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Financial Planning 1 Course > Chapters 6 & 7 - Retirement/Wills & POAs > Flashcards

Chapters 6 & 7 - Retirement/Wills & POAs Flashcards

1
Q

What would reduce earned income for the purpose of calculating RRSP contribution room?

A

Annual union fees, professional fees, net business/rental losses, deductible employment expenses, deductible alimony or maintenance allowance paid

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2
Q

For how many years do you have to repay the LLP?

A

10 years

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3
Q

When is the first LLP repayment due?

A

Within 60 days of the end of the 5th year following the 1st withdrawal (or failure to complete a course)

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4
Q

How much can you withdraw under LLP?

A

Up to $10k per year over 4 years to a max of $20K

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5
Q

What are the 4 common formulas used to determine DBPP benefits?

A

Flat benefit
Career average
Final or best average
Combination of benefit

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6
Q

How do you calculate the pension adjustment for a DCPP?

A

Total employer and employee contributions to the plan

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7
Q

How do you calculate the pension adjustment for a DBPP?

A

(Benefit accrual for the year x 9 ) - $600

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8
Q

What is a PSPA?

A

Past service pension adjustment. Allows an employee to make catch-up contributions to their pension plan.

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9
Q

What is the Pension Adjustment Revesal (PAR)?

A

Restores an individual’s RRSP contribution room when a member terminates their membership in a benefit provision of an RPP or DPSP.

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10
Q

When would a PAR be applied under a DP plan?

A

When the individual receives a termination benefit that is less than the individual’s total PAs and PSPAs.

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11
Q

When would a PAR be applied under a DC plan or under a DPSP?

A

Only if the individual is not vested at termination.

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12
Q

How does unlocking work?

A

One time 50% unlocking may be completed where funds are transferred from a LIRA to a LIF. The other 50% must remain in the LIF and the annuitant must be 55 years old. From there, it may qualify for full unlocking (form 5) under the small balance rule.

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13
Q

How is the CPP contribution amount determined for self-employed workers?

A

Based on net business income, after expenses.

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14
Q

What is the YBE?

A

Year’s basic exemption is $3,500, no contributions before $3,500 of income.

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15
Q

When will the PRB be mandatory?

A

Post-retirement benefit - contributions to CPP must continue to be made if receiving CPP benefits and between the ages of 60 and 65.

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16
Q

What is the Quebec equivalent of the PRB?

A

Retirement pension supplement.

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17
Q

How old must children be to be able to receive benefits for a disabled parent?

A

Under the age of 18 or under 25 if full-time student.

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18
Q

How much is the OAS clawback?

A

15 cents for every dollar of NET INCOME in excess of the yearly determined limit.

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19
Q

Who can receive the Allowance and what is it?

A

Provides a benefit to 60-64 year olds who are spouses/CL partners of GIS recipients.

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20
Q

What is a holograph will?

A

Entirely handwritten by the testator without assistance from any mechanical device, signed by the person making it, with or without witnesses present.

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21
Q

What is a notarial will and how does it differ from a conventional or formal will?

A

Typed and executed in the presence of one notary, the testator and a witness. This applies to the province of Quebec.

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22
Q

What is an affidavit of execution?

A

If filed it means that, in the absence of other objections, the court can usually be satisfied that the will was properly signed and that the formalities of execution were all observed.

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23
Q

What is an international will?

A

Made in compliance with a convention that provides a uniform law on the form of an international will. Valid in every jurisdiction in which the convention is in ofrce.

24
Q

What is a domicile?

A

The jurisdiction to which an individual has the strongest link or connection and, usually, a present intention to remain in or return to.

The domicile where a will was executed determines how the estate is administered. The domicile at the time of death determines which intestate laws might apply.

25
Q

What is testamentary freedom?

A

The freedom to will property away.

26
Q

Which assets cannot be willed away in some common law provinces?

A

Assets held as a joint tenant with rights of survivor ship must go to the survivor. Shares of a corporation may also be subject to prior contractual obligations such as a shareholder’s agreement which would restrict to the right of the owner to bequeath shares by the will.

27
Q

When may a court rule that a will be ignored?

A

If the will fails to make adequate provision for the testator’s spouse and dependents.

28
Q

What can a surviving spouse claim from an estate?

A

An equalization payment (compensatory allowance in Quebec) - if the surviving spouse feels the will has not treated them fairly or that the testator has not left them enough income or capital to live according to their usual standards. Other dependents can also make claims against the estate.

29
Q

What are the 3 tests to determine whether a court will consider awarding support?

