Assessment >> Self Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 9 Lesson 4

Date Submitted: 12/01/2022 02:07:00 AM

Total Correct Answers: 1
Total Incorrect Answers: 2

Your Mark (total correct percentage): 33.3333333333333%

1 Jade wants to leave her house and rural property to the conservation authority. She
knows that if she gives them the property now, she can claim a tax credit to offset her
taxes. However, she wants to continue living on the property until she dies. Her financi
planner recommends that she establish a residual trust. Which of the following stateme
is FALSE?

Incorrect
The correct answer: The charity receives a lif e interest in the property; while Jade receives a residua
interest.
Your answer: Once Jade transfers her assets to the residual trust, an estate f reeze is in ef fect.
Solution:

The charity receives a residual interest in the property; while Jade retains a lif e interest.

If the charitable gif t consists of appreciated property, the donor will realize a capital gain on the deeme
disposition, but this should be of f set by the allowable tax credit. The donor could make sure to avoid f u
capital gains by gif ting the asset now instead of upon death, essentially implementing an estate f reeze
respect to the donated items.

In the case of a "residual trust", the donor retains the right to use and enjoy the gif ted property as long
he or she is alive (or f or some other specified period of time), while the charity receives the property up
his or her death. Therefore, the charity receives a residual interest while the donor receives a lif e intere
the property.

Jade wants to receive a tax credit; while still retaining use of the property. So, the charity receives a
residual interest in the property; while Jade retains a lif e interest.

2 Zelda assigns her whole life policy to her favourite charity, the Humane Society. Which
the following statements is FALSE?

Correct
The correct answer: Zelda will receive a tax receipt f or any f uture premiums paid out of the policy cas
value through a policy of f set.
Your answer: Zelda will receive a tax receipt f or any f uture premiums paid out of the policy cash value
through a policy of f set.
 Solution:Zelda will not receive a tax receipt f or any f uture premiums paid out of the policy cash value
through a policy of f set.

(Concepts) A donor can assign a whole lif e policy to a charity. In this case, the donor will receive a tax
receipt f or the cash surrender value of the policy at the time the policy is assigned. The donor will also
receive a receipt f or any premiums that the donor pays af ter the policy is assigned or any money donat
the charity f or the purpose of paying those premiums. If premiums are paid f rom the cash value throug
policy of fset, the donor has not made a donation of premiums and the charity will not issue a receipt f o
premiums to the donor.

(Choice A is f alse.) So, Zelda will not receive a tax receipt f or any f uture premiums paid out of the polic
cash value through a policy of fset.

3 Delia's charitable gift annuity provides her with payments of $5,000 per year for a fixed
term of 12 years. She made an initial payment of $40,000 to the charity. Which of the
following statements is TRUE?

Incorrect
The correct answer: The charity will not issue a tax receipt to Delia f or the gif t.
Your answer: The annuity will pay Delia a total of $40,000.
Solution:

The charity will not issue a tax receipt to Delia f or the gif t.

(Concepts) CRA does not distinguish between self-insured or reinsured gif t annuities. In either case, the
donor is receiving something (the promise of f uture payments) in exchange f or his or her contribution,
obviously the f ull amount of the annuity cannot be considered a charitable gif t. The amount that is
considered to be a gif t is the dif f erence between the value of the payments that the donor/annuitant is
expected to receive (which depends on his or her lif e expectancy) and the original contribution to the
charity.

Each annuity payment consists of a return of capital, and in some cases, interest. If the payment consis
only of capital, the donor does not have to include that payment in his or her income. However, if the
payment also includes an element of interest, the interest portion of that payment must be included in h
her income f or the year in which it is received.

(Choice C is true.) Delia can expect to receive a total of $60,000 f rom the annuity, calculated as ($5,00
12). This is more than her initial contribution. As a result, there is no gif t and the charity will not issue a
receipt. Delia will also have to include a portion of the annual payment in her income each year. The
increase in her taxable income amounts to $1,666.67, calculated as (($60,000 - $40,000) ÷ 12). So, th
charity will not issue a tax receipt to Delia f or the gif t.

CFP®, CERTIFIED FINANCIAL PLANNER® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing autho
the CFP marks in Canada, through agreement with FPSB.
 Copyright �2002-2022 www.CIFP.ca. All rights reserved.

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CP6 (5273715) - 12/1/2022 2:07:17 AM

Assessment >> Self Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 9 Lesson 5

Date Submitted: 12/01/2022 02:08:00 AM

Total Correct Answers: 1
Total Incorrect Answers: 2

Your Mark (total correct percentage): 33.3333333333333%

1 Harold is exploring the possibility of implementing an estate freeze. What course of

action would NOT meet his objective?

Incorrect
The correct answer: Harold could transfer estate assets to a testamentary trust.
Your answer: Harold could sell estate assets at f air market value to a chosen beneficiary.
Solution:

The objective of an estate freeze is to minimize income taxes due at death by f reezing the deemed
disposition of a capital property at an earlier point in time. Thus, any f uture gains would accrue to the
intended benef iciaries. An individual would then transfer estate assets to an inter vivos trust, and not a
testamentary trust, to create an estate f reeze.
So, Harold could not transf er estate assets to a testamentary trust.

2 Bonnie has a large amount of assets, and is thinking about effecting an estate freeze in
order to minimize taxes upon her death. Which of the following is NOT a method for
effecting an estate freeze?

Incorrect
The correct answer: Transferring her assets to tax sheltered investments.
Your answer: Selling or gif ting the assets to intended benef iciaries prior to death.
Solution:Transferring her assets to tax sheltered investments will not ef f ect an estate freeze.

(Concepts) There are several methods of effecting an estate f reeze including:

 selling or gif ting assets to intended beneficiaries prior to death

 transf erring assets to an inter vivos trust
 creating a new holding company
  reorganizing the share structure of an existing corporation

(Choice D) So, transf erring her assets to tax sheltered investments will not ef fect an estate f reeze.

3 Betty has created a new holding company to which she wants to transfer her assets. Th
ACB of the assets is $210,000; the fair market value of the property to be transferred is
$300,000. In exchange for the transfer of assets, Betty will receive preferred shares in
holding company. What amount would Betty NOT be allowed to elect as the cost of the
assets for tax purposes?

Correct
The correct answer: $200,000
Your answer: $200,000
Solution:Betty cannot elect to have the value of the assets transferred be $200,000 f or tax purposes.

(Concepts) The transfer of assets to the holding company can be done on a tax-deferred basis under Se
85 of the Income Tax Act. Using the Section 85 rollover provision, the transferor and the transf eree
corporation can elect, for tax purposes, that the transf er take place at an amount agreed upon by both
parties. The elected amount must be within an upper limit equal to the value of the transf erred propert
and a lower limit equal to the greater of the transferor's ACB and the amount of any non-share
considerations (i.e., cash or a promissory note).

Thus, the transfer can take place with no immediate tax consequence to the transf eror provided that, a
consideration f or the transfer, the transferor receives at least one share of the corporation, although he
she may receive other payments as well.

(Choice A) The elected amount must be within an upper limit equal to the value of the transferred prop
and a lower limit equal to the greater of the transferor's ACB and the amount of any non-share
considerations (i.e., cash or a promissory note). So, Betty cannot elect to have the value of the assets
transf erred be $200,000 f or tax purposes.

CFP®, CERTIFIED FINANCIAL PLANNER® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing autho
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

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CP6 (5273715) - 12/1/2022 2:07:47 AM

Assessment >> Self Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 9 Lesson 6

Date Submitted: 12/01/2022 02:08:00 AM

Total Correct Answers: 0
Total Incorrect Answers: 3

Your Mark (total correct percentage): 0%

1 Leonard is preparing an estate plan for Mr. and Mrs. Montegue. The Montegues are awa
that the U.S. has death taxes. Although they have no intention of residing in the U.S.
permanently, they live in a condo in Florida from November through April of each year a
are concerned about the effect of U.S. death taxes on their estate. Leonard explains to
Montegues that the taxable value of an estate and the exemptions available depend on
residency of the deceased. Which of the following describes the residency status of the
Montegues while they are in the U.S.?

Incorrect
The correct answer: non-resident aliens.
Your answer: residents
Solution:The Montegues are non-resident aliens while in the U.S.

(Concepts) While all U.S. estates may be subject to taxation, the determination of the taxable value of
estate and the exemptions available depend upon the residency of the deceased. Residency requiremen
f or the purpose of U.S. estate taxation differ f rom the residency requirements f or the purpose of U.S.
income taxation. Thus, residency is a critical issue that must be clarif ied before you can prepare an esta
plan f or a client with U.S. assets. An individual is a "resident" of the U.S. if he or she lives there, howev
brief ly, with the intent of remaining there permanently. If he or she is a resident, but is not a United Sta
citizen, he or she is ref erred to as a "resident alien". Thus, a Canadian citizen who moves to the United
States with the intention of staying there permanently, but who does not become a U.S. citizen, is a
resident alien. He or she is a "non-resident alien" if he or she lives there, even f or an extended period o
time, and if it is not his or her intention to remain there permanently.

