Chapter 3 Flashcards
E book 3 - Why type of taxation are sole traders liable for and why?
a) Income tax & National Insurance contributions (NICs) on his earnings
b) Corporation tax on the profits of his business
a
The law does not distinguish between Doug and his business, so it is Doug and not the business that is liable to any income tax and NICs due.
The self-employed pay income tax twice yearly directly to HMRC, and National Insurance contributions (NICs) are paid either under Class 2 or Class 4, depending on the amount of profit made.
As Doug is self-employed, he must use HMRC’s self assessment process to pay any income tax and/or NICs due.
He would also be liable for capital gains tax (CGT) on any capital gains made (e.g. the sale of machinery).
E book 3 - Doug initially employs one other person in his business, Ivor, to whom he pays weekly wages. Which of these do you think Ivor’s income as an employee will be taxed under?
a) Self-Assessment
b) Pay as you earn (PAYE)
c) The tax credit system
b
Doug will collect income tax and primary Class 1 NICs under PAYE from Ivor’s wages and submit these amounts to HMRC.
Doug will also be liable to pay secondary Class 1 NICs as Ivor’s employer.
E book 3 - As Reliable Excavations (company) gets larger, Ivor decides to buy his way into the business and so it becomes a partnership.
Who do you think is now responsible for paying tax on the business profits?
a) Doug is still responsible for paying income tax and NICs on all the profits
b) Doug and Ivor each pay income tax and NICs on their share of the profits
c) The partnership will pay corporation tax on the profits
b
Both income tax and NICs are assessed on each partner’s share of the profits (in whatever proportion has been decided by the partners) and counted as their personal income against which they can offset their personal allowances.
A partnership is not a separate legal entity for tax purposes.
E Book 3 - What do you think is the extent of a partner’s liability for the debts of the partnership?
a) Limited to the amount of their initial investment
b) Unlimited
c) Normally unlimited, but may also now be limited
c
Traditional partnerships = Unlimited liability (partners’ personal assets at risk if the business cannot pay what it owes). This liability continues even after a partner leaves unless agreed otherwise
LLPs =The Limited Liability Partnerships Act 2000 introduced a new type of partnership: the LLP (Limited Liability Partnership). LLPs are separate legal entities, meaning the business itself is responsible for its debts, not the individual partners. Partners in an LLP only risk losing what they invested and are not personally responsible for business debts beyond that.
LLPs combine the tax benefits of a partnership (income tax + NICs, not corp tax) with the legal protection of a company.
E Book 3 - As the business continues to grow, Doug and Ivor decide to incorporate and become Reliable Excavations Ltd.
Who do you think is now responsible for paying tax on the company’s profits?
a) Doug
b) Doug and Ivor
c) The limited company
c
Limited companies have a legally separate identity from their proprietors (who are shareholders in the company). As such, HMRC looks to the company itself to pay tax on any profits.
There is no difference between a limited company and a public limited company (PLC) for tax purposes, but a limited company is unable to offer its shares for sale to the public.
E book 3 - Adrian, who lives in Wales, has given power of attorney for Gillian to act on his behalf.
In which circumstances below do you think the power of attorney would be revoked?
a) Death of Adrian
b) Bankruptcy of Adrian
c) Adrian being sent to prison
a & b
Under English law, an ordinary power of attorney is automatically revoked on the:
death of the donor;
bankruptcy of the donor;
expiry of a specified time; or
mental incapacity of the dono
E book 3 - Which of the following formalities must be met for a will to be valid?
a) It must be in writing
b) It must be signed by the person making the will (the testator)
c) The testator’s mark or signature must be witnessed by two people (attestation)
d) It must be dated
a, b & c
Forgetting to date a will does not invalidate it.
All the other options are requirements that must be met for a will to be valid.
You should also be aware that the witnesses cannot be beneficiaries under the terms of the will.
E book 3 - Owen Johnson dies intestate, leaving behind his wife and two adult children. His estate comprises the family home and its contents which he owned as a ‘joint tenant’ with his wife. He also owned investments, in his own name, worth £370,000.
How do you think the estate is likely to be distributed?
a) Mrs Johnson will automatically receive everything
b) Mrs Johnson will receive half of everything and the other half will pass to the children
c) Mrs Johnson will receive the house and contents and most of the investment capital
c
Intestate means Owen didn’t leave a will.
Land/buildings in joint names will pass to the surviving spouse if it is held as ‘joint tenants’. Owen’s wife will receive all of his personal chattels – that is, the house and its contents.
The remainder of his estate is investment capital of £370,000 in his sole name.
Where the remainder is worth more than £322,000 (the statutory limit) the residual sum is treated as follows:
-Owen’s wife will inherit £322,000 outright, plus will receive half the residual amount (in this case, £24,000) absolutely; and
- the other £24,000 will pass to the children in equal shares immediately (assuming they are over 18).
GQ 3 - What’s the difference between ordinary, enduring and lasting power of attorneys? What are two types of lasting power of attorneys?
Power of attorney:
Under the Powers of Attorney Act 1971, a person can give consent for another individual to act on their behalf.
For example:
someone who leaves the country for a long period of time; or
an elderly or infirm person who wants someone to handle their affairs.
Ordinary: Can act on their behalf until the death, bankruptcy, expiry of specified time or mental incapacity of the donor
Enduring: Can continue to act in the event of mental incapacity of the donor but new EPAs can be set up since 2007 though existing ones can continue. Covered Property & Financial Affairs only
Lasting: the new enduring since 2007 but must be registered with the Office of the Public Guardian (OPG) before it can be used and covers Property & Financial Affairs + Health & Welfare. Includes extra safeguards, including certificate provider
GQ 3 - What are Executors and administrators? What are they collectively known as?
Executors - people named in the will and responsible for dealing with the deceased’s estate
Administrators - Where someone has not left a will and has died intestate, their estate is usually handled by their next of kin who are known as the administrators
Collectively, executors and administrators are known as legal personal representatives (LPRs).
E book 3 - What is the major difference in the taxation of limited companies and unincorporated businesses?
Unincorporated Businesses (Sole traders/partnerships): Owners personally pay income tax on profits, NICs, and Capital Gains tax on asset sales (e.g. machinery and property).
Limited companies: The company itself pays corporation tax, and owners only pay income tax on money they withdraw (e.g., salary/dividends) and NICs.
E book 3 - What events will normally revoke an ordinary power of attorney?
