For business owners, succession planning should include taking a serious look at segregated funds. Segregated funds are similar, often identical, to mutual funds in that there is a pool of investments held by unitholders, and professional managers invest the funds according to stated objectives – in fact, the better known mutual funds often offer segregated versions of the same investment products.
Like mutual funds, the market value of segregated fund units fluctuate with the fund’s portfolio. However, segregated fund units often come with a guaranteed minimum value as high as 75% or 100% of the original purchase, as a protection for their investors.
But the key difference is that segregated fund units are contracted as a life insurance benefit passing immediately to a named beneficiary, separately from the estate, probate and taxes. Because of this feature, segregated funds can only be purchased through life insurance companies.
Segregated funds can also offer creditor protection, in many cases sheltering a beneficiary from creditors of the estate.
These and other features can vary from fund to fund, but your Orr representative knows the segregated fund market well and can give specific guidance to suit your goals.