to tax your income and savings further. While we cannot eliminate taxes entirely, strategic planning can significantly reduce the burden.

Certainty 3: The Need for Capital

“We finance everything we buy, whether we borrow from a lender and pay back with interest, or pay cash and lose the opportunity to earn interest on that capital.”

Cash is the lifeblood of both businesses and households. We need it for everyday expenses, significant purchases, emergencies, and investments. Yet, many of us fail to distinguish between cash and capital. Cash becomes capital when it is invested and preserved in a way that it continues to grow, such as through real estate, precious metals, or a permanent life insurance policy.

The Difference Between Cash and Capital

While cash is simply money in hand, capital is wealth that can be leveraged to create more wealth. For instance, cash sitting in a savings account earns little to no interest, whereas capital invested in assets like real estate, stocks, or a whole life insurance policy has the potential to grow. However, unlike other assets that are subject to market volatility, the cash value within a whole life insurance policy grows steadily and predictably.

Savings vs. Investing: Understanding the Difference

The word “investing” is derived from the verb “invest,” which traces back to the Latin investīre, meaning “to clothe” or “to endow with authority.” When you invest, you endow someone else with authority over your capital.

The word “saving” comes from the verb “save,” which has roots in the Latin salvāre, meaning “to make safe” or “to secure.” This in turn comes from salvus, meaning “safe” or “uninjured.” It conveys a sense of preservation and careful management, where one secures resources now to protect against possible future needs or uncertainties.

The Problem of Undercapitalization

We have been trained to forfeit our cash as soon as it lands in our hands, often through systematic investing without truly understanding the distinction from saving. Traditional financial advice perpetuates this issue, encouraging people to “invest” constantly, even when doing so may blur the lines between investing and saving. As a result, many Canadians find themselves chronically undercapitalized.

Instead of building a secure foundation of capital that can be accessed when needed, they end up with volatile investments that may not provide the stability required during financial emergencies or opportunities.

Participating Whole Life Insurance: The Financial Swiss Army Knife

A specially designed participating whole life insurance policy is uniquely equipped to address these three certainties. Here’s how:

Risk Mitigation: Death

From the moment you fund a whole life insurance policy, it provides a guaranteed death benefit, which grows over time. This benefit is paid out tax-free to beneficiaries, bypassing estate taxes and probate fees, ensuring financial stability for your loved ones. This allows for a seamless transfer of wealth, avoiding the stress of legal and financial complexities.

Additionally, a properly structured estate plan, which includes life insurance, can make a significant difference in how a family copes with these unexpected expenses.

Risk Mitigation: Taxes

Whole life policies allow for tax-deferred growth, and if structured correctly, the accumulated value can be accessed tax-free. This helps reduce the overall tax burden, shielding your wealth from excessive taxation. Moreover, the tax-free nature of death benefits ensures that your estate planning is more efficient and effective.

Tax-Deferred Growth and Tax-Free Access

One of the less-known advantages of participating whole life insurance is its ability to accumulate cash value on a tax-deferred basis. This means that the funds grow within the policy without being subject to annual income tax. Over time, this can lead to significant growth, as the policy benefits from uninterrupted compounding. Furthermore, the policy owner can access this cash value through policy loans, which can be structured to be tax-free.

Policy loans allow you to borrow against the accumulated cash value without disrupting the growth of the policy. Essentially, your money continues to grow even when you’ve borrowed against it, and because loans are not classified as income, they remain tax-free. This feature is a crucial component of the “infinite banking” concept, which empowers policyholders to utilize their insurance policy as a private bank, financing their own needs instead of relying on traditional lenders.

Reducing Estate Taxes

When a policyholder passes away, the death benefit from a whole life insurance policy is paid out to beneficiaries tax-free, allowing them to cover any estate taxes without having to sell off assets. This ensures that family wealth is preserved and can continue to grow for future generations.

Risk Mitigation: Your Need for Capital

By accumulating capital within a specially designed participating whole life policy, you can turn it into your own private bank. This gives you a powerful opportunity to reclaim the banking function in your life by leveraging the benefits of uninterrupted compounding and accessing your capital through policy loans. Unlike other financial vehicles, your money can grow sheltered from two of the biggest threats to wealth: taxes and market volatility.

Conclusion

A participating whole life insurance policy is more than just insurance; it’s a robust financial tool that preserves and grows your wealth, protects against taxation, and offers flexibility for managing life’s uncertainties. It builds discipline in saving, encourages thrift, and enhances your ability to seize opportunities as they arise.

At Strongtower Life Capital, we believe in this system so much that we practice it ourselves. You don’t need to be wealthy to start; with a disciplined approach and long-term vision, this strategy can lead to financial independence. Let us help you build your own private banking system today.

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