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Sheldon's investment portfolio is comprised of both registered and non-registered accounts. He is aware that his holdings in registered accounts are tax-sheltered, but any investment income in his non-registered account will be taxed. Therefore, Sheldon is looking for the most tax-efficient option for his non-registered investments.
Which of the following segregated funds will be of most interest to him from a tax perspective?
a) Real Estate Fund
b) Canadian Bond Fund
c) Canadian Dividend Fund
d) Balanced Fund โโ(correct) Canadian Dividend Fund
Rationale:
Dividends from Canadian corporations are taxed at a lower rate than interest income and foreign dividends. As such, the Canadian Dividend Fund is the most tax-efficient fund among the listed options. (Refer to Section 2.2.6)
Darrin is single and wants to invest some money to pass on to his children. He has decided on a segregated fund for the investment. He does not intend to use any of the invested money during his lifetime. He intends to continue investing in the segregated fund until his death.
Which of the following features of the segregated fund is/are the most important for Darrin?
a) Maturity guarantees and bypass of probate
b) Death benefit guarantee and resets
c) Creditor protection
a) His clients can also make claims directly through the insurer.
b) His clients can complete the needed forms online for faster processing.
c) Claims can be made by a child if the beneficiary has passed away.
d) The death benefit will not pay out less than 10 years from the start date. โโ(correct) His
clients can also make claims directly through the insurer.
Rationale:
Dennis should mention to his clients that he can help them through the claims process but they can also deal directly with the insurer. This is important because Dennis may not be able to assist them when they are ready to make a claim and the clients need to know that they will still be able to access their investment. (Refer to Section 6.4.1.1)
Louise has been working for the same company for eight years. She has a successful and stable career and is looking to purchase her first house. She wants to put as much money as possible on a down payment, without having to pay income taxes, in order to lower her overall interest cost
on the mortgage. Louise has accumulated savings in a Group Registered Retirement Savings Plan (GRRSP) with her employer, who also contributes to a Deferred Profit Sharing Plan (DPSP) on behalf of its employees. Additionally, she has an individual Tax-Free Savings Account (TFSA).
From which account(s) can Louise make withdrawals for the purchase of a house, without triggering income taxes?
a) TFSA
b) GRRSP through the Home Buyers' Plan (HBP) and the TFSA
c) GRRSP and DPSP through the HBP and the TFSA
d) GRRSP through the HBP โโ(correct) GRRSP through the Home Buyers' Plan (HBP) and the TFSA
b) Since the $5,000 withdrawn represents investment gains, it cannot be re-contributed, but Tim can contribute $5,500 as early as January 1 for the next calendar year.
c) Tim can combine his re-contribution of $5,000 and next year's contribution of $5,500 (for a total of $10,500) as early as January 1.
d) Tim can contribute $5,500 as early as January 1, and re-contri โโ(correct) Tim can combine his re-contribution of $5,000 and next year's contribution of $5,500 (for a total of $10,500) as early as January 1.
Rationale:
Any amount withdrawn from a TFSA can be re-contributed in any year following the year of withdrawal. Therefore, the earliest Tim can re-contribute the amount withdrawn is January 1 of the following calendar year. He does not have to wait a full year from the date of withdrawal. Furthermore, as a new calendar year starts, that year's maximum contribution can be made ($5,500 in this case). (Refer to Section 4.7.3.2)
Johnson is a member of a Group Registered Retirement Savings Plan (GRRSP), to which he and his employer each contribute 5% of his earnings. He is planning to leave his employer for a higher paying job. Johnson wonders whether his GRRSP has vested and whether he has ownership rights on the employer's contributions.
When do contributions to GRRSPs vest?
a) Two years
b) Four years
c) 30 days
d) Immediately โโ(correct) Immediately
Rationale:
Contributions to a GRRSP vest immediately. (Refer to Section 8.2.2.0)
London Pharma Inc. has a group plan for its employees and their human resources manager, Laura has gone on vacation. Laura's substitute, Amy does not know for which of the following situations London Pharma is responsible:
Rationale:
London Pharma Inc. is responsible for taking care of Karl, Julie and Aman's issues. The group administrator's responsibilities include:
Enrolling new members
Ensuring contributions are met
Processing withdrawal requests
The administrator is not responsible for investment choices in a DCPP or providing additional benefits to employees that are not included in their plan. (Refer to Section 1.3.11.1, 1.3.11.2)
Maria has a Guaranteed Lifetime Withdrawal Benefit (GLWB) plan that guarantees her a payment of $1,500 per month. An unexpected event occurs in Maria's life and she needs to withdraw more than what she is already receiving from her GLWB.
