Segregated Fund Policies

Segregated fund policies

Bring a new
perspective to family wealth transfer

Discover how segregated fund policies add desired control, privacy and greater payout potential when tailoring your clients’ estate plans.

Segregated fund policies

Bring a new
perspective to family wealth transfer

Discover how segregated fund policies add desired control, privacy and greater payout potential when tailoring your clients’ estate plans.

Grow wealth by investing with a safety net

Unlike a mutual fund, a segregated fund policy is designed to provide certain guarantees, such as savings protection on the initial amount invested and estate benefits.

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Wealth transfer is
on your clients’ minds.

Are segregated funds
in their portfolio?

When considering segregated funds and their role in a portfolio, you may wonder what opportunities they provide for your clients looking to transfer their wealth.

Let’s look at the facts about family wealth transfer and how segregated fund policies can help your clients pass on their wealth quickly and cost-effectively.

Wealth transfer isn’t strictly a financial process.
It’s an emotional one, too.

Having control and confidence in this complex scenario is something you can’t put a price on.

Financial			Emotional
Estate payouts are often held up by a lengthy and complex probate process			Family dynamics can complicate passing on wealth
Estate value is diminished by probate, legal and executor fees and taxes			Tensions often happen when everyone can see how the estate is divided among beneficiaries
Bypassing the costs and processes of estate payouts is highly attractive to your clients.			Your clients want to know their loved ones will be well taken care of - as they see fit.

With this in mind, segregated fund policies provide a perfect financial/emotional balance.

Control

Privacy

Efficiency

Higher payout potential

Put wealth transfer on your radar

Whether you're a well-established advisor with an aging client book or a newer advisor helping younger clients plan 30 to 40 years ahead, this is a conversation you should be having. Now.

1 in 5 by 2031^a

21.3% of Canadians will be age 65 or older ^a

$1,275B by 2032^b

Projected total amount transferred within households

With the largest transfer of generational wealth happening before our eyes, clients need your expertise more than ever.

Fact:

Estates are often entangled in fees, delays and the legal process.
Segregated fund policies aren’t.

“Segregated fund policies are a great tool for seamlessly transferring assets to named beneficiaries because they bypass probate taxes altogether. This makes them an attractive choice for individuals looking to efficiently pass on their wealth to the next generation.”

—

Daniel Gremonprez, National Vice-President,
Wealth Distribution, Canada Life

Legal + executor fees

Up to 10% of an estate’s value can be consumed by legal and executor fees.

$1M estate

Legal fees settlement^c

2.5%-5% = $25K-$50K

Executor fees^d

5% = $50K

Probate costs

Probate fees run into the thousands.

Estate payouts can face processing delays.

days

Waiting period after notices are delivered to beneficiaries^f

days

Waiting period before the executor can distribute the estate^f

- weeks - several months

Court processing time^f

Minimizing taxes

Canadians don’t want their savings to go to taxes.

51% of investors with $1M+ in investable assets discussed tax minimization with their advisor^g

Help your clients maximize their legacy.

How segregated fund policies can make a nearly quarter-million-dollar difference:

Non-registered investable assets

Value of investment: $1,500,000

Costs that may impact a client’s legacy¹	Segregated funds	Mutual funds, securities, guaranteed investment certificates (GICs)
Market drop² -5%	$0	-$75,000
Legal fees and settlement 3.5%	$0	-$52,500
Executor fees 5%	$0	-$75,000
Probate fees 1.5% on the amount over $50,000	$0	-$21,750
Beneficiaries receive	$1,500,000	$1,275,750 -$224,250 LESS

Case study: Sophia’s story³

Meet Sophia

Widowed, she’s looking at her future. And thinking about her now-grown children’s future, too.

Sophia | 68

Widowed 6 years

Chair of high-profile art gallery

Her investable assets:

$1.5M in non-registered assets held in a segregated fund policy

75% maturity / 100% death benefit guarantee

Doesn’t include her home, vehicles, art collection and other non-liquid assets.

It’s been six years since Sophia’s husband, Ernest, unexpectedly passed away. While Sophia knows her own life is far from over, the suddenness of Ernest’s death has her thinking about what she’ll leave behind (and how best to do it). With three very different adult children and an exciting — and surprising! — new relationship in her life, it’s a complex situation.

77% of Canadians surveyed want to see their children “get ahead”^h

Alain | Sophia’s new partner

Sophia has found a loving and dedicated new partner in Alain.

Alain | 70

Retired

Sophia’s new relationship of 19 months

Not cohabitating

She’s committed enough to Alain to want him included in her will. Her kids like Alain, but is it fair to include him so soon after their dad’s death?

Sophia’s children | Sophia’s children have very different lives and aspirations. That’s why she wants her non-registered investable assets to align with their specific needs.

Sarah | 37

Brain injury due to a car accident requires home care

It’s important to Sophia that Sarah will always get whatever care she will require.

This will likely mean Sarah receives a higher percentage.

Olivia | 35 | Married

HR executive
Financially responsible

Sophia doesn’t worry about Olivia. She knows Olivia is smart with her money and, because of it, lives quite nicely.

Olivia’s share will reflect that while still giving her a helping hand.

Noah | 32 | Independent

Advertising copywriter
Nonchalant about money

Sophia is concerned about Noah — especially his “relaxed” attitude toward money.

While deserving of a fair share, Sophia doesn’t want to see it wasted or misused.

Having her children know about any inequities will create tensions. In her perfect world, how Sophia leaves her money behind is her business and nobody else’s. This keeps everything conflict-free.

Here’s how Sophia wants to divvy up her assets

Sarah

in an annuity to help cover ongoing care over time, with no delay.

Olivia

as a lump sum payout, which she can invest in her children’s education and, perhaps, a small business.

