Free IFSE Institute LLQP Practice Exam with Questions & Answers

Comprehensive and Detailed Explanation From Exact Extract:

Angela is taking steps to lessen the likelihood or severity of a potential loss. In insurance, this is termedrisk reduction, which involves implementing measures to reduce the frequency or severity of potential losses. By wearing protective gear, Angela is not avoiding the risk entirely but is actively minimizing it.

Group life insurance coverage often requires the employee to be "actively at work" on the day the coverage takes effect. Although Ayla’s coverage would have started on May 5, she was not actively at work on that date due to her medical condition. Most group insurance policies have this requirement, and without meeting it, coverage typically does not commence. Therefore,Option Caccurately reflects why the death benefit would not be paid​​.

Comprehensive and Detailed Explanation From Exact Extract:

On death, RRSPs are deemed disposed of and included as income on the deceased’s final return unless transferred to a spouse. The full $450,000 will be taxed. The capital gain on the art collection is $600,000 – $150,000 = $450,000; only 50% is taxable, resulting in a $225,000 taxable gain. These are standard treatments outlined in estate taxation modules of LLQP.

Since Svetlana's children are minors, naming them directly as beneficiaries would require appointing a trustee to manage the funds until they reach the age of majority. Given that Vladimir is unreliable,Sergei—who is dependable and supportive—is the most suitable choice to act as trustee. Naming him as trustee ensures that the funds are managed responsibly for thebenefit of Georgi and Ingrid until they can access them.Therefore,Option Bis the most appropriate choice​​.

Keisha’s investment portfolio is highly concentrated in Belmont Inc. common shares, which include her TFSA and defined contribution pension plan (DCPP). This significant exposure to a single company’s stock poses a risk because the value of her investments is directly tied to the financial performance of Belmont Inc. Diversification is a key strategy to mitigate risk by spreading investments across various asset classes, industries, or geographic regions. This can reduce the impact of poor performance in any one area on the overall portfolio. According to LLQP content, one of the primary goals in managing an investment portfolio is to ensure appropriate diversification to avoid over-reliance on a single asset or asset type​​.

While other needs, like liquidity and emergency fund savings, are important, Keisha's immediate concern should be diversification. Her current investments do not provide adequate protectionagainst company-specific risks, such as the potential downturns specific to Belmont Inc. This aligns with LLQP principles, which emphasize diversification as a way to manage risk effectively and achieve a more stable financial outcome​.

Adeferred payout term annuityinvolves depositing funds now with payments starting after a deferment period (in Julia’s case, 3 years) and continuing for a set term (10 years).

Exact Extract:

"A deferred payout annuity begins income payments after a specified deferment period. If a fixed period is selected, it is known as a term annuity."

(Reference:Segfunds-E313-2020-12-7ED, Chapter 3.2.1.1 Payout Annuity​)

A spousal RRSP is beneficial for couples with differing income levels as it allows for income splitting during retirement. This is advantageous because it enables the higher-income spouse to contribute to the RRSP of the lower-income spouse. When the funds are eventually withdrawn during retirement, they are taxed at the lower-income spouse’s rate, potentially reducing the couple’s overall tax burden. This aligns with the LLQP guideline on income splitting as a tax minimization strategy​.

Option B is incorrect because the contributions to a spousal RRSP reduce the contribution room of the contributing spouse, not the recipient. Option C is technically accurate but does not directly address the primary advantage of a spousal RRSP in terms of tax planning, and Option Dis correct regarding extending tax benefits but does not directly highlight the immediate benefit of income splitting for the couple.

Comprehensive and Detailed Explanation From Exact Extract:

Term insurance is designed for temporary needs (income, mortgage, childcare).

However, covering tax liabilities that will arise at death (e.g., deemed disposition of a cottage) requires permanent coverage to ensure the benefit is available whenever death occurs. The LLQP outlines this clearly in estate planning modules.

TheTerminal Illness Benefit(also known as an accelerated death benefit) allows a policyholder diagnosed with a terminal illness to receive a portion of the policy’s death benefit while still alive. This benefit is designed specifically for situations like Douglas's, where he has a limited life expectancy and needs immediate funds. While the Dread Disease Benefit (Option A) coversspecific critical illnesses, it is generally not as expansive as the terminal illness benefit, which directly applies to Douglas's prognosis. Options C and D involve accessing cash values or loans, which are not immediate death benefit payouts​​.

Defined Benefit Pension Plans (DBPPs) provide a guaranteed income stream to the plan member after retirement, based on a formula considering factors like years of service and salary history. Generally, unless explicitly set up with survivor benefits, DBPPs do not automatically transfer income to a surviving spouse upon the member's death. In Harold's case, if no survivor benefit option was selected during retirement setup, Karl would not receive any income from Harold’s DBPP. Therefore, the correct answer isA. $0as no automatic provision ensures Karl receives benefits unless Harold had chosen and paid for survivor benefits​​.