As we go through life our financial goals change. When we are younger (20-40’s), our objectives tend to be focused on debt management, building wealth and protecting our income. Moving towards retirement, typically we have less or no debt and greater asset and wealth accumulation. The focus at this point then shifts toward estate preservation and wealth transfer. An estate wedge is a planning strategy that can help you with this shift from accumulation to estate planning.
What is an estate wedge?
An estate wedge is a planning strategy that involves moving a portion of your non-registered assets into a segregated fund contract.
Why would you consider adding this strategy to your overall financial plan?
Utilizing an estate wedge has multiple benefits;
- The guarantees associated with a segregated fund provide protection of your money in volatile markets
- The assets remain liquid and you maintain full control over them
- Payout options can be tailored (lump sum, annuity style or a combination of both)
- Strategies can be employed to address the issue of cognitive decline
- It is exempt from probate so payout to the beneficiaries is direct and quick
- Distribution of assets is not subject to the terms of your will, therefore not public
- Due to the fact it is outside of your estate, it lowers the overall settlement cost
- Assets in the segregated fund are protected from creditors
When transitioning into retirement or if you have already retired, it is important to make sure you have re-visited your will and ensured that the executors, power of attorneys and beneficiaries are all aligned with your plan. You should review your situation and options to see whether an estate wedge can help streamline and simplify the whole process and help you meet your specific estate planning objectives.
If you are not at the phase of life where you are retiring or you are the beneficiary and/or the executor of your parents’ estate or their POA, you may want to have a conversation with them to see if they have a plan in place that simplifies the transfer of their assets.
Photo by Tyler Nix on Unsplash.