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| Section | Weight | Objectives |
|---|---|---|
| Investment and Tax Planning | 10% | - Investment strategies and portfolio considerations - Tax planning concepts |
| Financial Planning for Small Business | 15% | - Small business financial strategies - Business ownership structures and planning |
| Savings Planning & Debt Management | 10% | - Debt management techniques - Savings strategies and cash flow management |
| Insurance Planning | 10% | - Insurance needs analysis - Risk management and insurance products |
| Family Law | 15% | - Legal implications in financial planning - Family property and financial considerations |
| Financial Planning Practice | 10% | - Financial planning process and client relationship management - Professional standards and ethical practices |
| Estate Planning | 10% | - Wills, trusts and succession planning - Estate transfer strategies |
| Retirement Planning | 20% | - Retirement income sources and strategies - Government benefits and retirement plans |
>> FP2 Exam Sample Questions <<
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NEW QUESTION # 15
Roy gifted his nephew Charles, age 16, shares for his birthday. The managed portfolio will generate both dividends, and capital gains and losses. What will be Roy's future tax implications, with respect to this transfer, until Charles reaches the age of majority?
Answer: B
Explanation:
Because Charles is a related minor, the attribution rules apply to income generated from property transferred to him by Roy. Dividend income earned on the gifted shares is therefore attributed back to Roy and included in Roy's taxable income while Charles remains a minor.
The important distinction is between income from property and capital gains or losses. CRA's interpretation of subsection 74.1(2) confirms that income or loss from transferred property is generally attributed to the transferor where property is transferred to a related minor. This captures investment income such as dividends and interest.
Capital gains and capital losses receive different treatment. The same CRA guidance states that subsection
74.1(2) does not ordinarily attribute a subsequent taxable capital gain or allowable capital loss arising from disposition of transferred property back to the transferor. Those gains or losses generally remain with the minor, subject to specialized exceptions not indicated in this scenario.
Therefore, an equity portfolio producing capital appreciation may have different attribution consequences from one producing substantial current dividend or interest income.
FPII reference/topic: Investment and Tax Planning - attribution rules; transfers to related minors; property income versus capital gains.
NEW QUESTION # 16
In November 2018, Leon put his former wife Betty on notice that her current child support payments were insufficient and that he would be seeking an increase. From what date may a retroactive change to child support apply?
Answer: D
Explanation:
The applicable exam principle is the presumptive three-year limitation or "three-year rule" for retroactive child-support adjustments. Counting back three years from November 2018 produces November 2015, making option B correct.
The Supreme Court of Canada's framework in D.B.S. v. S.R.G. established that effective notice is highly important in deciding the commencement date for retroactive child support and that, as a general rule, an award should not extend more than three years into the past. The Court described effective notice broadly:
formal court proceedings are not required; the support issue merely needs to have been raised with the other parent.
Later Supreme Court authority continues to recognize the three-year presumptive rule, while emphasizing that it is not absolute. Factors such as blameworthy conduct, failure to disclose income, the child's circumstances, delay, and hardship can justify a different result.
For FPII examination purposes, with November 2018 as the relevant notice date and no additional facts establishing exceptional conduct, the three-year look-back identifies November 2015.
FPII reference/topic: Family Law - child support; retroactive support; effective notice; three-year presumptive rule.
NEW QUESTION # 17
What is the primary difference between a Life Income Fund (LIF) and a Registered Retirement Income Fund (RRIF)?
Answer: A
Explanation:
Both a RRIF and a LIF provide retirement income and are subject to prescribed minimum annual withdrawals. The distinguishing feature of a LIF is that it contains pension money that remains subject to locking-in legislation. Consequently, in addition to the minimum required withdrawal, the amount that may normally be withdrawn from a LIF is subject to an annual maximum.
The Office of the Superintendent of Financial Institutions confirms that federally regulated LIFs have minimum and maximum annual withdrawal limits. The minimum is governed by income-tax rules, while pension standards legislation determines the maximum.
A conventional RRIF does not impose this pension-based maximum withdrawal limit. Once the required minimum has been taken, the annuitant may generally withdraw additional amounts, although those amounts remain taxable.
Option A is incorrect because there is no universal rule requiring all LIF holders to purchase a life annuity at age 80. Option B incorrectly describes the permitted source of LIF assets; LIFs are primarily funded from locked-in pension arrangements, not simply retirement compensation arrangements. Option D is also incorrect because taxable RRIF withdrawals do not become tax-free merely because they represent the prescribed minimum.
FPII reference/topic: Retirement Planning - RRIFs; LIFs; locked-in pension assets; minimum and maximum retirement withdrawals.
NEW QUESTION # 18
Fiona's eligibility for insurance benefits is measured by her ability to perform the usual activities of daily living. What type of insurance policy does Fiona have?
Answer: B
Explanation:
Long-term care insurance is the correct classification because eligibility for benefits is commonly based on an insured person's inability to independently perform specified activities of daily living (ADLs). Typical ADLs include bathing, dressing, eating, toileting, transferring, and maintaining mobility. The Financial Consumer Agency of Canada describes long-term care insurance as coverage intended for individuals who become unable to care for themselves or who require assistance managing daily activities.
Disability insurance is fundamentally different. Its principal purpose is income replacement where illness or injury prevents the insured from performing occupational duties. Eligibility therefore normally depends on an occupational definition of disability rather than inability to perform basic ADLs. Critical illness insurance generally pays a lump-sum benefit following diagnosis of a covered condition that satisfies the policy definition. Extended health insurance reimburses eligible medical and health-related expenses that provincial plans may not fully cover.
The wording specifically connects benefit eligibility to Fiona's functional capacity in everyday living. That is the characteristic trigger associated with long-term care coverage.
FPII reference/topic: Insurance Planning - health-related insurance; long-term care coverage; activities-of- daily-living benefit triggers.
NEW QUESTION # 19
By when must a personal trust file its income tax return?
Answer: C
Explanation:
A trust's T3 Trust Income Tax and Information Return must generally be filed within 90 days after the trust's tax year-end. This makes option C the technically complete rule.
CRA confirms that the T3 return, together with the related information slips and summaries where applicable, is due no later than 90 days following the trust's taxation year-end. Any balance of tax owing is generally subject to the same deadline.
For most inter vivos trusts and many other trusts, the tax year ends on December 31. In those cases, "within
90 days of December 31" will normally produce the practical filing deadline. Nevertheless, option B is less precise because certain trusts-particularly qualifying graduated rate estates-can have a non-calendar taxation year. Consequently, the universal principle is based on the actual trust year-end, not automatically December 31.
The February 15 and April 30 dates relate to other Canadian tax-reporting contexts and are not the general T3 filing rule.
For estate planners, determining the trust's taxation year and status is therefore an essential preliminary step before establishing compliance and tax-payment deadlines.
FPII reference/topic: Estate Planning - taxation of trusts; T3 returns; trust tax year; graduated rate estates; filing obligations.
NEW QUESTION # 20
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