- Mental incapability of donor
- Death of donor
- Bankruptcy of donor
- Date of expiry, if one exists
E book 3 - What is intestacy?
Intestacy occurs where a person has died without leaving a valid will.
E book 3 - What are the two types of Grant of Representation?
1.Grant of Probate (Executors): Executors must ‘prove’ the will in the Probate Registry in order to obtain the Grant of Probate.
Before receiving the Grant of Probate, executors of large estates must complete an HMRC account showing all assets of the deceased plus any gifts made in the last seven years.
Any IHT due must be paid before they receive a grant of probate
2. Letters of Administration (Administrators): Administrators of an estate where there is no will must apply to the Probate Registry for a Grant of Letters of Administration. Administrators will pay any IHT due before receiving the Letter of Administration.
GQ 3 - What are the 5 features of a valid contract?
- valid offer (e.g. proposer completes a proposal form for insurance. The insurer can look and make any enquiries or medical evidence and issues a letter of acceptance stating it will issue a policy - like a counter offer)
- unqualified acceptance: The party to whom the offer has been made must accept every term of that offer, without alteration (e.g. the proposer agreeing to the terms quoted by the insurance company).
- capacity to contract: Both parties must have the power to contract. Two exceptions: 1) Minors (in general law it is not possible to enforce most contracts against a minor, although the minor may be able to enforce contracts against the other party). 2) Those with a mental health condition and those intoxicated by alcohol or drugs (who can avoid contracts only if they were so confused at the time that they did not understand what they were doing and the other party knew this).
- consideration: Both parties must pay, or stand to pay, something, or provide some benefit to the other party. (e.g. in an insurance contract, the policyholder’s consideration is the premium and the insurer’s consideration is the promise to pay the policy benefits when they become due.)
- Intention to create a legally binding contract - The parties must have the intention to enter a contract
E book 3 - In addition to the ordinary law of contract, life assurance contracts are subject to the requirements of good faith and insurable interest.
Which of the following do you think best illustrates good faith?
a) The proposer must declare that they have a legal relationship with the life assured
b) The insurer must declare that it will not increase the level of premiums over the term of the policy
c) The proposer must declare all material circumstances about the risk to be insured
c
Good faith requires that the proposer of a life policy declares all circumstances which the underwriters might reasonably want to know in relation to the life assured’s health or other circumstances.
GQ 3 - What is Insurable interest?
Insurable interest means the policyholder must have a financial or legal reason to insure someone’s life.
It prevents people from taking out life insurance on strangers for speculative gain.
It must be based on a legal or equitable obligation (e.g., family, financial dependence, business relationships).
E Book 3 - Katherine is an independent financial adviser (IFA) working for a firm. John approaches her for advice on the most suitable investment.
In this situation, who is Katherine acting as an agent for?
a) John
b) The investment product provider
c) The firm that employs her
a
When someone consults an IFA, the IFA becomes the agent of the client and owes a duty of care to the client.
The IFA owes no duty to a provider (such as a life office, for example) but must comply with the relevant FCA rules. The client is then, in law, responsible for the acts of the IFA.
Therefore, if a material circumstance is disclosed by the client to the IFA, but the IFA does not disclose it to the insurer, there has been non-disclosure and the insurance contract may be void.
E book 3 - Are contracts made by someone with a mental health condition invalid?
No, although the contract may be voided by them if they were unable to understand the nature of the agreement and the other party was aware of this.
GQ 3 - What is a freehold?
Freehold means that both the building and the land it stands on are owned until such time as the owner decides to sell or dies.
GQ 3 - What is a leasehold?
Leasehold means that the land on which a building stands is not owned outright by the buyer. Instead, it is leased from the person who owns the freehold rights at a ‘rent’.
The lease may typically be for 99 or 125 years. At the end of the term, the land and the building, or buildings on it, revert to the freeholder (land owner, not the home owner).
The Leasehold Reform (Ground Rent) Act 2022 came into effect on 30 June 2022. The Act restricts ground rents on newly created long leases of houses and flats (with some exceptions) to an annual rent of one peppercorn being intended to represent no financial value.
The term “one peppercorn” is used instead of “zero” because English contract law generally requires some form of consideration (payment) to make an agreement legally binding.
GQ 3 - What is a commonhold?
Commonhold is a newer form of ownership for flats. It aims to provide an alternative to leasehold and eventually to replace it.
Owners of flats under commonhold are called unit-owners. They own their flats in perpetuity (as with freehold) and are members of a commonhold association.
The commonhold association owns the land, the building and the common parts. Unit owners have a vote in the operation of the association, which is responsible for the management, maintenance, repair and servicing of the building.
E book 3 - All other things being equal, which of the following clients might struggle to get a mortgage from a mainstream lender?
a) Falguni who is looking for a mortgage on a freehold house
b) Carla who is looking for a mortgage on a freehold flat
c) Bill who wants a mortgage on a leasehold flat with 10 years to run on the lease after expiry of his required mortgage term
d) Tom who wants a mortgage on a flat with 75 years to run on the lease after expiry of his required mortgage term
b & c
B) Many lenders will only lend on leasehold flats, because the terms of the lease will set out responsibility for common repairs, and flat-owners within a block can be forced under the terms of the lease to share their part of the cost.
This is useful because if the borrower defaults and the property has to be sold to repay the debt, there is a better chance it will be sold in a reasonable state of repair.
C) Why this is a problem:
If Bill’s mortgage is 25 years, and the lease has only 10 years left after (meaning it starts at 35 years now), most lenders will refuse the mortgage.
Once the lease drops below 25 years, the flat becomes very difficult to sell or remortgage, as it is considered unmortgageable by most banks. Many require as much as 40 years so that if the borrower defaults and the property has to be sold to repay the debt, it can still be sold at reasonable value in the market.
What Bill Can Do:
Negotiate a lease extension before applying for the mortgage.
Choose a different property with a longer lease or a freehold
GQ 3 - What is a joint tenancy?
Under a joint tenancy neither individual can sell a property without the other’s agreement.
Each party jointly owns the whole property with the other party. When one dies, the survivor inherits the other’s share of the property without probate being needed and regardless of the provisions of any will.
Joint tenancy is usually used where the joint owners are spouses or civil partners. It may not be suitable for other situations, e.g. two friends buying a house together, especially where the deposit or monthly repayments are not shared equally.
GQ 3 - What is tenancy in common?
With tenancy in common, each owner holds their share separately. They can dispose of their share as they wish.
