Segregated funds can be a valuable tool when it comes to growing, protecting and transferring your wealth. Much like mutual funds, traditional segregated funds are professionally managed and invested in a portfolio of diversified securities, but offer an added insurance component. The insurance element of segregated funds offers additional benefits such as principal investment guarantee, potential for creditor protection, and the ability to bypass probate.

Maturity guarantee

In today’s current rate environment, Canadians are looking for alternatives to GICs without sacrificing the comfort of principal protection. Regardless of market performance, segregated fund contracts offer a guarantee ranging from 75% to 100% of your principal investment at maturity. Standard maturity is 10 to 15 years from the date of your deposit. While the contract provides a guaranteed value, if the market value is greater than the guaranteed value on the maturity date, you will receive the market value. This allows you to capture any potential market growth. Most segregated fund contracts also offer reset features which allow you to lock in market growth which increases guaranteed amounts. Each segregated fund offers slightly different characteristics. Resets can impact the maturity guarantee, the death benefit guarantee or both.

Death benefit guarantee

In the event of death, between 75% and 100% (depending on the option chosen) of your initial deposit or the current market value, whichever is greater, will flow directly to your named beneficiaries. This feature is available immediately upon commencement of the contract.

Estate planning benefits

Proceeds from segregated funds with named beneficiaries bypass probate. They are not subject to probate, lawyers’ or executor’s fees, and they provide an efficient, cost-effective and timely way to disperse money to your beneficiaries. Because segregated fund contracts are held outside of the estate, they offer privacy and discretion in passing assets to those you care about.

For more information on the benefits of comprehensive wealth planning, contact Elizabeth de Groot of RBC Dominion Securities at or 705-444-4742 or visit her website at Elizabeth de Groot is an Insurance Representative of RBC Wealth Management Financial Services Inc. and therefore fully licensed to discuss any of these strategies.

This article is supplied by Elizabeth de Groot, CFP, FCSI, CIWM, FMA, Vice-President, Investment & Wealth Advisor with RBC Dominion Securities Inc. Member–Canadian Investor Protection Fund. This information is not intended as nor does it constitute tax or legal advice. Readers should consult their own lawyer, accountant or other professional advisor when planning to implement a strategy. Insurance products are offered through RBC Wealth Management Financial Services Inc. (“RBC WMFS”), a subsidiary of RBC Dominion Securities Inc.* RBC WMFS is licensed as a financial services firm in the province of Quebec. RBC Dominion Securities Inc., RBC WMFS and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. and RBC WMFS are member companies of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / TM Trademark(s) of Royal Bank of Canada. Used under licence. © RBC Wealth Management Financial Services Inc. © 2021 RBC Dominion Securities Inc. All rights reserved.