How are Segregated Fund distributions handled?

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Distributions are received by the segregated (seg for short)) fund from the assets held, such as stocks and bonds. Depending on the assets held, distributions could include Canadian dividends, foreign income, other income, and capital gains. A seg fund may also realize capital gains upon a disposition of fund assets (including redemption of seg fund units). It is also possible for a seg fund to incur capital losses on the disposition of fund assets. Seg fund income as well as capital gains and losses are allocated each year to the contract holders.

Tax rules that apply to seg funds are quite complex, especially when a spouse dies who holds a seg fund contract in an RRSP. However, there are tax strategies that your insurance advisor can develop to make the use of seg fund’s ability to establish a policy beneficiary.

You may be a good candidate for seg fund use if:

• You are a conservative investor and yet want higher returns than GICs offer.
• You are a pre-retiree who needs growth, but can’t afford to lose money over the long term.
• You are a senior who requires estate protection and certain capital guarantees.

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Life Insurance and Segregated Funds Disclaimer

Life Insurance policies vary according to contract terms. Please read any Life Insurance policy contract provided, or the segregated fund summary information folder prospectus before the time of purchase. Full details of coverage, including limitations and exclusions that apply, are set out in the policy of insurance. Commissions, trailing commissions, management fees and expenses may be associated with segregated fund investments which may not be guaranteed and their market value changes daily and past performance is not indicative of future results. A description of the key features of a life insurance policy, a segregated fund; and any applicable individual variable annuity contract is contained in information provided by the company from which it is purchased. Talk to your advisor before making any financial decision. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. The information provided is accurate to the best of our knowledge as of the date of publication and is general in nature, intended for educational purposes only, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. Rules and their interpretation may change, affecting the accuracy of the information.