This assignment is based on material regarding segregated funds.

It was the summer of 2011, and your client, Mr. Ritter, called you to let you know that he would be receiving an inheritance of $750,000 sometime next month. He was 50 years old and had been a client of yours for many years. Mr. Ritter wanted to take advantage of the potential growth in the equity markets, but he also wanted to make sure that his wife would not suffer due to a market downturn if he died when the markets had dropped. You recommended that he invest in some segregated funds that had a good track record regarding performance and that offered a 100% benefit guarantee at death and maturity. He agreed with your recommendation and made the investment upon receiving the inheritance, with him as the contractholder and annuitant, and his wife as the beneficiary. He purchased 25,000 units of a segregated fund at $30.00 per unit. The policy contract used a proportional basis for adjusting the amount of the guarantee if Mr. Ritter made a withdrawal from the segregated fund.

One year later, Mr. Ritter withdrew $50,000 from his segregated funds to pay for renovations in his house. On the day that he made this sale, the segregated funds were priced at $33.00 per unit.

Four years after the date of his investment (i.e. in 2015), Mr. Ritter died. Unfortunately, the market value of his segregated funds when he died was only $685,000. Assume that there were no purchases and no distributions of any kind between the initial date of his investment and the date of death.

1. Who will receive the money from this investment and why?