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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Family Law | 15% | - Legal implications in financial planning - Family property and financial considerations |
| Topic 2: Financial Planning for Small Business | 15% | - Business ownership structures and planning - Small business financial strategies |
| Topic 3: Savings Planning & Debt Management | 10% | - Debt management techniques - Savings strategies and cash flow management |
| Topic 4: Financial Planning Practice | 10% | - Financial planning process and client relationship management - Professional standards and ethical practices |
| Topic 5: Estate Planning | 10% | - Estate transfer strategies - Wills, trusts and succession planning |
| Topic 6: Retirement Planning | 20% | - Government benefits and retirement plans - Retirement income sources and strategies |
| Topic 7: Investment and Tax Planning | 10% | - Tax planning concepts - Investment strategies and portfolio considerations |
| Topic 8: Insurance Planning | 10% | - Insurance needs analysis - Risk management and insurance products |
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NEW QUESTION # 33
Shelley has been engaged in the financial planning process with her client Kim. Shelley has just obtained permission from Kim to refer her to a lawyer for estate planning considerations. What stage of the financial planning process are Shelley and Kim in?
Answer: D
Explanation:
Shelley and Kim are at the implementation stage. The important fact is that the need for estate-planning assistance has already been identified and Shelley has obtained Kim's permission to refer her to a lawyer. This is no longer simply information gathering or analysis; an action arising from the planning recommendations is being put into effect.
FP Canada's current Practice Standards expressly recognize referrals to other professionals as part of implementation. PS.9 requires the planner to establish implementation actions, responsibilities, sequencing, and timing, including situations involving another professional. PS.10 then requires completion of implementation actions for which the planner has accepted responsibility, with appropriate follow-up on professional referrals where the client has consented.
Collecting data occurs earlier when the planner obtains quantitative and qualitative client information.
Analysis evaluates the client's existing circumstances and possible strategies. Establishing the client/advisor relationship occurs at the beginning when scope, responsibilities, and engagement terms are defined.
Because Shelley is now arranging access to the legal expertise needed to carry out the estate-planning recommendation, the correct stage is implementation.
FPII reference/topic: Financial Planning Practice - financial planning process; implementation; coordination and referral to other professionals.
NEW QUESTION # 34
Xavier is a high-net-worth client in the highest tax bracket. He has maximized his child's registered education savings plan, and is interested in setting up an informal trust account to supplement his child's education savings. What is the most appropriate investment vehicle for this account to minimize taxes for Xavier?
Answer: A
Explanation:
A capital-gains-oriented equity portfolio is the most tax-efficient choice among the alternatives because of the Canadian attribution rules applying to property transferred to a related minor.
Where a parent transfers money or other property directly or indirectly to a minor child, including through a trust in which the minor is beneficially interested, income from the transferred property, such as interest and dividends, is generally attributed back to the transferor. The transferor therefore reports that income at his or her own marginal tax rate. CRA's trust guidance expressly recognizes this attribution treatment for property transferred for a related minor.
Capital gains are treated differently under the ordinary minor-child attribution rule. CRA's longstanding interpretation confirms that subsection 74.1(2) does not generally attribute a subsequent capital gain on transferred property back to the transferor.
A GIC or Government of Canada bond primarily produces interest, while mature dividend-paying stocks generate dividends; both would tend to create attributed investment income for Xavier. An equity mutual fund emphasizing capital appreciation minimizes current income distributions and places more of the return in capital gains.
FPII reference/topic: Investment and Tax Planning - informal trusts; attribution rules; taxation of minors; investment income versus capital gains.
NEW QUESTION # 35
Bonny is looking to lease a vehicle. Here is the information given to her by the salesperson:
Net capitalized value
$25,000
Monthly payments
$300
Term of the lease
48 months
Residual value
$13,450
Sales taxes on residual value
$1,749
Down payment (including taxes)
$4,500
What is the total cost of leasing?
Answer: A
Explanation:
The cost of leasing the vehicle during the contractual lease period consists of Bonny's lease payments plus the initial down payment.
Total monthly lease payments are:
$300 ร 48 months = $14,400
Add the initial down payment:
$14,400 + $4,500 = $18,900
Therefore, the total cost of leasing is $18,900, corresponding to option B.
The residual value of $13,450 represents the vehicle's contractual value at the end of the lease. It is relevant if Bonny elects to purchase the vehicle at lease-end, but it is not part of the cost of simply leasing and returning the vehicle.
Similarly, the $1,749 of sales tax associated with the residual value becomes relevant in connection with the purchase of the vehicle at the residual amount. Since the question asks for the cost of leasing-not the combined cost of leasing and subsequently purchasing the vehicle-those amounts should not be added.
This distinction is central when comparing leasing with financing. Lease analysis must separate the cash flows required to use the vehicle during the lease term from the optional amount required to acquire ownership when the lease terminates.
FPII reference/topic: Savings Planning and Debt Management - vehicle leasing; lease payments; residual values; lease-versus-buy analysis.
NEW QUESTION # 36
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: A
NEW QUESTION # 37
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: C
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 # 38
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