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| Deferred Annuities |
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GICs |
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Overview |
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A type of insurance product sold by insurance companies. They are usually guaranteed interest accounts that credit interest at a fixed rate for the period of the account. At maturity, the proceeds are paid out in cash or in a new life annuity. |
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A type of debt security sold by banks and trust companies. They usually cannot be cashed before the specified redemption date, and pay interest at a fixed rate. |
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Regulated by |
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Provincial Life Insurance Acts |
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Depends on the financial institution issuing the product. |
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Capital Growth Potential |
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No |
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No |
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Diversify investments |
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No |
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No |
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Financial Protection |
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Deposit is guaranteed by Foresters. |
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Deposit is guaranteed. |
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Death Benefit |
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Yes, there is a guaranteed death benefit. |
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No, GIC carries on until maturity. If estate or beneficiary1 cancels contract prematurely, penalty may be incurred. |
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Probate Protection |
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At death, proceeds can be paid promptly and directly to a named beneficiary, avoiding the estate administration process, and the cost of probate fees. |
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At death, proceeds are an asset of the estate and are subject to estate administration process, legal fees. It could be
some time before the estate can distribute the GICs. Note: |
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Creditor Protection |
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When you make designations in favour of a parent, spouse, child or grandchild, it may result in the insurance money being exempt from seizure. This is sometimes referred to as "creditor protection".
The money cannot have been deposited as:
- Part of a fraudulent conveyance (transferring money to keep it out of reach of existing creditors).
- Within a specific time period before bankruptcy
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No protection against the claims of creditors. |
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RRSP Eligible |
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Yes |
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Yes |
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RESP Eligible |
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No |
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Yes |
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Taxation Implications for non-registered investments |
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Interest is taxable as earned. |
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Interest is taxable as earned. |
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Under what circumstances might these be more suitable? |
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For each deposit, the rate of return is fixed so you don’t have to worry about market fluctuations.
Guaranteed principal investment and interest payments.
At maturity, option to take life annuity rather than cash. |
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Rate of return is fixed so you don’t have to worry about market fluctuations.
Guaranteed principal investment and interest payments. |
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for Americans
