Topic 16

Question 1

Which of the following is a reason for beneficiaries under a will to execute a ‘deed of variation’?

a. Inheritance tax advantages can be obtained.

b. It is a way of avoiding intestacy.

c. It is a way of meeting the executor’s wishes.

d. It is a way of rendering a will void.

Answer 1

a. Inheritance tax advantages can be obtained.

Question 2

Walter and Winnie own their house on a joint tenancy basis.

If Walter dies:

a. his share of the property will pass automatically to Winnie.

b. his share will pass to whoever is nominated as his beneficiary in his will.

c. Winnie will need to purchase Walter’s share of the property from his estate.

d. Winnie will own 50% of the property and retain an interest in the other 50%.

Answer 2

a. his share of the property will pass automatically to Winnie.

Question 3

Which of the following is the definition of an attorney?

A person who:

a. delegates authority to another to act on their behalf.

b. does not himself have the authority to enter into a contract.

c. is given authority to act on behalf of another person.

d. moves abroad but wishes to retain a decision maker in the UK.

Answer 3

c. is given authority to act on behalf of another person.

Question 4

A useful tool to investigate if an investment opportunity is a scam or not, called ScamSmart, is available from:

a. the FCA.

b. MoneyHelper.

c. the PRA.

d. the National Crime Agency.

Answer 4

a. the FCA.

Question 5

John is completing the proposal form for the level term assurance he is hoping to take out.

Which of the following describes how he must answer the questions?

a. By following the principle of ‘caveat emptor’.

b. By following the principle of ‘utmost good faith’.

c. By taking reasonable care not to make a misrepresentation.

d. By volunteering all material facts.

Answer 5

c. By taking reasonable care not to make a misrepresentation.

Question 6

The difference between a lasting power of attorney and an ordinary power of attorney is that:

a. a lasting power of attorney can be agreed on a verbal basis between donor and donee, but ordinary power of attorney must be registered at the Public Trust Office.

b. a lasting power of attorney can be revoked at any time by the donor, whereas an ordinary power of attorney can only be revoked by the Court of Protection.

c. an ordinary power of attorney becomes invalid if the donor loses mental capacity, whereas a lasting power of attorney remains effective.

d. an ordinary power of attorney remains valid if the donor loses mental capacity, whereas a lasting power of attorney becomes invalid.

Answer 6

c. an ordinary power of attorney becomes invalid if the donor loses mental capacity, whereas a lasting power of attorney remains effective.

Question 7

Which of the following roles does the Court of Protection play with respect to powers of attorney?

a. All powers of attorney must be registered with the Court of Protection.

b. Any action taken by the attorneys must be agreed by the Court of Protection.

c. Enduring powers of attorney can only be revoked with the consent of the Court of Protection.

d. The Court of Protection retains a list of all those qualified to act as attorneys.

Answer 7

c. Enduring powers of attorney can only be revoked with the consent of the Court of Protection.

Question 8

Under the law of agency, a recent act by an agent has been subject to ratification.

This implies that the agent has:

a. asked their principal to deal directly with a client.

b. exceeded their authority.

c. received money or money’s worth from a client.

d. refused to act on the principal’s behalf.

Answer 8

b. exceeded their authority.

Question 9

Which of the following has full capacity to enter into a legal contract?

a. A limited company.

b. A person under the age of 18 years.

c. An unauthorised insurance company.

d. Someone with reduced mental capacity.

Answer 9

a. A limited company.

Question 10

An agent has made an agreement outside the limit of their authority laid down by the principal.

Assuming a liability occurs, the agent may avoid taking responsibility for this liability if:

a. apparent authority has been given or if the principal ratifies the action.

b. the existence of the principal is known to the third party.

c. the third party is also represented by an agent.

d. the third party resides outside the UK.

Answer 10

a. apparent authority has been given or if the principal ratifies the action.

Question 11

Haresh has received a mailing from a firm which says it can help him transfer his occupational pension into a scheme that will enable him to save a substantial amount of tax.

Haresh is interested in proceeding but suspects the offer may be fraudulent. Which of the following actions should he take at this stage?

a. Visit the FCA’s ScamSmart website.

b. Report his suspicions to the Pensions Regulator.

c. Contact the Financial Ombudsman Service for guidance before proceeding.

d. Seek guidance from the Pensions Ombudsman Service.

Answer 11

a. Visit the FCA’s ScamSmart website.

Question 12

Which of the following items of property would be referred to as personalty?

a. A collection of vintage wines.

b. A detached house.

c. A paddock used for grazing horses.

d. A Victorian factory building.

Answer 12

a. A collection of vintage wines.

Question 13

One of the restrictions placed on undischarged bankrupts is that they are:

a. only able to borrow nominal amounts of money.

b. only able to work on an employed basis.

c. unable to buy goods except for their own consumption.

d. unable to contribute to protection policies.

Answer 13

a. only able to borrow nominal amounts of money.

Question 14

Peter, Paul and Pamela own a house on a tenants-in-common basis, each having a 1/3 share.

