The Best Features of Segregated Funds

In the ever-evolving landscape of investment options, Segregated Funds, often referred to as “Seg Funds,” have emerged as an appealing choice for investors seeking to balance growth potential and capital protection. These specialized investment products combine the features of mutual funds with the benefits of insurance, offering a range of advantages that make them stand out in the market.

1. Principal Protection: One of the most attractive features of Segregated Funds is their principal protection. Unlike traditional mutual funds, which expose investors to market fluctuations, Seg Funds guarantee a return of a certain percentage of the initial investment, typically 75% to 100%, upon maturity or death. This safety net provides investors with a level of security that is especially valuable in times of market volatility.
2. Maturity and Death Benefit Guarantees: Segregated Funds often come with maturity guarantees, ensuring that investors receive a predetermined amount upon the fund’s maturity, usually after a specified number of years. Additionally, in the unfortunate event of the investor’s passing, the named beneficiaries are guaranteed to receive either the market value of the investment or the original capital, depending on the terms of the contract. These guarantees make Seg Funds an attractive option for risk-averse investors and those looking to provide financial security for their loved ones.
3. Potential Creditor Protection: In some jurisdictions, Segregated Funds may offer a level of protection against creditors in the case of bankruptcy. This can be particularly advantageous for business owners and professionals concerned about safeguarding their assets from potential legal claims.
4. Professional Management: Segregated Funds are managed by experienced investment professionals who make decisions based on market research and analysis. Investors benefit from the expertise of fund managers who actively monitor and adjust the portfolio to capitalize on market opportunities, aiming for optimal returns while mitigating risks.
5. Estate Planning Advantages: Segregated Funds offer efficient estate planning features. The ability to designate beneficiaries directly without going through the probate process can simplify the transfer of assets to heirs, potentially reducing administrative costs and delays. This feature is particularly valuable for those who wish to streamline the inheritance process and minimize the impact of estate taxes.
6. Privacy: Your Will is a public document. Segregated Funds bypass the Will and probate which means that your seg fund assets transfer quickly, directly and privately to your beneficiaries.
7. Diverse Investment Options: Investors can choose from a variety of Segregated Fund options, including equity funds, bond funds, and balanced funds. This diversity allows investors to tailor their portfolios to match their risk tolerance, financial goals, and investment preferences.

While Segregated Funds may not be suitable for every investor or financial situation, their combination of principal protection, guarantees, and professional management makes them a compelling choice for those seeking a balanced and secure approach to investing. Seg funds add unique insurance protection to your investments, with features that can’t be found with other investments. With any investment decision, it’s crucial to carefully evaluate your financial objectives and consult with a financial advisor to determine if Segregated Funds are the right fit with your overall investment strategy.

Health and Dental Plans for Small Business

Every small businesses should investigate the value of offering health and dental plans to their employees for several compelling reasons:

Competitive Advantage: Offering health and dental benefits can give small businesses a competitive edge in attracting and retaining top talent. In a competitive job market, prospective employees often consider the availability of benefits when evaluating potential employers. By providing these benefits, you can make your business more attractive to skilled workers.

Employee Retention: Offering health and dental plans can help retain valuable employees. When employees have access to these benefits, they are more likely to stay with the company for the long term, reducing turnover and the associated costs of recruitment and training.

Tax Benefits: In Canada, employer contributions to health and dental plans are generally considered a non-taxable employment benefit. This means that both the employer and employees can benefit from tax advantages, as premiums paid by the employer are typically tax-deductible, and benefits received by employees are not considered taxable income.

Enhanced Employee Wellness: Health and dental coverage contribute to the overall health and well-being of employees. Regular check-ups, preventative care, and access to dental services can help employees stay healthy, reducing absenteeism due to illness and promoting productivity.

Lower Absenteeism: Employees with health and dental benefits are more likely to address health issues promptly, reducing the number of sick days taken. This can help maintain productivity and minimize disruptions to the business.

Employee Satisfaction: Providing health and dental coverage demonstrates that you value and care for your employees. This can boost morale, job satisfaction, and overall workplace happiness, leading to increased productivity and a positive work environment.

Positive Company Image: A small business that offers health and dental benefits is often seen as a responsible and caring employer. This positive image can enhance your brand, reputation, and relationships with customers, partners, and the local community.

Recruitment Success: Access to health and dental plans can help you attract candidates who might otherwise overlook small businesses for larger employers who offer benefit packages. It can also attract candidates who place a high value on their health and well-being.

