Segregated Funds
When downsizing you will likely release significant equity. Segregated funds could be the best investment vehicle for you. Now would be a very good time to seek expert advice from a Certified Financial Planning professional about investment planning, tax planning, estate planning and updating your retirement plan. Why you should consider segregated funds:
- A professionally managed diversified portfolio of stocks and/or bonds
- Combines the growth potential of a mutual fund with the security of a life insurance policy, offering guarantees that are not available with traditional mutual funds.
- No health questions
- Downside protection: Offers between a 75-100% guarantee at death and maturity. This means that you enjoy all the potential upside of your investments, but should the funds value decline before death or maturity then the insurance company is obliged to pay out at the level of the guarantee selected at purchase.
- Bypasses probate and pays directly to the designated beneficiary(s)
- Avoids probate fees and (possible) executor fees, pays quickly to the beneficiary (typical probate timeframe in Ontario is nine to twelve months)
- Enjoys certain protections from creditors of both the estate and the beneficiary
- Privacy; when a will goes into probate it becomes a public document that anyone can see. A segregated fund is a confidential contract between the insurance company and the Annuitant and then the beneficiary
- Only available through a licensed life insurance advisor.
Segregated funds will make life easier for your executor. Being the executor of an estate can be a very involved and time-consuming process that can drag on for years. Many people who are appointed as executor don't have the financial or legal background to deal with the complexities and personal liabilities that may arise. Moving assets into segregated funds outside the estate simplifies the probate process.