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| Section | Weight | Objectives |
|---|---|---|
| Technical Competencies | 84% | - Retirement Planning - Risk Management and Insurance - Investment Planning - Asset and Liability Management - Tax Planning - Estate Planning |
| Enabling Competencies | 16% | - Professional Conduct and Regulatory Compliance - Client Relationship and Practice Management |
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NEW QUESTION # 91
Edward's client is updating his will and is concerned what will happen to his and his wife's estates should they die within a short time of each other. Which clause in the will should Edward recommend the couple discuss with their lawyer?
Answer: A
Explanation:
A survivorship clause addresses the risk that spouses or beneficiaries die within a short period of each other.
The clause normally requires a beneficiary to survive the testator by a specified number of days before inheriting. Without such a clause, assets may pass through one estate and then almost immediately through another, increasing administration complexity, probate exposure, and possible distribution results that do not match the couple's intentions. A conversion clause is not the standard will clause for this issue. A life interest gives someone use or income from property for life, which is a different estate-planning tool. A successor designation may apply to certain registered or TFSA arrangements, but the will provision for near- simultaneous deaths is survivorship. Edward should advise the client to discuss survivorship wording with a lawyer because provincial legislation and drafting precision matter. Study Guide focus: wills, survivorship clauses, estate administration, simultaneous death planning, and beneficiary succession.
NEW QUESTION # 92
In which life cycle stage would a financial planner identify his client to be if they have a high mortgage balance and an unstable or lower income, and are willing to take on investment risk because of their longer time horizon?
Answer: A
Explanation:
The accumulation stage is characterized by asset building while major liabilities and career uncertainty may still exist. Clients in this stage often have mortgages, young families or early career responsibilities, and a long time horizon before retirement. Because the investment horizon is long, they may be able to accept more growth exposure, provided cash flow, emergency reserves, and debt servicing are under control. The consolidation stage usually occurs later, when income is stronger, debts are falling, and retirement funding accelerates. Financial independence refers to clients who can maintain lifestyle without employment income.
Gifting generally occurs after core lifetime needs are secure and surplus wealth can be transferred. The scenario states high mortgage balance, unstable or lower income, and willingness to take investment risk due to a long horizon; that is the accumulation phase. Study Guide focus: client life-cycle stages, risk capacity, accumulation planning, mortgage debt, and time horizon. Insurance planning and emergency reserves are usually reviewed alongside investments because human-capital protection is critical in this stage.
NEW QUESTION # 93
Dianna is visiting with Karen, her Financial Planner, and is excited to report that she has just bought her dream home. She has also let Karen know she Is meeting with an insurance representative to purchase a whole life insurance to cover her 20-year mortgage. Why might Karen suggest Dianna consider term life insurance instead?
Answer: A
Explanation:
Karen's recommendation should match the insurance product to the liability. Dianna's need is temporary: a 20- year mortgage balance that would create financial hardship if she died before the debt was retired. Term life insurance is designed for temporary capital needs and normally provides the largest amount of death benefit for the lowest initial premium because it contains no cash-value savings component. Whole life can be appropriate for permanent estate liquidity, final taxes, charitable objectives, or lifetime dependency needs, but those facts are not present. Option A may be true as a general underwriting concern, but it does not explain why term is better for this mortgage need. Option B is false because term insurance does not build cash value.
Option C describes permanent needs, not a 20-year mortgage. The AFP planning conclusion is that term coverage should be considered where the risk period and capital need are limited. Study Guide focus: needs- based insurance analysis, term versus permanent insurance, mortgage protection, and product suitability.
NEW QUESTION # 94
Owen and Lina are looking to purchase a home in the next few months. Owen is the primary income earner for the family. His credit history is weak with several recently paid collections Lina has a perfect credit record but limited income and irregular employment. What will their financial planner advise them about the impact their credit ratings will have on their ability to secure a mortgage?
Answer: A
Explanation:
The weak credit history of the primary income earner is the central mortgage issue. Lenders assess income, debt service ratios, down payment, property, and creditworthiness. Owen supplies the main income needed to qualify, but his recent collections create underwriting risk even if they have been paid. Lina's strong credit record helps the household profile, but it does not fully offset limited income and irregular employment. Paid collections may improve the application compared with unpaid collections, yet they do not automatically qualify the borrowers. Lina's low income alone may not prevent approval if Owen qualifies, but his credit weakness may. The planner should advise them to review the credit bureau, correct errors, reduce revolving debt, avoid new inquiries, and allow time for stronger repayment history before applying. Study Guide focus:
mortgage qualification, credit history, debt service capacity, borrower risk, and liability management. The advice should be delivered before a formal application so avoidable bureau damage and failed underwriting can be reduced.
NEW QUESTION # 95
Tom has two children from a previous marriage. He has been paying $1,000 per month for spousal support and $1,500 per month for child support to his ex-wife. Recently, his ex-wife was awarded increased child support payments from Tom to cover unanticipated university expenses for one of the children. What should Tom's financial planner advise him about how this increased monthly payment may impact his finances?
Answer: A
Explanation:
The increased child support payment reduces Tom's net cash flow by the full amount. Under the standard tax treatment, child support is not deductible to the payer and is not taxable to the recipient. That differs from qualifying periodic spousal support, which may be deductible to the payer and taxable to the recipient when the legal requirements are met. Because the increased amount relates to child support for university expenses, Tom receives no tax deduction and no offsetting tax credit merely because he pays more. The tuition tax credit belongs to the eligible student unless transferred under applicable rules; it is not automatically applied to Tom because he pays support. The planner should update Tom's cash-flow plan, debt ratios, retirement savings ability, and emergency reserve using the full increased payment. Study Guide focus: child support, spousal support, tax deductibility, cash-flow planning, and separation agreements. This distinction is essential when modelling separation settlements because gross payments and after-tax cost can differ sharply.
NEW QUESTION # 96
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