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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Family Law | 15% | - Fundamental Aspects of Family Law
|
| Topic 2: Savings Planning and Debt Management | 10% | - Debt Planning and Mortgages
|
| Topic 3: Insurance Planning | 10% | - Life Insurance
|
| Topic 4: Financial Planning for Small Business | 15% | - Small Business Financial Planning
|
| Topic 5: Investment and Tax Planning | 10% | - Tax Planning Strategies
|
| Topic 6: Retirement Planning | 20% | - Retirement Income Needs Analysis
|
| Topic 7: Financial Planning Practice | 10% | - The Personal Financial Planning Process in Canada
|
| Topic 8: Estate Planning | 10% | - Trusts and Powers of Attorney
|
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NEW QUESTION # 10
Jerry, age 58, has been working for the same employer since he graduated university. Over the years, he has had a few promotions. Jerry and his wife, Beth, are well on their way to financial independence, and they plan to retire in two years. Which of the following scenarios will most likely represent Jerry and Beth's financial scenario?
Scenario
Liquid assets relative to total assets (%)
Investment assets-to-net worth ratio (%)
Debt-to-asset ratio (%)
A
5
75
10
B
10
25
20
C
15
45
25
D
20
70
30
Answer: C
Explanation:
Scenario A best represents a household approaching financial independence and retirement.
Jerry and Beth are only two years from retirement and are described as being well on their way to financial independence. At this stage of the financial life cycle, a financially strong household would ordinarily be expected to have accumulated a substantial investment portfolio and to have materially reduced debt. Scenario A has an investment-assets-to-net-worth ratio of 75%, the highest of the four scenarios, together with the lowest debt-to-asset ratio of 10%.
Scenario D also has significant investment assets at 70%, but its 30% debt ratio represents materially greater leverage immediately before retirement. Scenarios B and C have lower proportions of wealth committed to investment assets-25% and 45% respectively-which are less consistent with the stated level of financial independence.
The 5% liquid-asset ratio in Scenario A is not necessarily problematic. Near retirement, an appropriate emergency reserve is important, but excessive cash holdings may reduce long-term investment efficiency. The overall balance of high accumulated investment wealth and low debt is the decisive factor.
Since option D corresponds to Scenario A, option D is correct.
FPII reference/topic: Retirement Planning - financial life cycle; personal financial ratios; investment-asset accumulation; debt reduction before retirement.
NEW QUESTION # 11
What is the tax treatment on disability assistance payments for Registered Disability Savings Plans?
Answer: B
Explanation:
A Disability Assistance Payment from an RDSP contains both potentially taxable and non-taxable components.
The beneficiary's own private contributions were made with after-tax funds and are therefore not taxed again when returned. However, the portion of a payment representing Canada Disability Savings Grants, Canada Disability Savings Bonds, investment income earned within the plan, and specified rollover proceeds is included in the beneficiary's income when paid from the RDSP. CRA confirms this treatment expressly.
Option A is therefore the best available answer. Its reference to the "grant and income earned portions" captures the central distinction tested by the question, although the complete current rule also encompasses bonds and taxable rollover amounts.
Option B is incorrect because the entire withdrawal is not taxable; the portion attributable to private contributions is returned tax-free. Option C incorrectly treats all withdrawals as tax-free. Option D is also inaccurate as a general tax characterization. CRA specifically provides that the taxable RDSP portion is excluded from income when calculating several federal income-tested benefits and credits.
The RDSP therefore combines non-deductible contributions with tax-deferred investment growth and government assistance, with taxable amounts recognized when qualifying payments are made.
FPII reference/topic: Investment and Tax Planning - RDSPs; Disability Assistance Payments; grants, bonds and investment income; taxation of withdrawals.
NEW QUESTION # 12
Which term describes an attempt to create a tax system that gives no preference to the form of ownership?
Answer: B
Explanation:
Integration describes the Canadian tax-policy objective of producing approximately the same overall tax burden whether income is earned personally or through a corporation and subsequently distributed to an individual shareholder.
Without integration, income earned through a corporation could be subject to inappropriate double taxation or, conversely, receive a permanent tax advantage solely because of the ownership structure. Canada attempts to mitigate this through mechanisms such as the dividend gross-up and dividend tax credit.
CRA describes the principle directly: corporate and personal tax integration is intended so that income earned by a Canadian corporation and paid to an individual as a dividend bears approximately the same combined tax as income earned directly by the individual.
"Equalization" is not the relevant tax principle in this context; it is commonly associated with fiscal transfers among governments. "Equilibrium" is an economic concept rather than the Canadian corporate-personal tax mechanism. "Graduated rates" refers to progressive taxation under which marginal tax rates increase as taxable income increases.
Integration therefore seeks tax neutrality between different forms of ownership or income earning, particularly corporate versus direct individual ownership.
FPII reference/topic: Investment and Tax Planning - tax integration; dividend gross-up and credit mechanism; corporate versus personal taxation.
NEW QUESTION # 13
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: C
Explanation:
Kienle's available RRSP contribution room is $10,000.
The starting point is 18% of the previous year's earned income:
$50,000 ร 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 # 14
In November 2018, Leon put his former wife Betty on notice that her current child support payments were insufficient and that he would be seeking an increase. From what date may a retroactive change to child support apply?
Answer: C
Explanation:
The applicable exam principle is the presumptive three-year limitation or "three-year rule" for retroactive child-support adjustments. Counting back three years from November 2018 produces November 2015, making option B correct.
The Supreme Court of Canada's framework in D.B.S. v. S.R.G. established that effective notice is highly important in deciding the commencement date for retroactive child support and that, as a general rule, an award should not extend more than three years into the past. The Court described effective notice broadly:
formal court proceedings are not required; the support issue merely needs to have been raised with the other parent.
Later Supreme Court authority continues to recognize the three-year presumptive rule, while emphasizing that it is not absolute. Factors such as blameworthy conduct, failure to disclose income, the child's circumstances, delay, and hardship can justify a different result.
For FPII examination purposes, with November 2018 as the relevant notice date and no additional facts establishing exceptional conduct, the three-year look-back identifies November 2015.
FPII reference/topic: Family Law - child support; retroactive support; effective notice; three-year presumptive rule.
NEW QUESTION # 15
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