(Choice B is true.) A Canadian citizen who resides in a Florida condo every year from November throug
April, with the intent of returning to Canada each May, is a non-resident alien. So, the Montegues are n
resident aliens while in the U.S.

2 Titus has recently died, and appointed his cousin Julius to be the administrator of his
estate. Titus owned many assets in the United States, and Julius needs to discover whi
of the assets are considered situs assets for estate tax purposes. Which of the followin
NOT a situs asset for the estate of Titus?

Incorrect
The correct answer: His personal U.S. savings account.
Your answer: Titus's vacation home in Colorado.
Solution:Titus's personal U.S. savings account is not considered to be a situs asset.

(Concepts) Situs assets include all real and personal property normally located in the United States,
regardless of where the items were purchased or where they are located at the time of death. Thus, situ
assets could include real estate, f urnishings, cars, boats, recreational vehicles, jewellery, and artwork. I
would also include shares in U.S. corporations, even if they were purchased on a Canadian stock excha
 and are held in Canada, and certain bonds and debt obligations issued by U.S. corporations. However,
deposits within a U.S. bank are not considered to be situs assets, unless those deposits are related to a
trade or business.

(Choice C) Deposits within a U.S. bank are not considered to be situs assets, unless those deposits are
related to a U.S. trade or business. So, Titus's personal U.S. savings account is not considered to be a s
asset.

3 Tammy is retired and enjoys spending every winter in Florida. She rents an apartment f
her time in Florida, but pays for her own furnishings. She also has her car and a summe
wardrobe in Florida. She qualifies as a non-resident alien of the United States. Tammy
recently died, leaving behind an estate of $1,000,000. The total value of the assets she
had in the United States was $200,000. On what percentage of her estate must she pay
U.S. estate tax?

Incorrect
The correct answer: 0%
Your answer: 100%
Solution:Tammy will not be required to pay any U.S. estate tax.

(Concepts) If a Canadian who is a non-resident alien of the United States has a worldwide estate of less
than $1.2 million at death, the United States will only impose estate tax on U.S. real estate. Other U.S.
assets, including personal property and U.S. securities would be exempt from U.S. estate tax. (Canada
Tax Treaty, Article XXIX B, paragraph 8).

(Choice A is true.) Tammy's estate is valued at less than $1.2 million, and she owns no U.S. real estate
Tammy will not be required to pay any U.S. estate tax.

CFP®, CERTIFIED FINANCIAL PLANNER® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing autho
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

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CP6 (5273715) - 12/1/2022 2:08:09 AM

Assessment >> Formal Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 9 Post-Assessment
(C432V20U9L0A25Q10)
Date Submitted: 09/30/2022 02:00:00 AM
Total Correct Answers: 10
Total Incorrect Answers: 0
Your Mark (total correct percentage): 100%

1 Morris and Emmett are same-sex, common-law partners. Morris owns a townhouse an
Emmett owns a cottage. They live in the townhouse during the winter and the cottage
during the summer. Which of the following statements is TRUE?

Correct
The correct answer: Morris and Emmett can designate either the house or the cottage as a principal
residence f or a specific calendar year.
Your answer: Morris and Emmett can designate either the house or the cottage as a principal residenc
a specif ic calendar year.
Solution:

Morris and Emmett can designate either the house or the cottage as a principal residence f or a specific
calendar year, but not both.

(Concepts) The Income Tax Act recognizes same-sex, common-law partners as having the same rights
obligations as spouses. As a result, same-sex couples can only designate one property as their principa
residence.

(Choice A is true.) The townhouse is not registered in joint tenancy, so Emmett will not automatically
acquire ownership of the townhouse if Morris predeceases him. If Morris and Emmett bequeath their
property to each other in their wills, the f amily of the deceased may be able contest their wills. They ar
common-law partners, so if Emmett bequeaths his cottage to Morris, he can rollover the property to Mo
However, because they are treated as spouses under the Income Tax Act, Morris and Emmett can desig
either the house or the cottage as a principal residence f or a specific calendar year, but not both.

2 Kevin and Ryan are involved in a same-sex relationship. Kevin wants to make sure tha
Ryan is provided for in the event that Kevin should predecease him. Kevin's family is
strongly opposed to the relationship and Kevin is concerned that they will contest the
will if he bequeaths his property to Ryan. Kevin wants to make sure that Ryan is the
beneficiary of his life insurance policy. Which of the following statements is FALSE?

Correct
The correct answer: The terms of Kevin's will are private and conf idential, and will not be released to
f amily unless they are beneficiaries under that will.
Your answer: The terms of Kevin's will are private and conf idential, and will not be released to his f am
unless they are benef iciaries under that will.
Solution:

The terms of Kevin's will are not private and conf idential, and may be released to his f amily, whether o
they are benef iciaries under that will.

(Concepts) When wills are subject to probate, they essentially become public documents. In order to pr
their partners f rom public scrutiny, some same-sex couples opt to use lif e insurance as a means f or
providing f or their surviving partner. Beneficiary designations on lif e insurance policies are not made pu
and cannot be challenged by the f amily of the deceased. Thus, same-sex couples can use lif e insurance
provide f or each other while maintaining their privacy. Because of the high underwriting risk associated
the increased possibility of AIDS, an individual in a same-sex relationship may have dif ficulty obtaining
insurance contract that names a same-sex, non-related person as a beneficiary. However, such policies
available.

(Choice D is f alse.) When wills are subject to probate, they essentially become public documents. So, th
terms of Kevin's will are not private and conf idential, and they may be released to his f amily, whether o
they are benef iciaries under that will.

3 Rita was a widow with one child, Erin. In the year of Rita's death, Erin was 11 years o
and lived with Rita. Erin is the sole beneficiary of Rita's estate, including Rita's RRSPs
One of the ways to avoid having to include the FMV of the RRSP on Rita's final return i
transfer the RRSPs to an annuity that names Erin as the annuitant. Which of the
following is one of the conditions that the annuity must meet to maintain the tax-
deferred status?

Correct
The correct answer: It must be a term annuity with a maximum term of seven years.
Your answer: It must be a term annuity with a maximum term of seven years.
Solution:

In order to maintain the tax-deferred status, it must be a term annuity with a maximum term of seven
years.

(Concepts) The RRSPs of a deceased taxpayer can be rolled over to a f inancially dependent child on a ta
def erred basis. The eligible amount can be used to buy a term annuity f or that dependent child. The ter
the annuity cannot exceed 18 years minus the age of the child at the time of purchase. Payments f rom
annuity must begin within one year of the date of purchase and will be included in the benef iciary's inco
f or tax purposes.

(Choice B) Erin was 11 years old and f inancially dependent on Rita at the time of Rita's death. So, Rita'
RRSPs can be rolled over to Erin and be used to purchase a term annuity with a maximum term of seve
years, calculated as (18 - age of child at time of purchase) or (18 - 11).

4 Rick finds himself in a difficult situation. His brother died recently and in his will he
named Rick as the person he wants to care for his mentally disabled adult son, Joseph
However, his brother bequeathed his estate directly to Joseph who insists he can care
himself. Which of the following statements is TRUE?

Correct
The correct answer: The court must declare Joseph incompetent to care f or himself before Rick can b
appointed as his legal guardian.
Your answer: The court must declare Joseph incompetent to care f or himself before Rick can be appoi
as his legal guardian.
Solution:
The court must declare Joseph incompetent to care f or himself before Rick can be appointed as his lega
guardian.

(Concepts) It is possible to bequeath assets directly to a disabled dependant. If the disabled dependant
an adult, he or she will receive control of any direct bequests. If the beneficiary is mentally challenged,
rather than physically challenged, a direct bequest may be inappropriate. However, the person named a
guardian must apply to the court to have the benef iciary declared incompetent to handle his or her own
af fairs before the guardian can legally act on the benef iciary's behalf.

(Choice A is true.) Rick's brother bequeathed his estate directly to Joseph. So, the court must declare
Joseph incompetent to care f or himself before Rick can be appointed as his legal guardian.

5 Norah has a daughter, Claire, who has been legally declared mentally incompetent to
handle her own affairs. In her will, Norah bequeaths a large part of her estate to Clair
and names a family member as Claire's guardian of estate. Norah asks her financial
planner if there are any other special aspects that she needs to consider regarding he
bequest to Claire. Norah's financial planner is concerned about what will happen when
Claire dies. Which of the following statements concerning her estate plan is FALSE?

Correct
The correct answer: Claire needs to make a will.
Your answer: Claire needs to make a will.
Solution:

Claire does not need to make a will.

