LLQP Ethics & Professional Practice · Component 1.2 · 60% of the exam
A family trust is proposed as the owner and beneficiary of a policy on a parent's life. The agent should understand that:
- Athe parent whose life is insured retains all ownership rights despite the trust
- Bthe beneficiaries of the trust may instruct the insurer directly about the policy
- Ca trust cannot own a life insurance policy under provincial insurance legislation
- the trustees exercise the ownership rights according to the terms of the trust deed
Correct answer: D) the trustees exercise the ownership rights according to the terms of the trust deed
Where a trust owns a policy, the trustees hold and exercise the ownership rights subject to the deed and their fiduciary duties. The arrangement has tax and legal consequences and should be set up with professional advice.
Why the other options are wrong
- AThe life insured has no rights unless also a trustee or owner.
- BTrust beneficiaries deal with the trustees rather than the insurer.
- CA trust may hold a policy as it may hold other property.
Exam tip
Trust ownership means the trustees act, bound by the deed.
Common mistake
Taking instructions from a trust beneficiary rather than from the trustees.
What this tests
CISRO competency component 1.2 — 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.