LLQP Ethics & Professional Practice · Component 1.2 · 60% of the exam
A 'trustee' named to receive proceeds on behalf of a beneficiary:
- AIs the beneficiary in law, since the insurer pays the trustee and has no further obligation
- BCan spend the money freely, since the designation transfers the proceeds to the trustee outright with no continuing obligation
- COwns the proceeds personally until the beneficiary reaches the age set out in the designation
- Holds the proceeds for the beneficiary under the terms set out, with fiduciary duties
Correct answer: D) Holds the proceeds for the beneficiary under the terms set out, with fiduciary duties
Trustees are fiduciaries. A designation should specify the trust terms or refer to a trust instrument.
Why the other options are wrong
- AThe trustee holds for the beneficiary.
- BFiduciary duties restrict use.
- CThe beneficiary is the beneficial owner.
Exam tip
Trustee holds for the beneficiary under fiduciary duties.
Common mistake
Naming a trustee without specifying terms.
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:
- The 'automatic premium loan' (APL) provision:
- A life insurance contract 'matures' when:
- The 'assignment' provision typically states that:
- The 'personal representative' (executor or administrator) of a deceased owner:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.