What must be demonstrated for creditor protection regarding segregated funds?

To achieve creditor protection for segregated funds, it is essential to demonstrate both an investment purpose and the presence of an irrevocable beneficiary. This requirement is crucial because these factors help to differentiate the segregated funds from assets that could be considered part of the debtor's estate in the event of bankruptcy or legal claims.

When segregated funds are purchased for an investment purpose, it indicates that the funds are not merely being held as an asset that could be readily liquidated to satisfy creditors' claims. Furthermore, having an irrevocable beneficiary means that the policyholder cannot change the beneficiary without the consent of the beneficiary, which adds a layer of protection. This structure is designed to ensure that the intended beneficiary will receive the funds, safeguarding them from creditors.

In contrast, having a personal use purpose does not meet the criteria for creditor protection, as it implies that the funds may be accessible for personal liabilities. Similarly, the retention of a non-registered account does not directly correlate with the requirements for creditor protection associated with segregated funds. Lastly, stating that no specific requirements are needed contradicts the foundational principles that underpin creditor protection laws.