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CSI Applied Financial Planning Certification Exam 1 (AFP) Sample Questions:

Question 1

Kendrick, age 55, owns a successful small business, ZXC Inc., valued at $800,000. Kendrick has extensive savings outside of the business and would like to pass the company onto his son at some point in the future.
Kendrick expects the business to increase in value $25,000 per year. If Kendrick decides to use an estate freeze to reduce the amount of taxes he will be required to pay, his financial planner should recommend that he implement the estate freeze at which point in relation to gifting the business to his son?

A. Immediately.
B. At the same time as gifting the company.
C. One month prior to gifting the company.
D. To take effect at the time of his passing.

Question 2

During implementation, a client agrees to update her will, purchase disability insurance, and increase RRSP contributions. Which statement best describes the planner's role?

A. Clarify responsibilities, timelines, and any required referrals or product steps.
B. Focus only on the RRSP contribution because it creates an investment transaction.
C. Complete the will without involving a lawyer.
D. Assume the client will implement everything without follow-up.

Question 3

Wendy, age 60, has a holding company whose sole asset is a commercial property. The property appreciated considerably in value over the last 10 years, and she expects the property value will continue to grow. Wendy is concerned about the tax implications this may have when she dies and leaves the property to her children.
What strategy should Wendy's financial planner recommend to her?

A. Gift common shares to her children and retain majority ownership.
B. Transfer the common shares of the company into joint name with her children.
C. Conduct an estate freeze.
D. Sell the property to her children below market value.

Question 4

Tom has two children from a previous marriage. He has been paying $1,000 per month for spousal support and $1,500 per month for child support to his ex-wife. Recently, his ex-wife was awarded increased child support payments from Tom to cover unanticipated university expenses for one of the children. What should Tom's financial planner advise him about how this increased monthly payment may impact his finances?

A. Net cash flow will be reduced equal to the amount of the extra child support payments, less the tax deduction.
B. The tuition tax credit for his child's post-secondary education will be applied towards Tom's taxes.
C. Net cash flow will be reduced equal to the full amount of the extra child support payments.
D. The increased amount Tom pays in child support will result in a larger tax credit at the end of the year.

Question 5

Leena and Harry are married and hold RRSPs with a value exceeding $500,000. They are concerned about their final tax liability and want to cover the taxes after they have both died. What would their financial planner recommend them to implement in order for the couple to achieve the objective?

A. Transfer the funds into an inter vivos trust.
B. Purchase a joint last-to-die permanent life insurance policy.
C. Update the beneficiary of the RRSP plans to each other.
D. Set up a testamentary trust through their wills.

Solutions: