[Summer 2025 GPS] Segregated Funds, Estate Planning Tool

The goal of estate planning is to secure your legacy and make sure that your assets are passed on to your loved ones according to your wishes. In Canada, segregated funds, which are insurance contracts on investment assets, have distinct advantages that can help when arranging your estate. Here is a short and straightforward list of segregated funds advantages:
 

1. Avoiding Probate and Saving Fees: For segregated fund contracts, naming a beneficiary other than your estate bypasses probate and allows assets to pass directly to the named beneficiary. This is particularly important for non-registered assets, as naming a beneficiary is not possible if they are invested in investments, such as mutual funds, stocks, or ETFs. By not flowing through your estate, these assets save probate, legal, and executor fees (up to 1.5% of the estate).
    
2. Faster and Simpler Distribution: Beneficiaries receive funds within weeks, avoiding lengthy estate settlement delays and providing timely support for your loved ones.
    
3. Privacy: Beneficiaries and estate details remain private, unlike wills, which enter the public record (except in Saskatchewan).
    
4. Creditor Protection: Designating specific beneficiary categories (e.g., spouse, kid, parent) can safeguard against creditor claims, benefiting business owners and professionals. Also, segregated funds assets are typically not accessible to estate creditors since they don’t pass through the estate on death.
    
5. Shielded from Estate Litigation: Segregated fund designations lessen problems as assets are not susceptible to will terms or legal issues concerning the estate. Except for fraud or some legal disputes, the direct designation stands.
    
6. Flexibility: Changing a segregated fund beneficiary is much easier and more cost effective than changing a will.
    
7. Extras: Segregated Funds contracts offer Death and Maturity guarantees, providing older clients with peace of mind, as they do not have the time horizon to weather market volatility. In addition, some contracts offer resets to lock in growth, which in turn will increase guaranteed minimum payouts over time.
    

Comparison: Segregated Fund vs. Mutual Fund in Estate Transfer

In brief, incorporating segregated funds can add significant value to your estate plan, especially if you value speed, privacy, asset protection, and cost savings for your loved ones. As always, it's wise to consult with a financial or estate planning advisor to ensure segregated funds suit your overall financial goals and circumstances.