Free IFSE Institute LLQP Practice Exam with Questions & Answers | Set: 9

Mohammed’s plan allows him to make contributions that are not tax-deductible, and he is also not taxed on withdrawals, indicating that his employer’s plan is a group TFSA. In a TFSA, contributions are made with after-tax dollars, and withdrawals (including any growth) are tax-free, consistent with the LLQP outline on TFSAs. This is distinct from other retirement accounts, such as RRSPs, which provide tax deductions on contributions but tax the withdrawals as income​​.

Options A, B, and D are incorrect because these plans involve different tax treatments where contributions may be tax-deductible, and withdrawals are generally taxable.

According to the LLQP Segregated Funds and Annuities curriculum, selecting an appropriate annuity requires matching the source of funds, risk tolerance, and income objectives. In Irwin’s case, several key facts clearly guide the recommendation.

First, Irwin’s funds are held in a LIRA, which is a registered, locked-in retirement account. Under LLQP and pension legislation principles, funds from a LIRA must be used to purchase a registered annuity (or transferred to another registered retirement income vehicle). This immediately eliminates any non-registered annuity option, making Option B incorrect.

Second, Irwin wants stable, low-risk income, which is a core feature of traditional life annuities. Although variable annuities can offer income that fluctuates based on investment performance, they do not provide predictable increases and expose the annuitant to market risk. Since Irwin specifically appreciates the reduced risk of an annuity, a variable income annuity is not suitable. This rules out Option A.

Irwin’s most important objective is that his annuity payments increase gradually over time to help offset rising private health insurance costs. The LLQP study guide explains that an indexed income annuity is designed precisely for this purpose. Indexed annuities provide income that increases each year by a fixed percentage or in line with an inflation index. While initial payments are lower than a level annuity, the increasing payments help preserve purchasing power over time, which is especially important for retirees facing rising expenses such as health care.

A registered level income annuity (Option D) would provide constant payments that do not increase, leaving Irwin vulnerable to rising costs in later years.

Therefore, considering that the funds are registered, Irwin values income security, and he specifically wants payments that grow over time, the LLQP-approved solution is a registered indexed income annuity.

Accordingly, the correct and fully verified answer is Option C.

Most group benefits, including medical, dental, and retirement plans, require employees to complete a standard waiting period (e.g., 3 months) before they become eligible for enrollment.

Exact Extract:

"Group insurance plans often impose a standard waiting period before new employees become eligible for coverage."

(Reference: Sickness-E312-2020-12-7ED, Chapter 2.3.3.1 Qualification Period【45:3†Sickness-E312-2020-12-7ED.pdf**)

Since the agent had only completed one prior transaction for Helmut, Helmut was still considered a new client for identity verification purposes, and identification was mandatory. Failure to verify identity violates PCMLTFA regulations.

Exact Extract:

"Where there is no ongoing business relationship or where previous transactions were limited, the representative must identify the client again. Failure to do so for investments over $10,000 breaches PCMLTFA requirements."

(Reference: Segfunds-E313-2020-12-7ED, Chapter 4.3 Compliance Requirements​)

Under the LLQP Group Benefits and Group Savings curriculum, eligibility for group insurance benefits such as medical and dental coverage is typically subject to a waiting period, especially for new employees. This waiting period is a standard feature of group insurance contracts and is designed to manage risk for the insurer by preventing immediate claims shortly after employment begins.

A waiting period usually lasts between three and six months, depending on the terms of the group policy. During this time, employees may complete enrolment forms, but coverage does not become effective until the waiting period has been satisfied. This principle applies regardless of whether the employee is otherwise eligible or intends to participate in other employer-sponsored plans.

The key distinction in this question is between group insurance benefits (medical and dental) and group savings plans such as a GRRSP. While Jack’s employer offers both, eligibility rules differ. A GRRSP often allows employees to begin contributing immediately upon employment, and employer matching contributions may vest over time. However, vesting schedules relate only to ownership of employer contributions, not to eligibility for participation in group insurance coverage. Therefore, Option B is incorrect.

Option A is also incorrect because there is no legislated waiting period tied to GRRSP contributions that governs eligibility for group insurance benefits. Option C is incorrect because group plan renewal dates apply to the employer’s contract with the insurer, not individual employee eligibility.

The LLQP study materials emphasize that group insurance eligibility is most commonly determined by a standard waiting period, which must be completed before coverage becomes effective. Once this period ends, Jack will become eligible to participate in the medical and dental plans.

Therefore, based on LLQP-approved group benefits rules, the correct and fully verified answer is Option D: At the end of a standard waiting period.

