Chapter 3: UK Contract and Trust Legislation Flashcards
Jack is the financial advisor to Jill. Which one of the following is FALSE?
A. If Jack is acting as an IFA then he is the ‘agent’ of Jill
B. Jill is the ‘principal’ under the law of agency
C. Jack may either be independent (IFA) or ‘restricted’ to one or more providers
D. Jack does not need to disclose to Jill his tied status
D. Under the FCA’s Conduct of Business rule, all advisors must disclose their status before providing advice.
Which of the following is NOT true of a trust?
A. They can be important estate-planning tools
B. The trustee keeps legal control of the settlor’s assets
C. Trusts may be set up to look after beneficiaries
D. Trusts are separate legal entities
D. Trusts are legal arrangements governed by a trust deed and by well-established trust laws, but they are not separate legal entities like a company is.
Anthony wishes to set up a trust and appoint his brother, William, as trustee. Unfortunately, William is NOT deemed to be sui juris. What can we categorically conclude from this?
A. William is under 18 years of age and considered dependent on his guardians
B. William is mentally incapable and considered dependent on his guardians
C. William is unemployed and considered dependent on the state
D. William does not have capacity to contract
D. William does not have capacity to contract.
Sui juris implies that you are over 18 and sound of mind - essentially you have capacity to contract. The answers referring to age and mental capacity could be true, but it may have one or the other or both.
Which of the following may NOT be actioned by an enduring power of attorney?
A. The donee may sign documents on behalf of the donor
B. The donee may handle the financial affairs of the donor
C. The donee may make unusual gifts to third parties if a court specifically approves
D. The donee is empowered to make medical decisions on behalf of the donor
D. A PoA must be signed by the donor; or if not signed by the donor, then signed in their presence with two witnesses. A lasting power of attorney can cover health and welfare matters.
Which of the following can never be made bankrupt?
A. A person that is not in sound mind at the time of the procedures
B. A person that is a minor
C. The spouse of another person declared bankrupt
D. A person that is deceased having left an estate
D. A deceased person cannot be made bankrupt, although their estate can be administered in bankruptcy.
Someone who is mentally incapable can be made bankrupt as long as they were sound of mind when they incurred the debts. And although rare, it is theoretically possible for a minor to be declared bankrupt. The spouse of a bankrupt can also be declared bankrupt in respect of their separate property.
- John dies having left no will
- Mary dies having left an unsigned will
- Collette dies having left a will that contains a slight error
- David dies leaving a valid will
Which of the following would be TRUE?
A. The personal representatives of Mary and Collette will need to obtain a letter of administration with the will annexed
B. David and Collette will have their assets distributed according to the National Intestacy Rules
C. Only David’s executors will directly obtain a grant of probate
D. John’s personal representative will need to obtain a letter of administration
C. Only David has a valid will, so only David’s executors will directly obtain grant of probate and have his assets distributed according to his wishes.
The rest are considered to have died intestate and the personal representative (executor or administrator) will be responsible for putting the estate in order by obtaining a letter of administration.
This could mean distribution of assets according to the terms of the invalid will (this is why any invalid will is annexed to the letter of administration) or the National intestacy rules.
Which of the following is NOT true?
A. A ‘natural person’ describes a human being
B. A company is a ‘legal person’ under contract law
C. There is no distinction between a company and its owners and directors
D. A partnership is not a separate legal entity
C. A company is a separate legal entity and is distinct from its shareholders and management in the eyes of the law.
Which of the following is NOT a method for creating a trust?
A. By deed
B. By will
C. By statue
D. By PoA
D. PoA is not a method for creating a trust.
A trust may be set up under statue under s33 Administration of Estates Act 1925 (altered by s5 of the Trusts of Land and Appointment of Trustees Act 1996) and s36 Law of Property Act 1925.
You are advising Adam on the most appropriate form of trust to set up on his death for his son, Dave. He is concerned that Dave has very little willpower when it comes to money and wants to safeguard the trust’s assets but is happy for Dave to receive income from the trust. The most suitable trust to advise Adam to set up is most likely to be a:
A. Bare trust
B. Flexible trust
C. Discretionary trust
D. Protector trust
C. Placing funds in a discretionary trust can also mean that the beneficiaries can continue to receive means-tested benefits.
