LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client's business will be sold in five years, producing a large capital gain. The planning need includes:
- ASpending the proceeds over the first years of retirement, since the sale will have paid all the tax that is owed
- The capital gains exemption, tax on the sale, and investing the proceeds for retirement income
- CNothing until the sale closes, since planning before the price is known is premature
- DBuying a LIRA with the proceeds, so the money is locked in for retirement
Correct answer: B) The capital gains exemption, tax on the sale, and investing the proceeds for retirement income
Business sale proceeds are a life event needing tax and investment planning; the agent coordinates with tax advisors.
Why the other options are wrong
- ASpending the proceeds is not a plan for retirement income.
- CThe event is significant and benefits from advance planning.
- DLIRAs hold pension money only, not sale proceeds.
Exam tip
Business sale: LCGE, tax, investment of proceeds, coordination with advisors.
Common mistake
Planning the investment without the tax advisor's input.
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
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