LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
An existing segregated fund contract names the client's estate as beneficiary. The assessment should note:
- AThis is ideal, since the estate can distribute the proceeds according to the will
- BThat the contract is void, since insurance law requires a living person as beneficiary
- CThat taxes are avoided, since proceeds paid to an estate are received tax-free
- That proceeds pass through the estate, losing probate bypass and creditor protection
Correct answer: D) That proceeds pass through the estate, losing probate bypass and creditor protection
Beneficiary review is part of assessing existing contracts. Naming a person restores the insurance advantages.
Why the other options are wrong
- ANaming the estate wastes the contract's key features.
- BThe contract is valid; the estate is a permitted beneficiary.
- CTax is unaffected by the designation.
Exam tip
Estate as beneficiary = probate and creditor exposure; name a person.
Common mistake
Leaving 'estate' as the default beneficiary.
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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