Part 3 Flashcards
Ahmed will turn 65 in a few months. He wants to continue working part-time and defer taking CPP/QPP and AS until age 70. Consequently, he wants to maximize his investment income for the next several
years and is willing to accept moderate risks. To this end, Ahmed would be willing to dispose of some-or all-of the investment assets he has outside of his RRSP to invest the proceeds in a Canadian dividend segregated fund. He owns the following investment assets outside his RRSP:
• $30,000 of a commodity mutual fund with an unrealized gain of $10.000
• $25,000 of a growth equity mutual fund with an unrealized loss of $10,000
• $40,000 in a TSA holding investments suited to his current risk tolerance
Which one of the following investment decisions will best meet Ahmed’s objectives?
A. Dispose of all three assets now.
B. Hold the equity fund until it recovers to his cost; dispose of the other assets now.
C. Dispose of both the commodity fund and the equity fund now, but keep the TSA.
D. Keep all three assets.
C. Dispose of both the commodity fund and the equity fund now, but keep the TSA.
Six years ago, Stéphane left his job as technical director at ADM Consultants in order to branch out on his own. He transferred the $48.000 pension amount accumulated under his former employer’s pension plan into a LIRA, investing it in a balanced segregated fund offered by NJ Insurance. Now 38, Stéphane is going through a divorce and would like to redeem his segregated funds contract in order to pay part of what he owes his ex-wife. What will NRJ Insurance do in this situation?
A. NRJ Insurance will liquidate the fund units and pay Stephane the full amount obtained
B. NRJ Insurance will liquidate the fund units and pay Stephane the amount obtained, minus the
applicable income taxes.
C. NRJ Insurance will not be able to carry out Stéphane’s request at this time because there are four
years left to go before the contract matures.
D. NRJ Insurance will not be able to carry out the request. Since the funds are held in a locked-in account Stéphane cannot cash them in right now.
D. NRJ Insurance will not be able to carry out the request. Since the funds are held in a locked-in account Stéphane cannot cash them in right now.
After 20 years at JL Inc., Dave, age 45, has agreed to take on new challenges at a rival company. The new company offers a higher annual income, better career opportunities, a DCPP and a DPSP. He would like to transfer the sums accumulated in his DBPP to his personal RRSPs.
To which one of the following accounts can Dave transfer the sums accumulated in his DBPP?
A. He can transfer them to his new employer’s DCPP.
B. He can transfer them to his new employer’s DPSP.
C. He can transfer them to a personal LIRA.
D. He can transfer them to his personal RRSPs.
C. He can transfer them to a personal LIRA
Insurance agent Denis has just completed an in-depth analysis of his client Michel’s situation. They agree that an investment in a segregated fund would meet Michel’s savings needs. Michel signed the application form completed by Denis and gave him a cheque for the deposit. Denis then handed Michel the Fund Facts and information folder. Denis sent the application along with the cheque to the insurer. What can be concluded about Denis’ obligations during the sales process?
A. Denis fulfilled his obligations, because he sent the application and cheque to the insurer.
B. Denis fulfilled his obligations, because he handed Michel the information folder and Fund Facts.
C. Denis did not fulfill his obligations, because he should have asked Michel to confirm in writing that
he Received the information folder and Fund Facts
D. Denis did not fulfill his obligations, because he should have reviewed the information folder and Fund Facts with Michel before he signed the application form.
D. Denis did not fulfill his obligations, because he should have reviewed the information folder and Fund Facts with Michel before he signed the application form.
Dee works for a large company in the travel and hospitality business. She has been with this company for 30 years and has contributed to their DCPP right from the start. Her DCPP account now holds $415,000. Dee is ready to retire and wonders how she can start drawing an income from her pension plan. What could she do to draw an income from her DCPP?
A. Transfer her pension account value to a LIRA.
B. Transfer her pension account value to a TSA.
C. Transfer her pension account value to an RRSP.
D. Transfer her pension account value to a LIF or a life annuity.
D. Transfer her pension account value to a LIF or a life annuity.
Phillip plans to purchase a term certain annuity, using a portion of his registered retirement funds to pay the lump-sum premium. He is single and without children, but would like his sister Vivienne to receive the remaining annuity payments in the event he dies before the contract matures. And if Vivienne were to predecease him, he would like the funds to pass on to his niece Hailey (Vivienne’s only child).
What must be done to ensure the contract is issued in accordance with Phillip’s wishes?
A. List Vivienne as co-annuitant and Hailey as primary beneficiary.
B. List Vivienne as owner and Phillip as annuitant.
C. List Vivienne as primary beneficiary and Hailey as contingent beneficiary.
D. List Vivienne as co-annuitant and Hailey as contingent beneficiary.
C. List Vivienne as primary beneficiary and Hailey as contingent beneficiary
Pam and Ben are married. They’re both 65 years old and retired. Ben’s annual income is $60,000 ($46,000 of which comes from his workplace pension) and his average tax rate is 25%. Pam, on the other hand, has an annual income of $38,000 ($24,000 of which comes from her own workplace pension); her average tax rate is 15%. Their accountant suggests they split their pension income to take advantage of
the tax break. Allocating $11,000 of Ben’s pension to Pam would bring both spouses’ average tax rate to 20%. How much less would Pam and Ben pay in taxes from splitting their pension income as suggested?
