LLQP Life Insurance · Component 3.2 · 25% of the exam
A charitable donation made in the year of death:
- AIs taxed as income to the estate, since the deceased no longer has a taxable year in which to claim a credit for the donation
- BIs not eligible for any credit, since donation credits can be claimed only by living taxpayers
- CMust be under a fixed amount set by the CRA, above which the excess is treated as a gift to the estate
- Generates a donation credit that reduces tax on the final return, which is why insurance-funded bequests are tax-efficient
Correct answer: D) Generates a donation credit that reduces tax on the final return, which is why insurance-funded bequests are tax-efficient
Charitable giving at death is one of the credits the curriculum lists under tax efficiency. Naming a charity as beneficiary of a life policy provides the gift outside the estate and the credit against the terminal return.
Why the other options are wrong
- ADonations are not taxed as income.
- BGifts at death do qualify for the donation credit.
- CThere is no such fixed cap; the credit applies within the rules for the terminal return.
Exam tip
Insurance-funded bequests give the charity the gift and the estate a credit against tax on the final return.
Common mistake
Overlooking the tax credit when comparing ways to fund a bequest.
What this tests
CISRO competency component 3.2 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Life Insurance module. Written against the published curriculum.
More from component 3
- At policy delivery, the agent should obtain:
- The effective date of a life insurance policy is generally:
- A client's application is approved but he has not paid the first premium when the policy is delivered. The agent should:
- A pre-authorized debit form is part of implementation because:
- During implementation, the agent learns the client wants the policy owned by her corporation instead of personally, as first applied for. The correct step is:
- Which of the following is a legitimate reason an insurer might refuse to issue a policy even after favourable underwriting?
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.