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| Are you a conservative investor who is
tired of seeing the returns generated by GIC's reduced by inflation
and taxes? Or are you a small business owner who wants to make sure
your personal savings remain protected in the event of bankruptcy?
Perhaps you are in poor health and want to make sure your savings
are there for your loved ones should you pass on. In all of these
cases, you could benefit from investing in Segregated funds. |
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What are they? |
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Segregated funds (or "seg funds") are basically the insurance
industry's version of a mutual fund.with a few twists. Both mutual
and seg funds are pooled investments where the investor deposits money
with a professional money manager in return for units of the fund.
However, there are a few key benefits to seg funds that you can't
get with their mutual fund counterparts. |
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Guarantees |
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Segregated funds are technically insurance products, and therefore
must offer insurance protection in the form of guarantees. There are
two types of guarantees - a guarantee at maturity, and a guarantee
at death. When you invest in a seg fund, you get a maturity date (generally
at least 10 years from the date of investment). On this date, you
are entitled to the greater of the maturity value, which is 100% of
your initial investment, or the actual market value of your fund.
The guarantee at death provides the same benefit at the death of the
annuitant, regardless of whether it occurs 10 years or 10 days after
the initial investment. |
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Every insurance company has different ways of calculating the guarantees.
Most companies will also allow you to reset the guaranteed value if
your investment performs well. It is important to make sure you know
the details of your particular fund guarantees before investing. |
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Creditor Protection |
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Unlike mutual funds, an investment in a seg fund can also be shielded
from creditors in the event of bankruptcy. This can be quite beneficial
to small business owners. For the creditor protection to apply however,
you must name a beneficiary who is a direct family member, and you
must be able to prove that your investment in the segregated fund
was not made solely for the purpose of shielding assets from creditors. |
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No Probate Fees |
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Since a segregated fund is an insurance contract, you do no have
to pay provincial probate fees which can be quite high depending on
where you live. Your seg fund holdings will pass directly to your
named beneficiaries instead of going to your estate. |
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Death Benefit and Maturity Guarantees: |
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Segregated funds offer death benefit and maturity guarantees. The
death benefit guarantee ensures that if the contract holder dies,
a specific percentage of the principal of the investment – normally
100% - is payable to the named beneficiary. |
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The maturity guarantee ensures that after a specific number of years
– often 10 years – there is a guaranteed residual principal
value – normally 75%. |
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Bypass Probate Fees: |
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Segregated fund contracts have the ability to bypass probate. In
the event of death of the contract holder, the proceeds pass directly
to the named beneficiary, bypassing probate. This means that these
assets are not subject to probate and estate administration fees,
and the beneficiaries receive the proceeds without extended delays
– and without costly fees. |
| To know more about the program give us
a call at 416-283-8899 and one of our friendly customer
service representatives will put you in contact with a authorized
representative. |
