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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Retirement Planning | 20% | - Retirement income sources and strategies - Government benefits and retirement plans |
| Topic 2: Investment and Tax Planning | 10% | - Tax planning concepts - Investment strategies and portfolio considerations |
| Topic 3: Insurance Planning | 10% | - Insurance needs analysis - Risk management and insurance products |
| Topic 4: Financial Planning for Small Business | 15% | - Small business financial strategies - Business ownership structures and planning |
| Topic 5: Family Law | 15% | - Family property and financial considerations - Legal implications in financial planning |
| Topic 6: Financial Planning Practice | 10% | - Professional standards and ethical practices - Financial planning process and client relationship management |
| Topic 7: Savings Planning & Debt Management | 10% | - Savings strategies and cash flow management - Debt management techniques |
| Topic 8: Estate Planning | 10% | - Estate transfer strategies - Wills, trusts and succession planning |
>> Examinations FP2 Actual Questions <<
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NEW QUESTION # 47
Which statement describes the doctrine of non est factum as it applies to contracts?
Answer: D
Explanation:
The doctrine of non est factum, literally meaning "it is not my deed," may provide relief where a person signs a document while fundamentally mistaken about the nature or legal character of the document being executed.
Accordingly, option B captures the essential contractual principle.
The doctrine is narrower than ordinary mistake or misrepresentation. It is not enough that a party misunderstood a particular contractual term, underestimated the financial consequences, or later regretted signing. The error must concern the document's essential nature or effect. Canadian jurisprudence also imposes an important diligence requirement: a person who carelessly signs a document without taking reasonable steps to understand it may be prevented from relying on non est factum, particularly where an innocent third party relied on the signed instrument. The Supreme Court of Canada applied this principle in Marvco Colour Research Ltd. v. Harris.
Option A describes misrepresentation. Option D describes common mistake, where both parties share a fundamental erroneous assumption. Option C may involve mistake concerning the existence of subject matter or impossibility, not non est factum.
FPII reference/topic: Financial Planning Practice - contract law; validity and enforceability of contracts; mistake; misrepresentation; non est factum.
NEW QUESTION # 48
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 # 49
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: B
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 # 50
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 # 51
Fatima would like to make a prepayment on her mortgage and her bank advises her that she has a closed mortgage so there will be a penalty, using the three months interest formula. Calculate the penalty, assuming that Fatima's mortgage rate is 5% with 36 months remaining and there is $250,000 balance outstanding on the mortgage.
Answer: C
Explanation:
The question specifically directs that the penalty be calculated using the three-month interest formula. The calculation is:
Outstanding mortgage balance × annual interest rate × 3/12
Therefore:
$250,000 × 5% × 3/12 = $3,125
The correct answer is option C.
Closed mortgages generally restrict the amount of principal that can be prepaid without charge. When the permitted prepayment privilege is exceeded, a prepayment penalty may apply. The Financial Consumer Agency of Canada explains that mortgage prepayment penalties are commonly calculated using either three months' interest or an interest rate differential, depending on the mortgage terms and lender's methodology.
The 36 months remaining in Fatima's term would be relevant if an interest-rate-differential calculation were required, but it does not alter the three-month interest calculation specified in the question.
The annual interest on the outstanding balance is:
$250,000 × 5% = $12,500
Three months represent one-quarter of a year:
$12,500 ÷ 4 = $3,125
Accordingly, the applicable penalty is $3,125.
FPII reference/topic: Savings Planning and Debt Management - mortgages; closed mortgages; prepayment privileges and penalties.
NEW QUESTION # 52
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