Customization: Small businesses can tailor health and dental plans to suit their specific needs and budget. This allows for flexibility in selecting coverage options that align with your employees’ requirements and your financial constraints.

If you have any general questions or would like to learn more about health and dental plans for small business I invite you to contact me today.

Please note: As an insurance broker, at Bequest Insurance we also offer a variety of small business health and dental plans.

Jack Bergmans CFP
Certified Financial Planner/ Founding Partner 

Life Insurance & Estate Consultant

Bequest Insurance

jack@bequestinsurance.caPhone: (416) 356-4511 

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A Few Easy Estate Planning Tips For A Smooth Transition

Planning for your estate is a practical gift that you can leave for your family, heirs and charities.

Here is a short list of some common estate snags that you can avoid with just a little bit of planning.

1. Get a Will. 

i) In general, in most jurisdictions dying without a Will means that your estate will be distributed by the courts in a rigidly prescribed manner which neither you nor your survivors have any control over. 

Having a Will avoids having your estate being distributed to people you didn’t intend to give money to.

ii) Powers of attorney for your financial affairs and health care are very important additional items that you walk out of your lawyers office with when you make out your Will. These may seem like throwaway items at the time but can become extremely important documents that can have a dramatic influence for many years of your life, long before you pass away. 

Though not technically an estate snag, having powers of attorney in place avoids giving up control over these important life matters and can often help to avoid potential abuse of your assets while you are alive.  

2. Review and update your Will.

Over time things in life change. Births, deaths, preferences, divorce, remarriage and the charities you support are just a few things that should be considered. A rule of thumb is to review your Will at least once every 5 years.   Be sure to share any changes with your financial advisor who should be able to help you protect your assets and get the most out of your estate for your heirs. 

Like getting a Will in the first place, updating your Will avoids your estate being distributed to people you didn’t intend to give your money to.

3. Probate.  

Thankfully there are exceptions however in general,  when you die most of your assets instantly belong to a new legal entity that’s referred to as your estate, known as ‘the estate of … ‘. In most jurisdictions ‘the estate of …’ must go through the probate process before it can be distributed. Probate is time consuming and expensive, reducing the value of your estate while your executor has little if any control over it. In general, your estate can’t be accessed by your heirs until it clears probate which includes paying probate taxes and legal fees etc. 

If your estate is simple, probate can often take six to nine months or more to complete; in more complicated cases it can literally take years. In particular, if you expect that your heirs will quickly need access to your estate assets to pay the bills etc. ask your financial advisor about setting aside money that sidesteps being included in your estate and avoids the probate process entirely.  

Avoiding probate where ever practical avoids putting a lot of unnecessary stresses on your survivors and allows ‘the estate of….’  to flow quickly and smoothly to your intended heirs.

Market Volatility and Risks to Retirement Income

Market Volatility, Retirement Income and the Risk of Time

This February 2020 post updates an original posting on November 10, 2015 |and the Feb 2018 edit.

Recent surveys show that over 60% of pre-retirees feel most comfortable with the knowledge that they’ll never outlive their income.  Do your current investments offer you peace of mind like this?

With interest rates stubbornly stuck at historic lows,  investors find themselves caught in a catch-22 situation with investment choices that offer either poor results or uncertain results.

For safety and short term needs many people leave money in bank accounts, and invest in GICs and term-deposits. Savings in these types of savings are safe, but growing at a rate that is barely keeping up with inflation. In many cases these savings may not be growing fast enough to meet long term income needs.

Alternatively many of our investment savings are entrusted to volatile markets that don’t guarantee gains, and may actually lose value when we need that money for a retirement  income that will be expected to last for the rest of our lives.

It’s not that market risks or volatile markets are necessarily bad. In fact it is technically correct that over time, securities markets outperform many other investment savings choices. But these rewards are typically gained over uncertain and random periods of time.  Depending on individual circumstances and income needs, the math is clear that retirement income plans that rely on uncertain sequences of investment returns have a high probability of failure.

And longevity risk can compound the risks to retirement income as we continue to live longer and longer.

So time is a very important factor for investment savings that have been earmarked for retirement income.

If the simple fact of knowing that you’ll never outlive your savings is important for you, thankfully there is a variety of guaranteed-for-life income investments that might be a good fit.

To discover whether guaranteed retirement income options are a good fit in your situation, some general questions to ask about your current situation and possible transition plans may include:

• Can your lifetime annual expenses be covered by pensions and government retirement benefits?
• Are future travel plans and other bucket list items included?
• Can dependents be supported?
• Are long-term care needs covered?
• Will we have enough to cover the needs of our survivors, bequests and the charitable legacies that we wish to leave behind?
• What are the best options available when converting some of the equity from nest eggs into a guaranteed-for-life income stream?

