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Why segregated fund solutions?

Segregated fund contracts let investors access the growth potential of the markets, prepare for retirement, and tap into estate planning benefits designed to facilitate quick, cost-effective, and private wealth transfer.1

Segregated funds are similar to mutual funds, but with a few key differences. A mutual fund is a security, while a segregated fund is an insurance product (i.e., an individual variable insurance contract). Only insurance companies can offer them.

Manulife’s segregated fund solutions offer:

  • Growth potential

  • Estate planning advantages

  • Protection features

  • Choices to meet a range of investment styles and needs

Like mutual funds, they:

  • Invest in a diversified portfolio

  • Are professionally managed

  • Offer a wide range of funds to choose from

In addition, they offer:

  • Estate planning benefits

  • Access to guarantees

  • Potential creditor protection

Segregated funds combine many of the features of a mutual fund. They also provide elements of an insurance contract. Available for purchase only through an insurance company, a segregated fund includes guarantees and advantages that are not available with traditional mutual funds. I was intrigued.

Additional protection for your investments

A segregated fund policy includes both a maturity guarantee and a death benefit guarantee. These guarantees range from 75% to 100% of your principal investment (fewer withdrawals). Of course, it depends on the guarantee option you choose. For the maturity guarantee, your principal investment must remain in the policy for a specified time period, usually 15 years. The death benefit guarantee applies on death. In both cases, the higher the guarantee value or the market value at maturity or death would apply.

Growth potential and flexibility

Some types of segregated funds include resetting options. A reset allows you to increase your guarantee values to a percentage of the market value. This feature allows you to protect your original investment and grow your portfolio. Keep in mind that a reset could extend the length of time before you are entitled to your maturity benefit guarantee, usually 15 years from the date of reset.

Potential for creditor protection

If you go bankrupt or are hit with a lawsuit, your investments within a segregated fund may be protected from your creditors. You need to have named a family member as a beneficiary. This feature is especially important for self-employed professionals and small business owners who want to protect their personal holdings from professional liability.

Protect your privacy

With mutual funds and other types of investments, when you die the investment proceeds are paid directly into the estate and are subject to probate. Once a will is probated, it becomes a publicly available record in the province of residence. Segregated funds with a named beneficiary do not form part of an estate, and therefore the proceeds are paid directly to the beneficiaries quickly and privately.


An efficient way to do an estate transfer

Upon your death, if you have named a beneficiary other than your estate, the proceeds are paid directly to the beneficiary bypassing probate. Probate can be a time consuming and expensive legal process as most governments charge a costly probate fee.

Maturity and death benefit guarantees

With segregated fund contracts, investors are guaranteed to receive at least 75% of deposits (or 100%, depending on the contract), less any withdrawals, when the contract matures. This is known as a maturity guarantee, and it applies at the maturity date. The maturity date occurs after a minimum number of years have elapsed or on a date specified in the contract; for example, age 100 of the annuitant.

Segregated fund contracts can also protect investment for beneficiaries. The death benefit guarantee can be up to 100%, depending on the type of contract selected and the age of the annuitant when the product is purchased. The named beneficiary gets the death benefit in the event of the annuitant’s death. The beneficiary can be anyone—a family member, a friend, or a charity.

Some segregated funds also offer resets to lock in growth, while others include an option that can deliver lifetime guaranteed income.

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