When you decide on your investment strategy, segregated funds should be front row centre! Among the many products available on the market, they represent a good way of diversifying your portfolio while at the same time protecting your investment.

What are Segregated Funds?

Segregated funds are investment funds created and used by life and health insurance companies. They are called "segregated" because their assets are excluded from the general funds of the company. Segregated funds are similar from one company to another. The funds offered by Desjardins Financial Security are called Millennia III Segregated FundsT and have the following features:
 

• A minimum guarantee of 100% of the capital at death.
• Automatic resets and protection against inflation: On each policy anniversary, up to age 75, your death benefit is inflation-adjusted, subject to an annual maximum of 5%. This death benefit always corresponds to the higher of the market value of your units and their adjusted value, minus the value of the units that are surrendered.
• Protection against market fluctuations: If you surrender, or sell, units before the contract matures, you will receive the market value, less applicable surrender charges. There are surrender guarantees after 10 years (75% of the value of your deposit) and
  20 years (100% of the value of your deposit).
• Diversification of your investments: For $50 a month or an initial deposit of $500, you have access to funds from various industries and regions around the world. The Millennia III Funds have long-term growth potential.
• 100% eligible for RRSPs (registered retirement savings plan), LIRAs (locked-in retirement accounts), RRIFs (registered retirement income funds) and LIFs (life income funds).
   

An Example of Estate Planning

When you invest in a segregated fund, you must appoint a beneficiary who will collect the proceeds of your contract upon your death. Segregated funds are an excellent estate-planning tool because the inherited capital is protected as well as transferred more quickly to those whom you wish to protect. Moreover, your beneficiary will avoid the delays and charges associated with executing a will.

Rose is 70 years old, lives alone, and has three grandchildren. Financially comfortable, she wants part of her estate to go directly to her grandchildren without administrative or financial complications. She therefore invests $25,000 in a segregated fund. In the event of her death, her grandchildren will directly inherit the higher of the market value of her investment and the initial investment (that is, $25,000 less any surrendered amounts).

Quick transfer to the beneficiaries

Since there is a designated beneficiary, a segregated fund contract is not included in the holder's inheritance. As a result, the funds are transferred quickly to the beneficiaries without them having to pay legal fees or estate executor fees.

It is never too late to include segregated funds in your estate plan!
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T: Millennia III is a registered trademark owned by Desjardins Financial Security Life Assurance Company. The Millennia III Funds are issued by Desjardins Financial Security Life Assurance Company.