(Concepts) When bequeathing assets to a mentally incompetent person, it is important to consider wha
happen when the benef iciary dies. An individual must be mentally competent to make a will, or the will
be challenged in court and ruled as invalid.

(Choice B is f alse.) Norah can establish a trust naming Claire as income beneficiary and perhaps also gi
the trustee the discretion to use some or all of the capital f or the child's benef it if necessary. However,
Norah should also specif y how any capital remaining af ter the child's death is to be distributed, by nam
the f inal or capital benef iciary to be someone other than Claire. So, Claire does not need to make a will.

6 Brent, Phil and Rudy were the only shareholders of a private corporation. They each h
1,000 shares. Shortly after they executed a cross-purchase buy-sell agreement, Brent
died. Which of the following statements is FALSE?

Correct
The correct answer: Phil and Rudy both have an option to buy 500 shares f rom Brent's estate.
Your answer: Phil and Rudy both have an option to buy 500 shares f rom Brent's estate.
Solution:
Phil and Rudy have an obligation, not an option, to buy 500 shares f rom Brent's estate.

(Concepts) In a cross-purchase agreement, the surviving shareholders have an obligation to purchase t

shares of the deceased.

(Choice C is f alse.) Brent, Phil and Rudy executed a cross-purchase buy-sell agreement, and Brent
subsequently died. So, Phil and Rudy have an obligation, not an option, to buy 500 shares f rom Brent's
estate.

7 Zachary made a $500 donation to his favourite charity last year. When he completed h
income tax return, Zachary claimed a tax credit on the $500 donation. Which of the
following statements is FALSE?

Correct
The correct answer: Zachary can claim a f ederal tax credit of 16% on the f irst $250 of his donation.
Your answer: Zachary can claim a f ederal tax credit of 16% on the f irst $250 of his donation.
Solution:

Zachary cannot claim a f ederal tax credit of 16% on the f irst $250 of his donation.

(Concepts) Taxpayers who make eligible charitable donations can claim a 15% non-refundable f ederal t
credit on the f irst $200 and a 29% credit on amounts over $200. Under the provincial tax on income (T
systems, an individual who makes a charitable donation may also claim a provincial tax credit, the amo
of which varies depending on the province.

(Choice A is f alse.) Zachary made a donation of $500 to his f avourite charity last year. So, Zachary can
claim a f ederal tax credit of 15% on the f irst $200 of his donation.

8 Rennie has a net income of $50,000. He made a large cash donation of $40,000 to the
Cancer Society in honour of his father who died recently. For the year of the gift, what
the maximum amount that Rennie can claim for purposes of the charitable donation ta
credit?

Correct
The correct answer: $37,500
Your answer: $37,500
Solution:

For the year of the gif t, Rennie can claim a maximum of $37,500 f or purposes of the charitable donatio
credit.

(Concepts) As long as a taxpayer is living, the f ederal tax credit f or charitable gif ts can be applied to the
amount of the gif t, up to 75% of the donor's net income f or the year.

(Choice B) Rennie made a cash donation of $40,000 in a year when his net income was $50,000. So, f o
year of the gif t, Rennie can claim a tax credit on a maximum of $37,500, calculated as [the lesser of (a
gif t and (net income × 75%))] or [the lesser of ($40,000 and ($50,000 x 75%))].

9 Francois has no family or loved ones. After being diagnosed with a terminal illness, he
asked his financial planner how he can distribute his estate to charity. Which of the
following BEST describes effective methods of distributing an estate as a form of plan
giving?

Correct
The correct answer: All of the above.
Your answer: All of the above.
Solution:

All of the above methods of distributing an estate are included in planned giving.

(Concepts) Planned giving refers to the process of including charitable donations as part of one's estate
plan. There are various methods that can be used in planned giving, including: making gif ts prior to dea
making charitable gif ts through a will, setting up an inter vivos trust, assigning lif e insurance and purch
a charitable gif t annuity.

(Choice D) So, all of the above methods of distributing an estate are included in planned giving.

10 Cole wants to leave various investment assets to the local humane society and receive
some immediate tax benefits. He also wants to continue to benefit from the income
generated by those assets during his lifetime. His financial planner recommends that
Cole establish a remainder trust to meet his objectives. What statement is true?

Correct
The correct answer: The humane society would be named the capital benef iciary of the trust.
Your answer: The humane society would be named the capital beneficiary of the trust.
Solution:

The humane society would be named the capital benef iciary of the trust.

(Concepts) A taxpayer who wants to leave various investment assets to his f avourite charity, but who w
to continue to benef it f rom the income generated by those assets during his lif etime, may choose to
establish a charitable "remainder trust". The charity is named the remainderman or capital beneficiary,
the donor retains an income interest in the trust property. In this way, the donor continues to receive
income generated by the investment assets, but the assets themselves are transferred to the charity up
death. If the donor wants a current tax receipt, the remainder trust must be irrevocable and the donor
not have any access to the capital. Even then, the receipt will only be f or the present value of the rema
interest, taking into account the donor's lif e expectancy and an appropriate discount rate.

(Choice B is true.) Cole wants to receive the income generated by the trust assets while still receiving s
immediate tax benefits. He would have to retain an income interest in the trust, but make the humane
 society the capital benef iciary. Cole would receive a tax receipt f or the present value of the remainder
interest in the trust. So, the humane society would be named the capital benef iciary of the trust.

CFP®, CERTIFIED FINANCIAL PLANNER® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing autho
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

Powered by 724Learning.net.

CP6 (5273715) - 12/1/2022 2:08:19 AM

￦
Assessment >> Self Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 8 Lesson 1

Date Submitted: 11/30/2022 05:46:00 PM

Total Correct Answers: 1
Total Incorrect Answers: 2

Your Mark (total correct percentage): 33.3333333333333%

1 Through her will, Farida transferred her rental property to a testamentary trust with he
husband, Hussein, named as income beneficiary for the duration of his lifetime. She als
named her children, Zainab and Ziad, as capital beneficiaries of the property upon
Hussein's death. Which of the following statements is FALSE?

Correct
The correct answer: Hussein can sell the rental property and share the proceeds with Zainab and Ziad
Your answer: Hussein can sell the rental property and share the proceeds with Zainab and Ziad.
Solution:

Hussein cannot sell the rental property and share the proceeds with Zainab and Ziad.

(Concepts) Property interest held in trust can be in two f orms: income interests and capital interests. Fo
assets that are likely to generate income, such as rental property or investments, both capital and incom
interests must be considered when establishing the trust. It must be clear whether beneficiaries are ent
to the capital interest, income interest or both.

(Choice D is f alse.) Farida's will named Hussein as the income beneficiary and Zainab and Ziad as the ca
benef iciaries. This means that Hussein is entitled to receive the income generated by the assets held in
until his death. He has no rights to the capital and he cannot sell it, even if he shares the proceeds with
children. Zainab and Ziad are not entitled to receive any income f rom the assets held in trust while Huss
is alive. They are entitled to inherit the capital when Hussein dies, and they will also be entitled to the r
income af ter that time.

So, Hussein cannot sell the rental property and share the proceeds with Zainab and Ziad.

2 Aaron purchased some GICs and placed them in trust for his son, Samuel, who is 23 yea
of age. The trust established by Aaron is valid and names Samuel's uncle, Benjamin, as
trustee. Which of the following statements is TRUE?

Incorrect
The correct answer: The interest income generated by the GICs is not attributed to Aaron.
Your answer: Aaron owns the GICs and he can sell or trade them as he sees f it.
Solution:
 The interest income generated by the GICs is not attributed to Aaron.

Once property is transferred to a trust, it must be clear that the settlor no longer owns the property or
control over it. If the settlor retains ownership of the assets or if the trustee can use the assets f or his o
her own use, a valid trust has not been established. If the trust is not valid, the interest income genera
attributed to the settlor.

(Choice B is true.) The trust established by Aaron is valid; therefore, Aaron has no control over or rights
the assets. In this case, the interest income is not attributed to Aaron. To the extent that the interest
income is paid or payable to Samuel, it can be taxed in Samuel's hands or in the hands of the trust, or a
combination thereof. So, the interest income generated by the GICs is not attributed to Aaron.

3 Rocco established a testamentary trust naming his wife and two children as beneficiari
According to the terms set out in the indenture, the trustee had the authority to distrib
some or all of the trust income or property to some or all of the beneficiaries, but only
when and if he wishes to do so. Which of the following forms of authority does the trus
have?

Incorrect
The correct answer: mere power
Your answer: absolute power
Solution:

The trustee administering Rocco's estate has mere power.