This can be useful when the joint owners are not spouses or civil partners, or where the joint owners, for whatever reason, would not wish their share of the property to go to the other joint owner on their death.
Tenancies in common need not involve equal shares.
E book 3 - What is meant by the term ‘staircasing’?
A housing association allows a purchaser to increase their share in a property by buying additional shares in the property, up to 100% ownership.
GQ 3 - What is the first homes scheme? Who can apply (3)? How does it work?
What is it?
- A scheme that offers first-time buyers a 30% to 50% discount on a home.
- It is considered affordable housing under planning rules.
Who can apply?
- First-time buyers only.
- Household income must be £80,000 or less (£90,000 in London).
- Must have a mortgage or home purchase plan (Islamic-compliant plans allowed) covering at least 50% of the discounted price.
How does it work?
- Buyers don’t have to pay back the discount.
- When selling, the same discount applies—the home must be sold to another first-time buyer.
- Property must either be a new build or was bought before using the scheme
- Property price (after the discount) must not exceed:
£250,000 in England
£420,000 in London
What are mortgage guarantee schemes? Who is it for? How does it work?
What is it?
- A government-backed scheme to help people buy homes with a 5% deposit.
- Launched in March 2021, now extended until end of 2025.
Who is it for?
✔ People buying their own home (not second homes or buy-to-let).
✔ Available for both new builds and existing homes.
How does it work?
- Buyers can get a 91% to 95% mortgage (meaning they only need 5-9% deposit).
- The government guarantees the part of the mortgage above 80% loan-to-value (LTV).
- Maximum property price: £600,000.
- Must be a repayment mortgage (interest-only not allowed).
This scheme helps buyers get a high-LTV mortgage with a small deposit, reducing the risk for lenders and making it easier to get on the property ladder. They typically have higher interest payments due to small deposits
GQ 3 - who are Official Receivers (OR) and Trustee in Bankruptcy (TIB), what are their roles?
OR initially takes control of the debtor’s property when a bankruptcy order is made against an individual. Then the OR appoints an Insolvency practitioner as Trustee in Bankruptcy (TIB) to realise and distribute the bankrupt’s estate in accordance with the Insolvency Act 1986.
Debtors are entitled to retain the tools of their trade, a vehicle (if they need one for their employment), clothing, and furniture and bedding belonging to themselves and their family.
GQ 3 - What is the difference between liquidation, administration and voluntary arrangement?
- Liquidation is the process whereby the existence of a company is brought to an end and all its assets are taken, sold, and the proceeds shared among the creditors by a liquidator. If there is any surplus (which is unlikely), this will be shared among the company’s shareholders. At the end of the liquidation process, the company is dissolved and removed from the Register of Companies.
- This is where an administrator is appointed to run the company’s affairs and aims, in the first instance, to rescue the company as a going concern.
- This occurs when a satisfactory settlement of financial difficulties between the debtor and their creditors is substituted for the need for insolvency proceedings. Voluntary agreements can be used by both individuals and companies.
E book 3 - A court will only consider a petition for bankruptcy where a creditor is owed at least how much?
£5,000, or a share of debts totalling at least £5,000.
GQ 3 - What is a trust? Who are the main parties to a trust?
A trust is a means of arranging property for the benefit of others, without giving them full control over it.
The key elements of a trust are that someone – the settlor – gives property to another – the trustee(s) – to look after on behalf of someone else – the beneficiary.
E book 3 - Tom gifts £100,000 into a trust. The money is to be used for the education of his grandchildren.
This makes Tom the trust’s…
a) Beneficiary
b) Settlor
c) Trustee
b
The settlor gifts property into the trust. Tom is therefore the trust’s settlor. Tom may be a trustee, but this is not something that happens automatically. The grandchildren are the beneficiaries of the trust.
GQ 3 - (Ways a trust can come into existence) What is an express trust?
An express trust is a trust intentionally and expressly created, usually by some written method such as a deed or a will. It is called ‘express’ because the trust is expressly set out.
For example, a trust of personal property can be made by an express oral declaration (oral declarations are often not recommended in practice because they can be difficult to prove in the event of a dispute). A trust of a life policy is normally made by a declaration in writing (on a declaration of trust form supplied by the life office) or a deed.
GQ 3 - (Ways a trust can come into existence) What is an implied trust? What is a Constructive trust example?
Implied trusts are not written or declared by the parties; they are imposed by the law. These trusts arise from actions, intentions, or fairness rather than formal agreements.
E.g. Constructive Trust Example:
Situation: A couple, Alex and Jamie, buy a house together. Alex provides all the funds for the purchase, but the house is registered in both their names.
Issue: After a few years, the relationship ends, and Alex wants to claim full ownership of the house, as they provided all the money.
Implied Trust: The court may impose a constructive trust because although the property is in both names, the intention may have been that Alex would own the property due to their sole financial contribution. The court would imply a trust based on the equitable principles of fairness and justice. Alex could be entitled to the house or a share of it, even though the legal title is in both names.
GQ 3 - (Ways a trust can come into existence) What is a resulting trust? What’s the famous example?
A resulting trust arises where there is a ‘failure’ of the trust on which the property is held.
E.g.: A man took out a policy on his own life on trust for his wife, should she be living at his death, but otherwise for his estate. He was then murdered by his wife, and the life insurer faced a claim from the wife’s assignee. It was held that it was against public policy to allow a person to benefit from their own criminal act, so this defeated the wife’s claim and anyone deriving title from her.
The trust had therefore failed and there was a resulting trust of the policy moneys for the husband’s estate. In other words, the policy proceeds formed part of the man’s estate, just as they would have done had the wife pre-deceased him.
GQ 3 - (Types of trust) What is a bare (absolute) trust?
The trustee’s sole duty is to transfer the trust property to the appropriate beneficiary.
GQ 3 - (Types of trust) What is an Interest in possession trust?
A trust where a beneficiary has a present right to income from (or enjoyment of) the trust property. That beneficiary might (or might not) also be entitled to the capital.
E.g. John passes away and leaves his house and investments in a trust for his wife, Mary, and their children.
✅ Mary has an “interest in possession”—she can live in the house and get income from the investments.
✅ She may or may not be entitled to the capital—in this case, she isn’t; it goes to the children after her death.
✅ The trust ensures Mary is financially supported while protecting the assets for John’s children in the future.
This type of trust is commonly used in wills to provide for a surviving spouse while preserving assets for future generations.
GQ 3 - (Types of trust) What is a Power in appointment trust?
