gogietwo said:
Hi All,
My financial situation is as under
Assets: Fixed deposit
Liabilities : EMI towards premiums (LIC and Pension Plans)
Settlement funds:meaning?
Please advice what is meant by unencumbered transferable and available funds?
Liabilities: What is EMI? Typically, premiums toward pension plans and life insurance don't count as liabilities because they aren't something that could result in a seizure of your assets if you don't pay. A liability is something more like a home loan or car loan where the underlying asset will be repossessed if you don't pay, or a loan where the bank has the right to take the money out of your account if you don't pay on time. So it doesn't seem like those you list are actually liabilities.
Settlement funds are liquid, unencumbered, transferable and available funds. Typically this means something that you can convert to cash quickly and easily. Fixed deposits and cash bank balances qualify. So do stocks, bonds, mutual funds and similar securities that you hold that you could sell and get cash quickly if you needed it. Fixed deposits can be withdrawn at any time so they qualify. Property such as homes, land, cars, furniture, jewelry, and so on do not count because they probably can't be quickly converted to cash.
In addition to being liquid the funds must be unencumbered. So for example, if you have a cash bank balance, but you have a loan and the terms of the loan require the cash to remain in the account as a security against the loan, those funds are encumbered (because you can't withdraw them whenever you need them) and can't be used as settlement funds.
The funds must also be in a currency that is freely convertible. Some countries place a limit on how much (if any) of their currency can be exchanged for other currencies. If the currency isn't freely convertible to CAD it doesn't count as settlement funds because you won't be able to bring that money to Canada in the form of CAD. This is rare though.
Finally it must also be transferable. Some countries place a limit on how much currency can be taken into or out of the country within a given period of time. If your cash will be stuck in your home country due to a law like this it may not be able to be used as settlement funds. This is rare though.
Good luck!
