Legal Concepts

Question 1

What is a legal person?

Answer 1

Has rights, protections, privileges, responsibilities and liabilities under law

Question 2

What is a legal personality?

Answer 2

Allows one or more natural person to act as a single entity for legal purposes. It can shield its participants from personal liability.

Question 3

What is a power of attorney?

Answer 3

A legal document allowing one person to give another person the power to make decisions on their behalf.

Question 4

What are the two types of lasting power of attorney? ?

Answer 4

1. Property of affairs LPA: gives the recipient the ability to make deviations about the givers financial affairs
2. Personal welfare LPA: gives person ability to make personal decisions on the others behalf to do with their welfare

Question 5

Who do LPA’s need to be registered with?

Answer 5

The office of the public guardian to be effective.

Question 6

What are terms and conditions?

Answer 6

A contract is not normally legally binding if the terms and conditions are unclear.

Question 7

What are the types of contracts?

Answer 7

Contracts must be in writing. Oral contracts can be upheld but can be difficult to prove so should be in writing.

Question 8

What is a contract discharge (ie how can a contract end)? (4)

Answer 8

1. Performance - the obligations are completed by both parties
2. Agreement - both parties agree to end the contract
3. Frustration - when the completion of the contract is impossible
4. Breach - one party does not fulfil the terms and conditions. Damages can be awarded to the innocent party.

Question 9

What is legal ownership?

Answer 9

Naked on the title ID documents eg. Land registery, share register

Question 10

What is beneficial ownership?

Answer 10

Have the beneficial rights of ownership eg. Use of property, voting rights on shares

Question 11

Who has the ownership of bearers bonds?

Answer 11

Whoever is on the title of the bond.

Question 12

If there are two owners who own separate shares in a property, who is one beneficiary after death?

Answer 12

Their share passes to their beneficiaries on death (normally established in the will).

Question 13

If a share is owned by two or more co-owners as joint owners, who will receive shares after death?

Answer 13

Joint owners have identical interests. These interests pass on to the remaining over after death.

Question 14

What is insolvency?

Answer 14

A state of being where a company cannot pay its debts

Question 15

What is bankruptcy?

Answer 15

When you cannot pay your debt and therefore apply for bankruptcy. This means the company will be placed into administration.

Question 16

How much debt must you have to file for bankruptcy?

Answer 16

For debts > £5,000

Question 17

Who can file for bankruptcy? (2)

Answer 17

1. The debtor - debtor’s proton made voluntarily by the debtor (person that owes money)
2. Creditor - creditors petition to the courts for an enforcement order (person that is owed money)

Question 18

What is a will?

Answer 18

A will is a written document that sets out how a deceased persons estate is to be distributed

Question 19

What are the conditions for a will to be valid?

Answer 19

• in writing
• signed and witnessed
• the person must be over 18, have the mental capacity to understand and make the will and not been pressured by someone to make the will.

Question 20

What is probate?

Answer 20

It establishes ownership of the deceased person’s estate before assets are distributed.

Question 21

What is a trust?

Answer 21

An arrangement that allows an individual (settlor) to have assets controlled by certain parties (trustees) for the benefit of others (beneficiaries)

Question 22

What are bare trusts?

Answer 22

When a trustee holds property for a single beneficiary who has absolute interest. The assets are typically held in trust until the beneficiary reaches the age of 18.

Question 23

What are possession trusts?

Answer 23

These are passed down through generations.

Beneficiaries of life insurance. They have the right to benefit from the asset in their lifetime but no right to sell it. For example, can inherit a house and rent to earn money but can’t sell the house.

Question 24

What are discretionary trusts?

Answer 24

Where no beneficiary has the right to income.

The trustees have the power to accumulate it make distributions at their discretion.

The trust decided on the amount of trust income and/or capital each beneficiary receives.

Question 25

What does the trustees act of 2000 do?

Answer 25

Allows retested to make any kind of investment provided they:
- get and consider proper advice
- have regards to standard investment criteria (suitability and need to diversify)
- rescue return investments and take advice on variations

Question 26

Who does the trustee act 2000 not apply to?

Answer 26

• Occupational pension schemes
• Authorised unit trust
• Certain schemes under the charities act