Canadian Securities Course (CSC) Level 2 Practice Exam

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Prepare for the Canadian Securities Course (CSC) Level 2 Practice Exam. Study with multiple choice questions and detailed explanations. Ace your exam with comprehensive practice tests!

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What is a feature of segregated funds related to bypassing probate?

  1. Bypassing probate - pass directly to beneficiary.

  2. Guarantee costs - higher MER than mutual funds.

  3. Can't change the beneficiary to help bankruptcy, but it can be seized.

  4. Taxation of income allocated per unit to the contract holder.

The correct answer is: Bypassing probate - pass directly to beneficiary.

The correct choice emphasizes that one of the primary features of segregated funds is their ability to bypass probate, allowing assets to pass directly to the named beneficiary upon the contract holder's death. This characteristic is particularly attractive for individuals wanting to ensure a quick and efficient distribution of their estate, avoiding the lengthy and sometimes costly probate process. By designating a beneficiary, the assets within the segregated fund can be transferred directly to that individual, providing them with immediate access without the delays typical of probate court proceedings. This direct transfer also aids in preserving the privacy of the deceased's financial affairs, as the details of the segregated fund do not become part of the public probate record. Thus, the route of bypassing probate is a significant advantage of segregated funds for individuals looking to manage their estate planning effectively. In terms of the other options, while it's true that segregated funds may have higher management expense ratios (MER) compared to mutual funds, this characteristic doesn't focus on the issue of probate. The mention of changing beneficiaries and the implications for bankruptcy is also less relevant, as it pertains more to the legal aspects of beneficiary designations rather than the primary feature of probate avoidance. Lastly, the taxation related to income allocated per unit is a standard consideration for