A power of appointment trust is very flexible as it gives the trustees power to vary the beneficiaries according to changing circumstances.
It can cope with deaths and births in a way which a fixed-interest trust could not. Maximum flexibility can be retained if any appointments are made revocable. The power can be exercised only among the prescribed class of beneficiaries.
Most life offices use a power of appointment trust as their standard trust form for most circumstances.
GQ 3 - (Types of trust) What is a discretionary trust?
A discretionary trust gives the trustees full control over how and when beneficiaries receive money or assets. There is no guaranteed entitlement for any beneficiary. This flexibility can be beneficial in many situations.
Reasons might be:
- Protecting Beneficiaries Who Are Not Good with Money
- Supporting Beneficiaries with Special Needs
- Protecting Assets from Divorce or Bankruptcy
- Tax Planning & Inheritance Tax (IHT) Benefits
- Future-Proofing & Changing Circumstances
- Protecting Assets for Future Generations
E book 3 - John wishes to gift £200,000 in favour of his three children. Two of his sons are under 18, and his eldest son is busy travelling and showing no signs of settling down. John intends to be one of the trustees and wants to retain flexibility as to the amount and timing of benefits to his sons.
Select which type of trust do you think is most appropriate.
a) Bare trust
b) Interest in possession trust
c) Power of appointment trust
d) Discretionary trust
d
The discretionary trust would be most appropriate. None of the beneficiaries will be entitled to anything; the trustees decide the amount and timing of the benefits.
John is the settlor and will also be one of the trustees, so he will retain future control and flexibility.
GQ 3 - (Ways a trust can come into existence) What is a successive trust?
A successive trust is where property is held in trust for a succession of interests, taking effect one after the other.
E.g., a marriage settlement might provide for property to be on trust for a husband for his life, thereafter for his wife for her life, and on her death for the children of the marriage in equal shares.
GQ 3 - (Types of trust) What is a will trust?
A will trust is simply a trust IN a will, as opposed to one created during the settlor’s lifetime. Like anything else in a will, it only becomes effective when the testator dies.
Any asset left in a will trust is still in the testator’s ownership, is disposable by them and is subject to inheritance tax (IHT) as part of the estate. However, there may be a nil rate band trust in a will to maximise IHT efficiency.
A straight gift in a will to a minor is effectively a will trust until the child reaches age 18.
GQ 3 - (Types of trust) What is a statutory trust?
A statutory trust is a trust that is automatically created by law rather than by a person (such as through a will or trust deed). This typically happens in situations where legal rules require assets to be held in trust.
E.g. If someone dies without a will (intestate) and leaves a spouse/civil partner and children, the law automatically applies statutory trusts to distribute the estate:
The spouse/civil partner gets:
- All the personal belongings (chattels).
- A statutory legacy of £322,000 (as of 2023/24).
- Half of the remaining estate outright.
The children get:
The other half of the remaining estate, but this is held in a statutory trust until they turn 18.
E book 3 - A group of friends is discussing how trusts can be created in various business and personal situations. Cliff is of the opinion is that a trust must be set up in writing via a trust deed. Mike is of the opinion that a trust can set up more simply, on a verbal instruction.
Who is correct?
Select one answer, then select Submit to confirm.
a) Mike
b) Cliff
a
A trust may be created over personal property verbally, or even be implied from the conduct of the parties.
However, the more usual method of creating a trust is by the property owner (or settlor) executing a deed assigning the property; for example, to trustees A, B and C for the benefit of beneficiaries X, Y and Z.
The deed will specify the trust property and name the trustees and beneficiaries. It will also set out the powers of the trustees and the rights of the beneficiaries.
GQ 3 - What are the three certainties of trusts for them to be valid?
Certainty of Subject, Object and Words
Subject: Property to be subject to the trust must be specified
Object: Objects of the trust, beneficiaries, must be certain. Name them or say ‘my children’ etc.
Words: Words used must unmistakably show that a trust is intended. E.g. using ‘on trust for’ makes it certain.
*E book 3 - Henry wants to gift £75,000 of cash on deposit to a trust for his grandchildren. The children are very young and he doesn’t want to be committed to spelling out who among his grandchildren gets what and when. Select which of the following statements are false.
Select one or more answers, then select Submit to confirm.
a) Henry can be a both a settlor and a trustee
b)The trust will fail because of lack of certainty of objects
c) The trust will fail because of lack of certainty of subject
b & c
READ THE QUESTIONS: WHICH ARE FALSE
He said his grandchildren, so certainty of objects is there
He said £75k so certainty of subject is there
Henry can, and arguably should, be a trustee as well as a settlor – that way he can have a say in future distributions, but it is essential that he also names other trustees who may act in the event of his death prior to the trust property being distributed.
GQ 3 - How do trustees gain control over the trust property?
They need to obtain possession of the property or whatever title documents represent e.g. deeds or share certificates. They need to make sure their names are entered as owners of the property on any relevant register.
E book 3 - Think how Laura and Liam (who have been appointed as trustees for a discretionary trust) must carry out their responsibilities.
Which of these statements are false?
Select one or more answers, then select Submit to confirm.
a) Liam and Laura must disclose the rationale for the decisions they make to the trust beneficiaries
b) Laura and Liam are bound in their actions for the trust by the terms of the trust documentation
a & b
In the case of a discretionary trust the settlor normally drafts a letter of wishes to guide (but not bind) the trustees in making their decisions.
Beneficiaries of discretionary trusts can ask to see a copy of the letters of wishes, but the trustees do not have to disclose reasons for making decisions made in respect of a discretionary trust.
This is consistent with the spirit of discretionary trusts. Remember, a discretionary trust is one in which none of the beneficiaries is entitled to anything, not even the trust income.
GQ 3 - What are these types of beneficiaries and how do they work? Life Interest, Reversionary Interest, Contingent Interest
Life interest: A life interest beneficiary (or life tenant) has the right to income or use of an asset for life, but they do not own the asset itself. When they die, the asset passes to another person (the reversionary beneficiary).
E.g. John dies and leaves his house and investments in a life interest trust for his wife, Mary.
- Mary (the life tenant) can live in the house for the rest of her life.
- She also receives the income from the investments (e.g., dividends, rental income).
- She cannot sell the house or take the investment capital.
- When Mary dies, the house and remaining investments pass to John’s children.
Contingent Interest: A contingent interest means a beneficiary will only inherit if a certain condition is met (e.g., reaching a certain age, getting married, or having children).
