Segregated funds may be the best option for you to protect your existing wealth and future retirement income, and ensure your beneficiary or beneficiaries of choice receive the funds when the fund matures (or on your death).
Segregated funds are particularly beneficial for business owners and professional who face financial risks and or professional malpractice claims.
What is a segregated fund?
A segregated fund is an insurance contract and therefore governed by insurance legislation. It protects an individual’s personal assets from attack by creditors. Segregated funds also provide growth potential similar to mutual funds, and they allocate income and capital gains/losses to contract holders each year.
Segregated funds are on the rise, reflecting the increasing recognition of the tangible benefits they offer investors. However, whilst segregated funds can be effectively employed to protect assets from creditors, there are some important provisos, including:
- The contract must be purchased in good faith, otherwise it can later be challenged
- To ensure you benefit from creditor protection the contract needs to be registered in the investor’s name with a preferred beneficiary named in the contract
- Segregated funds may not be the best form of asset protection if it is collateral for a loan, or if the investor has outstanding income tax liabilities
When might segregated funds be suitable?
Investing in segregated funds may be an effective option in the course of estate planning, because you can name your designated beneficiary/ies in the event of your death. This means two notable things: the funds will pass quickly to any named beneficiary (avoiding the usual lengthy distribution of the estate); and probate fees will be reduced as the fund will not form part of the estate for probate purposes.
In addition, segregated funds guarantee either 75% or 100 % of your investment capital back when the fund reaches maturity after a period of 10 or 15 years (or on death).
Professionals, corporate directors and business owners can also benefit from segregated funds. They can protect their personal assets from potential seizure from creditors. They are also are covered by the Insurance Act.
How can we help?
Our asset protection lawyers are highly experienced in both onshore and offshore jurisdictions. Our practice head, Andrew Rogerson, is an internationally known, award winning asset protection specialist barrister with many years’ practical experience in offshore jurisdictions. Contact us now to find out if segregated funds can help secure your wealth and assets.