Segregated Funds and Annuities Flashcards

A client wants an annuity that will provide income for as long as either she or her spouse is alive. Which annuity type should be recommended?

Answer: Joint and last survivor annuity

A joint and last survivor annuity continues payments until the last surviving annuitant dies, making it ideal for couples.

Which of the following is a potential disadvantage of irrevocably naming a beneficiary on a segregated fund contract?

Answer: The policyholder cannot change the beneficiary without the beneficiary's consent

When a beneficiary is named irrevocably, the policyholder loses the unilateral right to change or remove that beneficiary without their written consent.

For LLQP purposes, what is the primary regulatory body overseeing segregated fund contracts in Canada?

Answer: Provincial insurance regulators

Segregated funds are insurance products regulated primarily by provincial insurance regulators, not securities regulators.

A client who is age 70 purchases a deferred annuity. What is the primary tax consequence of the annual growth inside the contract?

Answer: It accumulates tax-deferred until withdrawals are made

Growth inside a deferred annuity accumulates on a tax-deferred basis; taxes are only triggered when funds are withdrawn or the annuity begins paying income.

What happens to the death benefit of a segregated fund if the market value exceeds the guaranteed death benefit amount at the time of the annuitant's death?

Answer: The beneficiary receives the higher market value

The beneficiary receives the greater of the market value or the guaranteed death benefit, so if market value is higher, they receive the market value.

Which of the following annuity payout options provides the highest periodic income payment to a single annuitant?

Answer: Straight life annuity with no guarantee period

A straight life annuity with no guarantee period provides the highest payment because there is no residual value or survivor benefit reducing the payout.

Under the LLQP framework, a key suitability consideration before recommending a segregated fund over a mutual fund is whether the client:

Answer: Values the insurance guarantees and potential creditor protection enough to justify the higher MER

The advisor must determine if the client's need for insurance guarantees and creditor protection justifies the typically higher cost of a segregated fund versus a mutual fund.