LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
A beneficiary designation for a registered plan (RRSP/RRIF/TFSA) in common-law provinces:
- AMust be the estate, since registered plans are governed by the Income Tax Act rather than by provincial insurance law
- BIs not permitted, since registered plan proceeds must pass under the will in every province
- CAvoids all tax on the plan, since a named beneficiary removes the plan from the deceased's final return
- Is permitted, allowing proceeds to bypass probate; the tax treatment is governed separately by the Income Tax Act
Correct answer: D) Is permitted, allowing proceeds to bypass probate; the tax treatment is governed separately by the Income Tax Act
Probate bypass and tax treatment are separate questions; agents must explain both.
Why the other options are wrong
- ANamed beneficiaries are allowed.
- BDesignations on registered plans are permitted in common-law provinces.
- CTax may still apply to the deceased.
Exam tip
Registered plan designations bypass probate; tax follows ITA rules.
Common mistake
Telling a client a named beneficiary makes the RRIF tax-free.
What this tests
CISRO competency component 1.5 — Integrate into practice the legal aspects of insurance and annuity contracts — which is weighted at 60% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 1
- An 'assignee' of a life insurance policy is:
- A corporation as policyowner and beneficiary of a policy on a key employee:
- A 'trustee' named to receive proceeds on behalf of a beneficiary:
- The 'automatic premium loan' (APL) provision:
- A life insurance contract 'matures' when:
- The 'assignment' provision typically states that:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.