LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client is worried about the tax burden on her estate from registered plans. The need is to:
- AAccept it, since registered plans are taxed at death in every case and nothing can be done
- Plan for the deemed disposition at death, using spousal rollover, insurance or gradual drawdown
- CMove everything to a TFSA immediately, since TFSA balances pass to heirs tax-free
- DCash out the plans now, since paying the tax today avoids a larger bill at death
Correct answer: B) Plan for the deemed disposition at death, using spousal rollover, insurance or gradual drawdown
Registered plan tax at death is a major estate risk. Solutions include spousal rollover, insurance and withdrawal planning.
Why the other options are wrong
- AThe tax can be large and can be planned for.
- CTransfers are limited by TFSA room and the RRSP withdrawal is taxed first.
- DCashing out now taxes it all at once at the highest rate.
Exam tip
RRSP/RRIF at death: income to the deceased unless spousal/dependant rollover; plan for the tax.
Common mistake
Ignoring the registered plan tax liability in estate planning.
What this tests
CISRO competency component 1.3 — 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.