Part 1 Flashcards
Ali asks Marcel, a licensed insurance agent, to review his segregated fund portfolio and calculate how much he will receive at the maturity date. Ali owns one IVIC which holds three segregated funds. The maturity date of the contract is next week and the maturity guarantee is 100%. Ali made the investment 10 years ago through an agent who has left the business. The total premium was $30,000.
The following table shows the amount Ali invested in each of the funds and their current market values.
Funds held under the contract
XYZ Technology Fund XYZ Asia-Pacific Fund XYZ U.S. Growth Fund
Invested $10,000 $10,000 $10,000
Market value $6,500 $9,000 $17,000
Assuming there are no changes in market values at the maturity date, what is the amount that Ali will receive?
A. $30,000
B. $37,000
C. $33,500
D. $32,500
B. $37,000
Jordan has a registered retirement savings account and has invested in an equity segregated fund within the account. The fund earns income in the form of capital gains and Canadian dividends; it also reports capital losses. What is the tax treatment of Jordan’s registered retirement savings?
A.Capital gains and dividends receive preferential tax treatment when Jordan reports them.
B.Jordan receives the income as interest, which is deferred until withdrawal.
C. Capital gains and dividends are allocated to Jordan annually but he does not report them.
D. Jordan does not report annually the interest income he receive
A.Capital gains and dividends receive preferential tax treatment when Jordan reports them.
In the past, Justin purchased a single life annuity contract ($100,000 value) with no guaranteed period and no survivor benefit. He is now hospitalized for a serious illness. If Justin were to pass away, who could make a claim on behalf of his estate as regards the annuity?
A. Only the executor of Justin’s estate could make the claim.
B. Only Justin’s spouse, as the contingent annuitant, could make the claim.
C. Any person to whom Justin has given a power of attorney could make the claim.
D. A death claim could not be made for the annuity Justin purchased.
D. A death claim could not be made for the annuity Justin purchased.
Monique holds the position of Vice-President, Public Relations, at a private car parts manufacturer. She participates in a deferred profit sharing plan (DPSP) offered by the employer. Now 69, Monique is still motivated and energetic and plans to work for another three years. When she retires at age 72, she would like to transfer the funds from her DPSP to an individual RIF. However, the plan sponsor explains that such a transfer will not be possible. Why?
A. The transfer must occur before the end of the year in which Monique turns 70.
B. The transfer must occur before the end of the year in which Monique turns 71.
C. DPSP funds can only be transferred to a group RRSP.
D. DPSP funds can only be transferred to a group RRIF,
B. The transfer must occur before the end of the year in which Monique turns 71
Yves has worked for a company with a DBPP for 37 years. The plan states that his retirement pension cannot begin before age 65. It is a very generous pension plan that will provide him with a large and secure retirement income. While Yves has worked, he has used his annual bonus every year to buy blue- chip shares in his RRSP. At age 60, Yves decides to retire and would like a dependable income to pursue his dreams. He has accumulated significant savings in his RRSP. What can his licensed life agent suggest to replace Yes’s income between ages 60 and 65?
A. Sell the shares in the RRSP needed to buy an immediate five-year term annuity.
B.Use the shares as collateral for a loan that will be large enough to fund his income needs
for five years.
C.Commute the value of his pension, transfer the funds to a LIF and buy an immediate life annuity
D.Start CPP/QPP at age 60 at the reduced rate and begin withdrawals from his DBPP
B.Use the shares as collateral for a loan that will be large enough to fund his income needs
Shareholder-manager of a large firm, Germaine set up a group SP for her business several years ago. As the company has been very successful, she now wants to set up a second group savings plan for her employees. She would like for this new plan to allow employees to withdraw money at any time without incurring additional income tax or other penalties. Which one of the following plans would best fit
Germaine’s requirements?
A. A DBPP.
B. A group TFSA
C. A PRPP.
D. A DPSP.
B. A group TFSA
Lothar retired last month at age 55. For 30 years, he contributed to a DCPP at work. He also has: an RRSP account (set up by his financial advisor Amy) that he contributes $500 to every month, a line of credit linked to the value of his mortgage-free home, and $3,000 in a savings account at the bank. In their first meeting since his retirement, he asks Amy what changes he must make to begin drawing a retirement income. Which one of the following options would be best suited to Lothar’s situation?
A. Stop his RRSP contributions and close his line of credit.
B. Transfer his pension funds to his RRSP and apply for CPP/QPP.
C. Stop his RRSP contributions and transfer his DCPP funds to a LIF or an annuity.
D. Transfer his pension funds to a LIRA and apply for CPP/QPP.
D. Transfer his pension funds to a LIRA and apply for CPP/QPP.
Irwin recently retired from thirty years of service with a trucking company. He has a lump sum of money in a LIRA from a prior employer that he wishes to purchase an annuity with, to cover the costs of his
personal health insurance once his group coverage runs out in four months’ time when he turns 65. Although he appreciates the reduced risk an annuity provides, he would like to see the payments increase gradually over time, because he is sure the rates on his private health coverage will steadily rise in years to come. What type of annuity would best meet Irwin’s needs?
A. A registered variable income annuity.
B. A non-registered variable income annuity.
C. A registered indexed income annuity.
D. A non-registered indexed income annuity.
C. A registered indexed income annuity.
Jamil, a resident of Ontario, plans to put a significant amount of cash in a long-term investment. His main concerns involve his chronic health issues. He has been hospitalized recently and while he is recovering, he is still off work. He intends to invest his money for income either in the XYZ dividend mutual fund or in a segregated fund whose underlying investments are units of the XYZ mutual fund. He intends for his entire estate to go to his two adult children. What is, for Jamil, the key advantage of the segregated fund over the XYZ mutual fund?
A. Absence of medical underwriting.
B.Exemption from probate fees.
C.Lower management fees.
D.Tax treatment of dividend income.
B.Exemption from probate fees.
Question 16:
David and Suzan are meeting with their life licenced insurance agent to discuss transferring David’s GRRSP into an annuity. They have done some research into various investment options and determined
that an annuity is what they feel most comfortable with. Still, they are confused about the different kinds of annuities available. They tell their insurance agent that the income from the annuity is meant to fund their basic living expenses, and that they do not expect this amount to diminish very much in the event either of them passes away. What type of annuity would best suit David and Suzan’s needs?
A. A T-90 annuity on each of their lives.
B. A joint and last survivor annuity.
C. A life annuity on each of their lives.
D. A life annuity on David’s life with a 15-year guarantee period.
B. A joint and last survivor annuity.