(Concepts) When a settlor establishes a trust, he or she can outline the duties and responsibilities of the
trustee in the indenture (i.e., the trust deed). If the trustee is restricted to distributing the trust propert
specif ied in the indenture or as prescribed by provincial legislation, the trustee has "non-discretionary
power". The settlor can also choose to give the trustee "discretionary power" by giving the trustee the
discretion to distribute trust income and trust property to any or all benef iciaries as he or she sees f it. A
trustee who has "mere power" may distribute some or all of the trust income or property to some or all
the benef iciaries, but only if and when he or she wishes to do so. A trustee who has "trust power" must
distribute the trust income and/or property, but he or she is f ree to choose how that income or property
going to be divided among the benef iciaries.

(Choice C is true.) Rocco gave the trustee the authority to distribute some or all of the trust income or
property to some or all of the benef iciaries, but only when and if he wishes to do so. So, the trustee
administering Rocco's estate has mere power.

CFP®, CERTIFIED FINANCIAL PLANNER ® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing author
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

 Powered by 724Learning.net.

CP6 (5273715) - 11/30/2022 5:45:49 PM

Assessment >> Self Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 8 Lesson 2

Date Submitted: 11/30/2022 05:46:00 PM

Total Correct Answers: 0
Total Incorrect Answers: 3

Your Mark (total correct percentage): 0%

1 Punjab asks his financial planner how testamentary trusts are taxed. Which of the
following statements is FALSE?

Incorrect
The correct answer: Income earned and retained by a testamentary trust is taxed at the top margina
rate.
Your answer: Income earned by a testamentary trust from any source is taxable either in the hands o
trust, or in the hands of the benef iciary.
Solution:

Income earned and retained by a testamentary trust is not taxed at the top marginal rate.

A testamentary trust pays tax on its retained income according to the same graduated scale that is app
to personal income tax. Thus, the marginal tax rate will vary, depending on the total taxable income of
trust.

Income earned by a testamentary trust from any source is taxable either in the hands of the trust, or in
hands of the benef iciaries. All of the income is initially reported by the trust. To the extent that such inc
is paid or payable to a benef iciary, it may be deducted in calculating the taxable income of the tr ust.

Income earned and retained by a testamentary trust is not taxed at the top marginal rate.

A testamentary trust pays tax on its retained income according to the same graduated scale that is app
to personal income tax. Thus, the marginal tax rate will vary, depending on the total taxable income of
trust.

Income earned by a testamentary trust from any source is taxable either in the hands of the trust, or in
hands of the benef iciaries. All of the income is initially reported by the trust. To the extent that such inc
is paid or payable to a benef iciary, it may be deducted in calculating the taxable income of the trust.
 2 Five years ago, Paramjit purchased a cottage for $75,000. He never claimed it as his
principal residence. Last year, the cottage was valued at $82,000 when it passed to
Paramjit's son, Satnam, through Paramjit's will. This year, Satnam sold the cottage for
$92,000. Which of the following statements is FALSE?

Incorrect
The correct answer: Satnam must report a taxable capital gain of $3,500 on his tax return f or the yea
Paramjit's death.
Your answer: Paramjit was deemed to have realized a capital gain of $7,000 on his death.
Solution:

Satnam need not report a taxable capital gain of $3,500 on his tax return f or the year of Paramjit's dea

(Concepts) Upon his or her death, an individual is deemed to have disposed of all of his or her assets at
market value. The deemed capital gain is taxable to the deceased, not to the benef iciary. The FMV at th
time of the transf er becomes the beneficiary's ACB.

(Choice C is f alse.) Paramjit was deemed to have realized a capital gain of $7,000 on his death, calculat
as (FMV - ACB) or ($82,000 - $75,000). A taxable capital gain of $3,500, calculated as (50% x $7,000)
must be reported on Paramjit's f inal tax return.

When he sold the property, Satnam realized a capital gain of $10,000, calculated as (FMV - ACB) or
($92,000 - $82,000).

So, Satnam need not report a taxable capital gain of $3,500 on his tax return f or the year of Paramjit's
death.

3 Rodney wanted to give his property to his two adult daughters in trust, with his wife,
Leigh, named as trustee. He decided to set up a separate, irrevocable inter vivos trust f
for each of his daughters. Which of the following statements is TRUE?

Incorrect
The correct answer: The trusts are separate entities f or tax purposes.
Your answer: Income generated within an inter vivos trust is not subject to income tax.
Solution:

The trusts are separate entities f or tax purposes.

If an individual establishes two trusts naming the same person as the benef iciary, according to Section
104(2) of the Act, the trusts will be considered to be a single trust f or income tax purposes.

However, one individual can establish two dif f erent trusts, each with a dif f erent beneficiary. Provided th
neither trust is revocable, so property cannot revert to the settlor, the trusts will be considered to be
separate entities f or tax purposes.
 Rodney made sure to set up each inter vivos trust as separate and irrevocable. The trusts have differen
benef iciaries and are irrevocable. So, the trusts are separate entities f or tax purposes.

Income generated within the trust and not distributed to its benef iciaries is taxed at the highest margin
rate. Since Rodney's daughters are both over 18 years of age, any income distributed to them f rom the
trust will be taxed at their respective marginal rates and not attributable back to their f ather.

CFP®, CERTIFIED FINANCIAL PLANNER ® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing author
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

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CP6 (5273715) - 11/30/2022 5:46:21 PM

Assessment >> Self Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 8 Lesson 3

Date Submitted: 11/30/2022 05:47:00 PM

Total Correct Answers: 1
Total Incorrect Answers: 2

Your Mark (total correct percentage): 33.3333333333333%

1 Terry died this year. At the time of his death, he had investment assets worth $480,000
with an ACB of $280,000. In his will, he specified that the investment assets were to be
transferred to a trust for the benefit of his wife, Alisha. His will specified that Alisha wa
to receive all of the income generated by the investments, and she could encroach upon
the capital if she needed the money. His will also gave the trustee the discretion to use
to $40,000 of the trust capital to pay for their son's education. What will his personal
representative report on Terry's final return?

Correct
The correct answer: A taxable capital gain of $100,000.
Your answer: A taxable capital gain of $100,000.
Solution:

His personal representative will report a taxable capital gain of $100,000.

(Concepts) If income or capital f rom a testamentary spousal trust can be used f or anyone's benefit othe
than the surviving spouse as long as that spouse is alive, then the spousal trust is "tainted" and the spo
rollover provisions are not available.

(Choice D is true.) Because Terry's trustee can use a portion of the trust capital to pay f or the son's
education, the spousal trust is tainted. As result, Terry will be deemed to have received the FMV of his
investments upon death.

So, his personal representative will report a taxable capital gain of $100,000, calculated as ((FMV - ACB
capital gains inclusion rate) or (($480,000 - $280,000) x 50%).

2 When Hugh embarked on a safari through Africa this year, he transferred 10,000 share
Icandus Holdings to an inter vivos spousal trust, which named his wife, Angelica, as the
sole beneficiary. Hugh purchased the shares for $10 each. At the time that they were
transferred to the spousal trust, the shares were worth $12 each. He also made the
provision that the trustee had the discretion to transfer the shares to Angelica at her
request. Two days after Hugh's departure, Angelica asked the trustee to transfer the
shares to her. The shares were transferred to Angelica and she imme diately sold them
$15 per share. Which of the following statements is TRUE?

Incorrect
The correct answer: Hugh must report a taxable capital gain of $25,000.
Your answer: Angelica must report a taxable capital gain of $15,000.
Solution:

Hugh must report a taxable capital gain of $25,000.

A settlor can establish an inter vivos spousal or common-law partner trust, by transferring property to a
trust during his or her lif etime, with a spouse or common-law partner named as the sole income benefi
and with the provision that no one other than that spouse or common-law partner would have use of th
capital during his or her lif etime.

Assets can be rolled over to a spousal inter vivos trust without incurring a deemed disposition at the tim
the transfer. The trust acquires the shares at an ACB equal to the settlor's ACB, and thus the settlor doe
not have to worry about incurring a tax liability on the capital gains. However, any capital gains realized
the trust or the benef iciary are attributed back to the settlor, while the settlor and the benef iciary are s
alive. Thus, an inter vivos spousal or common-law partner trust cannot be used as an income splitting t

Hugh established a spousal inter vivos trust. There was no deemed disposition, and therefore no tax
consequences, when the f unds were transferred. However, Angelica later sold the shares, which means
any capital gains realized by the sale are attributed back to Hugh. Hugh must report a taxable capital ga
of $25,000, calculated as [((FMV - ACB) x number of shares) x inclusion rate] or [(($15 - $10) x 10,000
50%].

3 Rachel is interested in establishing an alter ego trust, rather than an inter vivos trust. S
knows that there are some conditions that must be fulfilled for her inter vivos trust to b
an alter ego trust. Which of the following statements is FALSE?
 Incorrect
The correct answer: Rachel must be at least 60 years of age at the time she creates the trust.
Your answer: Rachel must be the only individual who has access to the capital of the trust during her
lif etime.
Solution:Rachel must be at least 65 years of age, not 60, at the time she creates the trust.

