ALL Flashcards
How are payments from a life insurance policy taxed?
a payment received as proceeds of a life insurance policy is not taxable
Which statement about critical illness insurance (CII) is correct?
a.
CII is not based on the insured’s ability to work.
b.
The benefit under CII is paid out on a monthly basis.
c.
The benefit paid under CII is proportionate to the severity of the insured’s condition.
d.
CII serves to manage the risk of contracting terminal diseases.
A.
What are the steps of a retirement income needs analysis
- Determine retirement goals
- Calculate how much a client will need to meet the retirement objectives.
- Determine the sources of income at retirement.
- Adjust finances to meet retirement goals.
Describe how you and your clients can use the projected cash flow statement as a planning tool.
To control spending, ensure liquidity and implement the financial plan.
What ethical principle requires a planner to attain an adequate level of knowledge and skill and make a commitment to continuous learning and professional development.
Competence
How much of the OAS will need to be repaid if the income is $87000 the OAS will be clawed back if over $77580
$87000-$77580 X 0.15= $1413.00
If a pensioner receives GIS and earns $4000 in income, how much will the GIS be reduced?
For a single, widowed, divorced or separated pensioner, the maximum monthly supplement is reduced by $1 for each $2 of other monthly income. There is an exemption for employment earnings to encourage participation in the labour market. The first $3,500 of earnings is fully exempt. ($4,000 - $3,500)/2
What are attribution rules?
The attribution rules provide that where property, including money, is transferred or loaned, directly or indirectly, by one spouse to another, then all income or loss from the property and any capital gain or loss on the disposition of the property will be attributed back to the transferor spouse
Which legislation deals with the custody of children
Married then the divorce act
Common Law or Unmarried then the Children’s Law Reform Act
What is a Constructive Trust
a constructive trust can be awarded by the courts to remedy a situation where one party is unjustly enriched to the deprivation of the other
What is a “proprietary award”
a court order that indicates one party receiving proportional ownership
What is ILA?
Name 2 characteristics of ILA
Independent Legal Advice
- not a formal requirement however it is recommended so that one party cannot overturn the contract in the future claiming they did not understand their rights
- ILA should always be provided to both parties, even if only one part pays for it
What are the 4 Life Cycle Approach?
- Accumulation
- few assets, significant debts
- income is low
- longer time horizon, portfolio growth - Consolidation
- Income exceeds expenses
- Portfolio shifted to more fixed income - Financial Independence
- Living expenses financed through investments and pension income
- Cant afford losses in the portfolio because they are no longer working
- More of the portfolio should be in fixed income and stocks should be blue chip - Gifting
- Sharing wealth with families and charities
- Time horizon switches from their own needs to be the needs of those receiving the gifts
What is fundamental analysis?
What is technical analysis?
Fundamental Analysis
- measures the future value of a stock based on many different factors including interest rates, the economy, industry conditions, the financial strength of the company
- study everything except historical stock prices when projecting future prices
Technical Analysis
- study of historical stock prices and stock market behaviour in an attempt to identify recurring patterns in the data
- a technical analyst studies numbers, price movements, trading volume, data on the number of stocks that rise in prices versus the number of stocks that fell in price
How far back can the courts go when considering retroactive child support orders?
3 years
How to conduct a capital needs analysis?
- Prepare asset inventory with asset values that would be part of the deceased estate
- Determine estate obligations at death based on immediate cash needs of survivors
- Determine the amount of capital to provide income needs for the survivors
After conducting a capital needs analysis for her clients, Anastasia and Denys, Padme, an advisor, estimates they will have $20,000 in final expenses, and need net monthly income for their survivors of $3,000. They currently have investible assets of $425,000. Assume a discount rate of 4.5%. Calculate the additional capital they will need.
(3000 x 12)/4.5% = $800,000
$800,000 + $20,000 - $425,000 = $395,000
Charley’s employer has opened a Retirement Compensation Arrangement (RCA) for him. Calculate the refundable tax that Charley employer must pay if $25,000 in contributions are made to the plan and $15,000 in income is earned in the RCA in that year. No benefits are paid out in the taxation year.
