Creditor Protected Investment
Protecting Your Investments from Business Risk: How Segregated Funds Can Help
As a business owner operating as a sole proprietor in Ontario, your personal and business assets are legally intertwined. That means if your business faces financial trouble or legal action, your personal investments could be at risk. Fortunately, there's a unique investment solution available to help protect what you've worked hard to build: segregated fund contracts.
What Are Segregated Funds?
Segregated funds are investment products offered by insurance companies that combine the growth potential of mutual funds with key insurance benefits – including potential creditor protection. When structured correctly, these contracts can safeguard your investments from creditors if your business runs into difficulty.
How Does Creditor Protection Work?
Creditor protection through segregated funds is possible when: - The contract is issued by an insurance company, - A named beneficiary other than your estate is listed (e.g., spouse, child, parent), and - The policy is not set up to defraud creditors (i.e., you weren't already in financial trouble when you invested). This protection applies to non-registered accounts, and in many cases, to RRSPs and TFSAs as well – as long as the beneficiary designation and timing are handled properly. For registered accounts, the protection can extend even further, as RRSPs and RRIFs already have some protection under Ontario law when a family-class beneficiary is named.
Why Sole Proprietors Should Pay Attention
Unlike incorporated businesses, sole proprietors have no legal separation between personal and business finances. That means a lawsuit, bankruptcy, or unpaid business debt could put your personal savings at risk. Segregated fund contracts are one of the few tools available to create a legal barrier between your personal investments and your business liabilities, without needing to restructure your business.
Peace of Mind with a Plan
Seg funds also offer guaranteed death benefits, maturity guarantees, and estate planning advantages – making them a flexible part of a business owner’s overall financial strategy.
Is This Right for You?
Segregated funds aren't for everyone, and not all products offer the same level of protection. If you’re a sole proprietor in Ontario and want to explore how to shield your investments from risk, let’s talk. There’s no pressure – just a conversation to help you understand your options and protect what matters.