LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
Creditor protection for a segregated fund is available when:
- The beneficiary is family class or irrevocable, and the contract was not set up to defeat creditors
- BThe estate is the beneficiary, since the estate's assets are protected until the executor distributes them to the heirs
- CIn every case, since insurance legislation exempts all life insurance contracts from seizure
- DThe fund is held inside a registered plan, since only registered assets are exempt from creditors
Correct answer: A) The beneficiary is family class or irrevocable, and the contract was not set up to defeat creditors
Provincial insurance acts exempt insurance proceeds from seizure when qualifying designations exist. Fraudulent conveyance and bankruptcy rules can override it.
Why the other options are wrong
- BNaming the estate loses protection.
- CProtection is conditional on the designation and timing.
- DProtection derives from insurance law, not registration.
Exam tip
Creditor protection: family-class or irrevocable beneficiary; not for defeating existing creditors.
Common mistake
Promising protection to a client who deposits after being sued.
What this tests
CISRO competency component 2.2 — 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.