BCC Case Prep

Question 1

What is regular occupation?

Answer 1

Most used definition. Provides benefit as long as insured can’t do a job that doesn’t fit their range of skills

Question 2

What is own occupation?

Answer 2

Most generous. As long as you can’t do your job, you’ll get the benefit. Ex. Surgeon

Question 3

What is any occupation?

Answer 3

Most restrictive. No benefits if you can do any job you are qualified for. Normally used in lower occupations.

Question 4

What are some benefits of the RDSP

Answer 4

-Free bonds
-tax splitting from parents to child
-beneficiary might not be able to save on their own
-will not interfere with provincial
Benefits

Question 5

How are gains on stock options a treated?

Answer 5

Same as capital gains, but Proceeds-ACB(which is purchase price plus benefit) then had 50% stock deduction

Question 6

What are the benefits of divesting stock options?

Answer 6

Diversification, locking in a gain

Question 7

What happens when you transfer a corporate policy to personal ownership?

Answer 7

Policy is taxable as passive income to corporation (CSV-ACB)

Question 8

What is the taxable gain for the individual when transferring a policy from corporation to individual?

Answer 8

Taxed as shareholders benefit on FMV. Unless he put any amount towards it then that would reduce the benefit.

Question 9

What assets are hard to categorize?

Answer 9

• CSV
• balanced mutual funds/ETFs
• preferred shares

Question 10

How do you calculate the real rate of return?

Answer 10

Return-inflation/

1+inflation

Question 11

What does Assuris cover for disability benefits?

Answer 11

85% when benefit is higher than 2000/m.

-Covers the higher amount

Question 12

How do tax credits on charitable donations work?

Answer 12

15% on first $200
29% on amount above
-can be carried forward up to 5 years

Question 13

How do you determine the medical expense deduction?

Answer 13

The lesser of the max or 3% of your income

Question 14

What are the key considerations of a spousal Loan?

Answer 14

• need a loan agreement (in case of marital breakdown)
• must charge CRA prescribed interest rate
• person getting funds can deduct interest
• person receiving interest would include it as income

Question 15

How to calculate taxes/credit on dividend?

Answer 15

-dividend is paid
Dividend is grossed up
Tax paid on dividend (MTR)
Dividend tax credit applied on grosses up amount 
After tax return (tax-credit)

Question 16

What does LTD’s benefit calculation include?

Answer 16

Salary only, not dividends

Question 17

What does LTD all-sources maximum mean?

Answer 17

If the plan is not taxable: take after tax monthly income and x 85% =can’t go Over this amount

Question 18

How does someone who has a corp obtain more disability insurance?

Answer 18

• Replace dividends with salary.
• replace group plan with individual coverage
• change to an insurer that would cover dividends

Question 19

What event would require a buyout?

Answer 19

• death
• disability or illness
• failure to perform
• morals
• loss of capacity
• marital breakdown
• personal bankruptcy

Question 20

Why is purchase price valuation important in a buy sell agreement?

Answer 20

To get proper valuation of the business. Hire CBV to value.

Question 21

Why is timing of purchase important in a buy sell agreement

Answer 21

Makes it clean and sets a common timing for certain events

Question 22

Why is source of funds important in a buy sell agreement

Answer 22

To determine where the funds will come from. Insurance, loan agreement, third party borrowing

Question 23

Why is tax handling important in a buy sell agreement

Answer 23

The amount paid to the departing shareholder can be from capital dividend, eligible, non Eligible, return of capital

Question 24

What happens when you transfer property into a trust?

Answer 24

Think of it as if there’s no trust:
-if it’s staying in the control of the same person: no tax
-if there’s an opportunity for a spousal rollover: no tax
Needs to be over 65

Question 25

What’s the 21 year rule?

Answer 25

All capital property is deemed to be disposed.

If you’re over 65 this doesn’t apply

Question 26

What happens when the last interest beneficiary dies in the trust?

Answer 26

The trust pays tax on the last deceased on their terminal return

Question 27

What happens to the death benefit of life insurance paid to the trust?

Answer 27

Paid out to beneficiary tax free

Question 28

What is income interest in a trust?

Answer 28

When a beneficiary receives income generated in the trust

Question 29

What is capital interest in the trust?

Answer 29

Gives the beneficiary the right to the capital in the trust. Cars, buildings, bank account

Question 30

What is life interest in a trust?

Answer 30

Beneficiary has access to to the funds in the trust during their lifetime.

Question 31

What is remainder interest in a trust?

Answer 31

A beneficiary only has access to the funds if the beneficiaries with life interests have died

Question 32

How do the grants work for an RESP?

Answer 32

• 2,500 contribution gets 20% ($500)
• for additional grants:
• if income is less than 100k, it’s 30% on first 500, and 20% on next 2000
• if income is less than 50k, it’s 40% on first 500 and 20% on next 2000

Question 33

How do grants work for RDSP?

Answer 33

Family net income over 100k=100% so 1000 gets 1000
-family net income less than 100k, 300% on first 500
And 200% on next 1,000

Question 34

When do you normally use BGN ‘mode for TVM?

Answer 34

Lease payments, mortgages

Question 35

What are the financial planning steps?

Answer 35

1. Letter of engagement
2. Discovery
3. Calculate retirement needs
4. Recommend products

Question 36

How do you calculate GDS?

Answer 36

Mortgage or rent + property taxes+heating+50% condo fees/gross monthly family income

-upper limit is about 30-35%

Question 37

How do you calculate TDS?

Answer 37

Debt payments+car payments+same as GDS/family net monthly income

Question 38

How to calculate how much salary you need for a net amount?

Answer 38

Net amount/(1-tax rate)

Question 39

What are the rates of depreciation for passenger vehicles, buildings, and most other things?

Answer 39

30%
4%
8%

Question 40

What is the Canada learning bond for an RESP?

Answer 40

Modest family income

• max 2000 per child
• for children born 2004 or later
• 500 when the account is opened and 100 per year until child turns 15

Question 41

What are some benefits to a fixed rate mortgage?

Answer 41

• More terms available

- eliminate interest rate risk

Question 42

What are some benefits of variable rate mortgages?

Answer 42

Usually less expensive as more is paid towards principal

-has option to convert to fixed