LLQP Segregated Funds & Annuities · Component 4.2 · 10% of the exam
A beneficiary of a registered segregated fund who is a financially dependent child or grandchild (minor or infirm) may:
- AReceive nothing until the age of majority, since a dependant cannot hold registered proceeds
- BPay probate fees on the proceeds, since registered plans left to children pass through the estate
- CBe forced to cash out and pay tax at the highest marginal rate in the year of death, with no deferral of any kind available
- Have the proceeds taxed in their hands, buy a term-certain annuity to 18, or roll to an RRSP or RDSP if infirm
Correct answer: D) Have the proceeds taxed in their hands, buy a term-certain annuity to 18, or roll to an RRSP or RDSP if infirm
Dependant rollovers are a valuable exception to full taxation at death. Claim service should identify them.
Why the other options are wrong
- AProceeds are payable, with options that reduce tax.
- BDesignated registered proceeds bypass probate.
- CDependant rollover options exist; cashing out is not forced.
Exam tip
Financially dependent child/grandchild: taxed in their hands; annuity to 18; infirm rollover.
Common mistake
Missing the dependant rollover and taxing everything on the deceased's return.
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 Segregated Funds & Annuities module. Written against the published curriculum.
More from component 4
- A client's daughter was born last month and the client wants her added to the segregated fund designation. The agent should:
- A client wants to withdraw part of his segregated fund before maturity. The agent should explain:
- A client's segregated fund contract is approaching its maturity date. The insurer will:
- A client asks to add her adult son as a joint owner of her non-registered segregated fund contract. The agent should explain that:
- A client wants to replace the beneficiary on a contract where the current designation was made irrevocable. The agent must explain that:
- A client who has lost her job asks to pause her pre-authorized monthly contributions for six months. The agent should:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.