LLQP Life Insurance · Component 3.2 · 25% of the exam
A client has a large capital gains exposure on a farm she intends to pass to her son, who works the farm. Which two planning points should the agent raise?
- AGroup life and AD&D through the farm's employees' plan, so the son is covered if he is injured while working on the farm
- BDecreasing term to cover the farm mortgage and a TFSA to build savings for the other children's inheritance
- CNothing in particular, since farms are exempt from capital gains tax at death under the family farm rules
- The potential farm rollover to a child and life insurance to equalize the estate for the others
Correct answer: D) The potential farm rollover to a child and life insurance to equalize the estate for the others
Qualified farm property may roll over to a child, deferring tax, which changes the liquidity need; the son receiving the farm creates an equalization need for siblings. Both are classic life insurance conversations, in coordination with a tax advisor.
Why the other options are wrong
- AGroup products do not address estate planning.
- BNeither product addresses a farm succession.
- CFarms are not simply exempt; specific rollover rules apply.
Exam tip
Farm and business succession: rollover rules change the tax need; equalization creates a new one.
Common mistake
Sizing coverage for a tax that a rollover may defer, while missing the equalization need.
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.