Curious about Actual IFSE Institute Life License Qualification Program (LLQP) Exam Questions?

Correct : A

A spousal RRSP is beneficial for couples with differing income levels as it allows for income splitting during retirement. This is advantageous because it enables the higher-income spouse to contribute to the RRSP of the lower-income spouse. When the funds are eventually withdrawn during retirement, they are taxed at the lower-income spouse's rate, potentially reducing the couple's overall tax burden. This aligns with the LLQP guideline on income splitting as a tax minimization strategy.

Option B is incorrect because the contributions to a spousal RRSP reduce the contribution room of the contributing spouse, not the recipient. Option C is technically accurate but does not directly address the primary advantage of a spousal RRSP in terms of tax planning, and Option D is correct regarding extending tax benefits but does not directly highlight the immediate benefit of income splitting for the couple.

Correct : A

Kadiha's investment in a segregated fund with a 75% maturity guarantee means that upon maturity, she is guaranteed to receive 75% of her original investment, which would be $7,500 (75% of $10,000). The payment is considered part of the maturity guarantee under segregated fund contracts, and the difference paid out by the insurer to meet the guarantee ($2,500 in this case) is not subject to capital gains or interest income tax as it's part of the guaranteed benefit. According to LLQP guidelines, segregated funds with such guarantees only tax the difference as capital gains if the payout exceeds the original investment, which is not applicable here.

Correct : D

An impaired life annuity would be the best option for Thien given his health condition and reduced life expectancy. Impaired life annuities offer higher payouts compared to standard life annuities because they take into account the reduced life expectancy due to a serious health condition. This type of annuity provides an opportunity for individuals with significant health issues to receive increased income during their retirement years. According to LLQP resources, impaired annuities are designed specifically to address the needs of clients with severe health concerns by offering enhanced benefits that align with their specific life expectancy.

Options A, B, and C are standard annuity options that would not take Thien's specific health impairment into account and therefore would not maximize his retirement income as effectively as an impaired life annuity.

Correct : A

In a non-registered equity segregated fund, capital gains are only 50% taxable under Canadian tax rules. Amber's investment grew by $15,000, which represents a capital gain. As per LLQP guidelines, capital gains on non-registered investments are subject to preferential tax treatment, meaning only half of the gain is added to taxable income. Therefore, only $7,500 of the gain will be taxable. This treatment is consistent with capital gains taxation principles outlined in the LLQP material, where only the taxable portion of the capital gain is reported, resulting in reduced tax liability compared to regular income.

Correct : C

One of the significant advantages of segregated funds is creditor protection, which is particularly beneficial for business owners and professionals who may face potential claims from creditors. Under LLQP principles, segregated funds are insurance contracts, and when beneficiaries such as spouses or children are named, the investment may be protected from creditors in the event of bankruptcy or legal action. This makes segregated funds distinct from other investment types, which do not inherently offer creditor protection unless specific trusts or structures are in place.

Option A is incorrect as Assuris provides limited coverage rather than full protection, Option B is partially true but not unique to segregated funds, and Option D is incorrect as segregated funds typically do not require medical underwriting.