 

Additionally, some of these guaranteed for life retirement income plans also offer benefits that suit a variety of circumstances such as:

• Guaranteed future income growth during savings years.
• Plans that allow you to participate in the upside of the markets while also guaranteeing an income for life.
• Guaranteed income payments that won’t be reduced over your lifetime.
• Minimum guarantees for RRSPs and RRIFs. In a worst case scenario -what you deposit will be the minimum you’ll withdraw, even if the market value goes lower than your initial deposits during retirement income years.
• Control and access over your savings. Just in case.
• Joint accounts, for the purpose of guaranteed income continuation for surviving spouses.
• Avoid probate taxes and maintain control over savings. Note: in most Canadian provinces, it is unnecessary to set up joint accounts on guaranteed investments if your wish is for your estate to avoid probate delays, fees and taxes – and to ease the distribution of the residual values to your beneficiaries.
• The transfer of residual assets to your beneficiaries can be delivered as incremental payments over time and/or as lump sums, as you see fit.

If you’re interested in learning more about guaranteed-for-life income solutions can provide peace of mind for a lifetime of retirement income I invite you to contact me today.

 

Jack Bergmans CFP

Certified Financial Planner/ President

Life Insurance & Estate Consultant

Author

Bequest Insurance

jack@bequestinsurance.ca

416-356-4511

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Market Volatility, Retirement Income and the Risk of Time

doneslaving

Recent surveys show that over 60% of pre-retirees feel most comfortable with the knowledge that they’ll never outlive their income.  Do your current investments offer you peace of mind like this?

With interest rates stubbornly stuck at historic lows, many savers and investors find themselves caught in a catch-22 situation with investment choices that on the one hand offer either poor results, or on the other hand offer uncertain results.

For safety and short term needs many people leave money in bank accounts, and invest in GICs and term-deposits. Savings in these types of savings are safe, but growing at a rate that is barely keeping up with inflation. In many cases savings may not be growing fast enough to meet their longer – term financial goals.

Others place hope for better growth on their investment savings in volatile markets that don’t guarantee gains, and may actually lose value by…

View original post 586 more words

Have you set aside money in your Will to go to your favourite charities?

Even if you’re still just thinking about it that’s fantastic!  But if you could guarantee that your charities receive a much larger gift using this same money – and remove potential headaches for your executors – would you consider doing that instead?

Giving through your Will – a public document that all can see – can present challenges that you might not have thought of.

For example, is there any chance that any of your beneficiaries may resent your charitable gifts because they feel that they deserve a bigger inheritance – especially if they have acted as your caregiver? It’s quite common that scenarios like this result in beneficiaries contesting philanthropic gifts made through a Will.

Such challenges can result in significant delays in settling your estate. This adds significant legal costs that reduce the size of the estate for all of your beneficiaries, including your charities. This can decrease the size of charitable tax receipts that you may be counting on to reduce estate taxes in order to leave more to all your beneficiaries.

Also, the anger and disagreements that often surround contested Wills often permanently fractures families.

 

Here are three simple and cost-free ways that ensure your charitable wishes remain intact.

1. Give to your favourite charities while you are alive.Time-honoured estate planning strategies often involve reducing the potential size of your estate. If you can afford to give now, your estate will be smaller so will its taxes, fees and many potential headaches for your executor.
2. Or if you are less than 80 years old, it’s often wise to use money you’ve set aside for your charities to buy a life insurance policy, naming your charities as its beneficiaries.

Life insurance allows anyone, even people of modest means, to give more.  In many cases, if you have normal health issues such as high blood pressure or cholesterol and they are effectively managed with medication, you are likely eligible to buy life insurance.  Finding out if you are insurable is actually a simple process.

When you choose a life insurance policy that grows in value over time you’ll get four important benefits without spending any more money:

1. i) You can withdraw the growing cash value inside your policy anytime, just in case you need money sometime down the road.
2. ii) The size of your charitable gifts increases over time so your charities can have a bigger impact on the causes close to your heart.

iii) Tax receipts to your estate also increase in value, helping to offset your potential estate income and capital gains taxes.

 

1. iv) Growth in the value of life insurance policies is tax-free so you’ll give more, without spending more.

Because life insurance policies are private, and usually can’t be contested*, you won’t lose control over your charitable intentions. Even better, because your death benefit will go to your charitable beneficiaries outside of your Will, your charities will get your gifts much faster and with very little effort on the part of your executor.

