Wealth transfer challenges
Segregated fund solutions can help speed the wealth transfer process, making it more cost effective, efficient, and private.
Learn how segregated funds can help
First, here are the stats: You probably already know the stakes are high--there’s a huge amount of wealth changing hands in Canada (estimates put it at $1 trillion+1 over the next decade). And while chances are this impacts your life in some way (approximately 60% of Canadians expect to receive an inheritance) odds indicate that you may not be as prepared as you should be. Half of adult Canadians don’t have a last will and testament, and of those who do have one, a significant portion say it’s out of date.2
A will is a legal document that lets you specify how you want assets and belongings distributed after death. Having a will helps ensure that your wishes will be followed, minimizes potential disputes among family members, and simplifies the process of settling the estate. Anyone who has assets, belongings, or wants a say in what happens to their estate, should have a will.
By comparison, segregated fund solutions are investment vehicles that, because they’re technically insurance contracts, have built in estate planning benefits that can help transfer a portion of your wealth outside of the probate process where applicable.3 If you’re not familiar with what probate is and how it works, you’re not alone: six in 10 (61%) Canadians admit to not being knowledgeable about the probate process.4
In a nutshell, probate is a public process that confirms a will is valid and binding, prior to any payouts being distributed. Probate can take time and can be expensive to complete. You can read more about it here. Probate fees vary by province. Learn the advantages of bypassing probate in your province by reviewing the table at the end of this article.
Because segregated funds bypass this requirement altogether, they can help speed the wealth transfer process, making it more cost effective, efficient, and private. Here’s a look at some of the benefits of a segregated fund contract:
Wealth transfer: Will vs Segregated fund contract
Segregated Fund Contract
Time to distribute funds
|Lengthy process, can takemonths or years to settle your estate5.
|Expedited process,beneficiaries may receive funds in as little as two weeks.
|Wills are subject to probate,4 which is a public process. All related financial details may become public knowledge. This can lead to conflict between those involved.
|A segregated fund contractoffers confidentiality by bypassing the probate4 process. Privacy is maintained for you and your beneficiaries.
Ability to make changes
|More complex: The testator(person who makes a will) can make changes as desired but may require legal advice and witnesses. Depending on the circumstances, a new will may become necessary.
|Easy to complete: Thepolicyholder has control over the beneficiary designations and can make changes anytime by submitting a non-financial change form. A new contract is not required.
|Probate fees, executor fees,legal costs, and accounting costs may all apply, which will result in lower payouts.
|Bypassing probate means asegregated fund avoids associated fees, as well as legal, accounting and administrative costs, resulting in higher payouts.
|Subject to legal disputes, canbe contested by beneficiaries and/or challenged by creditors.
|At time of death, segregatedfund claims are typically settled quickly without being contested and may also offer creditor protection provisions, shielding the assets from potential claims. This ensures that the intended beneficiaries receive their allocated funds.
|No investment opportunities.
|Segregated funds combine thegrowth potential of investment funds with built-in guarantees. These guarantees can help protect the capital and ensure a predetermined minimum payout to beneficiaries upon the owner's death.
Estate planning is a critical piece of your financial plan. You can use it protect your wealth, and ensure it transfers to future generations in a way that reflects your wishes. Segregated fund contracts offer unique advantages, including bypassing probate, creditor protection, growth potential, and privacy, making them a valuable tool. To maximize the benefits of estate planning for your situation, it’s a good idea to contact your life insurance advisor or estate planning professional who can give tailored advice that suits your unique objectives and situation.
Browse our Why Avoid Probate form for each Canadian province and territory:
Learn more about segregated funds
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3Ipsos poll, May 2022: RBC Estate Factum.pdf (ipsos.com)