That means your assets within a segregated fund policy, whether registered or non-registered, may be protected from creditors, where a specific type of beneficiary – like a spouse or a child – has been named. It also means that, in the event of your death, your assets may be passed onto your beneficiaries without being exposed to creditors. One difference between mutual funds and segregated fund policies is that the latter offer the potential for creditor and liability protections. 1 Footnote 1 Creditor and liability protection If your beneficiary is your spouse, those savings will be transferred to them quickly, though other types of beneficiaries – such as friends or charities – may have to wait longer. In comparison, you can also arrange to have your registered mutual funds savings passed on to your beneficiaries when you die. It also means your beneficiaries will get the money faster, since segregated funds policies are usually paid out to beneficiaries within a few weeks of the paperwork being filed. That means the money in your policy won’t be reduced by taxes and the fees associated with settling an estate. Estate planningĪs for estate planning, all segregated funds allow your beneficiaries to receive your money without having those funds flow through your estate.
This means that, if you pass away or hold onto the fund until it reaches the maturity guarantee, you or your beneficiaries get the new total instead of the original amount. If your principle investment grows, then you could lock in at the new total, making this your new guaranteed amount. Segregated fund policies also offer you the ability to “lock in” your gains as part of the principal when you reach a maturity or death guarantee, for an additional fee. This makes segregated funds an excellent choice for individuals worried about how their assets will be passed on to their beneficiaries. This means your named beneficiary (or beneficiaries) will receive either the market value of your investments or the guaranteed amount, whichever is higher at the time of your death. You can usually choose between 75% or 100%, so even if the market drops, you’ll get most or all of your original investment back when your policy reaches its maturity date.Ī segregated fund policy also comes with a death benefit guarantee. One benefit of a segregated fund policy is that they include guarantees to your original investment. Advantages of segregated funds Maturity and death benefit guarantees That said, the variety of mutual fund choices means someone who starts investing in mutual funds in their teens or twenties could continue investing in them – having updated their investment style to their changing risk tolerance – as time goes on and they enter new stages of life. That means mutual funds are often the first type of investment a young person tries after they get their first job and begin making money Opens in a new window. And if you want to take a more conservative approach, there are funds to match your tolerance for risk, too. If you want to be more aggressive, there are growth-focused specialty funds available to help you. There are many different types of mutual funds, which means it’s possible to create an investment package to match your specific risk tolerance. For this reason, mutual funds may be the better choice for some individuals. The management and insurance fees that come with segregated fund policies tend to make them more expensive than mutual funds. Mutual funds don’t have the insurance guarantees segregated funds have, but that’s why they’re a lot cheaper to purchase. Let’s look at the advantages of mutual funds and segregated funds in more detail. But unlike mutual funds, a segregated fund policy includes insurance guarantees that can protect much or even all your original investment. For many people, it’s a very attractive investment option because it’s cost-effective and can be customized to your unique risk tolerance.Ī segregated fund policy is similar – like mutual funds, there’s a pooling of investments.
It’s a process that diversifies your investments, potentially limiting your exposure to market fluctuations. Mutual funds let investors pool their money together in a fund that’s managed by a qualified investment firm. What are mutual funds and segregated funds?
Two of the most popular choices among investors are mutual funds and segregated fund policies. If you’ve made the decision to invest some of your money, you may be wondering which option will offer you the best bang for your buck.
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