Unit 7 - answers

2023-11-03, 9 : 50 PM VirtualUniversity.CIFP.ca Page 1 of 5 https://virtualuniversity.cifp.ca/TestScore/English/Assessment/AssessmentFormalAsResult.asp Assessment >> Formal Assessment Assessment: Registered Financial and Retirement Advisor Course - Part II Unit 7 Post-Assessment (C242V20U7L0A25Q10) Date Submitted: 11/03/2023 09:50:00 PM Total Correct Answers: 8 Total Incorrect Answers: 2 Your Mark (total correct percentage): 80% 1 Chandler wants to include a power of attorney for personal care in his estate plan. Which of the following statements is FALSE? Correct The correct answer: Chandler's power of attorney for personal care is restricted to instructions on emergency life saving measures. Your answer: Chandler's power of attorney for personal care is restricted to instructions on emergency life saving measures. Solution: Chandler's power of attorney for personal care is not restricted to instructions on emergency life saving measures. (Concepts) A power of attorney for personal care (also known as a "living will) is a legal written document that appoints an individual to make health care decisions and personal care decisions in the event that the grantor becomes incapacitated (i.e., a proxy directive.) It could also include specific instructions regarding his or her future personal and health care, including treatments that the grantor would or would not find acceptable under certain circumstances (i.e., and instructional directive). (Choice B is false.) Chandler's power of attorney for personal care can include the appointment of a substitute decision maker (i.e., a proxy directive), as well as specific instructions regarding his future personal and health care, including treatments that he would or would not find acceptable under certain circumstances. So, Chandler's power of attorney for personal care is not restricted to instructions on emergency life saving measures. 2 Samuel and his sister, Amanda, are about to buy a house together. They are unsure whether they should register their joint ownership as a joint tenancy or a tenancy-in-common. Which of the following statements is FALSE? Correct The correct answer: If they register their ownership as a joint tenancy, Samuel can bequeath his interest in the house to his brother, Max. Your answer: If they register their ownership as a joint tenancy, Samuel can bequeath his interest in the house to his brother, Max. Solution: If they register their ownership as a joint tenancy, Samuel cannot bequeath his interest in the house to his brother, Max. One of the main differences between a joint tenancy and a tenancy-in-common relates to how the co-owner can dispose of the property after death. During life, the co-owners of either a joint tenancy or a tenancy-in-common have equal right of possession of the whole property. Tenants-in-common may dispose of their portion as they see fit, while they are alive, or in their will. However, in a joint tenancy, the co-owners are treated as a single owner for legal purposes. One tenant may not dispose of his or her share without the consent of the other joint tenants. Upon the death of one co- owner, the ownership interest of the deceased flows automatically to the surviving owners under the right of survivorship, regardless of what may be indicated in a will. Thus, a co-owner in a joint tenancy cannot bequeath his or her interest in the property to someone other than the surviving co-owners. So, if they register their ownership as a joint tenancy, Samuel cannot bequeath his interest in the house to his brother, Max.

2023-11-03, 9 : 50 PM VirtualUniversity.CIFP.ca Page 2 of 5 https://virtualuniversity.cifp.ca/TestScore/English/Assessment/AssessmentFormalAsResult.asp 3 Two brothers, Jesse and Nicholas, purchased a house together several years ago. They each put up half of the purchase price, and registered the house in joint tenancy. For the first two years, Jesse and Nicholas lived in the house together. Last year, Nicholas decided to move out of the house and move in with his girlfriend, although he still had free access to the house he owned with Jesse. Nicholas then decided he needed some cash, so, with Jesse's permission, he sold 50% of his interest in the house to his sister, Tiffany. The joint tenancy has reverted to a tenancy-in-common as a result of Nicholas violating what unity? Correct The correct answer: interest Your answer: interest Solution: The joint tenancy reverted to a tenancy-in-common because Nicholas has violated the unity of interest. (Concepts) Four unities are required to form a valid joint tenancy. They are the unities of possession, interest, time and title. The unity of interest says that each co-owner must have an equal interest in the property. If one of the co-owners subsequently sells a portion of his interest in the property, the unity of interest will be violated and the joint tenancy will revert to a tenancy-in-common. (Choice B) So, the joint tenancy reverted to a tenancy-in-common because Nicholas has violated the unity of interest when he sold half of his interest to Tiffany. 4 Altare and Sable purchased a townhouse together as tenants-in-common. Altare contributed $75,000 to the purchase price of $100,000. Sable contributed $25,000. Which of the following statements is FALSE? Correct The correct answer: If they rent out the townhouse, 50% of the net rental income will be attributed to Altare. Your answer: If they rent out the townhouse, 50% of the net rental income will be attributed to Altare. Solution: If they rent out the townhouse, 75% of the net rental income will be attributed to Altare. (Concepts) In a tenancy-in-common, all co-owners have an equal right to possess and use the whole property, along with the right to dispose of their interest in that property however they see fit during life and after death. Any property income realized by property held as a tenancy-in-common will be attributed to the co-tenants in proportion to their ownership interest (Choice D is false.) So, if they rent out the townhouse, 75% of the net rental income will be attributed to Altare. 5 Jung and Maurice purchased a house as tenants-in-common. Jung met with his personal financial planner to discuss the estate planning implications of the purchase. Which of the following statements is FALSE? Correct The correct answer: Jung will automatically inherit Maurice's share of the property if Maurice should predecease him. Your answer: Jung will automatically inherit Maurice's share of the property if Maurice should predecease him. Solution: Jung will not automatically inherit Maurice's share of the property if Maurice should predecease him. (Concepts) An individual is said to have "post-mortem control" over his property when he is free to bequeath his share of the property to whomever he chooses through a beneficiary designation or will. In a tenancy-in-common, all co- owners have an equal right to possess and use the whole property, along with the right to dispose of their interest in that property however they see fit during life and after death. Property that is owned in the form of a tenancy-in-

