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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Estate Planning | 10% | - Estate transfer strategies - Wills, trusts and succession planning |
| Topic 2: Retirement Planning | 20% | - Retirement income sources and strategies - Government benefits and retirement plans |
| Topic 3: Savings Planning & Debt Management | 10% | - Savings strategies and cash flow management - Debt management techniques |
| Topic 4: Family Law | 15% | - Family property and financial considerations - Legal implications in financial planning |
| Topic 5: Insurance Planning | 10% | - Insurance needs analysis - Risk management and insurance products |
| Topic 6: Financial Planning Practice | 10% | - Financial planning process and client relationship management - Professional standards and ethical practices |
| Topic 7: Investment and Tax Planning | 10% | - Tax planning concepts - Investment strategies and portfolio considerations |
| Topic 8: Financial Planning for Small Business | 15% | - Business ownership structures and planning - Small business financial strategies |
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NEW QUESTION # 25
Kimberly, age 24, has few assets, and is single with no children. Kimberly has a 10-year-old niece Tanya who she would like her entire estate to be distributed to at death. She consults with her lawyer Jackie to write a will. What is the most important clause Jackie should add in Kimberly's will?
Answer: C
Explanation:
A discretionary encroachment clause is particularly important because Tanya is only 10 years old and may inherit Kimberly's estate while still a minor. Rather than requiring the estate property simply to remain untouched until Tanya reaches the stipulated distribution age, an encroachment provision permits the trustee to use trust capital for Tanya's benefit when appropriate.
The clause can authorize payments for matters such as education, health care, maintenance, accommodation, and general welfare. Estate-planning guidance concerning trusts for minors commonly provides trustees with authority to encroach upon income and capital for the minor's benefit before final distribution.
Option B is not the appropriate solution because Kimberly is Tanya's aunt. A will-maker's nomination of a guardian generally concerns the will-maker's own minor children and does not allow an aunt simply to replace the legal decision-making authority of Tanya's parents.
Trustee investment and administrative powers in option A are useful provisions, but they do not specifically address the beneficiary's need to access inheritance funds during minority. Funeral and debt-payment provisions likewise do not solve that central issue.
The discretionary encroachment clause therefore gives the estate trustee the flexibility necessary to provide appropriately for Tanya before she reaches the age for outright distribution.
FPII reference/topic: Estate Planning - wills; minor beneficiaries; testamentary trusts; trustee discretion; encroachment on capital.
NEW QUESTION # 26
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: D
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 ร 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 # 27
Maxwell is filing a rights or things tax return for his deceased mother. She had the following sources of income:
Debenture interest coupons.
Unpaid dividends declared before her death.
Old age security that was due before her death.
Income from a registered retirement savings plan (RRSP).
Which form of income will Maxwell have to exclude from the rights or things tax return?
Answer: B
Explanation:
Income associated with the deceased person's RRSP must be excluded from the optional Return for Rights or Things.
The rights-or-things return under subsection 70(2) of the Income Tax Act allows certain income amounts that had been earned or became receivable before death, but had not actually been received, to be reported separately from the deceased person's terminal return. CRA examples include matured bond coupons, accrued bond interest, qualifying pension amounts, and dividends declared before death but unpaid at death.
CRA's longstanding treatment specifically states that an annuitant is not considered to have a "right or thing" in respect of an RRSP. Instead, the tax treatment of the RRSP on death is governed by the separate RRSP death provisions, which generally bring the fair market value into income subject to applicable rollover and refund-of-premiums rules.
The unpaid dividend declared before death is a classic example of a right or thing. Accrued debenture or bond amounts can likewise qualify, as can eligible OAS amounts payable in respect of the period before death.
Therefore, the RRSP amount is the required exclusion.
FPII reference/topic: Estate Planning - taxation at death; rights or things return; RRSP taxation on death; optional tax returns.
NEW QUESTION # 28
George tells his financial advisor that he will need to buy a new car in two years and would like some advice on the best way to fund this goal. What consideration should his financial advisor determine first when discussing George's investment objective?
Answer: D
Explanation:
George has identified a specific short-term capital requirement: money will be needed to purchase a vehicle in two years. The first investment consideration is therefore liquidity.
Liquidity refers to the ability to convert an investment into cash quickly, predictably, and without a material loss of value. Because George needs the funds within a short and defined period, the portfolio used for this objective should not ordinarily be exposed to substantial market volatility or assets that may be difficult or costly to liquidate at the required time.
A two-year horizon materially constrains investment selection. Capital preservation and ready access to the funds become more important than pursuing aggressive long-term growth. Suitable vehicles may therefore emphasize cash equivalents, high-quality short-term fixed-income investments, or other low-volatility instruments matched to the expected purchase date.
Tax consequences remain relevant, particularly when selecting between registered and non-registered savings alternatives, but taxes should be considered after determining the fundamental time horizon and liquidity requirement. George has already stated that the vehicle is needed, so the scenario provides sufficient indication that it is a meaningful financial goal.
FPII reference/topic: Investment and Tax Planning - investment objectives; liquidity; time horizon; capital preservation; matching investments to financial goals.
NEW QUESTION # 29
What is the maximum of the payor spouse's net income that may be deducted to fulfil child support obligations?
Answer: B
Explanation:
The applicable maximum is 50% of the payor's net amount under the ordinary support-deduction framework.
Ontario's Family Responsibility and Support Arrears Enforcement Act provides that the total amount deducted by an income source and remitted under a support deduction order generally must not exceed 50% of the net amount owed by the income source to the payor.
The "net amount" concept is important because the statutory limit does not simply mean 50% of gross salary.
Required statutory deductions are taken into account in determining the amount available for enforcement.
The support obligation itself continues to exist even where enforcement through a particular income source is limited. Arrears can accumulate and other enforcement measures may become available. There are also specific statutory exceptions applying to certain lump-sum amounts and enforcement circumstances, so the
50% figure should be understood as the standard deduction limit tested by the question rather than an absolute limit in every possible enforcement proceeding.
Accordingly, among the four alternatives, 50% correctly represents the general maximum deduction against the payor's net income source for support enforcement.
FPII reference/topic: Family Law - child-support enforcement; support deduction orders; garnishment; limits on deductions from income.
NEW QUESTION # 30
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