​That's a very good question for anyone looking to make their money work for them, especially as we get older and think about leaving a legacy for our loved ones. While Guaranteed Investment Certificates (GICs) have been a long-time favourite for their safety, Guaranteed Interest Accounts (GIAs), which are offered by insurance companies, often come with some extra benefits that can be quite appealing to seniors across Ontario.

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Here's why a GIA might be a better choice for you than a traditional GIC, even though both offer a guaranteed interest rate and principal protection:

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For seniors, Guaranteed Interest Accounts (GIAs) offer significant advantages over GICs. GIAs let you name a beneficiary, so your money goes directly to them when you pass, bypassing lengthy and public probate. This avoids probate fees and other estate costs, giving your loved ones faster access to funds while maintaining your financial privacy. GIAs also reduce the risk of family disputes. Plus, for those 65+, non-registered GIA interest might qualify for special tax credits or income splitting, potentially saving you money on taxes.

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• Passing on Your Money More Smoothly (Bypassing Probate):

  • With a GIC from a bank, when you pass away, the money usually becomes part of your "estate." This means it often has to go through a legal process called probate. Probate can be quite lengthy, sometimes taking many months or even over a year, and it's a public process, meaning details about your estate become public record.

  • A GIA is different because it's an insurance product. You can name a direct beneficiary (like your children or grandchildren) right on the GIA contract. When you pass away, the money goes directly to that named person. It bypasses your estate entirely, avoiding the whole probate process.

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• Saving on Costs (Probate Fees and Estate Expenses):

  • Because GIA money doesn't go through your estate when using a named beneficiary, it's not subject to probate fees. These fees (also known as estate administration tax in Ontario) can be a significant cost, calculated as a percentage of your estate's value. By avoiding probate, your loved ones keep more of your hard-earned money.

  • You also save on other potential costs like legal fees and executor fees that can pile up when settling an estate.

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• Faster Access to Funds for Your Loved Ones:

  • Imagine your family needing access to funds after you're gone. If money is tied up in probate with a GIC, it can take a long time to be released.

  • With a GIA, since the money goes directly to your named beneficiary, they can typically access the funds much faster. This can be a huge help during a difficult and emotional time.

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• More Privacy for Your Affairs:

  • Since probate is a public process, details about your will, assets, and beneficiaries can become public knowledge.

  • When GIA funds are paid directly to a named beneficiary, it's a private transaction between the insurance company and your loved one. This offers an enhanced level of privacy for your financial affairs.

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• Reduced Risk of Family Disputes:

  • Sadly, sometimes estates can lead to disagreements or even lawsuits among family members. Because GIA proceeds go directly to a named beneficiary outside of your will, they are generally less likely to be challenged or caught up in estate disputes. This can bring you peace of mind, knowing your wishes are clear and less prone to arguments.

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While GICs are still a safe and reliable choice, the added estate planning benefits, potential tax advantages for seniors, and the quicker, more private distribution of funds make Guaranteed Interest Accounts (GIAs) a compelling option for many seniors looking to grow their savings securely while also ensuring their legacy is managed efficiently and privately for their loved ones. It's always a good idea to discuss your specific situation with a trusted financial professional who can help you choose the best option for your unique needs.

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To discuss further or for questions of clarification please contact Mark Albert, CEA, EPC at either: 416-659-6655 or 

markalbertpfs@gmail.com.

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