E.g. David leaves £500,000 in a trust for his granddaughter, Emily, but with the condition that:
- Emily will only inherit if she turns 25.
- If Emily dies before 25, the money goes to David’s nephew instead.
- Until Emily reaches 25, the money is held in trust and managed by trustees.
E book 3 - Georgia sets up a trust stating that Clive is her sole beneficiary, providing he is alive when she dies. However, if on her death Clive has already died she states that Jim will benefit.
Select any of these statements that you think are true.
a) Clive has an absolute interest
b) Clive has a life interest
c) Jim has a life interest
d) Jim has a contingent interest
a & d
Clive has an absolute interest as he is the only beneficiary if he is alive when Georgia dies.
Jim has a contingent interest as he will only benefit if Clive dies before Georgia.
GQ 3 - (Ways a trust can come into existence) What is a presumptive trust?
One person buys a property in the name of another. Similar to an implied trust.
Alice buys a house in the name of Benny; there is then a presumption that Benny holds it in trust for Alice.
E book 3 - What type of trust is most life offices’ standard trust?
A power of appointment trust.
KC 3 - In what circumstances would administration be most appropriate for a limited company?
Select one:
a.
When there is little choice for creditors other than to accept less than full settlement.
b.
If the company has problems with its management structure, but it is otherwise sound.
c.
When there is a possibility that the company can be rescued as a going concern.
d.
If the liquidator is satisfied that there is no chance that the company can trade out of its financial difficulties.
c
KC 3 - Harry and Amy own a property together that is worth £800,000. Their lawyer has told them that when either of them dies, the survivor will automatically become the sole owner. What is the legal form of their ownership?
Select one:
a.
Tenancy in common.
b.
Commonhold.
c.
Leasehold.
d.
Joint tenancy.
d
KC 3 - Adam died in an accident and had not made a will. Ignoring his personal chattels, which pass to his wife Angela, how is his net estate of £1m distributed, bearing in mind that they had no children, his mother is still alive and he has two surviving brothers?
Select one:
a.
Angela receives £322,000 and Adam’s mother receives the remainder.
b.
Angela receives £450,000 and Adam’s mother and brothers each share £550,000.
c.
Angela receives £322,000 plus Adam’s unused nil rate band and Adam’s mother receives the remainder.
d.
Angela receives his entire estate.
d
KC 3 - In terms of the law of contract, as it applies to contracts of insurance, a letter of acceptance from an insurance company is considered, at law, to be a[n]:
Select one:
a.
acceptance.
b.
offer.
c.
invitation to treat.
d.
counter offer.
d
KC 3 - On his death, Peter wishes to leave some of his investments to his grandchildren, on a basis to be agreed in the future by his two children. What type of trust is most likely to meet his needs?
Select one:
a.
Presumptive.
b.
Interest in possession.
c.
Discretionary.
d.
Successive.
c
KC 3 - The trustees for the estate of John Smith deceased have exercised their discretion with regard to investment decisions. According to the case of Speight v. Gaunt [1883], what is the duty that the trustees owe to the beneficiaries?
Select one:
a.
The trustees must exercise the same level of care as that expected by the ‘man in the street’ investing his own funds.
b.
The trustees must act with the utmost diligence at all times, in order to avoid any loss.
c.
The trustees must act bona fide, with the diligence that a prudent businessman would use in managing his own affairs.
d.
The trustees must always enlist the services of professional advisers when investing trust assets.
c
*KC 3 - Why is it usually unwise for settlors to name themselves as beneficiaries under a trust arrangement?
Select one:
a.
The trustees would be able to treat the property as if it was their own property.
b.
It will make the trust assets potentially liable to inheritance tax.
c.
It will preclude the settlor from being a trustee, so control over the trust assets would be lost.
d.
The settlor loses legal ownership of the trust property.
b
Reason:
A settlor is the person who creates the trust by transferring assets into it. Normally, by doing this, they are removing the assets from their estate, which can help reduce their Inheritance Tax (IHT) liability.
However, if the settlor makes themselves a beneficiary, the trust assets remain part of their estate for IHT purposes, defeating the tax advantages of setting up the trust in the first place.
Even though the settlor technically “gave away” the asset, because they still benefit from it, the tax authorities treat it as if it never left their estate.
This means that when the settlor dies, the trust assets are still counted as part of their estate for IHT purposes.
*KC 3 - In what circumstances can the directors of a company become liable for the debts of the company?
Select one:
a.
Only if the directors are also shareholders of the company.
b.
Only if the directors formerly operated as a partnership.
c.
Where the directors continue to trade, knowing the company is insolvent, with the intention of defrauding creditors.
d.
Where the directors inadvertently trade ultra-vires the objects of the company.
c
It’s still a ‘company’ meaning it’s Ltd or PLC.
The managers, directors or shareholders of the company are not liable for the debts of the company unless (exceptionally) they are guilty of unlawfully trading – e.g. continuing to trade despite knowing the company was insolvent with the intention of defrauding creditors.
KC 3 - The trustees of a trust are exercising their duties, which does not include their discretionary powers. In exercising these duties, they may be liable for losses if the standard of care used is not that of:
Select one:
a.
utmost diligence.
b.
due diligence.
c.
utmost good faith.
d.
due skill, care and integrity.
a
KC 3 - Trustees have received the proceeds of a policy written under the Married Women’s Property Act 1882. Their sole responsibility is to transfer the claim monies to the beneficiary. This is most likely to demonstrate the operation of which type of trust?
Select one:
a.
Power of appointment.
b.
Resulting.
c.
Discretionary.
d.
Absolute.
d
KC 3 - Akio owns 50% of his property, and the other 50% is owned by a housing association under a shared ownership scheme. He is now able to increase his share in the property to 75%. This is known as:
Select one:
a.
staircasing.
b.
advancing.
c.
stepladdering.
d.
upgrading.
a
*KC 3 - Rina’s creditor, Banana Loans, is petitioning the court for a bankruptcy order. Before the court will make such an order, Banana Loans must:
Select one:
a.
prove that it is not the only creditor to which Rina owes money.
b.
prove Rina’s inability to pay by showing she has not complied with a statutory demand within three weeks or that a court order has not been enforced.
c.
prove that Rina has the ability to repay the amount owed to it, but has so far failed to do so.
d.
prove that it has followed every possible avenue before seeking a bankruptcy order.
b
*KC 3 - Dmitri is bankrupt and he wants to apply for credit. To which of the following organisations is he obliged to disclose his undischarged bankruptcy?
