Segregated Funds in Canada
Segregated funds can offer you the best of both worlds when it comes to investing. They combine the growth potential of a mutual fund with the security of an insurance product. At Experior Financial, we can help you determine if segregated funds are the right investment choice for you.
Segregated funds are similar to mutual funds in that they pool together money from multiple investors to invest in a variety of assets such as stocks, bonds, and real estate. However, segregated funds also offer additional benefits that make them stand out from traditional mutual funds.
One key advantage of segregated funds is their guarantee feature. Segregated funds come with a guarantee that you will receive a portion of your initial investment back, usually 75-100%, if you hold the fund for a certain period of time, typically 10 years. This feature helps protect your investment against market downturns and can provide peace of mind.
Segregated funds also offer potential creditor protection, making them a popular choice for business owners and professionals. Additionally, they have the potential to bypass the probate process, allowing your beneficiaries to receive the funds quickly and easily.
Our licensed financial services associates can help you determine if segregated funds are right for you by evaluating your risk tolerance, financial goals, and investment timeline. We can assist you in choosing the best segregated funds for your unique situation and provide ongoing management and monitoring of your investments.
At Experior Financial, we believe in transparency and providing our clients with the information they need to make informed decisions. We offer a free, no-obligation consultation to discuss your investment options and answer any questions you may have. Contact us today to learn more about how segregated funds can fit into your investment strategy.
FAQ
Are segregated funds guaranteed?
Yes, segregated fund investments are guaranteed for 75% to 100% of your contribution. This means that you can be confident that you won’t lose any of your investment, no matter the market volatility.
What are the benefits of segregated funds?
Segregated funds come with various benefits, including protection from market volatility and the ability to lock in your gains through a reset feature. You can also pass on your investment to your beneficiaries without probate fees, and your investment is protected from potential creditors in case of bankruptcy or a lawsuit.
Can you withdraw from segregated funds?
Early withdrawal from a segregated fund can result in strict penalties and should be avoided if possible. Your Experior expert can help you decide the best route to take if you need to withdraw some funds, as there may be capital gains and other penalties to contend with.
How do I buy segregated funds in Canada?
Speak with an Experior Financial Group Associate to start with a complete financial needs analysis. Our associate will help you determine your unique financial goals and needs and invest with the best products for your situation. We will deal with the insurance companies on your behalf and help you decide if segregated funds are the best investment option for you.
What happens to segregated funds when you die?
After your death, segregated funds come with a death benefit guarantee and are passed on to your beneficiaries. Unlike mutual funds, they can offer protection from probate fees.
Do beneficiaries of a segregated fund pay income tax?
No, beneficiaries of a segregated fund investment in Canada are not taxed upon death. There are no fees associated with inheriting this type of fund, and the deemed disposition (capital gain) is in the estate. However, if the segregated fund is joint-owned, then there is no deemed disposition on the death of a joint owner. Only an RRSP segregated fund that is rolled to a spouse does not incur a deemed disposition upon the owner’s death.
How are segregated funds taxed in Canada?
Generally, only 50% of the segregated fund’s realized capital gains are reported for tax purposes, and eligible dividends are taxed based on a grossed-up value of 38% of the actual dividend amount, with an enhanced dividend tax credit available of roughly 25.02% (combined federal-Ontario 2019 rate) of the grossed-up amount. Your tax advisor can provide more detailed information on this matter.