A6

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McGill University *

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Apr 3, 2024

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3/21/24, 11:43 PM VirtualUniversity.CIFP.ca https://virtualuniversity.cifp.ca/TestScore/English/Assessment/AssessmentFormalAsResult.asp 1/4 Assessment >> Formal Assessment Assessment: CIFP Retirement Planning Certificate™ Course - Quebec Unit 6 Post-Assessment (C183V17U6L0A25Q10) Date Submitted: 02/01/2024 12:32:00 AM Total Correct Answers: 11 Total Incorrect Answers: 0 Your Mark (total correct percentage): 100% 1 Pam and Christopher Williams were concerned about funding the post-secondary education of their son, Peter, aged 6. So, they met with their personal financial planner, Paul, to develop a funding plan. Paul helped them to establish what they wanted to achieve from the plan, collected information about their financial status, analyzed it and selected funding strategies. After discussing the strategies with the Williams, the strategies were implemented. When Peter Williams turned 18 and wanted to go to university to become a lawyer, the Williams realized they only had enough funds to send him to one year of university or three years of college. What error or omission, if any, did the Williams and Paul make in the funding plan? Correct The correct answer: They failed to monitor the funding plan. Your answer: They failed to monitor the funding plan. Solution: The final stage of the education planning process is monitoring the plan and making changes as required. If the Williams and their financial planner had monitored the plan after it was implemented, they would have realized they were going to fall short of the original target. Monitoring also involves re-evaluating the original objectives as the child grows and develops goals of his own. 2 In preparing a projection of education costs, certain assumptions are required. Which of the following statements concerning the assumptions is TRUE? Correct The correct answer: The rate of inflation of tuition fees would generally be expected to exceed the expected increase in the inflation rate. Your answer: The rate of inflation of tuition fees would generally be expected to exceed the expected increase in the inflation rate. Solution: Historically, the rate of increase in tuition fees has outpaced the rate of inflation. 3 Raymond is a full-time university student. He receives funding from several sources. What source of funding must Raymond eventually repay? Correct The correct answer: The loan he received under Québec's Loans and Bursaries Program. Your answer: The loan he received under Québec's Loans and Bursaries Program. Solution: Grants and bursaries provided by provincial governments, and awards, scholarships and bursaries from educational institutions are all forms of financial assistance which need not be repaid. However, after he graduates, Raymond must repay the government loan he received. 4 Raymond is a university student. He receives funding from several sources. What form of student aid must Raymond eventually repay? Correct The correct answer: The loan he received from the Ontario government. Your answer: The loan he received from the Ontario government. Solution:

3/21/24, 11:43 PM VirtualUniversity.CIFP.ca https://virtualuniversity.cifp.ca/TestScore/English/Assessment/AssessmentFormalAsResult.asp 2/4 Grants and bursaries provided by provincial governments, and awards, scholarships and bursaries from educational institutions are all forms of financial assistance which need not be repaid. However, after he graduates, Raymond must repay the government loan he received. 5 Ernie is studying at university full-time. At the beginning of the academic semester in January, he travelled 1,000 km from his home to university. He paid $200 in travelling expenses. He received a $4,000 fellowship, but also worked for the university. At the beginning of the summer, Ernie travelled back to his home town which cost another $200 in travelling expenses. He worked during the summer and earned $3,000. Based on these amounts, what is Ernie's net income for tax purposes? Correct The correct answer: $2,600 Your answer: $2,600 Solution: A full-time student attending a post-secondary educational institution can deduct traveling expenses against income reported on his or her return for the year from taxable income like prizes and research grants. He or she can also deduct, traveling expenses incurred to take a job, including summer employment, or to start a business from income earned at the new location. In either case the new location must be more than 40km away. Scholarship income such as a fellowship is exempt from tax. Ernie's scholarship income is exempt from tax but because he moved more than 40km in each direction and worked in both places, he may deduct all of his moving expenses. Therefore, Ernie's net income is $2,600, calculated as (summer employment income - traveling expenses to university - traveling expenses back home) or ($3,000 - $200 - $200). 6 Henry wants to establish one or more RESPs on behalf of his two children, Krista and Stephanie, as well as his niece, Rachel. Which of the following statements are TRUE? 1. Henry can establish a family RESP with Krista, Stephanie, and Rachel named as the beneficiaries. 2. Henry can establish a family RESP for Krista and Stephanie, but must set up a separate plan for Rachel. 3. In the case of a new family plan, each beneficiary must not have reached 21 years of age when she is named as beneficiary. 4. If one of the beneficiaries of the family plan does not attend post-secondary school, the accumulated income on contributions made on behalf of that child can be paid out to another beneficiary. Correct The correct answer: 2, 3, and 4 Your answer: 2, 3, and 4 Solution: In the case of a family plan, each beneficiary must meet both of the following conditions: be related to each living subscriber, or have been related to a deceased original subscriber, by blood relationship or adoption; and for RESPs entered into after 1998, must not have reached 21 years of age when she is named beneficiary or, for a transfer from one family plan to another, was the beneficiary under the old plan before the transfer. In the RESP rules, blood relationships include parents, grandparents, siblings, children and grandchildren, but exclude nieces and nephews, or grandnieces and grandnephews (ITA 251(6)). Family plans provide additional flexibility for the contributor because educational assistance payments need not be limited to the proportion of each child's share of the contributions. This allows a contributor who has named his three children as beneficiaries, for example, to direct the entire income to the two children pursuing education if the third child is not eligible. 7 Cindy is 28 years of age, and she is preparing a retirement plan. She plans to retire at age 65. She is unable to contribute very much into her RRSPs because her participation in the company pension plan has severely reduced her RRSP contribution room. She is wondering about the possibility of using an RESP, with the idea that she could use the accumulated income to fund her return to university during her retirement. Which of the following statements is TRUE? Correct The correct answer: Cindy should not set up an RESP for herself now because doing so would not meet her objectives. Your answer: Cindy should not set up an RESP for herself now because doing so would not meet her objectives.

