LLQP Life Insurance · Component 3.2 · 25% of the exam
A client wants to make tax-efficient gifts to adult children during her lifetime. Which point should the agent raise?
- AGifts to adult children are taxed as income to the children in the year in which they are received from the parent
- BGifts to adult children are prohibited above a stated annual amount under the Income Tax Act
- Cash gifts are not attributed back, but gifts of appreciated property trigger a deemed disposition
- DGifts must be insured, so the client should buy a policy for the amount of each gift she intends to make
Correct answer: C) Cash gifts are not attributed back, but gifts of appreciated property trigger a deemed disposition
Canada has no gift tax, and attribution does not apply to adult children (other than certain loans), but transferring appreciated assets realizes the gain. Cash gifts avoid that; insurance can fund the tax where property is transferred.
Why the other options are wrong
- ARecipients are not taxed on gifts.
- BGifts are permitted; Canada has no gift tax.
- DThere is no insurance requirement.
Exam tip
No gift tax; attribution for spouses and minors; deemed disposition on appreciated property.
Common mistake
Warning clients that gifts are taxed to the recipient.
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.