LLQP Life Insurance · Component 3.2 · 25% of the exam
Income splitting as a tax-efficiency strategy means:
- ASplitting premiums between two policies on the same life, so that each stays within the exempt test
- BPaying tax in two provinces where the client has income, so that the lower provincial rate applies to part of it
- Arranging income so it is taxed in the hands of a lower-income spouse or family member, within the attribution rules
- DDividing the death benefit among several beneficiaries, so that no one beneficiary is pushed into a higher tax bracket by the receipt
Correct answer: C) Arranging income so it is taxed in the hands of a lower-income spouse or family member, within the attribution rules
The curriculum lists income splitting among general tax-efficiency strategies. Spousal RRSPs, pension income splitting and prescribed-rate loans are common tools; the attribution rules limit what can be done with gifts to a spouse or minor child.
Why the other options are wrong
- ASplitting premiums between policies has no tax effect.
- BPaying tax in two provinces is not a strategy.
- DDividing a death benefit among beneficiaries is a designation choice, not income splitting.
Exam tip
Income splitting moves income to a lower-taxed family member within the attribution rules — spousal RRSPs, pension splitting, prescribed-rate loans.
Common mistake
Ignoring attribution rules when suggesting income splitting.
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.