(Concepts) Alter ego is Latin f or "other self" and ref ers to one's other self, or an intimate and trusted f r

An alter ego trust is an inter vivos trust where the trust deed specifies that:

• the settlor of the trust must be entitled to receive all of the income that the trust earns prior to h
her death
• the trust must be created after 1999
• the settlor must be at least 65 years of age at the time he or she creates the trust
• the only individual who has any access to the trust capital during the settlor's lif etime is the sett
(ITA 104(4)(ii.1) and (iv)); ITA 248(1))

Using this concept, an individual can transfer capital property to a trust without the transfer being
considered a disposition f or tax purposes. Disposition will be deemed to take place upon the death of th
transf eror of the trust at the property's fair market value at that time.

An alter ego trust would name someone other than the settlor as the income and capital benef iciaries a
the settlor's death. It would not revert to the settlor's estate upon his or her death.

(Choice B is f alse.) So, Rachel must be at least 65 years of age, not 60, at the time she creates the trus

CFP®, CERTIFIED FINANCIAL PLANNER ® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing author
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

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CP6 (5273715) - 11/30/2022 5:46:40 PM

Assessment >> Self Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 8 Lesson 4

Date Submitted: 11/30/2022 05:48:00 PM

Total Correct Answers: 1
Total Incorrect Answers: 2

Your Mark (total correct percentage): 33.3333333333333%

 1 Max owns a $400,000 term life policy on his own life, and he has used his beneficiary
designation to indicate that the proceeds are to be paid into a trust that is to be
established for the benefit of his two minor children, Bart and Matt, upon his death. Wh
of the following statements is FALSE?

Correct
The correct answer: The proceeds would be taxable when paid to Bart and Matt.
Your answer: The proceeds would be taxable when paid to Bart and Matt.
Solution:The proceeds would not be taxable when paid to Bart and Matt.

(Concepts) If the death benefit of a lif e insurance policy is payable to the estate of the deceased, then t
proceeds f orm part of the deceased's estate. As such, the proceeds would be subject to probate. The
proceeds would also be available to the creditors of the estate, such that they might never be paid to th
intended benef iciaries. This can be avoided if the benef iciary of the policy is a trust that is to be establis
upon the death of the lif e insured. The resulting trust would be a testamentary trust. The proceeds are
payable to the trust, and not to the estate of the deceased.

The death benef it of a lif e insurance policy, which usually makes up the entire proceeds of the policy, is
never taxable.

(Choice D is f alse.) The death benefit of a lif e insurance policy is never taxable. So, the proceeds would
be taxable when paid to Bart and Matt.

2 Sylvia owns a $300,000 life insurance policy and she wants the proceeds of that policy
benefit her husband, Maurice, upon her death. However, Maurice has a great job and a
marginal tax rate of 45%. Which of the following statements is TRUE?

Incorrect
The correct answer: Sylvia should designate a spousal testamentary trust as the benef iciary of the po
Your answer: Sylvia should designate Maurice as the benef iciary of the policy.
Solution:

Sylvia should designate a spousal testamentary trust as the benef iciary of the policy.

Because testamentary trusts are subject to graduated marginal tax rates, a spousal or common-law pa
trust can be used to f acilitate income splitting between the surviving spouse or common-law partner an
trust.

If the insurance proceeds were paid to Maurice directly, any resulting investment income would be taxe
45%. Instead, Sylvia should designate a spousal testamentary trust as the beneficiary of the policy, so
if Maurice did not need the resulting investment income, it would be taxable to the trust at its lower
marginal rate.

3 Doris has a $1 million life insurance policy, and she wants to ensure the proceeds bene
her minor granddaughter, Amelia. Doris' son, Max, is Amelia's father. The proceeds can
invested at 10% and Max has a 50% marginal tax rate. Which of the following
 recommendations is the BEST choice to ensure that Amelia receives the most benefit fr
the insurance proceeds while she is still a minor?

Incorrect
The correct answer: Doris should name a testamentary trust to be set up on Amelia's behalf as the
benef iciary of the policy.
Your answer: Doris should name Max as the benef iciary of the policy with the understanding that Max
use the proceeds f or Amelia's benefit.
Solution:Doris should name a testamentary trust to be set up on Amelia's behalf as the benef iciary of
policy.

(Concepts) A testamentary insurance trust f or minors is the most common f orm of an insurance trust, p
because in Canada, minors will generally not be permitted to receive insurance proceeds directly. If no t
exists, then government appointed trustees would manage the proceeds.

To prevent this, the policy owner can name a testamentary trust established on behalf of minor children
grandchildren as the benef iciary of the policy, and the terms of that trust can be specif ied in the testato
will. In addition to ensuring that the proceeds do not f all under government control, this arrangement
provides income-splitting opportunities with the minors.

If Doris names Max as the benef iciary of the policy with the understanding that Max is to use the proce
f or Amelia's benefit, Amelia will receive less of the money after tax than she would if a testamentary
insurance trust were established. Max would receive the death benefits tax -free, but the annual income
generated by those proceeds would be subject to his 50% marginal tax rate, rather than a lower MTR in
testamentary trust.

(Choice C is true.) So, Doris should name a testamentary trust to be set up on Amelia's behalf as the
benef iciary of the policy.

CFP®, CERTIFIED FINANCIAL PLANNER ® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing author
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

Powered by 724Learning.net.

CP6 (5273715) - 11/30/2022 5:47:35 PM

Assessment >> Self Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 8 Lesson 5

Date Submitted: 11/30/2022 05:48:00 PM

Total Correct Answers: 0
Total Incorrect Answers: 3

Your Mark (total correct percentage): 0%

1 Terrance has been appointed as the trustee of his father's will. He has no experience w
being a trustee and is afraid that he will make mistakes and be held liable. What
provisions of provincial legislation protects him from personal liability provided that he
carries out his duties in good faith?

Incorrect
The correct answer: exculpatory provisions
Your answer: due diligence provisions
Solution:The exculpatory provisions in provincial legislation protect Terrance f rom personal liability if h
carries out his duties in good f aith.

(Concepts) The provincial legislation gives the trustee certain powers, such as the power to invest the
trust's f unds in certain categories of investments. It also includes exculpatory provisions, which relieve
trustees of personal liability provided that they carried out their duties in good f aith.

(Choice A is true.) So, the exculpatory provisions in provincial legislation protect Terrance f rom persona
liability if he carries out his duties in good f aith.

2 Raschid listed his son, Uday, as one of the beneficiaries of his testamentary trust. Uday
cannot presently be located by the administrators of the trust or by anyone else. What
must be done before the trust can be administered?

Incorrect
The correct answer: The court must declare Uday as dead bef ore the trust can be administered.
Your answer: An additional trust is created f or Uday and if he does not appear in 21 years, the trust
escheats to the government.
Solution:The court must declare Uday as dead before the trust can be administered.

(Concepts) Normally, if a beneficiary cannot be located, the court must declare them dead before the tr
can be administered. This can be a long and involved process, which could seriously delay the distributi
the trust assets. To ensure that this does not happen, the settlor can insert a clause indicating that if an
benef iciary cannot be located within a prescribed time period, then it is to be assumed that the benefici
is dead and is not entitled to benef it f rom the trust.

(Choice D is true.) Normally, if a benef iciary cannot be located, the court must declare him or her dead
bef ore the trust can be administered. So, the court must declare Uday as dead bef ore the trust can be
administered.

3 Samar has been named the sole beneficiary of her mother's testamentary trust. The tru
states that Samar is to receive all funds held in the trust upon reaching 21 years of age
Samar is presently 19 years of age, and desperately needs the funds from the trust to
attend university. What must she do to have the trust distribute funds to her?
 Incorrect
The correct answer: Samar must demand that the trustee distribute the trust property.
Your answer: Samar must sue the trust f or support.
Solution:Samar must demand that the trustee distribute the trust property.

(Concepts) In most provinces, in certain cases the beneficiary or beneficiaries of a trust may demand th
the trustee make an immediate distribution of trust property, thereby ending the trust prematurely, eve
the settlor had specif ied that the property was not to be distributed until a much later date.

This possibility of earlier termination results f rom a common law rule set by the case of Saunders v. Va
in 1841, ref erred to as the Saunders v. Vautier rule. According to this rule, as long as the benef iciary or
benef iciaries are of the age of majority and of f ull mental capacity, and as long as they are absolutely
entitled to all of the trust property, then they can demand immediate payment f rom the trustee.

(Choice C is true.) So, f or Samar to have the f unds distributed, she must demand that the trustee distr
the trust property.

CFP®, CERTIFIED FINANCIAL PLANNER ® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing author
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

Powered by 724Learning.net.

