LLQP Segregated Funds & Annuities · Component 4.2 · 10% of the exam
For a registered (RRSP/RRIF) segregated fund death benefit paid to a non-spouse adult child:
- Income on the deceased's final return; the child receives the proceeds directly and may be jointly liable
- BProbate fees apply to the full value, since a registered plan passes through the estate regardless of designation
- CThe child pays the tax on receipt, since the proceeds are income to whoever receives them
- DNo tax applies, since the designation moves the plan outside the estate and outside the deceased's final return altogether
Correct answer: A) Income on the deceased's final return; the child receives the proceeds directly and may be jointly liable
The mismatch between who receives the money and who pays the tax is a known estate problem; the agent should explain it to the owner during planning and to the beneficiary at claim.
Why the other options are wrong
- BDesignated benefits bypass probate.
- CPrimary liability is the estate's, with joint liability possible.
- DFull income inclusion applies on the final return.
Exam tip
Registered plan to non-spouse: deceased taxed; beneficiary receives gross; joint liability possible.
Common mistake
Ignoring the estate's tax liability when children are named on a RRIF.
What this tests
CISRO competency component 4.2 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 4
- A client's daughter was born last month and the client wants her added to the segregated fund designation. The agent should:
- A client wants to withdraw part of his segregated fund before maturity. The agent should explain:
- A client's segregated fund contract is approaching its maturity date. The insurer will:
- A client asks to add her adult son as a joint owner of her non-registered segregated fund contract. The agent should explain that:
- A client wants to replace the beneficiary on a contract where the current designation was made irrevocable. The agent must explain that:
- A client who has lost her job asks to pause her pre-authorized monthly contributions for six months. The agent should:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.