LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A client with a high income this year and low expected income next year should be recommended to:
- AContribute to the RRSP next year, since the contribution should be made when the client has the least income to shelter
- Make the contribution or claim the deduction in the high-income year, since deductions carry forward
- CSkip the RRSP altogether, since a client whose income fluctuates gains little from a deduction
- DUse a TFSA only, since the tax-free withdrawal is worth more than a deduction that varies with income
Correct answer: B) Make the contribution or claim the deduction in the high-income year, since deductions carry forward
Timing deductions to high-income years maximizes their value. Contributions can be made and deducted later if that is better.
Why the other options are wrong
- AThe deduction is worth less next year.
- CThe deduction is valuable in the high-income year.
- DThe RRSP is better in a high-income year.
Exam tip
Deduct in high-income years; carry forward when useful.
Common mistake
Deducting a contribution in a low-income year.
What this tests
CISRO competency component 3.1 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 3
- A client's spouse must sign for:
- When the insurer requests additional information after the application (for example, source of wealth for a large deposit), the agent should:
- The implementation of a recommendation involving a switch from one seg fund to another within a contract requires:
- A client wishes to designate a charity as beneficiary of a segregated fund. Implementation should:
- For a deferred annuity implemented for a client, the agent should confirm:
- The agent's record of the implementation should be retained:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.