CP6 (5273715) - 11/30/2022 5:48:00 PM

Assessment >> Formal Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 8 Post-Assessment
(C432V20U8L0A25Q10)
Date Submitted: 11/30/2022 05:32:00 PM
Total Correct Answers: 10
Total Incorrect Answers: 0

Your Mark (total correct percentage): 100%

1 Beatrice owns a house. She allows her sister, Agatha, to live with her in the house.
Beatrice wants her property to pass on to her son, Albert, upon her death and she wan
to retain control of the property until she dies. However, she does not want Agatha to
forced to move out or to be obligated to let Albert live there after Beatrice's death. Wh
of the following arrangements would not allow Beatrice to achieve these objectives?

Correct
The correct answer: Through an irrevocable inter vivos trust, Beatrice can grant a lif e interest in the
property to Agatha and grant Albert a remainder interest.
Your answer: Through an irrevocable inter vivos trust, Beatrice can grant a lif e interest in the property
Agatha and grant Albert a remainder interest.
Solution:

An irrevocable inter vivos trust that grants a lif e interest in the property to Agatha and a remainder inte
to Albert will not allow Beatrice to achieve her objectives.

(Concepts) A trust can be used to give someone a lif e interest in a capital property. This entitles him or
to use the property f or a specif ied period of time (usually his or her lif etime), while the title to the prope
ultimately goes to a capital benef iciary when the lif e interest expires. The person entitled to a lif e intere
the capital property of a trust is of ten referred to as a lif e tenant. The capital interest is ref erred to as th
remainder interest and the person receiving this interest is ref erred to as the remainderman.

An inter vivos trust is a trust established during an individual's lif etime. The trust takes effect as soon a
is established, so the settlor immediately gives up any control over property that is transf erred to such
trust.

(Choice C) If Beatrice uses an irrevocable inter vivos trust to give Agatha a lif e interest and Albert a
remainder interest, she will be passing on legal title to the property during her lif etime, not at the time
her death. However, she has stated that she wants to retain control over the property until her deat h. S
an irrevocable inter vivos trust that grants a lif e interest in the property to Agatha and a remainder inte
to Albert will not allow Beatrice to achieve her objectives.

2 Vivian watched a TV program that featured a trustee who absconded with all of the
beneficiary's money. Her financial advisor tried to dispel her fears by explaining some
the obligations placed on trustees. Which of the following statements is FALSE?

Correct
The correct answer: The beneficiaries hold legal title to the property while it is in the trust.
Your answer: The beneficiaries hold legal title to the property while it is in the trust.
Solution:

The benef iciaries do not hold legal title to the property while it is in the trust.

(Concepts) The trustee, not the benef iciaries, holds legal title to the property while it is in trust. The tru
is obligated to manage the trust assets in a f iduciary manner, (i.e. in the best interests of the beneficia
Through the trust deed, the settlor can dictate how and when the benef iciaries of the trust will benef it a
how trust assets will be distributed.

(Choice C is f alse.) The trustee holds legal title to the property while it is in trust. So, the benef iciaries d
not hold legal title to the property while it is in the trust.

3 Adam purchased some GICs and placed them in an inter vivos trust for his son, Timoth
who is 23 years of age. The trust established by Adam is valid and names Timothy's
uncle, Jack, as trustee. Which of the following statements is TRUE?
Correct
The correct answer: The interest income generated by the GICs is not attributed to Adam.
Your answer: The interest income generated by the GICs is not attributed to Adam.
Solution:

The interest income generated by the GICs is not attributed to Adam.

(Concepts) Once property is transferred to a trust, it must be clear that the settlor no longer owns the
property or has control over it in order f or a valid trust to be created. If the settlor retains ownership of
assets or if the trustee can use the assets f or his or her own use, a valid trust has not been established

If a settlor transfers property to an inter vivos trust in which a designated person (including a spouse,
common-law partner, or minor child) has a benef icial interest, then any property income w ill be attribut
the settlor. However, the attribution of property income ceases once the child reaches age 18.

(Choice B is true.) The trust established by Adam is valid, therefore, Adam has no control over or rights
the assets and he cannot sell them as he sees f it. Adam has transferred GICs into an inter vivos trust f o
benef it of his son. Because Timothy is no longer a minor, any interest income generated by the GICs wi
be attributed to Adam. To the extent that the interest income is paid or payable to Timothy, it can be ta
in Timothy's hands, or in the hands of the trust, or a combination thereof.

4 Julia collected several valuable antiques over her lifetime. She set up an inter vivos tru
to leave the antiques to her son, Edward. She also included a provision in the trust
indenture stating that the trust's property would revert back to Julia at her discretion
This is an example of a:

Correct
The correct answer: revocable trust.
Your answer: revocable trust.
Solution:

This is an example of a revocable trust.

A revocable trust is one that can be dissolved or revoked at the discretion of the settlor, so that the trus
property reverts back to the settlor.

A discretionary trust gives the trustee the discretion to distribute tr ust income and trust property as he
she sees f it. A mere power trust allows the trustee to distribute some or all of the trust income or prope
to some or all of the benef iciaries, but only if he or she wishes to do so. With a precatory trust the
transf eror is relying on the moral values of the recipient to carry out his or her wishes. In reality, the
recipient receives absolute title to the property and is f ree to dispose of it as he or she wishes; a true tr
has not been established.

Julia included a provision in the trust indenture stating that the trust's property would revert back to Ju
her discretion. So, this is an example of a revocable trust.
 5 Steve purchased a cottage for $45,000. When he died, the cottage was valued at
$150,000. In his will, he left the cottage in trust to his daughter, Barb, with the provis
that she receives full title to the property in ten years time. After the ten-year term, th
cottage was valued at $190,000. This year, Barb sold the cottage for $220,000. What
amount will Barb include in her taxable income for the year of disposition?

Correct
The correct answer: $35,000.
Your answer: $35,000.
Solution:

Barb will include a taxable capital gain of $35,000 in her income f or the year of disposition.

(Concepts) A non-spousal testamentary trust is assumed to have acquired the property at the f air mark
value (FMV) of the property immediately prior to the settlor's death. This FMV becomes the trust's ACB
eventually the benef iciary's ACB when he or she receives f ull title to the property.

(Choice C) Steve established a testamentary trust for Barb. The trust is deemed to have acquired the
cottage with an ACB of $150,000, which was the FMV immediately prior to Steve's death. Barb's ACB
becomes $150,000 when she receives f ull title to the property. When she sold the cottage, she realized
capital gain of $70,000, calculated as (proceeds - ACB) or ($220,000 - $150,000). So, Barb will include
taxable capital gain of $35,000 in her income f or the year of disposition, calculated as (capital gain x ca
gains inclusion rate) or ($70,000 x 50%).

6 Chadwick wanted to establish an education fund for his son, Jackson. He transferred
1,000 shares into an inter vivos trust for Jackson with the provision that Jackson coul
receive title to the shares anytime after his 18th birthday. When Chadwick purchased
shares, he paid $15 per share. When he established the trust, the shares were worth
$19.50 per share. What was the taxation effect of transferring the shares?

Correct
The correct answer: Chadwick had to report $4,500 of capital gains.
Your answer: Chadwick had to report $4,500 of capital gains.
Solution:

Chadwick had to report a capital gain of $4,500 as a result of transferring the shares.

(Concepts) The transfer of property to an inter vivos trust, other than a rollover trust, results in a deem
disposition at f air market value (FMV) f or tax purposes. There is no rollover available if the property is
transf erred to a child, or to a trust on behalf of that child.

(Choice B) When Chadwick transferred his shares to the trust, he was deemed to have received proceed
equal to their FMV of $19.50 per share, and he originally acquired the shares f or $15 per share. So, in t
year Chadwick transferred the shares to the trust, Chadwick had to report a capital gain of $4,500,
calculated as ((FMV - ACB) x 1,000) or (($19.50 - $15.00) x 1,000).
 7 When Sally's dad, Kyle, died last year, she was named sole beneficiary of his investme
portfolio in the form of a testamentary trust. She needed money for university and ask
the trustee to liquidate 100 shares with a current market value of $75 per sha re. Whe
Kyle died, the shares were valued at $62 per share. What amount is Sally required to
include in her taxable income for the year?

Correct
The correct answer: $650.
Your answer: $650.
Solution:

Sally would have to include $650 in her taxable income f or the year.

(Concepts) For certain types of trusts, such as testamentary trusts, capital gains retain their character w
paid to a benef iciary. When property is transferred to a non-rollover testamentary trust, the trust is dee
to acquire that property with an ACB equal to the FMV immediately prior to the settlor's death.