A
  1. Was the deceased providing or obligated to provide support to the dependent?
  2. Did the deceased fail to provide adequately for the dependent (by will or otherwise)?
  3. Is the dependent in need of support?
30
Q

What happens if a subsequent will is created without adding a revocation clause?

A

In Quebec, usually only the latest will is considered valid. In other provinces, any conflicts between the two wills would cause the latter to prevail. In areas with no conflicts, both wills may be valid and the legacies set out under both could be payable.

31
Q

What is the impact of marriage on a will?

A

All provinces (except Quebec) have statutes where a marriage subsequent to the preparation of a will results in a revocation of the will. In Ontario, NS, and NB, a spouse can elect to have the pre-existing will of the other spouse not revoked.

32
Q

What is the impact of divorce on a will?

A

Divorce does not generally revoke a will, but in certain provinces (Ontario, BC, Sask, MB, PEI), bequests, legacies, and executorships in favour of the spouse are formally revoked. In Quebec, legacies in favour of the former spouse prior to divorce are revoked per the Civil Code.

33
Q

What is the impact of legal separation on a will?

A

Does not affect the will in all provinces except BC. If a new will is not made and the testator dies, the estranged spouse would inherit under the will.

34
Q

What is a codicil?

A

Legal document that can revoke, modify, or add provisions to a will without having to redraft the entire will.

35
Q

What is a memorandum?

A

A list of objects and their beneficiaries, can be referenced in the will. Must be in existence before the will is signed and then incorporated by reference into the will.

36
Q

What is the difference between alterations and interlineations?

A

Alterations are any changes made in the will. Interlineations refer to the insertion of words between the existing lines of a will. Neither is permitted after a will has been formally signed and executed.

37
Q

What happens if certain words in a will have been deleted or erased?

A

The will is still valid, whatever words are readable will constitute the valid will.

38
Q

When might it be the best choice to use a corporate executor such as a trust company?

A

Particularly so if trust assets are of significant value or if any resulting trust is expected to last for a number of years.

39
Q

How much is the usual compensation for executors?

A

Regardless of whether the executor is a trust company, lawyer, family member, etc., fees are usually about 2.5% of the value of the assets realized.

40
Q

What does the provincial court select if a person dies intestate?

A

An administrator to administer the estate and a guardian for any minor dependents.

41
Q

What is the order of priority for entitlement of being appointed administrator if an individual dies intestate?

A 
Surviving spouse
Child
Grandchild
Father & Mother
Brother & sister
42
Q

What happens if a person with no next of kin dies intestate?

A

Provincial government office may apply to administer the estate. In some cases, creditors may be appointed.

43
Q

What is probate (definition)?

A

Legal process by which the courts confirm a person’s will to be his/her valid last will and testament.

44
Q

Which type of will does not need to be probated?

A

Notarial wills.

45
Q

What are the steps for having a will probated?

A

Once the FMV of an estate has been reasonably ascertained, the executor must apply personally or through a lawyer for Letters Probate from the appropriate court.

46
Q

What are Letters Probate?

A

Essentially a court order declaring who the executor is and that the will is the effective one.

47
Q

Which documents are needed for probate?

A

Last Will and Testament
Affidavit of Value of the estate
Affidavit of Execution of Will (by one witness confirming that the formalities of signing were observed)

48
Q

What may a financial institution be willing to accept in lieu of Letters Probate if an amount is relatively small (under $30K)?

A

Letter of indemnity or probate bond from the executor. Letter of indemnity is an enforceable promise to reimburse the FI from all costs, claims, etc that may be triggered if the will turns out to not be valid. A probate bond is a promise by a bonding company to do the same.

49
Q

What is another term for a living will?

A

Personal care powers of attorney

50
Q

Who may endorse living wills and advance care directives?

A

The Canadian Medical Association. A doctor should also be consulted in drafting one and instructions should be very specific.

51
Q

What can POAs be granted over?

A
  • A person’s property

- Personal care

52
Q

What are the 4 types of wills?

A

Holograph
Conventional
Notarial
International

53
Q

What is the term for a POA in Quebec?

A

Mandate

54
Q

What are the two “mandates” that may be required?

A
  1. Mandate (one that is effective while the donor is capable)
  2. Protection mandate (one that becomes effective if the donor becomes incapacitated)
55
Q

What are the 2 main benefits for naming 2 POAs?

A
  1. They can audit each other

2. If one is away or becomes incapacitated, the other can step in with no delay

56
Q

Who is a POA accountable to?

A

The court, rather than the grantor, once the grantor is incapacitated.

57
Q

What is a possible negative consequence of naming 2 POAs?

A

May result in deadlocks if the attorneys can’t agree.

Financial Planning 1 Course (7 decks)

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