LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client wants to leave a business to one child and equivalent value to the other two. The need identified is:
- ABusiness overhead funding, so the business can continue operating after the client's death
- BCreditor protection, so the business cannot be claimed by the client's personal creditors
- CA buy-sell agreement, so the two children without the business can sell their shares to the third
- Estate equalization, funded with assets or insurance so the other children receive comparable value
Correct answer: D) Estate equalization, funded with assets or insurance so the other children receive comparable value
An indivisible asset left to one heir creates an imbalance that has to be funded from elsewhere if the client wants the children treated equally.
Why the other options are wrong
- AOverhead funding addresses operating costs, not fairness among heirs.
- BCreditor protection is a different objective altogether.
- CThe client wants value for the others, not shares they must then sell.
Exam tip
An indivisible asset creates an equalization need.
Common mistake
Assuming a business must be sold to treat children fairly.
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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