Segregated funds are no tax panacea

A 69-year-old widow with an $840,000 RRIF has been told that moving it into segregated funds will shield her heirs from the tax bill when she dies, and she writes in to ask Allan if that is really true. He starts by clearing up the premise: an RRSP or RRIF is taxed as income on the final return regardless of what it is invested in, so no product changes that basic mechanic. From there he walks through what a segregated fund's insurance wrapper actually buys, a death benefit guarantee, a maturity guarantee, some creditor protection, and the ability to bypass probate, and weighs those features honestly against the higher ongoing fees that come with them. The math does not always favour the switch, and heirs can end up with less, not more, once the extra cost is factored in over time. The piece is a clear-eyed reminder to model a strategy like this before committing to it rather than taking a guarantee at face value. It is a useful read for any retiree who has been pitched segregated funds as a tax fix for a large registered account.