Question 13Select one:
a.
Alpha Bank, to which he has applied for a £750 overdraft.
b.
Delta Dough, to which he has applied for a £150 loan over 30 days, at an APR of 365%.
c.
Beta Finance, which is offering him a loan of £400 over twelve months.
d.
Capital Two, which has sent him an application form for a credit card with a starting limit of £250.
a
Under the Enterprise Act 2002, bankruptcy normally continues for a 12-month period, although culpable bankrupts (for example, someone who continued to trade though insolvent) may remain undischarged for longer than this. During this time, a number of disqualifications will apply including: disqualification from acting as a company director, obtaining credit above the prescribed limit (£500) without disclosing the fact of an undischarged bankruptcy, and certain professional disqualifications such as accountancy, financial services and banking.
KC 3 - Why might Aafia’s legal personal representatives have to apply to the Probate Registry for a Grant of Letters of Administration?
Select one:
a.
Aafia’s estate consisted only of a house which she owned jointly with her son.
b.
Aafia’s will was made before she was widowed.
c.
Aafia made no will and so died intestate.
d.
Aafia left her estate to various charities.
c
ADMINISTRATION = Intestate = no will
KC 3 - When Jack died, he left his investment portfolio under trust to his wife Mavis. The trust provisions state that she could enjoy the income during her life and then, on her death, the capital should be split equally between their two children. This type of trust is known as a[n]:
Select one:
a.
power of appointment trust.
b.
resulting trust.
c.
interest in possession trust.
d.
discretionary trust.
c
*KC 3 - Jack is a partner in a double glazing business. His liability for trade debts can best be described as:
Select one:
a.
proportionate to his share of the business.
b.
limited by guarantee.
c.
unlimited.
d.
equally shared with his co-partners.
c
*KC 3 - Mary is concerned about her increasing forgetfulness. She would like to ensure that her son is able to act for her in respect of her future care if she is unable to make decisions for herself. What can she arrange that will achieve this?
Select one:
a.
Health and care decisions lasting power of attorney.
b.
Ordinary power of attorney.
c.
Enduring power of attorney.
d.
Financial decisions lasting power of attorney.
a
Not enduring as that was stopped in 2007.
Two types of Lasing Power of Attorney: Health & Care decisions and Financial & Property Decisions
KC 3 - Bruce bought a life assurance policy from Crick Insurance PLC following advice from Ryan, an IFA. In the context of this transaction, what duty of care, if any, does Ryan owe to Crick Insurance PLC?
Select one:
a.
The same duty of care he owes to Bruce.
b.
A greater duty of care than that he owes to Bruce.
c.
The duty of care generally owed to any eligible counterparty.
d.
None, but he must follow the FCA rules and regulations.
d
KC 3 - Who is regarded by HMRC as being directly responsible for an occupational pension scheme’s compliance with tax law?
Select one:
a.
The scheme trustees.
b.
The scheme accountant.
c.
The firm’s senior management.
d.
The company directors.
a
*KC 3 - For contracts of insurance, the Consumer Insurance [Disclosure and Representations] Act 2012 imposes a duty upon retail customers to:
Select one:
a.
disclose any facts that the proposer of the insurance would consider material.
b.
disclose any facts that a prudent underwriter would consider material.
c.
take reasonable care to not make a disclosure.
d.
take reasonable care not to make a misrepresentation.
d
KC 3 - Dan and Bert have a limited liability partnership. Bert wants to know to what extent, if any, creditors could pursue him personally for the debts of the partnership. What will you tell him?
Select one:
a.
That his liability in respect of partnership debts is limited to the size of his estate at the time the partnership was entered into.
b.
That he can only be pursued for partnership debts to the extent that his partner, Dan, is also pursued.
c.
That he cannot be pursued for partnership debts, except where he has provided a personal guarantee.
d.
That he and Dan are jointly and severally liable for the debts of the partnership and that he can be pursued personally to the full extent.
c
*KC 3 - Under the Commonhold and Leasehold Reform Act 2002, a leaseholder has the right to buy or extend a lease if they have lived in the property for at least:
Select one:
a.
2 years and the lease must have been for 30 years or more.
b.
2 years and the lease must have been for 21 years or more.
c.
5 years and the lease must have been for 21 years or more.
d.
5 years and the lease must have been for 30 years or more.
b
KC 3 - Vasos settles assets into a trust. The trustees are Suzie and Ann. The beneficiaries are Tom and Sian. Who has the equitable interest in the trust property?
Select one:
a.
Vasos.
b.
Tom and Sian.
c.
Suzie and Ann.
d.
Vasos, Suzie and Ann.
b
KC 3 - Mike, who lived in England, died in an accident and had not made a will. Ignoring his personal chattels, which pass to his wife Dawn, how is his net estate of £750,000 distributed, given that they had no children, his parents are dead and he has two sisters?
Select one:
a.
Dawn receives £600,000 and Mike’s sisters each receive £75,000.
b.
Dawn receives £450,000 and Mike’s sisters each receive £150,000 each.
c.
Dawn receives his entire net estate.
d.
Dawn receives £322,000 and Mike’s sisters each receive £214,000.
c
KC 3 - Stephan owns his flat as a ‘unit-owner’. Under what type of ownership does he hold his property?
Select one:
a.
Leasehold.
b.
Freehold.
c.
Commonhold.
d.
Unitised leasehold.
c
*KC 3 - In what circumstances, if at all, can gifts be made by an attorney of a financial decisions lasting power of attorney?
Select one:
a.
Gifts of any size can be made at any time to a charity.
b.
Gifts of any size can be made to anyone as long as these are made routinely.
c.
Reasonable sized gifts can be made to relatives of the donor on their birthdays.
d.
Attorneys are not able to make gifts under any circumstances.
c
Under s.12, a financial decisions Lasting Power of Attorney cannot be used to make gifts EXCEPT on customary occasions to persons related to or connected with the donor and gifts to charity which the donor might reasonably be expected to make, for example, birthday and Christmas gifts, and only then IF THE VALUE IS REASONABLE.
Therefore, inheritance tax (IHT) planning via LPAs is rarely possible, because the gifts are often huge.
However, the Court of Protection can authorise gifts not allowed under LPAs.
*KC 3 - Roger died in an accident and he had not made a will. Ignoring his personal chattels which pass to his wife Debbie, what else will Debbie receive if his estate was £650,000 and they had two children?
Select one:
a.
