LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
The main advantage of a segregated fund's beneficiary designation compared with a non-registered mutual fund is:
- AHigher returns, since the fund's assets are held in the insurer's segregated account
- BNo tax at death, since the death benefit is an insurance payment rather than a disposition
- CLower fees, since the insurer does not charge for the beneficiary designation
- The death benefit passes outside the estate, avoiding probate fees, delays and publicity
Correct answer: D) The death benefit passes outside the estate, avoiding probate fees, delays and publicity
Non-registered mutual funds have no beneficiary designation and pass through the will. The seg fund's insurance structure changes that.
Why the other options are wrong
- AReturns depend on the underlying assets.
- BTax on accrued gains still applies at death through the deemed disposition.
- CSegregated funds carry higher fees than mutual funds, not lower.
Exam tip
Beneficiary designation → probate bypass, privacy, speed, creditor protection.
Common mistake
Claiming the seg fund death benefit is tax-free.
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
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