LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A prospective client holds a temporary work permit and is unsure of her residence status for tax purposes. Before recommending a registered plan the agent should:
- Atell her that non-citizens may not hold Canadian investment contracts of any kind
- Brecommend the largest deposit possible, since deductions can be carried forward indefinitely
- Copen the plan anyway, since contribution room accumulates for everyone present in Canada
- confirm her status and eligibility, and refer her for tax advice before any deposit is made
Correct answer: D) confirm her status and eligibility, and refer her for tax advice before any deposit is made
Contribution room depends on earned income reported in Canada, and residence affects both eligibility and the treatment of withdrawals. The agent should establish the facts and refer the tax questions rather than guessing.
Why the other options are wrong
- AResidents who are not citizens may certainly hold Canadian contracts.
- BA deposit made without eligibility can result in penalties on the excess amount.
- CRoom accrues from reported earned income, not from mere physical presence.
Exam tip
Uncertain residence status equals confirm eligibility first, then refer the tax question.
Common mistake
Assuming anyone living in Canada automatically has registered contribution room.
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.