ESTATE SETTLEMENT - PLAN NOW TO AVOID THE HASSLES AND EXPENSE
by Terry Fay

Alex worked 45 years at a labor job in a packinghouse in Winnipeg. Together with his wife Linda they saved money whenever they could. Before buying something they shopped around, trying to save a dollar here and a dollar there. Alex’s favorite quote was “its not how much you earn but how much you save”.

Over the course of their working life they managed to save enough money to live comfortably in retirement. Comfortably was a small pension that allowed them to go out once a week to bingo or a drink with some friends.

They were both born in 1913. They lived through two world wars and the Great Depression. They were frugal with their money and they were not risk takers. They invested their money in conservative mutual funds.

Last year Alex passed away, February 1, 2003, the same day NASA’s space Challenger exploded re-entering the earth’s atmosphere. Alex survived Linda by one year.

One and a half years later after Alex’s death the estate is still not settled. Their children are waiting for CRA to give clearance so the estate can be settled. After a lifetime of savings, Alex and Linda’s estate will have to pay the final taxes, expenses, accounting, legal and probate fees.

It didn’t have to be like this. They could have had investments that provided guarantees, on the money they invested. Investments that would bypass the estate and therefore bypass probate and go directly to their beneficiaries within weeks of their deaths instead of years.

The investment is offered through insurance companies, and called segregated funds. A segregated fund can be a guaranteed investment or one that is the same as a mutual fund.

By investing in Segregated Funds they could have had principal protection on their investments. A death benefit guarantee that grows at a minimum 4% per year or market value whichever was higher. Plus, when they died the investment would have paid out to their beneficiaries within days or weeks of their deaths.

Thousands of dollars would have been saved in probate, legal and accounting fees. The money would have been paid to their beneficiaries in weeks, not years.

Here is an example. They invested $200,000 at age 70 and they never touched the investment, the minimum the investment would be worth at Alex’s death was $296,049, using the guarantee of 4% per year. The investment grew more than 4%, so the death benefit was $362,586.

The original investment was guaranteed at age 80 or the tenth year anniversary. At age 80 if their $200,000 investment was lower then $200,000 the insurance company would have guaranteed the principal value. So, regardless of market conditions at that time the principal was guaranteed.

Compare the difference in expenses having a segregated fund versus a mutual fund meant to Alex and Linda’s beneficiaries.

This doesn’t take into consideration that if their children had use of the money for the past year and a half they could have paid off their mortgages saving thousands more in interest expenses. If their children both at $100,000 mortgages and paid them off one and a half years ago they would have saved $15,000 combined in interest expenses, using 5% as an interest rate. Combine this with the other expenses that’s a savings of over $30,000.

Sometimes there are easy answers and solutions to you and your parent’s estate problems. Simple answers to complicated issues without the risk!

For more information on your estate plans contact us.

Insurance products provided through Dundee Insurance Agency Ltd.

This article was prepared by Terry Fay who is an Investment Advisor with Dundee Securities Corporation, a DundeeWealth Inc. Company. This is not an official publication of Dundee Securities and the author is not a Dundee Securities analyst*. The views (including any recommendations) expressed in this article are those of the author alone, and they have not been approved by, and are not necessary those of Dundee Securities.

The particulars contained herein were obtained from sources which we believe reliable but are not guaranteed by us and may be incomplete. The opinions expressed have not been approved by and are not those of DundeeWealth Inc., its subsidiaries, or its affiliates, including, but not limited to Dundee Securities Corporation, Dundee Private Investors Inc. / Ltd., Dundee Insurance Agency Ltd., Dundee Bank of Canada and Dundee Mortgage Services. This website is not deemed to be used as a solicitation in a jurisdiction where this Dundee representative is not registered.

Insurance products provided through Dundee Insurance Agency Ltd.
Only securities related products and services referenced are offered through Dundee Securities Corporation.

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