2023-11-03, 9 : 50 PM VirtualUniversity.CIFP.ca Page 4 of 5 https://virtualuniversity.cifp.ca/TestScore/English/Assessment/AssessmentFormalAsResult.asp the will. Solution: Mike is not entitled to the entire value of the cottage. (Concepts) In most provinces, the intestacy legislation requires that a set amount of the estate, called the "preferential share", goes to the spouse of the deceased. The remainder of the estate is divided between the spouse and surviving children or grandchildren in the form of "distributive shares". If the deceased had a will, but the will failed to address the disposition of some estate assets, it will result in a partial intestacy, and those assets will be distributed according to provincial intestacy legislation. If the surviving spouse already has an entitlement under the will, his or her preferential share under the intestacy legislation will be reduced by the value of the assets received under the will. (Choice A is false.) By not including the cottage in her will, Andrea's estate is partially intestate. Mike would be entitled to something less than the full value of the cottage because he already has an entitlement under the will. If the preferential share is $200,000, (assuming he received no other bequests) Mike would be entitled to only $80,000 from the cottage, calculated as (preferential share - value of stock portfolio) or ($200,000 - $120,000). He will also be entitled to a distributive share, the size of which depends on the number of Andrea's surviving issue. So, Mike is not entitled to the entire value of the cottage. 9 Provincial intestacy legislation may not always fit each client's specific situation. In the case of an intestacy, which of the following statements would be FALSE? Correct The correct answer: RRSPs with a named beneficiary might instead be distributed according to the intestacy rules. Your answer: RRSPs with a named beneficiary might instead be distributed according to the intestacy rules. Solution: RRSPs with a named beneficiary would bypass the estate and would not be distributed according to the intestacy rules. (Concepts) There are many problems that can arise when someone dies intestate. Clients need to be made aware that a valid will is an essential element in a financial plan. A will can protect his spouse or children from financial difficulty in the event of his death. Otherwise, his estate will be distributed according to provincial intestate laws. Property with a named beneficiary bypasses the estate and thus is not distributed according to intestacy rules. (Choice D is false.) So, RRSPs with a named beneficiary would bypass the estate and would not be distributed according to the intestacy rules. 10 Branson wants to set up a trust fund, so that his assets can pass to his family without being subject to probate fees. Which of the following statements is FALSE? Incorrect The correct answer: Branson can transfer his property to a trust while he is alive and still retain full control of the property until his death. Your answer: It is unwise for Branson to set up a trust fund solely for the purpose of avoiding probate fees. Solution: Branson can transfer his property to a trust while he is alive but he will not retain full control of the property. (Concepts) An individual can transfer his or her property to a trust while he or she is still alive. However, property transferred to a trust fund ceases to belong to the donor and is no longer controlled by the donor. Property held in a trust fund is not included in the donor's estate when he or she dies and, therefore, is not subject to probate. The cost of establishing and maintaining the trust, especially over a long period of time, may more than negate the savings realized on probate fees. The feasibility of this strategy for simply avoiding probate fees is restricted to large estates and would likely only be used if the trust also met some other estate planning objective. (Choice A is false.) So, Branson can transfer his property to a trust while he is alive but he will not retain full control of the property.

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