Time is money : Planning an efficient wealth transfer with segregated fund contracts

Eons ago, humans figured out — based on Earth’s rotation on its axis and around the sun — how to measure the passage of time. However, while time itself is objective, our perception of time varies constantly, depending on factors such as our age, our mood, as well as on what we’re doing — time flies when you’re having fun, as the saying goes. Moreover, time has become a commodity whose value can also vary greatly depending on the situation. Our perception and the value of time are two critical elements to consider when it comes to estate planning. We believe that segregated fund contracts can be a useful tool to address both.


Understandably, dying isn’t something we like to think about, and even if we do, we all believe it isn’t near. Because of this perception of “I still have time,” estate planning is often overlooked. In 2020, less than 40% of Canadians had a formal estate plan or a will, even though dying without a will can lead to significant additional delays, administration fees, and more repercussions.¹ Moreover, the most common reason people give for not having a will is because they felt they were too young to think about it.² While we argue that every Canadian should have a will to make sure your assets are distributed according to your wishes, there are other tools that can help plan an efficient wealth transfer, and often overlooked is the use of segregated fund contracts.

Segregated fund contracts can help people build wealth as well as transfer it to their beneficiaries in a quick and efficient manner. But beyond these benefits, they can also help investors perceive end of life wealth transfer as a long-term financial goal, in the same vein as other milestones such as retirement or the purchase of a house.

Every situation is unique, but if your goal is to bequeath money to your loved ones, segregated fund contracts can help you achieve that goal. While you may feel too young to talk about death, we argue that conversations with your financial advisor should start sooner than later.


Investment vehicles such as mutual funds and exchange-traded funds (ETFs) can also help you achieve your financial objectives, but when it comes to efficiently transferring wealth upon death, segregated fund contracts stand out.

While a will is crucial to making sure your assets get distributed as you wish, there are still administration fees associated with settling an estate with a will, and they can mount quickly as you pay for the time of many parties and processes (i.e., lawyer, accountant, executor, and probate³). Money invested in non-registered mutual funds and ETFs is subject to that process and those fees; however, assets in segregated fund contracts that have a named beneficiary bypass the estate-settling process entirely, leading to a significantly quicker and less expensive fund transfer.

For example, Investor A is 75 years old and assesses, based on their current lifestyle and savings, that there’s more than enough money in a nest egg. Investor A decides to invest $100K at a 5.5% yearly return to, ultimately, bequeath this amount (capital + growth) to their beneficiaries. As we can see in the table below, if Investor A was an Ontario resident and died on their 85th birthday, and if mutual funds/ETFs were used instead of segregated fund contracts, their beneficiaries would have to pay thousands of dollars in fees, detracting a few percentage points off the investment value. Investor A’s beneficiaries would, in fact, inherit more money with segregated fund contracts, in addition to benefitting from the protection and other features that investors get when paying for segregated funds’ incremental fees.

Transferring money invested in mutual funds/ETFs vs segregated fund contracts – Investor A

Table comparing mutual funds and segregated funds in terms of investment growth and money transfer at death. The table shows a higher market value at death through mutual funds vs segregated funds. However, Investor A’s beneficiaries would inherit about $6K more if segregated funds were used instead of mutual funds, as probate, legal, accounting, and executor fees add up to more than $10K.
This illustration is for general information only and should not be considered investment or tax advice to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.

Moreover, the time required to settle an estate with a will is generally six to twelve months, and assets in investment accounts may be frozen until the probate process is complete. Contrast this with segregated fund contracts, which usually take about two weeks upon receipt of all documentation to transfer the assets in them. In other words, by using mutual funds/ETFs as investment vehicles to reach the financial goal rather than segregated fund contracts, Investor A would also introduce an opportunity cost for their beneficiaries. The opportunity cost can take different forms depending on the beneficiary — for example, without the bequeathed funds, the beneficiary may not be able to buy a house or may not be able to invest the funds. And while a year may not sound like a very long time, it can make a significant difference. For example, Canadian home prices have increased by over 40% (or over 7% per year on average)⁴ over the previous five years to March 2021, while the S&P/TSX Composite Index has gained over 61% (or over 10% per year on average).⁵ In short, segregated fund contracts increase wealth transfer efficiency by allowing more money to change hands more quickly.

Bottom line: time can be on your side

While we maintain that too few people consider estate planning as part of their financial situation, we’re seeing some encouraging trends. The COVID-19 pandemic has prompted us to re-evaluate the value and our perception of time amidst this unsettling environment. There has been a surge in the number of Canadians interested in reviewing their wills, creating new ones, and discussing powers of attorney,⁶ while there’s also been strong demand for segregated funds over the past year⁷ —  and we’re hopeful that interest in estate planning and wealth transfer will continue to grow.

Time can have different implications depending on the situation, but when it comes to building and transferring wealth, time is money. Estate planning is a complicated yet extremely important process that protects you, your loved ones, and your wealth. Taking things one step at a time is key, and early conversations with your financial advisor can help you navigate through it and achieve your goals.

1 Ipsos research conducted on behalf of Manulife Investment Management. 2 https://angusreid.org/will-and-testament/3 The probate process and fees don’t apply in Quebec. There’s a verification process for non-notarial wills but not for notarial wills. 4 Manulife Investment Management, data via The Canadian Real Estate Association, as of March 2021. 5 Manulife Investment Management, data via Macrobond, as of March 31, 2021. 6 For example, see https://globalnews.ca/news/6761850/canada-coronavirus-wills-power-of-attorney/7 https://www.morningstar.ca/ca/news/207931/uncertain-times-see-investors-seeking-the-safety-of-segregated-funds.aspx.

The persons and situations depicted are fictional and their resemblance to anyone living or dead is purely coincidental. This media is for information purposes only and is not intended to provide specific financial, tax, legal, accounting or other advice and should not be relied upon in that regard. Many of the issues discussed will vary by province. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation. E & O E. Any amount that is allocated to a segregated fund is invested at the risk of the contractholder and may increase or decrease in value.

Manulife Investment Management

Manulife Investment Management

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