Noah

in an annuity that keeps him from unwisely spending a sudden windfall.

Alain

Yes, Sophia is committed to him. But it’s still early and things could change.

Here’s how a segregated fund policy helps Sophia make that happen

Control

Death benefits will be paid out
exactly as Sophia wishes.

Sophia has total say over how the money is paid out when a claim is made (i.e., lump sum or annuity).
She can easily make changes to beneficiaries when she wants - and it won’t cost her a cent.

Privacy

Sophia decides who gets what.

And it’s kept private.

Payout details are kept confidential, so there’s no family conflict.^4,5
Because Sophia specified named beneficiaries rather than her estate, payouts aren’t subject to probate or scrutiny.⁴

Efficiency

Sophia avoids dealing with lawyers.

There are no probate and estate-related delays.

Because an estate isn’t involved, non-registered investments held in a segregated fund policy keeps lawyers out of the equation.
Payouts can happen in as little as two weeks (as long as all documents needed to process the claim are received).

Higher potential payout

More money goes to Sophia’s beneficiaries.

Legal, probate, estate settlement fees and potential tax exposure are avoided.
75% to 100% of the initial amount invested is guaranteed, at maturity or death, based on the guarantees chosen (proportionately reduced by any withdrawals).

Here’s why Sophia is glad she invested using a segregated fund policy.

Sophia’s assets
are divided exactly
as she wants.

Her initial investment
is protected if the
market drops.

Without lawyers, process
and tax implications,
more money goes to
her family much faster.

The marginally higher
fees for segregated funds
were a small price
to pay for this
added reassurance.

Talk to your clients about segregated funds. It’s time.

As the volume of wealth transfer among affluent Canadians grows, so does your opportunity to prove the value of segregated funds in estate planning. Don’t miss out.

They won’t initiate the conversation. You should.

Only 14% of investors who work with a financial professional discussed inheritance(s) with their advisor in the past two yearsⁱ

Why Canada Life?

We’ve built one of the strongest segregated fund shelves in the industry - continually enhancing it to fit your clients’ needs at every stage of their lives through all market conditions.

Established trust

175+ years of growing and protecting wealth for Canadians

Market leadership

24% of all Canadian segregated fund assets under management are with Canada Life^j

Performance

78% of Canada Life segregated funds are performing above the median over three years⁶

Accolades

65% of Canada Life segregated funds are rated 4- and 5-stars⁶

1st ranked

out of 11 recognized companies for receiving the most FundGrade A+ awards for segregated funds in 2023^7k

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Choosing the right partner for your clients’ segregated fund investments is important.

You and your clients deserve the best. We’re here to deliver just that.

At Canada Life, we’re driven to provide tailored, best-in-class investment options from one of the strongest selections of segregation funds in the industry. Discover why we’re the right choice.

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Ready to start?

Open a new segregated fund policy for your clients in under 10 minutes.

Visit Canada Life’s digital segregated fund application to find out how.

Start here

All costs are estimates provided for this example. We don’t guarantee their accuracy or completeness. Estate taxes vary across Canada and, in this example, they’re based on Ontario taxes. Legal and accounting fees vary based on the complexity of the estate settlement. Executor fees vary and may be waived.

GICs aren’t influenced by the 5% market drop depicted in the table. GICs offer a stable investment option unaffected by short-term market fluctuations. The segregated fund showcased includes a 100% maturity and death benefit guarantee, offering protection against the 5% market drop at maturity and death.

The examples used in this case study are based on what Canada Life has to offer. Options may differ by provider.

This material is for informational purposes only and should not be construed as providing legal or tax advice. Reasonable efforts have been made to ensure it’s accurate, but errors and omissions are possible. All comments related to taxation are general in nature and are based on current Canadian tax legislation and interpretations for Canadian residents, which is subject to change. For individual circumstances, consult with your legal or tax professional. This information is provided by The Canada Life Assurance Company and is current as of March 2024.

In Saskatchewan, executors must disclose all known life insurance policies owned by the deceased, including segregated fund policies. They must list the insurance company, policy number, designated beneficiaries and the value at the date of death.

Performance data as at Sept. 30, 2024 (Morningstar Direct). Industry peer shelves are internally created and to the best of our knowledge reflects the equivalent Canada Life 75/75 (P) series. Canada Life 75/75 (P) series achieved its 3-year number in July 2021. For a full list of 4- and 5-star funds, visit Positioned to win - Segregated Funds (canadalife.com).

FundGrade A+® is used with permission from Fundata Canada Inc., all rights reserved. The annual FundGrade A+® Awards are presented by Fundata Canada Inc. to recognize the “best of the best” among Canadian investment funds. The FundGrade A+® calculation is supplemental to the monthly FundGrade ratings and is calculated at the end of each calendar year. The FundGrade rating system evaluates funds based on their risk-adjusted performance, measured by Sharpe Ratio, Sortino Ratio, and Information Ratio. The score for each ratio is calculated individually, covering all time periods from 2 to 10 years. The scores are then weighted equally in calculating a monthly FundGrade. The top 10% of funds earn an A Grade; the next 20% of funds earn a B Grade; the next 40% of funds earn a C Grade; the next 20% of funds receive a D Grade; and the lowest 10% of funds receive an E Grade. To be eligible, a fund must have received a FundGrade rating every month in the previous year. The FundGrade A+® uses a GPA-style calculation, where each monthly FundGrade from “A” to “E” receives a score from 4 to 0, respectively. A fund’s average score for the year determines its GPA. Any fund with a GPA of 3.5 or greater is awarded a FundGrade A+® Award. For more information, see http://www.fundgradeawards.com/. Although Fundata makes every effort to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Fundata. FundGrade ratings are subject to change every month.