(Choice C) When Kyle died, the testamentary trust was deemed to acquire the shares with an ACB of $6
which was the f air market value of the shares upon Kyle's death. The sale of the shares by the trustee
resulted in a capital gain of $13 per share or $1,300, calculated as ((FMV - ACB) x 100) or (($75 - $62)
100). So, Sally would need to include $650 in her taxable income f or the year, calculated as (capital ga
capital gains inclusion rate) or ($1,300 x 50%).

8 Joanne owns a cottage that was part of the divorce settlement from her first marriage
She also has a son, Dylan, by her first husband. She wants to make sure that her seco
husband, Bryant, can use the cottage after her death without paying tax on any capita
gains. She also wants to make sure that the cottage passes to Dylan upon Bryant's de
Joanne can BEST achieve her objective by establishing:

Correct
The correct answer: a spousal trust.
Your answer: a spousal trust.
Solution:

Joanne can best achieve her objective by establishing a spousal trust.

(Concepts) One of the common reasons f or establishing a spousal or common-law partner trust is that t
settlor wants his or her spouse or common-law partner to receive the income generated by his or her e
assets, but ultimately wants to ensure that his or her children receive the capital. If property is transfer
into a spousal trust, the spouse is allowed to use the property during his or her lif etime, but the spouse
does not have the option of disposing of the property. The individual who establishes the trust can spec
child as a benef iciary, insuring that the child will receive the property upon the death of the spouse.
Property that is transferred to a valid spousal trust is deemed to have been disposed at the settlor's AC
no capital gains arise at the time of the transf er.

(Choice D) Through a spousal trust, Joanne can make sure that Bryant can use the cottage during his
lif etime without having to pay tax on any capital gains deemed to occur upon her death. A spousal trust
also ensure Dylan receives the cottage upon Bryant's death, and prevent Bryant f rom selling the cottag
passing it to anyone else. So, Joanne can best achieve her objective by establishing a spousal trust.

9 At the time of his death, Johan owned a home and a cottage. In his will, he transferre
all of the property to his wife, Gretchen, in the form of a spousal trust. The will specifi
that Gretchen was allowed to use the cottage and receive any rental income that the
cottage generated. Johan's will also specified that his business partner, Jim, was to be
allowed to use the cottage for two weeks in the summer and two weeks in the winter.
According to the Income Tax Act, the spousal trust is:

Correct
The correct answer: tainted.
Your answer: tainted.
Solution:

According to the Income Tax Act, the spousal trust is tainted.

(Concepts) To qualif y as a spousal trust, only the spouse may be entitled to benef it f rom the properties
transf erred to the trust, either by receiving its income or by having access to some or all of its capital f o
the duration of the spouse's lif e. According to the Income Tax Act, if income or capital f rom the trust is
f or any other person's benefit, the trust is said to be tainted.

(Choice B) Johan's will specif ied that his business partner be allowed to use the cottage f or two weeks in
summer and two weeks in the winter. So, according to the Income Tax Act, the spousal trust is tainted.

10 Upon his death, Mathew's investments were rolled over to a spousal trust for the bene
of his wife, Jennifer. Mathew's will instructed the trustee to transfer the shares to
Jennifer once she completed courses in money management and basic investment
management. Mathew originally bought his 1,000 shares in Newcorp. Inc. for $12 per
share. At the time of his death, the shares were worth $16 each. Two years after his
death, Mathew's trustee transferred ownership of the shares to Jennifer, as per the tr
indenture. At the time of the transfer, the shares were worth $18 each. Last year,
Jennifer decided to sell the shares when they were valued at $21 each. As a direct res
of the sale, Jennifer will realize a deemed capital gain of:

Correct
The correct answer: $9,000.
Your answer: $9,000.
Solution:

Jennif er will realize a capital gain of $9,000.

(Concepts) Investment assets can be rolled over to an untainted spousal trust at their original adjusted
base. If the benef iciary of a spousal trust receives capital f rom that trust, it is rolled over to him or her o
tax-deferred basis. However, when the spouse subsequently disposes of the property, he or she will rea
a capital gain to the extent that the proceeds of his or her disposition exceed the adjusted cost base.
 (Choice D) Jennif er acquired the shares with an ACB of $12 per share. So, Jennif er will realize a capital
of $9,000, calculated as ((sale price - ACB) x number of shares) or (($21 - $12) x 1,000).

CFP®, CERTIFIED FINANCIAL PLANNER ® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing author
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

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CP6 (5273715) - 11/30/2022 5:48:12 PM

Assessment >> Self Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 9 Lesson 1

Date Submitted: 11/30/2022 05:49:00 PM

Total Correct Answers: 0
Total Incorrect Answers: 3

Your Mark (total correct percentage): 0%

1 Jason is having difficulties with his family. His family does not approve of his partner
Kevin, and they have threatened to challenge any estate planning mechanism he uses
which would give Kevin access to his assets. What estate planning methods is MOST
LIKELY to be challenged successfully by Jason's family?

Incorrect
The correct answer: a testamentary transfer through a will
Your answer: a personal trust
Solution:

Inter vivos transf ers can be challenged by Jason's f amily.

(Concepts) The wills of same-sex partners are often challenged by other f amily members who refuse to
accept or sanction the relationship. While these challenges are not always successful, they can be expen
and stressful f or all involved.

In addition, once a will is probated it becomes public inf ormation. Some same-sex partners who wish to
keep their relationship conf idential may want to avoid bequests to their partners in their wills, to mainta
their privacy. For these reasons, same-sex partners may prefer other methods of achieving their estate
planning objectives, such as joint tenancy or lif e insurance.

Personal Trusts - The settlement of a trust and designating the residue of the estate to the trust will
maintain the privacy required, because the terms of the trust are not disclosed in the application f or
probate.

Joint Tenancy - By holding common property in joint tenancy with right of survivorship, property transf
automatically to the surviving partner upon death of the f irst partner. The transfer takes place outside o
will and cannot be contested by the f amily of the deceased.

Lif e Insurance - Many same-sex couples choose to use lif e insurance to provide f or their partners upon
death, instead of bequests through a will. An insurance policy can ensure that the surviv or gets a good
settlement, while allowing the property of the deceased to pass to his f amily through a will. Benef iciary
designations on lif e insurance policies are not made public and cannot be challenged by the f amily of th
deceased. Thus, same-sex partners can use insurance to provide for each other while maintaining their
privacy.

Inter Vivos Transf ers - Finally, individuals involved in a same-sex partnership can transfer their assets t
their partners by way of gif t prior to death. Now that they are recognized as common-law partners und
the Income Tax Act, they can make use of the automatic rollover to avoid the realization of capital gain
the time of the transf er. Documentation of the gif t and of the mental capacity of the transferor will help
ensure that the legitimacy of the gif t is not successfully challenged after the death of the transferor. In
contrast, a testamentary transfer through a will means the assets will f orm part of the estate of the
deceased and as indicated above can be subject to challenges.

2 Vladimir bought his chicken farm property several years ago for $70,000. When he
decided to retire, he sold the property to his grandson, Sigmund, for $110,000. At the ti
of the transfer, the farm was valued at $870,000. Vladimir had already used the full
amount of his lifetime capital gains exemption on a previous transaction. If Vladimir did
not realize any capital gains when he sold the chicken farm to Sigmund because he too
advantage of the rollover provisions, what amount represents the LOWEST ACB for the
farm for Sigmund?

Incorrect
The correct answer: $70,000
Your answer: $110,000
Solution:Sigmund's ACB f or the f arm was $70,000.

(Concepts) In some cases, it may be benef icial f or the taxpayer to opt out of the rollover pro vision, or
choose to execute only a partial rollover, to take advantage of the lif etime capital gains exemption f or
qualif ied f arm property. The taxpayer's gain would be sheltered f rom tax, while the adjusted cost base f
the child would be stepped up, thereby limiting the child's capital gain on a f uture disposition of the
property.

(Choice B is true.) According to the rollover provisions f or f arm property under the Income Tax Act, Vla
can sell the chicken f arm to Sigmund on a complete rollover basis, meaning that Vladimir can elect to h
the transfer deemed to occur at his cost base of $70,000, thereby avoiding any capital gains. In this cas
Sigmund's adjusted cost base (ACB) becomes $70,000, instead of the $110,000 that he paid f or the
property. So, the lowest possible ACB f or the f arm f or Sigmund is $70,000.
 3 Ivan bought his farm property for $55,000 in 1958. Last year, he decided to retire and
transfer the property for $139,000 to his great grandson, Eric. The farm was valued at
$763,000 at the time of the transfer. Ivan elects to record the actual proceeds of the
disposition for tax purposes. All of the following situations are true, EXCEPT:

Incorrect
The correct answer: Eric's adjusted cost base is $55,000.
Your answer: Ivan could use the capital gains exemption on qualif ied f arm property to reduce his tax
liability to zero.
Solution:Eric's adjusted cost base is $139,000.

