How seg funds can be an estate-planning tool

Pitch Financial Group |

As many Canadians start to exit the accumulation phase of their lives and commence planning for retirement and beyond. Segregated funds are becoming an increasingly attractive option – especially for estate-planning purposes.

Older investors might gravitate toward seg funds because they can “facilitate the protection and efficient transfer of wealth in a cost-effective manner”. They are similar to mutual funds and can hold the full spectrum of asset classes but have an insurance contract wrapper that provides several key estate-planning benefits. They have guaranteed investment and death benefit values. As such, the minimum value transferred to a beneficiary for estate-planning purposes is known. Typically, guarantees range from a 75- to 100-per-cent payout of the principal at maturity and death.

Another major benefit of seg funds for estate planning relates to probate. The value of the insurance contract of a deceased policyholder can be paid directly to a named beneficiary without going through probate. That avoids paying probate fees, which can be substantial depending on the size of the estate, as well as legal and administration fees.

Seg funds facilitate privacy for estate planning, because the proceeds of a fund are not part of probated will, which is part of public record.

In addition, seg funds provide potential protection from creditors in the event of bankruptcies or lawsuits. Creditor protection is especially beneficial for business owners who wish to safeguard their personal assets.

For estate-planning purposes, different features of seg funds may appeal to different investors. But at the end of the day, it’s a peace of mind provided by segregated funds that matters.


Content from Globe Content Studio