LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
A client's daughter is named beneficiary on his segregated fund. Under the death benefit guarantee, at his death:
- ANothing is paid at death, since the contract simply ends and the units are cancelled
- BOnly the market value is paid, since the guarantee applies at maturity rather than at death
- CThe estate receives the fund and distributes it under the will after probate, in the same way as a bank account
- The beneficiary receives the greater of market value and the guaranteed percentage, outside the estate
Correct answer: D) The beneficiary receives the greater of market value and the guaranteed percentage, outside the estate
The death guarantee protects heirs against a downturn at death and combines with beneficiary designation to bypass probate. It is often the most valuable feature for older clients.
Why the other options are wrong
- AA death benefit is a core feature.
- BThe guarantee applies at death if higher than market value.
- CA named beneficiary receives it directly, bypassing the estate.
Exam tip
Death guarantee: greater of market value and % of net deposits, to the named beneficiary.
Common mistake
Naming the estate and losing the probate bypass.
What this tests
CISRO competency component 2.2 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
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