LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
A client wants to name her eight-year-old son as beneficiary of her segregated fund contract. The agent should advise that:
- naming a minor without a trustee can mean the proceeds are held by a court appointee
- Bthe proceeds would be paid directly into the child's own bank account at the time of death
- Ca minor cannot be named as a beneficiary on any segregated fund contract in Canada
- Dthe designation takes effect only once the child has reached the age of eighteen years
Correct answer: A) naming a minor without a trustee can mean the proceeds are held by a court appointee
A minor cannot give a valid receipt for insurance proceeds. Without a trustee named in the designation, or a court-appointed guardian of property, the money may be paid into court and administered until the child reaches the age of majority.
Why the other options are wrong
- BProceeds cannot be paid to a minor directly, which is exactly the problem to solve.
- CA minor may be named; the issue is who will receive and manage the money.
- DThe designation is effective at once; the difficulty is only in how proceeds are handled.
Exam tip
Whenever a minor is named, the exam wants a trustee named in the designation.
Common mistake
Recording a minor beneficiary without discussing a trustee or the rules in Quebec.
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
Timed sets weighted like the exam, and review of every question you miss. Free to start.