LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A Registered Education Savings Plan (RESP) offers:
- ADeductible contributions, so parents reduce their taxable income while saving for a child's education
- BTax-free withdrawals of growth, since education savings are exempt in the same way as a TFSA
- CRetirement income for the subscriber if the child does not attend post-secondary school
- Tax-deferred growth, government grants, and taxation of growth in the student's hands
Correct answer: D) Tax-deferred growth, government grants, and taxation of growth in the student's hands
The Canada Education Savings Grant matches a percentage of contributions to a lifetime maximum. Growth and grants are taxed to the (usually low-income) student.
Why the other options are wrong
- ARESP contributions are not deductible.
- BGrowth and grants are taxable to the beneficiary when withdrawn.
- CRESPs fund education; unused growth is taxed and penalized.
Exam tip
RESP: no deduction, grants, growth taxed to the student.
Common mistake
Missing the grant by not contributing annually.
What this tests
CISRO competency component 1.2 — 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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