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Home Financial Health Blog Active retirement - the early years Segregated funds can provide market growth with security

Segregated funds can provide market growth with security

by Tim Weichel

“Segregated” or Guaranteed Investment Funds (GIFs) can give you the growth potential of investment funds with the security of insurance guarantees.

• Guaranteed death benefit –  Your beneficiaries will receive the greater of market value or 75% or 100% of your net contributions tax free when you die, depending on which you choose.  Ideal for Estate Planning!

• Avoids delays in distributing the deceased’s assets and estate administration tax (probate) if your beneficiaries are named in the contract.

• Privacy – no one has the right to find out or challenge the amount that has been passed on to the beneficiary

• Potential creditor protection – This is a key feature for business owners in particular, or those who are concerned about creditors attacking their assets to collect debts.

• Tax-efficient – More tax-efficient than mutual funds with no built in long-term capital gains when you purchase a GIF.  Capital losses are allocated for use by the fund holder – unlike mutual funds. 

• Settlement Options –Option of electing to leave an annuity or structured payments instead of a lump sum to your named beneficiaries. Ideal for leaving to heirs when you don’t want to leave them a lump sum. May avoid the need for a testamentary trust. 

• Your investment is insured by Assuris – Assuris is the not for profit organization that protects Canadian policyholders if their life insurance company should fail. Every life insurance company authorized to sell insurance policies in Canada is required, by the federal, provincial and territorial regulators, to become a member of Assuris. Mutual funds do not have this protection – only Guaranteed Investment Funds do.

• Principal guaranteed – Depending on the contract, 75% to 100% of your principal investment is guaranteed if you hold your fund for a certain length of time (at least 10 years)

• Optional reset feature – If the fund value rises, some segregated funds also let you “reset” the guaranteed amount to this higher value – but this will also reset the length of time that you must hold the fund (at least 10 years from date of reset)

• Choice of Funds and Investment Portfolios – CI, Manulife, RBC, McKenzie, Franklin Templeton, Fidelity and many other brand name companies’ investment funds are available as segregated funds.

GIF Exchange-Traded Fund Portfolios (ETF) available – allow for index, style and broad market diversification holdings in small and mid-sized accounts.

• Manulife Private Segregated Pools offer professionally managed portfolios with lower MERs for a minimum investment per pool of $100,000.

If you want to participate in the growth potential of the markets, but want downside protection; you’re looking for estate planning benefits; or you’re a small business owner or a professional and want potential protection from creditors, call me. Let’s set up a discovery meeting to find out if these funds are right for you.


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