Debbie receives £164,000 plus a life interest in £322,000.
b.
Debbie receives the entire £650,000 estate.
c.
Debbie receives £322,000 plus a life interest in £164,000.
d.
Debbie receives £486,000.
d
Spouse/civil partner and issue (children/grandchildren) – spouse/civil partner takes personal chattels (car, furniture, pictures, clothing etc.) plus a statutory legacy of £322,000 plus half of any balance outright. The surviving issue will take the other half of the remaining estate on reaching 18.
Statutory Legacy = 322,000
Half of remaining balance:
650,000-322,000= 328,000
328,000 / 2 = 164,000
Total:
322,000+164,000 = 486,000
KRO 3 - Lisa, aged 67, has been recently widowed. Her and her late husband had three children. He died owning, on a joint tenancy basis with Lisa, a property valued at £500,000 and an investment portfolio in his own name of £210,000. He did not make a will, meaning his estate
a) will all be inherited by Lisa
b) will result in £516,000 going to Lisa, and the remaining amount split between the children
c) will result in £322,000 going to Lisa, and the remaining amount split between the children
d) will all be split equally between the children
a
As the house was owned on a joint tenancy with Lisa she gets the house
After this, Lisa is entitled to £322k of his estate, meaning she gets all of the £210k investment portfolio. None remains for his children.
*KRO 3 - Samantha has recently suffered a stroke and has been deemed to have diminished mental capacity to the extent that she is unable to make rational financial decisions. What options are available to her family to enable them to act on her behalf?
a) Complete a retrospective lasting power of attorney and register this with the Office of the Public Guardian
b) Apply to the probate office for a letter of administration
c) Apply to the court of appeal to appoint a deputy
d) Complete a general power of attorney which must be registered by Samantha’s next of kin
c
Samantha can’t establish a Power of Attorney due to her loss of mental capacity.
The option available to the family is to appeal to the Court of Protection to be appointed as a deputy / deputies
*KRO 3 - Hugo, aged 16, entered in to a contract via the internet. As far as the legal position with regard to the contract is concerned
a) it is fully binding on Hugo and the party he contracted with
b) it is fully binding only on Hugo
c) it is fully binding only on the party Hugo contracted with
d) it is not binding on either party
c
Hugo is under 18 and therefore a minor. Therefore it’s binding on the other party unless Hugo repudiates (cancels) it before he turns 18 or within a reasonable time afterwards (maybe it’s only just turned 18)
KRO 3 - Company X acts as an Appointed Representative firm for Company Y. Under agency law, Company X acts as an agent of whom when making investment recommendations?
a) Company X
b) Company Y
c) The client
d) Whoever the product provider is
b
KRO 3 - A Lasting Power of Attorney has been automatically revoked because
a) the donor married a third party
b) the attorney married a third party
c) the attorney dissolved their civil partnership with a third party
d) the donor dissolved their civil partnership with the sole attorney
d
*KRO 3 - Francis has approached an Insolvency Practitioner as she is concerned about her ability to service her debts. She is concerned about the length of time an Individual Voluntary Arrangement (IVA) would remain on her credit record for. You correctly inform her that
a) it will remain for a maximum of 12 months
b) it will be in force for the duration of the repayment period only
c) it will remain for 5 years
d) it will show on her record for a minimum of 6 years
d
Insolvency stays on the record for a minimum of 6 years
Bankruptcy normally continues for a 12-month period, although culpable bankrupts (for example, someone who continued to trade though insolvent) may remain undischarged for longer than this
KRO 3 - When Cameron passed away, he was legally considered to have died testate. This means that Cameron
a) died without a valid will
b) made a valid will during his lifetime
c) died with a valid will that did not name any executors
d) died with a contested legacy from an estranged spouse
b
*KRO 3 - Billie took out two policies with the same provider, but only had to prove insurable interest existed on one of the policies. This was because
a) one was a term assurance, the other being an Individual Savings Account
b) they were both protection policies, but only one had an investment element
c) one was an Individual Savings Account, the other being a personal pension plan
d) they were both Individual Savings Account, with one investing in stocks and shares
a
In addition to the ordinary law of contract, life assurance contracts are subject to the requirements of good faith and insurable interest.
Therefore, for an individual to take out a life policy on another individual insurable interest (financial interest) must exist.
The concept doesn’t apply to policies like ISAs or PPPs.
KRO 3 - Zak and Sara are both beneficiaries of bare trusts. Currently, only Zak is entitled to access the assets held within the trust. This is most likely to be because
a) Zak is also a trustee
b) Zak is aged over 18 whereas Sara is not
c) Zak has been categorised as a vulnerable person
d) Zak is a life tenant whereas Sara is a remainderman
b
KRO 3 - Rex established an Enduring Power of Attorney (EPA) in 2006, with his two children selected to act as joint attorneys. It has become clear that Rex is losing his mental capacity and that it would help for his children to make decisions on his behalf. The EPA
a) can be brought into use immediately with no further action required
b) needs to be registered with Rex’s legal representative before it can be implemented
c) needs to be registered with Rex’s with the Office of the Public Guardian before it can be implemented
d) is no longer valid and Rex must establish a Lasting Power of Attorney before he loses mental capacity fully
c
*KRO 3 - Jasmine has been declared bankrupt. What happens to her assets following this declaration?
a) They are immediately liquidated to repay her creditors
b) They are transferred directly to her creditors
c) They are transferred into a trust which is used to repay as much debt as possible
d) They are transferred to an insolvency practitioner who will arrange a vote as to which assets are sold to repay as much debt as possible
c
Official receiver initially takes control of the debtor’s property when a bankruptcy order is made against an individual, then appoints an insolvency practitioner as Trustee in Bankruptcy (TIB) to realise and distribute the bankrupt’s estate in accordance with the Insolvency Act 1986.
KRO 3 - Owen recently proposed a decreasing term assurance policy to protect his mortgage loan in the event of his untimely death. Under contract law, this proposal constituted
a) the offer
b) the declaration
c) the counter-offer
d) the consideration
a
KRO 3 - Miles has entered in to an Individual Voluntary Arrangement (IVA). This means that
a) creditors representing at least 75% of the debts voted in favour of the IVA, and Miles will be subject to an annual financial review by an insolvency practitioner
b)creditors representing at least 75% of the debts voted in favour of the IVA, and Miles will be subject to financial reviews by an insolvency practitioner every three years
c)75% of all creditors voted in favour of the IVA, and Miles will be subject to an annual financial review by an insolvency practitioner
d)75% of all creditors voted in favour of the IVA, and Miles will be subject to financial reviews by an insolvency practitioner every three years
a
This could be just one of the creditors if they hold a substantial proportion of the debt.
