LLQP Life Insurance · Component 1.1 · 35% of the exam
A client's will leaves her RRIF to her adult son, and she has named him beneficiary on the plan. At her death the tax on the RRIF is:
- AZero, since a RRIF left to a named beneficiary passes outside the estate and outside the tax system
- BDeferred until the son turns 71, when he must convert the inherited RRIF to income of his own under the maturity rules
- CPaid by the son on his own return, since he is the person who receives the RRIF proceeds
- Generally a liability of her estate on the final return, even though the son receives the proceeds directly
Correct answer: D) Generally a liability of her estate on the final return, even though the son receives the proceeds directly
Unless a spousal or dependent-child rollover applies, the RRIF value is included in the deceased's final return and the estate is liable for the tax, while the named beneficiary receives the full proceeds. The mismatch can leave other heirs bearing the tax — a planning point insurance can resolve.
Why the other options are wrong
- AThe RRIF is fully taxable at death absent a rollover.
- BNo deferral applies to an adult, non-dependent child.
- CThe named beneficiary receives the proceeds but the estate bears the tax.
Exam tip
Registered plans left to a non-spouse: beneficiary gets the money, estate gets the tax. Look for the mismatch.
Common mistake
Assuming the beneficiary of a RRIF also pays its tax.
What this tests
CISRO competency component 1.1 — Assess the client's needs and situation — which is weighted at 35% of the Life Insurance module. Written against the published curriculum.
More from component 1
- A client's existing policies were all sold by another agent who has left the business. The reviewing agent should:
- A client supports an adult child with a permanent disability who will never be self-sufficient. In the needs analysis this is:
- A self-employed client's income fluctuates widely year to year. When determining the income to replace, the agent should:
- A 58-year-old client plans to retire at 65 and has a pension that will pay a survivor benefit. How does time to retirement affect the life insurance need?
- Which of the following is a capital expense arising at death, rather than an ongoing income need?
- A client is the sole income earner in a household with a stay-at-home spouse and two young children. The greatest risk that life insurance on the client addresses is:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.