3. If you don’t qualify for life insurance, consider transferring your intended gifts into investments with an insurance company. Such investments – including money market funds, GICs, segregated funds (the mutual funds of the insurance world) and annuities of any kind – are not considered part of your estate, which also makes your executor’s job easier. All your charities will receive the proceeds privately, quickly and unreduced by estate fees and probate taxes.

Now isn’t that something worth thinking about?

 

Note: To learn more about whether life insurance estate strategies are the right fit for your circumstances, you must consult with a licensed insurance professional. When using insurance strategies to multiply your generosity to charities, it’s ideal to consult an advisor who is well versed in maximizing the power of your charitable giving, while also reducing potential taxes and other challenges that your estate might incur.

 

Jack Bergmans, CFP

Best-selling author of
Ripple Effect: Growing your business through insurance and philanthropy  &
Multiplying Generosity: Creatively using insurance to increase legacy gifts

* Some exceptions

Should you switch some of your savings into guaranteed income for life plans if you don’t have a defined benefit plan?

As the Canadian postal workers union (CUPE) continues to negotiate with Canada Post over their contract and in particular the issue of phasing out of Defined Benefit (DB) plans in favour of Defined Contribution (DC) plans as was recently discussed on the CBC, I’ve been wondering why we’re not hearing  more about guaranteed retirement income solutions that are already a huge market for many  Canadians across the country who don’t have access to DB pensions.

In our practice we speak with many Canadians who have saved and/or are saving for retirement and find that most people have the common desire to have at minimum, a rock solid core retirement income that’s guaranteed to keep them in the lifestyle they prefer, for life. I would suspect that the postal workers union and their members probably have the same goals in mind.

From the outside looking in, the main problem for the corporation in this dispute appears to be that the  financial risks of DB plans are too much to take on and would make them uncompetitive with other delivery firms. So the compromise on offer is a simple DC plan that offers similar corporate financial support for workers but eliminates the corporate capital requirements required by existing pension regulations, plus it moves the all of the future retirement income risks away from the corporation and onto the employees.

Guaranteed income for life solutions that combine some of the DC plan attributes with some of the DB plan attributes such as these are often a good compromise that suits a majority of retirement income needs.

A few of the key differences between DB plans and some of the available guaranteed income plans such as with variable annuity plans also known as GMWBs are:

a) savers maintain access to their savings in the event they need the money.

b) plans can be portable when people change jobs.

c) some plans offer lifetime income that is based on deposits plus 4-5% during your savings years (or market value which ever is higher).

d) lifetime retirement income might not be indexed to inflation.

e) savers can choose from a wide variety of investments.

It’s also been our experience that clients who integrate guaranteed income solutions into their financial plans tend to do so for a variety of common reasons. These often include such things as:

a) peace of mind that comes from having a core part of retirement income guaranteed for life that’s above and beyond meagre CPP and Old Age Security (OAS) payments.

b) to create a passive and guaranteed supplemental income in addition to small or insufficient existing DB plans in order to ensure that anticipated lifetime income needs are met.

c) create a DB plan equivalent with savings found in RRSPs, RRIFs and DC plans to eliminate or reduce the need of taking on additional investment risks during savings years, years that savings are being drawn down for income and most importantly, during retirement risk zone years.

d) smooth out or eliminate years where personal retirement incomes are reduced by volatile markets and also eliminate the possibility of running out of money during retirement.

It’s also important to note that guaranteed for life income solutions are implemented on a case by case basis that depend on the specific needs and circumstances of groups, couples and individuals.

For more on this topic please contact Jack Bergmans CFP at Bequest Insurance.

Should you consider getting life insurance before the rules change on Jan 1 2017?

Life insurance is commonly thought of as a simple estate planning tool. Yet it can also make a very powerful investment tool due to its favourable tax treatment.

Deposits and cash growth in life insurance policies are generally tax-free within certain limits, as are death benefits, which makes life policies used as investments very valuable.

On January 1, 2017 the part of the Canadian Income Tax Act governing life insurance policies will be amended to more accurately reflect changes in mortality rates (people are now living longer). It will also place additional limits on life insurance deposit amounts considered tax exempt.

If you decide to take advantage of life insurance for investment purposes and estate planning before these tax changes take place, your life policies will be grandfathered and provide you with the ability to invest more money tax-free than life policies purchased in 2017 and beyond.

