Laws And Legal Concepts Relevant To Financial Advice

Question 1

What is a sole trader?

Answer 1

A self employed person who is personally liable for the debts of their business

Question 2

How long does bankruptcy last?

Answer 2

12 months

Question 3

When is a will automatically fully revoked?

Answer 3

On marriage

Question 4

Why would a will be partially revoked?

Answer 4

On divorce the part of the will relating to the spouse will be revoked

Question 5

What trust doesn’t allow for flexibility?

Answer 5

Bare trust

Question 6

What is a limited liability partnership

Answer 6

A separate legal person with limited liability - persons have no financial liability
Self employed pay tax individually

Question 7

What is a limited company?

Answer 7

Legal separate identity from owners of business - not liable for company’s debts
Corporation tax is liable on profits

Question 8

What is a public limited company?

Answer 8

This company is on the London stock exchange. Must have 2 directors and 2 shareholders and a secretary

Question 9

What are the main types of Powers of Attorney?

Answer 9

Ordinary
Enduring
Lasting

Question 10

What is a ordinary power of attorney?

Answer 10

Used for people who leave the country

Question 11

What is and enduring power of attorney?

Answer 11

Enables the attorney to act on behalf of someone who is mentally incapacitated - cannot be granted now only existing cases prior to 2005

Question 12

What is lasting power of attorney?

Answer 12

Donor gives the attorney powers to make decisions about welfare and property as well as financial affairs - 2 LPA must be completed one for welfare and property and one for financial affairs

Question 13

Can a attorney make gifts on behalf of donor?

Answer 13

Only if they were seen as customary

Question 14

What would cause a POA to be revoked?

Answer 14

Donors bankruptcy
Death
Incapacity or
Bankruptcy of attorney
Dissolution of marriage between donor and attorney

Question 15

Under the law of contract when is an offer official?

Answer 15

When terms from the provider have been received

Question 16

Under the law on contract when is an insurance contract considered live?

Answer 16

When the first premium has been paid

Question 17

What duty does the consumer have to an insurance company?

Answer 17

Declare all facts a reasonable person would think the life office underwriter would want to know - a duty to take reasonable care not to make misrepresentation

Question 18

What is insurable interest?

Answer 18

The prosper needs to have financial interest in the life assured - full medical underwriting will be undertaken so history need to be known

Question 19

What restrictions are there to have a capacity to contract a protection policy?

Answer 19

Under the age of 18 w
Person affected by a mental health issue
Under the influence of alcohol / drugs

Question 20

What is the law of agency?

Answer 20

When a party (agent) agrees to do certain acts on behalf of another party (principle)

Question 21

What is a joint tenancy?

Answer 21

Where two people purchase a house and own equal shares - cannot sell without the others agreement. Share passes on death to other party

Question 22

What is tenants in common?

Answer 22

A couple purchase a house each party holds their share separately, and can dispose of how and when they wish. On death their share goes to their estate

Question 23

What is an IVA?

Answer 23

Individual Voluntary arrangement - as alternative to bankruptcy where the debtor proposes a voluntary agreement to repay some or all of their debts

Question 24

How long does an IVA last on a credit reference?

Answer 24

6 years

Question 25

What amount minimum will a court consider bankruptcy for?

Answer 25

£5,000

Question 26

How long does bankruptcy last?

Answer 26

12 months

Question 27

What is corporate insolvency?

Answer 27

Where a liquidator is appointed to take control of a company, collect assets and pay debts

Question 28

What are two alternatives to insolvency?

Answer 28

Administration - attempt to rescue a company
Voluntary arrangement - avoid insolvency but settling liabilities with creditors

Question 29

What is meant by intestacy?

Answer 29

Someone dying without a will

Question 30

What is Laws of succession?

Answer 30

When beneficiaries succeed on someone else’s death (inheritance law)

Question 31

What are the three requirements for a valid will?

Answer 31

Writing - print, type or personal handwriting
Signature - by testator
Attestation - whitenessed by 2 or more people

Question 32

When will a will be revoked?

Answer 32

In full - on marriage
Parts relating to former spouse - on divorce

Question 33

What happens to someone’s estate if the die intestate?

Answer 33

Surviving spouse will inherit 100%
If there are children and a spouse - spouse takes chattels plus £270,000 plus half of the remainder the children get the other half

Question 34

Who are the main people involved in a trust?

Answer 34

Settlor - creator of the trust
Beneficiary - person entitled to trusts assets
Trustees - legal owners of the property assets for beneficiaries

Question 35

What certainties are needed in a valid will?

Answer 35

Certainty of words, subject matter and beneficiaries

Question 36

What do the trustees of a trust have to provide to the life office in order to have the benefits of a life policy paid to them?

Answer 36

A copy of the trust deed and death certificate

Question 37

Under a life assurance contract how is insurable interest defined?

Answer 37

The prosper is required to have some financial interest in the life assured