LLQP Life Insurance · Component 4.2 · 10% of the exam
A registered charity is the named beneficiary of a client's policy. On the claim the charity will:
- Areceive the proceeds only after the estate's own debts and taxes have been fully settled
- Bpay tax on the proceeds as business income before applying them to its programs
- receive the proceeds free of tax, with the estate generally entitled to a donation receipt
- Dreceive the proceeds and issue a donation receipt to the deceased's estate
Correct answer: C) receive the proceeds free of tax, with the estate generally entitled to a donation receipt
The benefit is paid directly and bypasses probate, and a designation to a registered charity generally produces a receipt that can reduce tax on the final return or the prior year.
Why the other options are wrong
- ADesignated proceeds are not available to estate creditors.
- BA registered charity does not pay tax on a death benefit received.
- DThe receipt arises from the designation rather than being issued to the estate by arrangement.
Exam tip
A charitable designation gives probate bypass and a donation receipt.
Common mistake
Assuming a charitable gift must pass through the will to be receipted.
What this tests
CISRO competency component 4.2 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Life Insurance module. Written against the published curriculum.
More from component 4
- After a policy is reinstated, the contestability period:
- A revocable beneficiary designation is changed by:
- A client asks the agent to hold the beneficiary change form 'until next week' and dies in the meantime. The consequence is that:
- A client wants to reduce the face amount of her policy because her needs have fallen. The agent should note that:
- A client is unable to pay premiums temporarily on a whole life policy. Before letting it lapse, the agent should suggest:
- A client's term policy is being replaced with a new one from another insurer because it is cheaper and he remains healthy. To protect the client, the agent should ensure that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.