LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A couple used a spousal registered savings plan for several years and now want to convert it to an annuity. The agent should confirm that:
- Aspousal plan funds may be used only to purchase a joint and last survivor annuity contract
- Bthe plan must be collapsed and taxed in full before any annuity can be purchased with it
- Cthe annuity payments will be taxed to the contributing spouse for the rest of their lives
- payments are taxed to the annuitant spouse, subject to the attribution rules on recent contributions
Correct answer: D) payments are taxed to the annuitant spouse, subject to the attribution rules on recent contributions
The annuitant spouse reports the income, which is the purpose of income splitting. Attribution can pull recent contributions back to the contributing spouse, so the couple should check the timing before converting the plan.
Why the other options are wrong
- AA spousal plan may be converted to a single life annuity on the annuitant spouse.
- BA direct transfer to an annuity avoids any collapse of the plan and the tax on it.
- CThe annuitant spouse is taxed, which is exactly why a spousal plan is used.
Exam tip
Spousal plan plus recent contribution equals check the attribution rules before converting.
Common mistake
Converting a spousal plan without checking when the last contribution was made.
What this tests
CISRO competency component 2.3 — 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.