Segregated Funds: The
Differences
Author:
Ivon T. Hughes
Segregated fund are similar to a mutual funds but with added features. Like
a mutual fund, a segregated fund is a collection of stocks, bonds and other
investments owned by many investors and managed by a professional investment
company.
Capital Protection
Segregated fund holdings are kept separate from the insurance company's assets.
Unlike mutual funds, segregated funds are life insurance contracts that offer
up to 100% of your net deposits on the contract maturity date provided the
funds have been invested for at least 10 years. In the case of death, up
to 100% of your net deposits are guaranteed.
If you surrender the contract before the holding period is up, the guarantee
doesn't apply. So you can lose money if the market falls and you surrender
your contract early.
However, if you need the growth potential available from mutual funds, but
want protection for your capital, segregated funds may be suitable for you.
Segfund creditor protection
Segregated funds can be mostly be protected if you go bankrupt and have designated
a 'preferred class' beneficiary. But anyone who deliberately moves assets
to avoid their debts could lose this protection.
Segregated fund probate advantages
Probate is a legal process that certifies the validity of a Will. Provincial
governments raise money by charging probate fees or estate taxes; a percentage
of your estate's value.
However, these fees aren't charged on segregated funds because this asset
doesn't flow into your estate if you have a designated beneficiary. In Québec,
notarial Wills do not need to be probated by the court. For non-notarial
Wills, fees are nominal.
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Ivon T. Hughes, The Hughes Trustco Group Ltd.
Online Insurance Broker - Get a FREE Quote TODAY!
Tel: (514) 842-9001 Email: [email protected]
Web: http://www.trustco.ca
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