*KRO 3 - Bruce would like to buy the freehold of a property he has been leasing but has been told he has not got the right to do this. This is likely to be because
a) the property in question is a warehouse
b) Bruce has only lived in the property for three full years
c) the original lease was only for a period of 25 years
d) Bruce is still repaying a mortgage secured against the property
a
Under the Commonhold and Leasehold Reform Act 2002, a leaseholder has the right to buy or extend a lease if they have lived in the property for at least 2 years and the lease must have been for 21 years or more. BUT the act doesn’t apply to commercial premises such as a warehouse
KRO 3 - Frederick transfers his share portfolio into a trust for the benefit of his son, Marcus. Frederick and his brother, Thomas, are joint trustees. After the transfer, who are the legal owners of the share portfolio?
a) Marcus only
b) Frederick only
c) Frederick and Thomas only
d) Frederick, Thomas and Marcus jointly
c
The trustees are the legal owners of the trust assets
KRO 3 - Joe, Diane and Ashok are partners in the JDA Limited Liability Partnership. This means that each individual
a) pays their tax via the self-assessment system, including being subject to Class 1 National Insurance Contributions
b) pays their tax via the self-assessment system, including possibly contributing to either Class 2 or Class 4 National Insurance Contributions
c) pays their tax via the Pay as you Earn system, including being subject to Class 1 National Insurance Contributions
d) pays their tax via the Pay as you Earn system, including possibly contributing to either Class 2 or Class 4 National Insurance Contributions
b
Partners in an LLP are treated as being self-employed for tax purposes. Meaning they:
- Pay their income tax via the self-assessment process; and
- can choose to pay NIC class 2 (if they have profits below the small profits threshold) or be subject to class 4 (if their profits exceed the Lower Profits limit)
*KRO 3 - The donor of a Lasting Power of Attorney (LPOA) has been declared bankrupt. The attorney can still act on the donor’s behalf because
a) the attorney is financially solvent
b) the Trustee in Bankruptcy has given official approval
c) the LPOA is in respect of the donor’s Health & Welfare only
d) she has been appointed as the Deputy by the Court of Protection
c
The bankruptcy of the donor or the attorney would be automatically revoked if it was a Property & Affairs LPOA but NOT if the LPOA is for Health & Welfare purposes
KRO 3 - Elizabeth and Christopher are the joint attorneys of their father’s Lasting Power of Attorney, which bestows control over both his property & affairs and his health & welfare. The attorneys would like to gift a substantial amount from their father’s estate to their children, so as to reduce the Inheritance Tax liability currently on his estate. The proposed gifts
a) would always be allowed under their attorney powers
b) would possibly be allowed, but only if the attorneys can prove a pattern suggesting their father would have made the gifts if he retained capacity
c) would possibly be allowed, but only if the attorneys can prove the gifts form part of their father’s will
d) would never be allowed under their attorney powers
b
Under s.12, a financial decisions Lasting Power of Attorney cannot be used to make gifts EXCEPT on customary occasions to persons related to or connected with the donor and gifts to charity which the donor might reasonably be expected to make, for example, birthday and Christmas gifts, and only then IF THE VALUE IS REASONABLE.
However, the Court of Protection can authorise gifts not allowed under LPAs.
*KRO 3 - Jake entered a rental agreement at the age of 17. He has recently turned 18, and is trying to cancel the agreement to enable him to move elsewhere. The legal position is that the contract
a) was never valid and not binding on either party
b) was not valid initially, but is now that Jake has turned 18
c) is binding unless repudiated by Jake, which he is still potentially able to do
d) was binding on both parties initially, and remains so
c
The contract would only have been binding on the other party until Jake turned 18 unless Hugo repudiates (cancels) it before he turns 18 or within a reasonable time afterwards (because he has only just turned 18 he may be able to repudiate it)
*KRO 3 - Ben owns a flat and is a member of the block’s Commonhold Association. This means that he
a) has the right to extend his lease having owned his property for at least two years
b) can vote on the approval of potential buyers of other flats in the block
c) can insist a lender provides funds regardless of the remaining lease
d) has no obligation to pay ground rent
d
Commonhold ownership means that the unit-holders get to own their property in perpetuity (as per a freehold ownership) as opposed to a set term.
- They have no obligation to pay ground rent; and
- Their interest in the property cannot be forfeited.
*KRO 3 - Mr A is the proposer of a life assurance policy, with Mrs B as the life assured. This is most likely to be treated as a legal policy because
a) Mr A is the son of Mrs B
b) Mr A owes money to Mrs B
c) Mrs B owes money to Mr A
d) Mrs B is the daughter of Mr A
c
For an individual to take out a life policy on another individual, insurable interest and good faith must exist. Therefore, Mr A must have financial interest in Mrs B. He does, because Mrs B owes him money.
Although it’s possible for insurable interest to exist between a parent and child, it’s not automatically present just because of their relationship.
KRO 3 - Ryan established a discretionary trust eight years before his death. Following his death, the value of the trust was included in his estate when determining his liability to Inheritance Tax (IHT). This is most likely to be because
a) Ryan had previously established an Interest in Possession Trust
b) Ryan had been the recipient of an inheritance subject to IHT since the trust was set up
c) the trust included a Revert to Settlor clause
d) the trust value exceeded the IHT nil rate band at the time of Ryan’s death
c
As Ryan has survived for 7 years after the trust was set up, it would usually exclude the trust from IHT, but this is based on the asset being gifted from Ryan’s ownership.
If the trust includes a ‘revert to settlor’ clause, it creates the possibility for the asset to return to Ryan’s ownership, so it would never a true gift.
*KRO 3 - Amanda died intestate. She was the joint tenant, with her husband Paul, of a property worth £580,000. In addition to this, she left a further £472,000 of assets in her name, mainly held in collective investments. She and Paul were the parents of three children: Jessica (22), Emily (19) and Marie (16). What amount, if any, did each child receive as a result of Amanda’s death?
a) Nil
b) £25,000
c) £37,500
d) £121,666
b
Paul gets the house due to joint ownership
Paul has a right to the first 322,000 then half of what’s left so:
322,000 +
(472,000 - 322,000) / 2 = 75,000
Therefore the children split 75,000 between 3 = 25,000 each.