Which of the following statements is true?
a) Because the GLWB payments are guaranteed for life, Maria cannot withdraw an additional amount from the plan.
b) Maria can withdraw an additional amount from the GLWB plan and the guaranteed lifetime payments will continue to be $1,500 per month.
c) Maria can only withdraw an additional amount from the GLWB plan in a year when the market value of the plan increases.
d) Maria can withdraw an additional amount from the GLWB plan, but the guaranteed lifetime
payments will be lowered as a result of the withdrawal. โโ(correct) Maria can withdraw an
additional amount from the GLWB plan, but the guaranteed lifetime payments will be lowered as a result of the withdrawal.
Rationale:
A GLWB plan permits extra withdrawals exceeding the guaranteed income payments. However, such extra
Stacey is reviewing the current investments of her new client, Mario. Stacey's company recommends the following asset mix for an investor with a low-risk profile:
a) His overall portfolio is not in line with the requirements of a low-risk investor.
b) His overall portfolio is in line with the requirements of a moderate investor, but his registered portfolio is aggressive.
c) His overall portfolio is in line with the requirements of a low-risk investor, but โโ(wrong)
His overall portfolio is in line with the requirements of a moderate investor, but his registered portfolio is aggressive.
Rationale:
Mario's overall portfolio is within the asset mix recommended for a low-risk investor. However, he has 5% more in equities in the non-registered portfolio than is recommended for a low-risk investor. (Refer to Section 4.2.4.0)
Cory is a manager of a food transformation plant where the average salary is $40,000. In an effort to keep his best employees, he is looking to implement a group plan for retirement savings. The company is willing to contribute on behalf of the employees in this plan, as long as the employees contribute as well. It is important to Cory that the company contributions are stable
and do not incur additional charges. He also wants to make sure that the money invested goes towards retirement and not other purchases.
What type of group plan is best suited for Cory's company?
a) Define Contribution Pension Plan (DCPP)
b) Group Registered Retirement Savings Plan (GRRSP)
c) Group Tax-Free Savings Account (TFSA)
d) Deferred Profit Sharing Plan (DPSP) โโ(wrong) Group Registered Retirement Savings Plan
(GRRSP)
Rationale:
A DCPP will ensure that the investments made in the plan are for retirement because of the locked-in provision. Employer contributions will be stable since it is a fixed percentage of
d) The death benefit will not be not tax-free for Fern's son. โโ(correct) Fern should invest in
segregated funds so that her investment is protected from market risk with the death benefit guarantee.
Rationale:
Segregated funds offer the guarantee that 75-100% of the capital invested will be paid to the beneficiary. This protects Fern from a possible decline in the market. (Refer to Section 2.1.1.2)
Gary was receiving monthly payments from a joint and last survivor life annuity with a 20-year guarantee period. His wife, Aline, is the joint annuitant and his son, Bruce, is the beneficiary. Gary died eight years after purchasing the annuity.
Who can submit a claim to the insurance company with regards to Gary's annuity?
a) Aline
b) Bruce
c) The executor of Gary's will
d) No claim can be made โโ(correct) Aline
Rationale:
Because it is a joint and last survivor life annuity, the surviving annuitant will submit a claim to start receiving the annuity payments. (Refer to Section 7.4.2.1)
Margaret is a new life insurance agent who has just finished her first segregated fund application and collected a client cheque for $5,000. She spent time properly reviewing the details of the contract and explained to her clients the different fees associated with their fund selection. After emailing them the information folder, Margaret went through the questions that they still had. She then completed the application, obtained the clients' signatures, and submitted the signed application.
What does Margaret still have to do?
amount from his maximum RRSP contribution limit for the year to find the amount he can actually contribute to his RRSP.
What is the amount on the T4 slip called?
a) Pension credit
b) Benefit rider
c) Tax credit
d) Pension adjustment โโ(correct) Pension adjustment
Rationale:
The maximum RRSP or PRPP contribution for a DBPP, DCPP or DPSP member is maximum contribution limit for year - pension adjustment for previous year (Refer to Section 8.4.3)
Rhonda is in the process of setting up a spousal Registered Retirement Savings Plan (RRSP) to hold segregated fund investments. Her husband, John, is named as the contributor.
Which of the following is true?
a) John has ownership rights of the account.
b) John is the annuitant of the account and has the rights to withdraw money from the account.
c) Rhonda is the owner and annuitant of the account.
d) John names the beneficiary of the account. โโ(correct) Rhonda is the owner and annuitant of
the account.
Rationale:
