Estate planning is something we know we should do but the actual mechanisms of doing so can be a little more complicated.

I had a family that has 85 year old grandparents in long-term care, they have a portfolio currently of around $1 million, are selling the grandparents house and will receive proceeds of around $400,000.

The question arose of how to factor in estate planning while also still giving the grandparents access to the funds.

The idea of joint accounts was tossed around however there are multiple beneficiaries that they have and then the joint accounts would be out of the control of the grandparents and their beneficiaries.

They are already invested in stocks and these new assets are for long term growth, likely to never be spent by the older generation.

The grandparents have a cash flow requirement from the portfolio and that needs to be factored in.

The challenge was finding something that fit the ability to easily transition assets from one generation to the next, while also leaving them in control of the elders and their power of attorney.

In this particular scenario I believe that segregated funds are the best solution.

Segregated funds can be characterized as a hybrid between a mutual fund and an insurance contract.

Segregated funds are an investment with a death benefit and a maturity benefit where the funds flow upon death to the beneficiary like an insurance policy.

The death benefit provides a top-up if the investment loses money at time of death below a pre-determined percentage. The maturity benefit provides a top-up of the investment loses money if it loses money after a set amount of time below a pre-determined percentage.

There are no medical questions or procedures which makes things simple.

The segregated funds for the proceeds of the house are easy as there is no capital gains to factor in.

For the remaining investments they can be moved in right away if the capital gains are acceptable or the client may want to stager them in over a number of years to spread out the capital gains.

The other added benefit, in most cases as long as you aren’t avoiding a liability payout, these funds are creditor protected and can generally not be seized.

This is a benefit for most people, people where there is a higher legal risk, self-employed people and also corporate money that would see creditor protection as a benefit.

What I want to you to now is think of an area where a transfer of assets or creditor protection would be beneficial.

Think about how this might benefit you and think about how your life could be different.

Many advisors won’t switch the game plan however in this case I believe a switch from equities to segregated funds would have been a benefit years ago.

Call or email to run a scenario by us.

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