A. $400.
B. $1,100.
C. $1,800. D. $2,500.
B. $1,100.
Jonathan, age 50, is meeting with his insurance agent to discuss purchasing segregated funds for a small portion of his assets. He intends to leave this portion of his portfolio to a long-time friend who will be a named beneficiary. He lists his requirements: He wants a low-risk investment. He is concerned about costs. Which of the following is the most appropriate recommendation?
A. A fixed income government bond fund with a 75% maturity guarantee.
B. A money market fund with a 100% maturity guarantee.
C. A high yield corporate bond fund with a 100% maturity guarantee.
D. A Canadian equity fund with a 75% maturity guarantee.
B. A money market fund with a 100% maturity guarantee.
Claire, an entrepreneur, wants to set up a personal savings program. In addition to adequate diversification and access to professional managers, she would like for her savings to be creditor-proofed, insofar as possible, should her company have bad years. What kind of investment, from among the following, could be suitable for her?
A. Guaranteed investment certificates.
B.Exchange-traded funds.
C. Segregated funds.
D. Stocks
C. Segregated funds.
André set up a contributory pension plan for his employees as a way of recognizing their contribution to the company’s success and to win their loyalty. The employer pays 60% of the contributions and the employee, 40%. The vesting period is two years. Brigitte enrolled in the plan when she joined the company in 2016 but in 2017 left for a better job elsewhere. Which contributions did Brigitte keep when she left the company?
A. All the contributions made to her plan.
B. Her own contributions, plus 60% of the employer’s contributions.
C. Her own contributions only.
D. The employer’s contributions only.
C. Her own contributions only.
Réal runs a large manufacturing business with excellent net profits. He owns 60% of the shares and his daughter Justine owns the remaining 40%. There is a rumour going around that several management employees are thinking of joining a competitor that offers a pension plan. If true, this could be very problematic for the business. Réal and Justine therefore decide to set up a deferred profit sharing plan (DPSP) for the 18 management employees. Réal is President and CEO, while Justine is Vice-President, Sales. Justine’s husband Carl is the company’s HR Director. Audrey, whom Justine has been friends with since college, is Finance Director. Who among these individuals is eligible to enroll in the DPSP?
A. Only Audrey.
B. Audrey and Carl.
C. Audrey, Carl and Justine.
D. Audrey, Carl, Justine and Réal.
A. Only Audrey
Bernard, age 65, is divorced and has a 34-year-old daughter named Melanie. During his career, Bernard made contributions to his RRSP, which today is worth $300,000. He has just sold his home for $395,000 and has purchased a condo for $195,000. He places the profit on the sale of the home in an annuity, naming Melanie as his beneficiary. The annuity will provide Bernard with income until age 71, at which time he plans to convert his RRSP into a life annuity with a 20-year guarantee period. If Bernard dies before age 71, Melanie will receive the $200,000 invested in her first annuity, minus the payments her father received during his lifetime. What type of annuity did Bernard purchase at age 65?
A. An accumulation annuity.
B. A term certain annuity.
C. A joint and last survivor annuity. D. An impaired life annuity.
B. A term certain annuity.
Prem is reviewing his estate plan. He wants to allocate a portion of his investment capital to an adult son from a previous relationship using either a mutual fund or a segregated fund. He is concerned that his current spouse-or the children they have together-would challenge any bequest made to his son in his will. What unique feature of segregated funds will be most important to Prem in this regard?
A. Payments to a named beneficiary bypass the estate
B. Prem’s investment is protected through Assuris.
C. Prem has a right of rescission.
D. Death benefit is subject to probate fees.
A. Payments to a named beneficiary bypass the estate
Marielle, age 63, has been retired for two years. Including government benefits, she receives a monthly retirement income of $4,000. She is debt free, makes the maximum permitted TSA contribution and has an RRSP portfolio of $170.000 that matches her investor profile. Following the death of her husband, Marielle received a life insurance benefit of $100,000. She would like to invest the money in a segregated fund and name her grandchildren-all of majority age-as beneficiaries. She would like a fund that offers a mix of growth and capital security. Which of the following segregated funds would be most suitable for Marielle?
A. A money market fund.
B. A bond fund.
C. An industry -specific fund.
D. A balanced fund.
D. A balanced fund.
Cameron has invested in a Canadian equity segregated fund in a non-registered account.
Which of the following types of investment taxation will he be subject to based on this investment?
1. Interest income
2. Dividend income
3. Capital gains income
4. Return of capital
A. 1 and 2.
B. 1 and 4.
C. 2 and 3.
D. 3 and 4.
C. 2 and 3.
