# Segregated Funds : An efficient Estate Tax Saver ?



## dogleg (Feb 5, 2010)

I have always avoided segregated funds because of their high cost. Can a case be made for them as a tax saver when probate fees come into play?


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## MoneyGal (Apr 24, 2009)

Sure. If you know when you are going to die, and you know how much is going to be in your estate when you die and subject to probate, and you know the future value of the money you will be saving at your uncertain time of death, and you add all the extra fees associated with seg funds from the date of investment to the date of your death and probate, then you can compare the fees you'll pay versus the future money you'll save and see if this element of seg funds represents a "good deal." :love-struck:


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## dogleg (Feb 5, 2010)

MG : There are sure a lot of ifs. My cottage neighbour sells segregated funds and that is about all he sells.I am amazed at the business he gets mainly from older people. He seems to be making a ton of money. People flock to him in the hope of bypassing the tax man during probate . Am I missing something ? I don't discuss the topic with him because I don't want to say something that would create a bad neighbour either way.


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## OptsyEagle (Nov 29, 2009)

dogleg said:


> MG : My cottage neighbour sells segregated funds and that is about all he sells.I am amazed at the business he gets mainly from older people. He seems to be making a ton of money. People flock to him in the hope of bypassing the tax man during probate . Am I missing something ?


Yes. 

Seg.funds cost about 0.5% to 1% more then the same mutual fund. In Ontario, probate fees are only 1.5% on your assets above $50,000. So if you live more then 3 years, you will have paid an insurance company more then you will pay the province.

You said that your neighbour sells segregated funds. He is obviously going to make them sound good and without the little point I have added above, I bet they sound real good.


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## andrewf (Mar 1, 2010)

Probate is so insignificant, I wonder why people make such a big deal about it. Maybe it is some influence from the US, where estate taxes are very significant considerations.


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## MoneyGal (Apr 24, 2009)

Subways, subways, subways.


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## Square Root (Jan 30, 2010)

andrewf said:


> Probate is so insignificant, I wonder why people make such a big deal about it. Maybe it is some influence from the US, where estate taxes are very significant considerations.


Totally agree. In fact there aren't even probate fees in Alberta. Looks like solutions looking for a problem.


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## dogleg (Feb 5, 2010)

Thanks for all the helpful comments. Now I know why I have stayed clear of seg. funds.


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## andrewf (Mar 1, 2010)

MoneyGal said:


> Subways, subways, subways.


I don't get it...


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## MoneyGal (Apr 24, 2009)

Geez. I thought Rob Ford's reach (or his bad reputation) went as far west as you. It was intended to be a comment riffing his oft-repeated maxim that wherever he goes, people tell him they want "subways, subways, subways." 

Wherever the people who sell insurance go, magically EVERYONE tells them how much they "hate taxes" and "hate probate" and "will do anything to avoid probate!"


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## andrewf (Mar 1, 2010)

I don't want local TV news.

Good point though. When you sell hammers, all you see (and hear about from customers) is nails.


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## MoneyGal (Apr 24, 2009)

H.L. Mencken's formation of this maxim is "There is always an easy solution to every human problem--neat, plausible, and wrong."


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## dogleg (Feb 5, 2010)

MG: Well I'm glad Andrew asked the question. Your 'subways' - 'insurance' syllepsis left me scratching my head.


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## MoneyGal (Apr 24, 2009)

Let's chalk it up to an attempted semi-insider joke that did not hit the mark. :stupid:


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## kcowan (Jul 1, 2010)

I got it MG and I don't live in TO anymore. Of course Rob Ford does command national headlines. On the wet coast it would have been skytrains and bike lanes.


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