Friday Five – 6 March – 5 Questions in 5 Minutes

Welcome to this week’s Friday Five – 5 Questions in 5 Minutes Every Friday

What’s this all about?

It’s a bit of Friday Fun where we provide you with 5 questions relevant to a mix of CII exams. The challenge is for you to answer them in 5 minutes. Answers at the bottom of the page.

Questions

These questions relate to examinable tax year 2019/20, examinable until 31 August 2020.

1. What is the definition of a beneficiary who has a contingent interest under a trust?
   1. A beneficiary who is entitled to income from trust assets, but not the capital
   2. A beneficiary who cannot exercise control over the trust assets
   3. A beneficiary whose entitlement is dependent on something else happening first
   4. A beneficiary who shares entitlement to trust assets with other beneficiaries

2. Your client’s stockbroker has recommended to them that they borrow some money to take advantage of a potentially lucrative investment opportunity. What is this an example of?
   1. Diversification
   2. Bail-in risk
   3. Arbitrage
   4. Gearing

3. Frankie is looking to mitigate her Inheritance Tax situation and has made a start by using her annual exemption for this tax year. She should be aware that: Tick all that apply.
   1. she can use her annual exemption from last tax year if she hasn’t done so already
   2. any gift she makes now, and in the future, will qualify for taper relief
   3. if she makes a gift, it will be effective for IHT even if she retains a benefit from it
   4. a non-exempt gift into a discretionary trust will be a chargeable lifetime transfer (CLT)

4. Nigel, age 66, had been in flexi-access drawdown for 18 months when he died suddenly in June 2019. The death benefit is £50,000. If his widow, Debbie, decides to take this as a lump sum, what is the net amount she will receive? Debbie is a higher rate taxpayer and Nigel was a basic rate taxpayer in the year of death.
   1. £27,500
   2. £30,000
   3. £40,000
   4. £50,000

5. Karen has a combined life assurance and critical illness policy. What will happen to the sum assured on death if she makes a claim on the diagnosis of a critical illness?
   1. It will continue at the original amount for a maximum of five years.
   2. It will continue at half the original amount.
   3. It will only continue to exist if Karen survives for a minimum of two years.
   4. It will not exist as the policy has paid out an accelerated death payment.

Answers

1. C – See R01 Study Text, Chp 3
   Grab our taster mock exam paper for CII R01. Click here to download.

2. D – See R02 Study Text, Chp 5
   Grab our taster mock exam paper for CII R02. Click here to download.

3. AD – See R03 Study Text, Chp 4
   Grab our taster mock exam paper for CII R03. Click here to download.

4. D – See R04 Study Text, Chp 2:2
   Grab our taster mock exam paper for CII R04 Click here to download.

5. D – See R05 Study Text, Chp 7
   Grab our taster mock exam paper for CII R05. Click here to download.

How did you find this week’s questions? Did you complete them in 5 minutes? Did you get them all correct? Do you disagree with any?

If you found this quiz useful for your CII exam revision, please do share it with your colleagues.