Under the LLQP Segregated Funds and Annuities curriculum, beneficiary designations in insurance contracts—such as IVICs (segregated fund contracts)—follow strict contractual and legal rules. The key elements in this scenario are the irrevocable beneficiary designation, the presence of a contingent beneficiary, and the order of entitlement upon death.

Fiona named her brother Gerald as an irrevocable beneficiary. An irrevocable beneficiary has strong rights while alive, including restrictions on the policyholder’s ability to make changes without consent. However, those rights end upon the beneficiary’s death. Once Gerald died, his irrevocable beneficiary status ceased to exist. Importantly, irrevocable beneficiary rights do not pass to the beneficiary’s estate unless the contract specifically states otherwise, which is not indicated here. Therefore, Option A is incorrect.

Fiona also named her niece Ivy as contingent beneficiary. According to LLQP principles, a contingent beneficiary is entitled to the proceeds if the primary beneficiary predeceases the contract owner. That is exactly what occurred: Gerald died before Fiona. As a result, upon Fiona’s death, the contract proceeds are payable directly to Ivy. This payment bypasses Fiona’s estate and is governed solely by the beneficiary designation in the IVIC.

Option C is incorrect because divorce does not create an automatic entitlement to insurance proceeds. Andrew’s status as beneficiary on a separate life insurance policy has no legal impact on the IVIC. There is no automatic financial duty that would override a valid beneficiary designation in an insurance contract.

Option D is also incorrect. The existence of a valid contingent beneficiary means the proceeds do not revert to the estate, even though Fiona did not update the designation after Gerald’s death. The LLQP study guide clearly states that proceeds go to the contingent beneficiary when the primary beneficiary has predeceased the policyholder.

Therefore, in accordance with LLQP Segregated Funds and Annuities rules, the IVIC proceeds are payable to Ivy, making Option B the correct and fully verified answer.

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 D is correct regarding extending tax benefits but does not directly highlight the immediate benefit of income splitting for the couple.

A Registered Education Savings Plan (RESP) is specifically designed to fund education savings and allows contributions for a named beneficiary (Brienne), making it the perfect choice.

Exact Extract:

"An RESP is an education savings plan sponsored by the government, providing grants and tax-deferral advantages for beneficiaries saving for post-secondary education."

(Reference: Segfunds-E313-2020-12-7ED, Chapter 1.3.11.3 Group Plans and Registered Education Savings Plans​)

Under the LLQP Segregated Funds and Annuities and Investment & Savings curriculum, assessing investment risk requires reviewing both the client’s sources of income and the composition of their portfolio. In Jonas’s case, his primary retirement income of $2,000 per month is indexed to the cost of living. This indexing significantly reduces his exposure to inflation risk, as increases in prices are offset by corresponding increases in income. Therefore, inflation risk is not his primary concern.

Jonas’s RRSP investments consist entirely of foreign-based assets: an international equity fund and a global bond fund. According to LLQP investment principles, investments that hold securities denominated in foreign currencies are subject to foreign exchange risk. This risk arises because fluctuations in exchange rates can affect the Canadian-dollar value of both investment returns and principal, regardless of the underlying performance of the assets themselves. For example, even if the international equity fund performs well in local markets, a strengthening Canadian dollar could reduce the value of those gains when converted back to Canadian dollars.

Interest rate risk is most relevant to portfolios heavily concentrated in fixed-income securities, particularly long-term bonds. While Jonas does hold a global bond fund, it represents only $20,000 of his $50,000 RRSP portfolio, and it is diversified internationally. As a result, interest rate risk exists but is not his dominant exposure. Liquidity risk is also minimal, as mutual fund investments within RRSPs are generally considered liquid and accessible, subject to normal settlement periods.

The LLQP curriculum emphasizes that international diversification introduces currency exposure, which can increase volatility, particularly for retirees who rely on portfolio stability. Since Jonas’s retirement income is already protected against inflation, the most significant remaining risk affecting his RRSP investments is foreign exchange risk.

Therefore, based strictly on LLQP-approved investment risk definitions and client profile analysis, the correct answer is Option B: Foreign exchange risk.

Kadiha’s investment in a segregated fund with a 75% maturity guarantee means that upon maturity, she is guaranteed to receive 75% of her original investment, which would be $7,500 (75% of $10,000). The payment is considered part of the maturity guarantee under segregated fund contracts, and the difference paid out by the insurer to meet the guarantee ($2,500 in this case) is not subject to capital gains or interest income tax as it’s part of the guaranteed benefit. According to LLQP guidelines, segregated funds with such guarantees only tax the difference as capital gains if the payout exceeds the original investment, which is not applicable here​​.