There are many situations whereby you should consider investing in life policies before December 31, 2016. A couple of key situations include:

•  Your business is growing. Insurance taken out on the owners can create or strengthen succession plans to insure the business won’t suffer when key people are unable to continue working for any reason.
•  You own properties whose value has grown beyond the capacity of your estate to cover estate tax obligations. It’s possible that capital gains taxes will not allow you to have your estate assets distributed in the way that you’d like. Life insurance can be purchased to cover big tax hits such as these, and allow you to leave more to loved ones and charities.

If you’ve already set aside specific funds to go to beneficiaries such as your spouse, grandkids, kids, community causes and charities, Bequest Insurance’s Generosity Multiplier™ can mobilize those funds to guarantee that your beneficiaries receive even more than you hoped, at no additional cost to you.

Rates of return on our Generosity Multiplier™ are based on age, and since none of us are getting any younger and tax changes are coming on January 1st, this could be the perfect time to contact Bequest Insurance to learn more about how you can reduce your taxes and leave more to meet your personal or business needs!

Should you buy prescribed annuities now to avoid 2017 tax increases?

Living longer than people in previous generations is great but more and more people are now worried about the possibility of outliving their savings. 

Because of this, guaranteed-for-life income solutions are becoming a vital investment component for many Canadians. 

Within the available choices of guaranteed-income solutions, prescribed annuities provide much higher annual take-home income than you’ll get from other typical guaranteed savings choices due to both their structure and the overlay of significant tax benefits. For example*:

A 60 year old in the 40% tax bracket using $100,000 in savings to provide income for life :

Scenario 1:    2% GIC is purchased

Gross Income: $2,000
Taxable amount: $2,000
Net Annual Income: $1,200

 

Scenario 2:     5% Prescribed Annuity purchased

Gross Income: $5,000

Taxable amount: $1,054  (if purchased in 2016)
Net Annual Income: $4,578 

*Please note that this example is for illustration purposes only.

Your annual taxable amount is set for life when you purchase prescribed annuities.  If this same 5% prescribed annuity is purchased in 2017 the taxable amount is expected to increase from $1,054 to $1,450. 

It is also important to consider how various retirement income streams might lower or even eliminate your income tested government benefits such as your Old Age Security pension (OAS). For the 2015 taxation year OAS clawbacks begin when your total annual taxable amount (not your total income) exceeds $72,809.  OAS benefits are completely eliminated when your net income (including your OAS income benefit) is just over $117,000.

For many people,  increasing take-home income that’s earned from savings can end up being a bit of a balancing act that often includes tax-friendly income streams such as prescribed annuities. In fact, prescribed annuities are a very effective triple win for many people because they can provide higher incomes, lower income taxes and preserve as much as possible from income tested government pension plans.

You may now be asking yourself these questions:

• How do prescribed annuities or other guaranteed-for-life income options work?
• At my age what rate of return would I get on a prescribed annuity?
• How is prescribed annuity income guaranteed and for how long?
• How are my prescribed annuities valued for my estate, spouse and other beneficiaries when I die?
• Are annuities suitable for me? Would they be suitable for my dependants?
• Are there guaranteed income-for-life annuities that allow me to access my capital just in case I need it? 
• Should I get prescribed annuities now to avoid tax increases coming in 2017?

As many of you already know, there’s no obligation when you reach out to us and we make every effort to answer these and any other questions you might have within one business day.

Best Regards

Jack

This is often a good time of year to review your financial goals.

This is often a good time of year to review your financial goals and needs.

The deadline for 2015 RRSP contributions this year is Monday Feb 29 2016.

Should you be contributing to RRSPs?  Some of the positives include that RRSPs reduce your income tax owing at the income tax rate that you pay. That also means that if you’re in the 30% tax bracket and you contribute $100, your real cost is only $70.

Money held within your RRSP’s and RRIF’s etc. grows tax free but is taxable at your personal income tax rate at the time you make withdrawals. Some things to consider can include what your expected rate of return is, how many years your investments will be sheltered and what your income tax rate might be when you take money out of the RRSP.

The maximum RRSP contribution limit for 2015 is $24,930 (based on your income in 2014), plus any unused deduction room you might have left over from previous years. Your 2014 notice of assessment should have these figures for you.

The start of a new year can be a good time to review your financial needs, ask a few pointed questions about how your plans will meet your future goals and also share any changes in your circumstances with your financial advisor.

Everyone knows that hope is not a plan so if you’re self funding your pension and RRSP’s or wish to provide yourself with an increased retirement income, have you considered investing in worry free savings that will provide you with a guaranteed income for life regardless of the markets or how long you live?