| What is a Segregated Fund? Segregated funds
or seg funds are commonly thought of as a mutual fund where you're protected from losing
some or all of your initial investment in the fund. While this is generally correct, seg
funds are actually individual variable annuities and are issued only by life insurance
companies. They are really insurance contracts that have many of the benefits of mutual
funds and also some additional benefits that will help you protect your investment and
minimize taxes. Let's compare the benefits of mutual funds and seg funds.
Seg funds and mutual funds share many of the same benefits, including
Low-cost
professional management
Instant
diversification
Low minimum
investment requirements
Wide variety
of investments available
Customizable
risk levels
But seg funds
also have some valuable additional benefits that will help you protect your money and
minimize taxes. Seg funds are a great way to:
Guarantee
your initial investment: with a seg fund, you are guaranteed that you will get back at
least 75 percent of your original investment after ten years (ten years is the normal
lifetime of seg fund investments). If you die during those ten years, your named
beneficiary will receive the greater of your seg fund value or the guaranteed value at the
time.
Protect your
family from creditors: Seg funds offer protection from creditors if particular conditions
are met, unlike assets held in mutual funds which could be subject to the claims of
creditors.
Enhance your
estate: Unlike money in mutual funds, which are subject to estate taxes and probate fees,
money in seg funds can pass directly to a named beneficiary.
|
