What is a segregated fund?
Segregated funds are distributed exclusively by life insurance companies. When you invest with segregated funds, you are entitled to features that protect your investment throughout your life and assist in the efficient transfer of assets when you pass away. Many of these features are unique to insurance investments and may not be available in a traditional mutual fund. These features include:
- Maturity and death benefit guarantee options to protect your investment
- Bypass probate and associated fees by naming a beneficiary
- No early redemption fees at death
- Quick payment to beneficiaries after you pass away
- Private and confidential beneficiary designations
- Creditor protection may be available in the event of bankruptcy or lawsuit
Mutual Funds vs Segregated Funds
While mutual funds and segregated funds share many similarities, segregated funds have unique estate planning advantages because they allow a beneficiary to be named on a non-registered investment. Unlike mutual funds, the investment proceeds are paid directly to the named beneficiary(ies), bypassing the administrative costs associated with the estate settlement process.