3/21/24, 11:43 PM VirtualUniversity.CIFP.ca https://virtualuniversity.cifp.ca/TestScore/English/Assessment/AssessmentFormalAsResult.asp 3/4 Solution: A subscriber can name himself as the beneficiary of an RESP with a view to funding his future full-time studies. This would allow a taxpayer to shelter funds in addition to his RRSP contributions if he believes that he will want to attend school full- time in the future. However, if the subscriber is over 21 years of age, he can only establish an individual non-family plan for himself. The RESP is automatically terminated at the end of the 35 th year of registration. Because Cindy is only 28, setting up an RESP for herself now would not be appropriate because it would terminate before she reached her planned retirement. 8 Belinda wants to set up an RESP on behalf of her only child, Regina. What statement would NOT apply to Belinda's RESP? Correct The correct answer: The RESP is restricted to holding no more than 30% of the book value of its assets in foreign property. Your answer: The RESP is restricted to holding no more than 30% of the book value of its assets in foreign property. Solution: There is no foreign content limit for RESPs. The foreign content restriction for registered plans such as RRSPs and RRIFs was eliminated a few years ago. Even though an RESP is a registered plan, it never has been subject to a foreign content limit. While contributions to all RESPs established on Regina's behalf are limited to $50,000 over her lifetime, there is no longer an annual limit on contributions. So, provided Belinda does not exceed the lifetime limit, a $30,000 lump sum contribution in any given year is acceptable. There is a penalty tax of 1% per month on any cumulative excess amount. 9 Marvin is turning 18 years of age and is starting university next year. At that time, he expects to have $10,000 of capital, $800 of CESGs and $6,000 of accumulated investment income in his individual RESP. His parents are the subscribers to the plan. He needs $5,000 for his first year of university. All of the following statements are true, EXCEPT: Correct The correct answer: any amounts of accumulated investment income have been taxed as earned and are not subject to tax Your answer: any amounts of accumulated investment income have been taxed as earned and are not subject to tax Solution: The accumulated investment income has not yet been taxed and will be taxable to Marvin when withdrawn as educational assistance payments. 10 Sonja is a Lifelong Learning Program (LLP) participant. Three years ago, she made a $5,000 LLP withdrawal; she finished her schooling in the same year. Sonja claimed the full-time education amount for the year she attended school. She has yet to make an LLP repayment. As of March 2 nd of this year, what was Sonja's LLP balance? Correct The correct answer: $4,500 Your answer: $4,500 Solution: Sonja's first repayment year would have been last year calculated as the earlier of: the fifth year following the year of her first withdrawal and the second consecutive year in which she cannot claim the full-time education amount for at least three months each year. However, her first repayment could have been made to her RRSP as late as March 1 st of this year (i.e. the payment due date is 60 days from the year-end). The LLP is to be repaid over a maximum of 10 years. So, Sonja should have made a repayment of $500 last year, calculated as ($5,000 ÷ 10). Because she failed to make the required payment, she must include $500 in her income for last year. A participant's LLP balance at any point in time is calculated as: the total of all eligible withdrawals that the participant made from his or her RRSPs under the LLP; minus the total of all amounts that the participant designated as an LPP repayment, or that were included in his or her income because the participant failed to repay the required amounts to his or her RRSPs in previous years. So, Sonja's LLP balance as of March 2 nd of this year is $4,5000, calculated as ($5,000 – $500).

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3/21/24, 11:43 PM VirtualUniversity.CIFP.ca https://virtualuniversity.cifp.ca/TestScore/English/Assessment/AssessmentFormalAsResult.asp 4/4 11 Two years ago, Anthony made an LLP withdrawal of $6,000 to help finance his college education. He completed his full-time studies in March of last year. He claimed the full-time education amount two years ago and for three months last year. In December of last year, he made an RRSP contribution of $300, which he designated as an LLP repayment. What is the MINIMUM LLP repayment Anthony must make this year to avoid penalties? Correct The correct answer: $0 Your answer: $0 Solution: Anthony's first scheduled repayment year will not be until next year, which is the earlier of: the fifth year following the year of his first withdrawal and the second consecutive year in which he cannot claim the full-time education amount for at least three months each year. The LLP is to be repaid over a maximum of 10 years, so Anthony's first required repayment next year will be $600, calculated as ($6,000 ÷ 10). As with the HBP, if the LLP participant makes a contribution to his or her RRSP and designates it as a repayment under the LLP at a time earlier than the first required repayment period, that repayment will reduce his or her first required repayment only. So, Anthony's required repayment for next year will be $300, calculated as ($600 – $300). That said, as per the question, his minimum repayment for this year is zero. Close CFP ® , CERTIFIED FINANCIAL PLANNER ® and are certification marks owned outside the U.S. by Financial Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing authority for the CFP marks in Canada, through agreement with FPSB. Copyright 2002-2024 www.CIFP.ca. All rights reserved. Powered by 724Learning.net. CP6CV (6610516) - 3/21/2024 11:42:54 PM