Wealth transfer challenges
Segregated fund solutions can help speed the wealth transfer process, making it more cost effective, efficient, and private.
Updated 
5 min. read
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of adult Canadians don’t have a last will and testament, and of those who do have one, a significant portion say it’s out of date.2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
Concern | Will | Segregated Fund Contract |
|---|---|---|
Time to distribute funds | Lengthy process, can takemonths or years to settle yourestate5. | Expedited process,beneficiaries may receivefunds in as little as two weeks. |
Privacy | Wills are subject to probate,4 which is a public process. All related financial details maybecome public knowledge.This can lead to conflictbetween those involved. | A segregated fund contractoffers confidentiality bybypassing the probate4 process. Privacy is maintainedfor you and your beneficiaries. |
Ability to make changes | More complex: The testator(person who makes a will) canmake changes as desired butmay require legal advice andwitnesses. Depending on thecircumstances, a new will may become necessary. | Easy to complete: Thepolicyholder has control overthe beneficiary designationsand can make changes anytime by submitting a non-financial change form. A new contract is not required. |
Administrative Costs | Probate fees, executor fees,legal costs, and accountingcosts may all apply, which willresult in lower payouts. | Bypassing probate means asegregated fund avoidsassociated fees, as well aslegal, accounting andadministrative costs, resultingin higher payouts. |
Potential challenges | Subject to legal disputes, canbe contested by beneficiariesand/or challenged by creditors. | At time of death, segregatedfund claims are typicallysettled quickly without beingcontested and may also offercreditor protection provisions, shielding the assets frompotential claims. This ensuresthat the intended beneficiariesreceive their allocated funds. |
Additional features | No investment opportunities. | Segregated funds combine thegrowth potential of investmentfunds with built-in guarantees.These guarantees can helpprotect the capital and ensure apredetermined minimumpayout to beneficiaries uponthe 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:
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Disclaimer
Any amount that is allocated to a segregated fund is invested at the risk of the policyowner and may increase or decrease in value. Any withdrawals will reduce both the Maturity Guarantee Amount and Death Benefit Guarantee Amount proportionately.
BMO Life Assurance Company is the sole issuer and guarantor of the BMO GIF individual variable insurance contract. Please consult the Information Folder (including Policy Provisions & Fund Facts) for details of BMO GIF.