What tax advantage do segregated funds provide?

Segregated funds offer a distinctive tax advantage by allowing for a deferral of capital gains tax until withdrawals are made. This means that while the investments inside the segregated fund can grow without an immediate tax impact, any taxes on the capital gains accrued within the fund are not realized until the investor decides to take money out of the fund. This feature can be particularly advantageous for long-term investors, as it allows for the potential growth of their investments without the drag of immediate taxation, ultimately maximizing the overall investment growth.

This deferral is a strong incentive for individuals considering segregated funds, as it enables them to strategize their withdrawals in a manner that could potentially align with their personal tax situation, potentially leading to lower overall tax liabilities in the long term.