C4 - Legal Concepts (25-35 Qs with C3)

Question 1

Who creates a trust?
A) A trustee
B) A settlor
C) A beneficiary
D) A donor

Answer 1

B - A Settlor

Question 2

Which of the following is NOT a feature of a valid will?
A) The will is witnessed
B) The person must be over 16 years of age
C) The will is in writing
D) The person understands the effect of the will

Answer 2

B - The person must be over 16 years of age

A person must be 18 years or over for the will to be valid

Question 3

The law of contract is of a special importance in providing a legal framework wihin which businesses can operate
Which one of the following is CORRECT?
A) A contract need not necessarily be in writing
B) A contract is valid even when one party does not intend the agreement to be legally binding
C) A contract comes under the remit of criminal law, rather than civil law
D) A contract can be entered into validly by all adult persons

Answer 3

A - A contract need not necessarily be in writing

Contract law is civil law with damages, not criminal law with prison sentences.

Question 4

Probate can be described as:
A) The process of administering the deceased’s estate, collecting debts, and paying any tax due before the assets are distributed
B) The situation where a person dies without having written a will or with a invalid will
C) A legal ruling delivered by a bankruptcy court
D) A legal document that gives a person the right to take control of another person’s financial affairs.

Answer 4

A - The process of administering the deceased’s estate, collecting debts, and paying any tax due before the assets are distributed

Question 5

A legal document giving one person the power to take decisions over another persons financial affairs is known as a:
A) Lasting power of attorney
B) Lasting power of probate
C) Lasting power of transfer
D) Lasting power of authority

Answer 5

A - Lasting power of attorney

LPA Property and Affairs post 2007

Question 6

Which trust is typically used when a proposed beneficiary is a child?
A) A discretionary trust
B) A charitable trust
C) An interest in possession trust
D) A bare trust

Answer 6

D - Bare trust

With a bare trust, the assets in the trust (the ‘trust fund’) belong to the beneficiaries but are managed by the trustees of the fund. The makes them more sutiable when the beneficiary is a child who is not able to manage the assets. Though a discretionary trust can also be created by the settlor for this person which gives the trustees more control.

Question 7

If a person dies intestate, who does the court appoint to distribute the estate?
A) Bono beneficiary
B) Passo corpus
C) Executors
D) Administrators

Answer 7

D - Administrators

In the case of intestacy (dying withouit a will), Administrators must establish the value of the estate before executors may be appointed.

Passo Corpus and Bono Beneficiary do not exist, they are “distractors”

Question 8

Which party manages the payment of capital and income from the assets of a discretionary trust?
A) The executor
B) The trustees
C) The settlor
D) The beneficiaries

Answer 8

B - The trustees

Question 9

Which of the following statements is CORRECT regarding the beneficial interests under a trust?
A) An interest in possession trust is more flexible than a discretionary trust
B) A discretionary trust is more flexible than an interest in possession trust
C) A bare trust is the most flexible type of trust
D) Trust do not offer any flexibility

Answer 9

B - A discretionary trust is MORE flexible than an interest in possession trust

Question 10

The Mental Capacity Act 2005 created which of the following?
A) The enduring power of attorney
B) The lasting power of attorney
C) The beneficiary power of attorney
D) The official power of attorney

Answer 10

B - The lasting power of attorney (LPA)

Question 11

With who is a lasting power of attorney registered?
A) Crown Court
B) The Guardian Agency
C) The Ministry of Justice
D) The Office of Public Guardian

Answer 11

D - The Office of Public Guardian

Question 12

What is the name of the person who gains from the performancce of the assets held in a discretionary trust?
A) The settlor
B) The trustee
C) The beneficiary
D) The remainderman

Answer 12

C - The beneficiary

Question 13

A trust may be created for all of the following legitimate reasons, EXCEPT:
A) Holding assets for someone incapable
B) For the succession of property
C) For future flexibility
D) For tax evasion

Answer 13

D - For tax evasion

Tax evasion is illegal, unlike tax avoidance. It would not be a legitmate reason to create a trust.

Question 14

Who is responsible for dealing with probate following the death of a person?
A) The Office of Public Guardians
B) The executors of the will
C) The solicitors holding the will
D) The deceased persons heirs

Answer 14

B - Executors of the will

It is the executors of the will who are responsible for dealing with the probate office. Their heirs can be the executors.

Question 15

In which type of trust is the role of the trustee to act as nominee only for the beneficiaries?
A) Discretionary trust
B) Life interest trust
C) Bare trust
D) Interest in possession trust

Answer 15

C - Bare trust

A bare trustee may be the nominee rather than truly a trustee (e.g. trading account).

Question 16

What is the administrator of a bankrupt person’s financial affairs called?
A) Official registrar
B) Official representative
C) Official receiver
D) Official referee

Answer 16

C - Official receiver

Question 17

Which of the following statements is TRUE regarding a personal welfare LPA:
A) It must be signed before 1 Oct 2007
B) It can be used to manage a portfolio of investments
C) It can be used to make decisions relating to health
D) It does not need to be registered with the Office of the Public Guardian

Answer 17

C - It can be used to make decisions relating to health

Lasting Power of Attorneys came in from 2007, superseding Enduring Power of Attorney (EPAs), Welfare LPAs grant power over health decisions and must be registered

Question 18

The Scorlotti trust fund is governed by the Trustee Act 2000
Which of the following types of investments is the fund permitted to invest in?
1. UK growth unit trust units
2. Commercial property
3. Gilt-edged securities

A) 1 and 2
B) 1 and 3
C) 2 and 3
D) All of the above

Answer 18

D - All of the above

The Trustee Act 2000 is relatively permissive and allows a fund governed by it to invest in most asset classes, including land and property. The Investment provisions under the Act do not apply to occupational pension schemes, authorised unit trusts and certain schemes under the Charities Act 2011.

Question 19

Considering the following scenarios:
1. Patrick dies intestate and his son, Alex, inherits all of his assets. However, Alex wishes to include his father’s lifetime partner as a beneficiary
2. Wendy receives £30k as a beneficiary of her father’s will; her father’s second wife receives the remainder. Wendy intends to contest what she sees as a small amount in court
3. Colin left his sister £50k in his will, but the will is deemed invalid due to there being no signature. Colin’s wife, who now inherits all of the assets, wants to honour his request in the will

Which of the following is TRUE?
A) Situation 1 only would be passed on to the administrators
B) In situations 2 and 3 the executors would be granted probate
C) Situation 1 and 3 could be resolved with a deed of variation
D) The subsequent court appearance in situation 2 would require a letter of administration cum testamento annexo

Answer 19

C - Situation 1 and 3 could be resolved with a deed of variation

In both situations the donor is considered to have died intestate. This would lead to the creation of a letter of administration (cum testamento annexo with the will annexed” in the case of the situation 3). Where this occurs, deeds of arrangement (or variation) can be used to alter the distribution of the gifts. This needs to be done within 2 years of the death of the donor and with agreemnt from all involved.

Question 20

In liquidation proceedings, what percentage of creditor approval is required for a Company Voluntary Arrangement (CVA) or an Individual Voluntary Arrangement (IVA) to be approved?
A) 25%
B) 51%
C) 75%
D) 90%

Answer 20

C - 75%