Segregated SEG Funds
Segregated SEG Funds are Identical to Mutual Funds, they are pooled investments with a fund manager, except unlike Mutual funds they provide benefits and guarantees that Mutual Funds cannot.
They protect cash assets in your Estate.
They fall under the purview of the Beneficiaries Act. This means they can be creditor proof and are more highly regulated than other types of investments. In this age of corporate greed, with CEOs, and CFOs, Traders, being charged and convicted of theft. With Hedge funds collapsing, Mortgage companies scrambling to make up losses. Isn’t nice to know that Segregated Funds exist. Because when Insurance companies offer a guarantee it is far tougher. They must prove to the regulators they have the cash available to back up that guarantee. Until recently Registered accounts were not creditor proof in Ontario - unless you owned Segregated Funds. Meaning if you were sued or had a large tax bill, creditors could go after your Retirement savings. The government plans to institute creditor protection for Registered plans as of December 2008. For non registered investments these Funds have unique properties that really pay off. They behave the same as equivalent Mutual Funds, except they are creditor protected as long as you were solvent at the time of their purchase.
Case Study The bankruptcy trustee phoned me in regard to this client’s holdings. I explained they were SEG Funds. His response was “Beautiful they are off the table,” and that was that.
The ones provided by a Mutual Fund company are Insured by an Insurance company for a fee. The management of the fund is still handled by the Mutual Fund Manager. These are considered “third party” SEG funds and as such can have a higher MER-Management Expense Ratio-than straightforward Insurance company Segregated SEG Funds or the equivalent Mutual Funds. MER’s can be less than, the same as, or greater than equivalent Mutual funds. You have to look. Another Benefit of the Segregated SEG Funds is the reset feature. A reset means that you can reset the maturity date and value to day one. This gives you the ability to lock in the gains you have achieved. This also resets the death benefit guarantee. Case Study They come with two distinct guarantees. The maturity and death benefit. The maturity guarantee is normally 15 years from the day of deposit. The death benefit guarantee kicks in if you die. You can choose your level of guarantee. It can be 75%/100% - 100%/100% If you selected the 100% guarantee and you held the fund until the maturity date you are guaranteed to receive either your original investment or fair market value (less any withdrawals), which ever was the greater. Maturity Guaranteed does not mean locked in. You have access your money anytime you wish. What it does mean is that should your Segregated Fund completely fail, you are guaranteed to receive at the very least your original investment (less any withdrawals). The second and most important guarantee is a death benefit guarantee. Upon your death, your named beneficiaries, (spouse, children, grandchildren) would receive in cash the guaranteed amount or market value (less any withdrawals) which ever was the greater. Case Study His family received a $500,000 cheque from the Insurance company because of the death benefit guarantee. Bypassing the Estate process. Had those been Mutual Funds - it would have been sorry for your loss. Since 9-11 the market has not only recovered but made some terrific gains. The point is, with anything, but Segregated SEG Funds this man’s Estate would have been severely damaged. Bypassing the Estate process with the use of Segregated SEG Funds is a wonderful strategy and it will save you a lot. It guarantees your money is passed to those you want. Case Study When the client and spouse pass away. The Estate goes to the children through their Will. The Estate will face these fees (not including any taxes owing) Total Fees $159,250 Using seg funds with named beneficiaries-the children-would receive the cash within 6 to 10 business days of the Insurance company receiving the proper documentation.
A saving of $159,250 Unlike a Will, beneficiaries of Seg funds cannot be contested and the distribution is completely private. Known only to those directly involved. When you name a beneficiary to a Segregated Fund, creditors are not allowed to go after them for any monies owed by you when you pass away. There is no life insurance underwriting to buy Segregated Funds meaning that even if you are uninsurable or in poor health you can buy Segregated Funds and have these guarantees. You must be of sound mind to purchase SEG Funds and name beneficiaries. In your Estate, Segregated Funds eliminate all the fees normally associated with probate and Will distribution while making sure the money goes to those you choose--no ifs, ands, or buts. 
Terry Johnston CFPJ C Mitchell Financial Services Inc. Phone: 866-721-7781 ext. 232 Return from Segregated SEG Funds to Home Page
Disclaimer The information shown here was gathered from the Study Manual for Applicants for Life Agent’s license, Common Law Provinces 1990 edition, 1998 supplement included. The fees shown here, are only an illustration to depict the impact of any fee charged to the Estate. The fees* charged by Lawyers and Accountants will vary depending on the size and complexity of the Estate to be dispersed. Rates of return on Segregated SEG Funds, in most cases, are not guaranteed and as with any equity type of investment, there is a possibility of market volatility with the funds. Anyone wishing to buy Segregated funds should consult with an Insurance professional, read the provisions of the annuity contract and make sure they fully understand what they are buying.
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