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07 09 2007

Seniors Estate Transfers - Fear of Losing Money in the Markets

Posted by: Eric Hundin in , Estates, Wills, Trusts, Career Information, Blog Carnival

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As seniors think about setting up their Estate Plan, one of their concerns is the
Fear of Losing Capital in the markets. Senior investors worry that their investment value could be washed away, if the markets fall, and as a result many Canadian Seniors invest in GICs or Guaranteed Investment Certificates.

The fear is accentuated if they are giving a bequest. They naturally wish that their hard work in saving and growing the money, will last a long time into the future, providing beneficiaries with a measure of financial security and freedom. The worst possibility is that the capital given to beneficiaries could disappear or be diminished due to bear market.

Protecting your parent’s or a senior’s estate can be done quite simply. The value of peace of mind grows as we get older. While conservative investments such as GICs are an excellent way to preserve the value of one’s investments, segregated funds, should be considered.

Segregated funds are similar to mutual funds but only issued through Life Insurance Companies. They offer the potential for growth combined with protection from downside risk through maturity and death benefit guarantees. One supplier provides a Segregated Fund that Guarantees a 4% per year simple interest Death Benefit Guarantee up to age 80.

So, your parent’s have stated that they have $200,000 in GIC’s at the bank, that they intend to leave to their children. So this is money that is earmarked to go to a beneficiary. Because your parents do not want to tie up the funds in a 5 year contract, because they never know when the money will needed to pass onto the kids. They purchased a 3 month GIC that keeps rolling over. As a result, they are receiving little interest, on this short term purchase.

Another option to consider is, the purchase of a Segregated Fund with the 4% per year, death benefit guarantee, up to age 80. If your parents place their funds in this fund, they have a wide choice of investments, from short and long term GIC’s that are not locked in, as well as conservative, medium, and higher risk funds.

Assume that your parents are aged 65. Regardless of what investment choices your parents make, both you and your parents know that the funds will have a guaranteed death benefit value being the greater of the market value, or 4% per year, simple interest up to age 80. So at a guaranteed 4% per year for up to 15 years, equals a 60% growth over 15 years.

That provides a lot of Peace of Mind, for both generations.
Consider what Segregated Funds can do for your funds earmarked for Inheritance.

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This entry was posted on Friday, September 7th, 2007 at 9:35 am and is filed under , Estates, Wills, Trusts, Career Information, Blog Carnival. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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