In the event of Paul’s death:

a. his estate is obliged to sell his share to Peter and Pamela.

b. Peter and Pamela are obliged to purchase Paul’s share from his estate.

c. Peter and Pamela will each automatically increase their share to 50%.

d. the beneficiary of Paul’s share will be determined by reference to his will or the laws of intestacy.

Answer 14

d. the beneficiary of Paul’s share will be determined by reference to his will or the laws of intestacy.

Question 15

Any debt incurred by a partnership is always:

a. deducted from any future dividends payable.

b. the responsibility of the partners.

c. the responsibility of the shareholders.

d. secured on the partnership’s assets.

Answer 15

b. the responsibility of the partners.

Question 16

Under agency law, ratification is where:

a) The contract is deemed to be valid by a court.

b) The other party to a contract agrees that it should remain in place, despite the agent acting outside their authority.

c) Although the agent acted outside the terms of the agency agreement, the principal agreed to the actions after the event.

d) The principal did or said something that could be seen as giving the agent powers outside the agency agreement.

Answer 16

c) Although the agent acted outside the terms of the agency agreement, the principal agreed to the actions after the event.

Question 17

Which of the following is a reason a contract could be deemed invalid?

a) The contract was to buy 200 litres of smuggled rum.

b) The buyer promised to pay the full purchase price.

c) It was a contract for land performed by deed.

d) The buyer was aged 18.

Answer 17

a) The contract was to buy 200 litres of smuggled rum.

Question 18

On receipt of a policy claim, an insurer suspects inaccurate information was provided on the original application form. Under the Consumer Insurance (Disclosure and Representations) Act 2012, the insurer:

a) must pay the full claim if the consumer had just been careless when completing the application form.

b) can refuse the claim if there was deliberate misrepresentation when completing the application form.

c) can apply a compensatory remedy if the applicant took reasonable care and any misrepresentation was honest and reasonable.

d) cannot refuse the claim in any circumstance.

Answer 18

b) can refuse the claim if there was deliberate misrepresentation when completing the application form.

Question 19

A property owned on a joint-tenancy basis will allow each owner to leave their share to their chosen beneficiaries.

True or False?

Answer 19

False: A joint tenancy means both owners technically own 100% of the property, and on one death legal ownership of the property automatically passes to the survivor, regardless of any will or the laws of intestacy.

Question 20

Novak died without a valid will, leaving an estate of £500,000. He had not made a will because he assumed that his estate would automatically pass to his civil partner, and then to their two adult children. How will Novak’s estate be distributed?

a) The courts will decide on a fair distribution of the estate.

b) His wife will inherit £322,000 and the children will inherit £89,000 each.

c) His wife will inherit £411,000 and the children will inherit £44,500 each.

d) His wife will receive £500,000, and on her death the children will inherit whatever is left.

Answer 20

c) His wife will inherit £411,000 and the children will inherit £44,500 each.

Question 21

Which one of the following is not a legal requirement for a will to be valid?

a) The testator must be aged 18 or over.

b) The will must be dated.

c) The will must be properly executed.

d) The will must be in writing.

Answer 21

b) The will must be dated.

Question 22

Graham is a 2% shareholder in a small limited company. What is his liability if the company becomes insolvent?

a) His liability is limited to the amount he has invested in the company.

b) He is jointly and severally liable for all of the company’s debt with other shareholders.

c) He is fully liable for 2% of the company’s UK debts.

d) He is fully liable for 2% of the company’s worldwide debts.

Answer 22

a) His liability is limited to the amount he has invested in the company.

Question 23

Bartholomew has debts he cannot service and has applied for an individual voluntary arrangement (IVA). He owes £15,000 to his credit card company, £2,000 to a local builder, £1,500 to his bank and £1,500 to a local furniture shop. Which of the following is true?

a) The credit card company can veto the IVA application.

b) All four creditors must agree for the IVA application to be approved.

c) Bartholomew can insist on the IVA being approved.

d) The IVA application can be approved if the builder, bank and furniture shop agree.

Answer 23

a) The credit card company can veto the IVA application.

Question 24

Gary is a 50% partner in a limited liability partnership with his friend Mike. Gary has invested £30,000 and has provided a personal guarantee on a £50,000 bank loan the partnership took out. The business has become insolvent with debt of £1,000,000 and Mike cannot be found. What is Gary’s liability?

a) 50% of the partnership’s debts.

b) The £30,000 he initially invested.

c) The £30,000 he initially invested and the £50,000 bank loan.

d) All the debts of the partnership.

Answer 24

c) The £30,000 he initially invested and the £50,000 bank loan.

Question 25

To register a lasting power of attorney, application should be made to the:

a) County Registrar.

b) Office of the Public Guardian.

c) County Court.

d) Court of Protection.

Answer 25

b) Office of the Public Guardian.

Question 26

When applying for a mortgage, an individual who was previously the subject of a bankruptcy order but is now discharged must:

a. always disclose the previous bankruptcy to the lender.

b. disclose details of the bankruptcy if it was for more than £5,000.

c. ensure the lender conducts a thorough credit search.

d. not borrow more than £50,000.

Answer 26

a. always disclose the previous bankruptcy to the lender.