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| Section | Weight | Objectives |
|---|---|---|
| Investment and Tax Planning | 10% | - Tax Planning Strategies
|
| Financial Planning Practice | 10% | - The Personal Financial Planning Process in Canada
|
| Financial Planning for Small Business | 15% | - Small Business Financial Planning
|
| Estate Planning | 10% | - Estate Distribution and Tax Planning
|
| Retirement Planning | 20% | - Registered Pension and Retirement Income Plans
|
| Insurance Planning | 10% | - General Insurance
|
| Savings Planning and Debt Management | 10% | - Debt Planning and Mortgages
|
| Family Law | 15% | - Financial and Property Issues
|
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NEW QUESTION # 18
What type of trust is formed when one party is unjustly enriched at the expense of another person?
Answer: D
Explanation:
A constructive trust is an equitable remedy that may be imposed where one person has been unjustly enriched at another person's expense and a proprietary remedy is justified.
Unlike an express trust, a constructive trust does not arise because the parties deliberately created a trust relationship. Instead, it is imposed by a court to prevent a person from retaining property where doing so would be inequitable. In Canadian law, unjust enrichment generally requires an enrichment of one party, a corresponding deprivation of another, and the absence of a juristic reason that legally justifies the enrichment.
Where a monetary award is insufficient and the claimant can demonstrate an appropriate connection between the contribution or deprivation and particular property, a court may recognize a beneficial interest in that property through a constructive trust.
A resulting trust operates differently. It generally arises from presumed intentions or circumstances surrounding the transfer or acquisition of property, such as where one person provides purchase money but title is placed in another person's name. "Social trust" is not the applicable equitable classification, while
"private trust" is a broad category rather than the specific remedy produced by unjust enrichment.
Therefore, the appropriate answer is constructive trust.
FPII reference/topic: Estate Planning - trusts; equitable remedies; constructive trusts; unjust enrichment.
NEW QUESTION # 19
From the perspective of self-employment, how are personal benefits treated for the purposes of calculating child support?
Answer: A
Explanation:
Personal benefits paid through a self-employed individual's business are generally added back to income and grossed up when determining appropriate income for child-support purposes.
The purpose of the child-support income calculation is to identify the parent's true financial capacity rather than simply accept taxable income reported under the Income Tax Act. A business may legitimately deduct an expenditure for tax purposes while all or part of that expenditure provides a personal benefit to the owner- for example, personal vehicle use, housing expenses, meals, utilities, or other personal consumption paid by the business.
Where such expenditures effectively replace expenses the parent otherwise would have paid personally from after-tax income, the benefit is added back. A gross-up may then be necessary to express that tax-free or after- tax economic benefit as an equivalent amount of pre-tax income. Canadian child-support jurisprudence has repeatedly applied this approach to personal benefits funded through a business.
This prevents a self-employed support payor from artificially depressing guideline income by routing personal consumption through deductible business expenses.
Therefore, option D correctly reflects both required adjustments: add the personal benefit to income and gross it up where appropriate.
FPII reference/topic: Family Law - Federal Child Support Guidelines; determination of self-employment income; personal benefits; imputed income.
NEW QUESTION # 20
The following table outlines details for a life insurance policy issued in 1995:
Details
Amounts
Cash surrender value
$8,000
Premiums paid
$6,000
Dividends declared
$1,500
Net cost of pure insurance
$750
Marginal tax rate
30%
Assuming the policy is completely surrendered, what are the taxes payable?
Answer: A
Explanation:
The taxable policy gain is determined by comparing the policy's surrender proceeds with its adjusted cost basis (ACB).
For this policy, the simplified ACB calculation is:
Premiums paid # policy dividends # net cost of pure insurance
Therefore:
$6,000 # $1,500 # $750 = $3,750 ACB
CRA guidance confirms that the ACB of a life insurance policy is increased principally by premiums and reduced by specified amounts including the net cost of pure insurance; policy dividends to which the policyholder becomes entitled also reduce the ACB.
The policy gain on surrender is therefore:
$8,000 cash surrender value # $3,750 ACB = $4,250 taxable policy gain
Apply the 30% marginal tax rate:
$4,250 × 30% = $1,275
Therefore, option C is correct.
The $4,250 amount itself is not the tax payable; it is the amount included in taxable income under the simplified calculation. Applying the client's marginal tax rate determines the resulting tax liability.
FPII reference/topic: Insurance Planning - permanent life insurance; cash surrender; adjusted cost basis; net cost of pure insurance; policy gains.
NEW QUESTION # 21
Kienle has provided his advisor with the following information:
($)
Income last year
50,000
Pension adjustment last year
2,500
Unused contribution room from previous years
3,500
Assuming he has never over-contributed, what is the maximum amount that Kienle can put into his Registered Retirement Savings Plan without incurring a penalty?
Answer: A
Explanation:
Kienle's available RRSP contribution room is $10,000.
The starting point is 18% of the previous year's earned income:
$50,000 × 18% = $9,000
The pension adjustment reflects retirement benefits accrued through an employer-sponsored pension arrangement and reduces the amount of new RRSP room generated:
$9,000 # $2,500 = $6,500
Kienle also has $3,500 of unused RRSP contribution room carried forward from previous years:
$6,500 + $3,500 = $10,000
Therefore, the maximum contribution shown by the facts is $10,000, corresponding to option C.
CRA's RRSP methodology follows this structure: unused room from the prior year, plus the lesser of 18% of prior-year earned income or the annual RRSP dollar limit, reduced by the applicable pension adjustment and modified where relevant by other pension adjustments or reversals.
Because 18% of $50,000 is only $9,000, the statutory annual dollar ceiling is not the limiting factor in this scenario. The unused $3,500 remains available because unused RRSP deduction room carries forward.
FPII reference/topic: Retirement Planning - RRSP deduction limits; pension adjustments; carry-forward contribution room.
NEW QUESTION # 22
In order to complete the analysis and development of a financial plan, an advisor receives a client's investment statements and tax returns. From the perspective of principle six (code of ethics), what action should the advisor take in order to maintain a relationship of trust and confidence?
Answer: A
Explanation:
Principle 6 of the FP Canada Code of Ethics is Confidentiality. It requires client information to be secured, protected, and maintained so that access is limited to authorized persons.
FP Canada's Standards state directly that client information must be handled in a manner that permits access only to those who are authorized, and that the relationship of trust and confidence depends on personal and confidential information being collected, used, and disclosed only as authorized.
Investment statements and tax returns contain highly sensitive financial and personal information. The advisor must therefore maintain appropriate physical and electronic safeguards, restrict internal access to personnel who require the information for authorized purposes, and avoid disclosure to external parties unless the client has authorized it or disclosure is otherwise legally permitted or required.
Option B involves professional referrals and raises separate considerations concerning competence, scope, and client consent. Option C is more closely related to placing the client's interests first. Option D relates to analysis and diligence but does not specifically address the ethical requirement described by Principle 6.
Accordingly, securing the documents so that only authorized personnel can access them directly satisfies the confidentiality obligation.
FPII reference/topic: Financial Planning Practice - Code of Ethics; Principle 6 Confidentiality; protection and authorized use of client information.
NEW QUESTION # 23
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