LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client has been contributing to an education savings plan for one child who has decided not to study further. The review should identify:
- AThat the plan must be collapsed immediately and the full balance taken into income
- BThat the contributions and the grants both become the child's own property at the age of majority
- That the accumulated grants may be repayable and the growth taxed if it is not used for education
- DThat the plan converts automatically into a registered retirement plan for the subscriber
Correct answer: C) That the accumulated grants may be repayable and the growth taxed if it is not used for education
Government grants go back if the beneficiary does not pursue eligible studies, and the accumulated income can be taxed at a penalty rate unless one of the relief routes is used.
Why the other options are wrong
- AThere is time to name another beneficiary or use a relief provision.
- BGrants are conditional and contributions belong to the subscriber.
- DNo automatic conversion occurs; a transfer requires room and conditions to be met.
Exam tip
Unused grants go back; accumulated income is taxed unless relieved.
Common mistake
Assuming an unused education plan simply becomes the subscriber's money.
What this tests
CISRO competency component 1.2 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.