LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
When recommending a segregated fund for a client's TFSA, the agent should note that:
- AWithdrawals are taxable as income, since the segregated fund's allocations are taxed regardless of the plan
- BThe guarantees do not apply inside a TFSA, since the plan is governed by the Income Tax Act rather than insurance law
- CA TFSA cannot hold a segregated fund, since only securities and deposits are qualified investments
- Withdrawals reduce the guarantee proportionally, room is restored next year, and a spouse should be successor holder
Correct answer: D) Withdrawals reduce the guarantee proportionally, room is restored next year, and a spouse should be successor holder
TFSA rules and seg fund mechanics both apply. Successor holder status preserves the TFSA's tax-free nature.
Why the other options are wrong
- ATFSA withdrawals are tax-free.
- BSegregated fund guarantees apply inside a TFSA.
- CSegregated funds are eligible TFSA investments.
Exam tip
TFSA seg fund: guarantees apply; successor holder for spouse.
Common mistake
Naming the spouse as beneficiary rather than successor holder.
What this tests
CISRO competency component 3.1 — 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.