LLQP Segregated Funds & Annuities · Component 3.2 · 25% of the exam
When funds arrive from the sale of a non-registered mutual fund to buy a seg fund, the implementation should:
- ADeduct the deposit from the client's income, since money moved into an insurance contract is tax-deferred
- BSet tax aside, since the sale of one fund to buy another of the same type is not a disposition
- Ensure the client knows the gain or loss on the sale and record source of funds; the deposit is not taxable
- DReport the transaction to the police, since a large sale followed immediately by a purchase is a suspicious pattern
Correct answer: C) Ensure the client knows the gain or loss on the sale and record source of funds; the deposit is not taxable
Implementation includes confirming the client understood the tax effect of funding the deposit.
Why the other options are wrong
- ANon-registered deposits are not deductible.
- BThe sale has tax consequences.
- DIt is not a reporting event on its own.
Exam tip
Funding from non-registered sales: confirm tax awareness; record source.
Common mistake
Surprising the client with a tax bill from the funding sale.
What this tests
CISRO competency component 3.2 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 3
- A client's spouse must sign for:
- When the insurer requests additional information after the application (for example, source of wealth for a large deposit), the agent should:
- The implementation of a recommendation involving a switch from one seg fund to another within a contract requires:
- A client wishes to designate a charity as beneficiary of a segregated fund. Implementation should:
- For a deferred annuity implemented for a client, the agent should confirm:
- The agent's record of the implementation should be retained:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.