(Concepts) In some cases, it may be benef icial f or the taxpayer to opt out of the rollover provision, or
choose to execute only a partial rollover, to take advantage of the lif etime capital gains exemption f or
qualif ied f arm property. The taxpayer's gain would be sheltered f rom tax, while the adjusted cost base f
the child would be stepped up, thereby limiting the child's capital gain on a f uture disposition of the
property.

(Choice B is f alse.) Ivan elected to record the actual proceeds of the transfer of property. So, Eric's adju
cost base is $139,000, the amount he paid f or the property. If Ivan had made f ull use of the rollover
provision, Eric's ACB would have been $55,000. However, the higher ACB f or Eric will benef it him in the
f uture when he decides to sell or transfer the property since his capital gain will be reduced. So, Eric's
adjusted cost base is $139,000.

CFP®, CERTIFIED FINANCIAL PLANNER ® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing author
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

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CP6 (5273715) - 11/30/2022 5:48:51 PM

Assessment >> Self Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 9 Lesson 2

Date Submitted: 11/30/2022 05:49:00 PM

Total Correct Answers: 0
Total Incorrect Answers: 3

Your Mark (total correct percentage): 0%

 1 Five years ago, Rick purchased a universal life insurance policy with a death benefit of
$150,000. At that time Rick was single and did not have any dependants; today, he is
married and has one child and accordingly he would like to make some changes to his
contract. What statement is true?

Incorrect
The correct answer: If Rick applies to increase his death benefit, it may not necessarily result in an
increase in his minimum premium payment.
Your answer: If Rick applies to increase his death benefit, his minimum premium payment will
automatically increase.
Solution:

With universal lif e (UL) insurance, the components of insurance have been unbundled, enabling the
policyowner to change one component, without necessarily affecting the other components. For examp

• the f ace amount of coverage can be increased or decreased without impacting premiums
• additional lives can be added under the contract without af fecting the coverage amount or the
premiums
• premiums can be changed f rom year-to-year (subject to minimum and maximum requirements)
without altering the scope of coverage

In addition, deposits can be made to a UL policy (subject to limitations under the Income Tax Act) in ex
of actual mortality costs and allocated to the investment account of the contract. Within certain limits th
excess contributions can grow on a tax-deferred basis.

So, Rick may well in f act be able to increase his death benef it without triggering an increase in premium
As much as Rick can make premium deposits in excess of his mortality costs and have these excess
amounts grow on a tax-deferred basis, the contribution limit is not tied to 18% of his earned income.

2 Charlie earns $80,000 before-tax as a computer analyst. Early last year, he fell from a
ladder. His injury prevented him from doing the substantial and material duties of his
occupation. Charlie has an individual disability insurance contract. Charlie's average tax
rate last year was approximately 27%. What is the maximum amount of benefit that
Charlie would be entitled to receive?

Incorrect
The correct answer: $53,333
Your answer: $80,000
Solution:

The principle of indemnif ication is that insurance can restore the victim of a loss to his or her original
f inancial condition, but the insured cannot prof it f rom the loss. Since the f inancial loss f rom a total disab
is the amount of af ter-tax income, the maximum possible benefit payable is the amount of af ter-tax inc
if the benef it is not taxable. The maximum possible benefit is the amount of pre-tax income if the bene
taxable. Premiums f or Individually-owned disability contracts are paid f or by the insured with af ter-tax
income and are not tax deductible. Consequently, benefits when received are not taxable.
 Insurance companies place limits on the benef it amounts that they will issue; these limits are based sol
on the applicant's income. The insurance companies want to be sure that the insured incurs enough of a
f inancial loss that he or she will have an incentive to recover and return to work.

The insurance industry is not interested in detailed income tax calculations, so the benefits are often lim
to a percentage of income. Usually, this percentage is approximately 2/3 of pre-tax earned income.

So, under the principal of indemnif ication, the maximum amount of benefit that Charlie would be entitle
receive is about $53,333, calculated as (bef ore-tax earnings x maximum benefit rate) or ($80,000 x 2/3
the year he was totally disabled.

3 Eleven years ago, Vicki contributed $20,000 to an IVIC and allocated the funds to an
equity segregated fund. If Vicki redeemed her units this year, when the fair market valu
of the assets had declined in value to $14,000, what is the minimum amount Vicki will
receive?

Incorrect
The correct answer: $15,000
Your answer: $0
Solution:

Under the Unif orm Lif e Insurance Companies Act, an insurer must provide a minimum maturity guarant
f or a segregated fund in the amount of 75% of the principal investment pr ovided the investment has be
held f or at least 10 years. This guarantee also applies if the owner dies.

Vicki has held the segregated fund f or more than 10 years. Therefore, she is entitled to a guarantee of
principal of 75% of the capital she contributed meaning Vicki will receive at least $15,000, calculated as
($20,000 x 75%).

CFP®, CERTIFIED FINANCIAL PLANNER ® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing author
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

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CP6 (5273715) - 11/30/2022 5:49:19 PM

Assessment >> Self Assessment

Assessment: CIFP Retirement Planning Certif icate™ Course - Part II Unit 9 Lesson 3

Date Submitted: 11/30/2022 05:50:00 PM

Total Correct Answers: 0
Total Incorrect Answers: 3

Your Mark (total correct percentage): 0%

1 This year, Saul donated 100,000 shares to the local hospital improvement fund. The
shares are listed on the Toronto Stock Exchange. Saul acquired the shares for $12 each
and they were worth $18.50 at the time of the donation. As a result of his donation, w h
amount of taxable capital gain must Saul report on his income tax return?

Incorrect
The correct answer: $0.00
Your answer: $462,500.
Solution:

If a taxpayer makes a donation to a public charity using publicly listed securities, the resulting dispos itio
exempt f rom capital gains tax. This policy by the f ederal government is meant to encourage charitable
giving and provides a powerful incentive f or donors to donate shares whose later disposition f or anothe
purpose would result in a signif icant tax burden. Since Saul's shares are listed on a prescribed stock
exchange, his donation is eligible f or this f avourable tax treatment.

2 Rita was getting older and she rarely used her cottage property anymore. This year, she
decided to donate the property to the local Scout Group. Rita's husband bought the
cottage for $30,000, and she received it upon his death. At the time of the donation, the
cottage was worth $120,000. Rita's other income for this year is $40,000. On what
amount can Rita claim the federal tax credit for charitable donations?

Incorrect
The correct answer: $75,000.
Your answer: $120,000.
Solution:

Rita's net income limit is $75,000.

(Concepts) While the donor is living, tax credits f or charitable gif ts can be made on the lesser of (t he
amount of the gif t and his or her net income limit).

The net income limit f or both charitable and crown gif ts is 75% of the donor's net income f or the year. T
Income Tax Act increases this general limit by 25% of any taxable capital gain arising f rom the donation
appreciated capital property, to continue to ensure that any tax liability arising f rom the donation of suc
property can be offset by tax credits in the year of donation.
 Rita will realize a taxable capital gain of $45,000 as a result of her donation, calculated as ((deemed
proceeds - ACB) x inclusion rate) or (($120,000 - $30,000) x 50%). Her net income is increased to
$85,000, calculated as (taxable capital gains f rom sale + other income) or ($45,000 + $40,000).

When the gif t is one of appreciated capital property, the net income limit is incr eased by a f urther 25%
the taxable capital gain or $11,250, calculated as ($45,000 x 25%). So, Rita's net income limit is $75,0
calculated as (($85,000 x 75%) + $11,250).

Rita can claim a f ederal tax credit on $75,000, calculated as the lesser of (the amount of the gif t and he
income limit) or ($120,000 and $75,000).

3 Leo asks his financial planner what types of donations are charitable gifts for income ta
purposes in Canada. Which of the following statements is FALSE?

Incorrect
The correct answer: A charitable gif t includes a f inancial donation to a provincial Crown corporation.
Your answer: A charitable gif t includes a f inancial donation to a registered amateur athletic associatio
Solution:

A charitable gif t does not include a f inancial donation to a provincial Crown corporation.

(Concepts) A provincial Crown corporation is a Crown gif t, not a charitable gif t. A Crown gif t represents
donations to Her Majesty in right of Canada or a province and includes Crown agencies controlled by
provincial ministries. Other charitable gif ts include gif ts to registered charities, a housing corporation th
provides housing f or the elderly and acceptable universities outside of Canada.

(Choice D is f alse.) A donation to a provincial crown corporation is a Crown gif t. So, a charitable gif t do
not include a f inancial donation to a provincial Crown corporation.

CFP®, CERTIFIED FINANCIAL PLANNER ® and are certification marks owned outside the U.S. by Financ
Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing author
the CFP marks in Canada, through agreement with FPSB.

Copyright �2002-2022 www.CIFP.ca. All rights reserved.

Powered by 724Learning.net.

CP6 (5273715) - 11/30/2022 5:49:39 PM