The RCA is a taxable trust set up by an employer to hold funds for an employee’s retirement. The employer pays tax—which is refundable when the money is eventually paid out—at 50% of all contributions made to the RCA during the year plus 50% of the returns (income and capital gains) earned for the year. In this example, Charley’s employer would pay ($25,000+$15,000) x 50%= $20,000
Guido, a Canadian resident, dies owning US$750,000 in vacation properties in Maine. His total assets worldwide are US$3,500,000. Calculate his U.S. estate tax payable.
Under the Canada-U.S. tax treaty, if an individual’s worldwide assets are below the exempt amount, there is no U.S. estate tax payable regardless of the value of the U.S. assets. Guido is below the exempt amount of US$11.18 million with worldwide assets of $3,500,000. He will still be subject to Canadian estate and other taxes.
Identify a personal tax-sheltered investment vehicle that allows spouses to split income at retirement.
A. Spousal Registered Retirement Savings Plan.
B. Registered Retirement Savings Plan.
C. Registered Pension Plan.
D. Deferred Profit Sharing Plan
A Deferred Profit Sharing Plan (DPSP) is not a personal investment vehicle, and it does not allow for income splitting at retirement; a Registered Pension Plan is not a personal investment vehicle; and a Registered Retirement Savings Plan does not allow for income splitting. However, a Spousal RRSP does allow for income splitting at retirement where the spouse with the lower marginal tax rate withdraws and pay taxes on the amount withdrawn.
Sionna has $30,000 invested in preferred shares in a company with a 5% dividend. She is thinking of buying a car worth $30,000 and has been offered a loan at 3.7%. Her marginal tax rate is 30% and she will not incur a capital loss or gain if she sells the shares.
A. She should take the loan as the before-tax cost of the loan is 1.7% less than the return on the preferred shares.
B. She should sell the shares as she would require a before-tax return of 7.14% on her investment to equal the interest paid on the loan.
C. She should sell the shares as she would require a before-tax return of 5.29% on her investment to equal the interest paid on the loan.
D. She should take the loan as the before-tax cost of the loan is 2.59%, less than the return on her preferred shares.
C. Loan Rate/(1-MTR) 3.7%/(1-30%) =0.037/(1-.3) =0.037/(.7) =5.28%
What happens if a principal terminates an agency relationship?
if a principal terminates an agency relationship, the principal may continue to be bound by the acts of the former agent, under the legal concept of apparent authority. The principal should therefore notify all persons with whom he does business that the former agent no longer has authority to contract on his behalf
What is excluded from errors and omission coverage
Certain acts are excluded form coverage, such as: fraudulent or criminal acts; services not stated in the policy; and Warrantees or guarantees for future performance
What is a salary deferral arrangement
an arrangement where they can defer a portion of their salary annually to fund a leave of absence in the future. This type of structure arrangement helps employees save in an organized and planned manner, and has no cost to the employer as it is completely employee funded. It allows employees to take a self-funded leave of absence with company approval in the future.
What does the Family Law Act allow as exclusions for calculating net family property?
- Damages or a right to damages for personal injuries, nervous shock, mental distress, or loss of guidance, care, and companionship, or the part of a settlement that represents those damages.
- Proceeds or a right to proceeds of a life insurance policy.
Mary realizes a $250,000 gain on sale of a property. She is able to elect to defer the recognition of the gain. Calculate the minimum amount that must be included cumulatively in income in the second year after the sale.
A taxpayer claiming a reserve for proceeds not due until after the end of the year must include, cumulatively, at least one-fifth (1/5) of the gain times the number of taxation years since the disposition in income. In this example, 1/5 x 2 x $250,000 = $100,000.
What should be done if someone cannot pay for child support payments
payor may issue a Motion to Change to avoid an accumulation of arrears and enforcement issues
