The CII J02 February 2025 Exam in Review

Here, we take a look at the exam paper for J02, the exam that sits in the Diploma in Financial Planning and covers trusts – useful for those preparing to sit the next J02 exam.

This article is correct as at 22 May 2025. 

You can find the exam guide here.*

Two hours are allowed for the J02 paper which is made up of 15 short answer questions and carries a total of 130 marks.

Question 1

The exam started with a nice opener with an eight-mark question on the non-tax related reasons for creating a trust.  This has been asked many times, and most candidates should have picked up some good marks.

Question 2

The second question introduced us to Igor who had set up a discretionary trust for his adult children and grandchildren and was considering the trustees. Firstly candidates had to explain, for six marks, whether trustees can charge for their services and then identify four examples of expenses which lay trustees are entitled to be reimbursed.  This was specific technical detail which, unless candidates had studied it in full, may have been a struggle to guess at.

Question 3

Next, candidates had to define joint tenancy and tenants in common and describe the consequences of the death of a joint owner of each.  This should have been relatively straightforward for most.

Question 4

Candidates then had to explain the differences between how a non-statutory trust and a statutory trust are created.  This was for four marks and for another four marks, explain the benefits of a non-statutory trust compared to a statutory trust.

Question 5

This question introduced us to Gerard who had recently gifted assets into a bare trust for the benefit of his two minor grandchildren. Candidates had to describe the legal and beneficial ownership of the bare trust for three marks, and then for another six marks, explain how the bare trust operates from a tax perspective.  Bare trusts are a key part of the syllabus, and the Income Tax, CGT, and IHT implications should be well known.

Question 6

Next came a question on Married Women’s Property Act trusts and how they can be created with a life insurance policy and who can benefit from the trust.  With this type of trust rarely, if ever, used this may not have scored high marks overall.

Question 7

This question was for nine marks in total; firstly, a description of the general power of investment in s3 of the Trustee Act 2000 was required (for six marks) and then for three more marks, candidates were asked to state types of trusts to which s3 does not apply.  Again, this is technical knowledge which a candidate may have had difficulty with consequently affecting their marks.

Question 8

In this question, candidates were asked to describe how it is determined that a trust is UK resident for Income Tax and CGT purposes. This was for four marks and then for three more marks, explain when the settlor may be liable to CGT on gains made by a non-UK resident trust.

Question 9

Candidates then had to describe the main powers of the Court of Protection. This has been tested many times in the past and so candidates should have been able to pick up most of the six marks on offer.  In part (b), a description was needed of four considerations when assessing whether an individual has the capacity to make decisions themselves.

Question 10

In Question 10, candidates had to explain the consequences of divorce on an existing Will (for four marks) and then describe how an existing Will can be revoked (for another four marks).  This is a very standard J02 question which has been asked many times in the past; any student using past exam guides as part of their revision strategy would have easily gained good marks here.

Question 11

In this question we were introduced to Aisha, a widow with two adult children, who had recently passed away. Firstly, candidates had to briefly describe the action the executors must take before they can administer the estate (for four marks) and then for six more marks, describe the duties of the executors of an estate in respect of the reporting and payment of IHT.  The probate process and the duties of executors are also commonly tested areas and good marks should have been attained for a well prepared student.

Question 12

This question covered trust taxation; firstly candidates had to calculate the Income Tax payable by the trustees of a trust that had received interest and dividends totalling £1,600.  Another trust had received just £200.  The question then asked for a calculation of the first one and an explanation of the tax treatment of the second. This was a good question that not only tested the de minimis threshold of £500 but also the fact that it needs to be divided by the two trusts set up.

Question 13

This question involved an onshore investment bond under a discretionary trust where the settlor had died in the tax year 2023/24 and the bond was fully surrendered in 2024/25.  Firstly, candidates had to describe how any gain will be assessed for Income Tax purposes in the 2024/2025 tax year – this was for six marks and for another six marks, explain how the tax treatment of the gain would have differed if the trustees had assigned the bond to the beneficiaries prior to surrender.  Another challenging question requiring candidates to use the information in the mini case study to establish that as the settlor had died in the previous year, the trustees would be liable and would not benefit from top-slicing relief.

Question 14

This question started with a description of how a series of life insurance policies can be set up under trust following the IRC v. Rysaffe Trustee Company (2003) ruling. This fortunately was only for three marks as it may have been a challenging question for some. It was followed by a further three marks for explaining the implications for the trusts IHT charges.

Question 15

The final question was a factors question and for seven marks candidates had to state the factors which may cause the investment policy of a trust to be reviewed.  These types of question are often asked and candidates should have easily picked up the marks available.

Comparison with the September 2024 Exam Paper

If we look at what was tested in September 2024’s paper, we can see if there has been any overlap. This exam guide can be found here.*

The topics covered were:

• Legal and beneficial ownership of a trust
• How trustees can retire and the action required to appoint a new trustee following death
• Benefits and drawbacks of making a gift into a discretionary trust compared to a bare trust
• How a lifetime trust can be created
• Perpetuity and accumulation periods
• IPDI trusts
• Charitable trusts
• Lasting powers of attorney
• Rules of intestacy
• Deeds of variation
• Bankruptcy of a trustee and potential beneficiary
• IHT on a chargeable lifetime transfer
• CGT on disposal from a trust
• Personal representatives responsibilities in respect of Income Tax
• Business trusts/share purchase arrangements
• Flexible reversionary trusts and discounted gift trusts
• Disputes between trustees and beneficiaries that may require a trust review

On first glance, both papers had some challenging questions – perhaps more so in the most recent sitting.  J02 does cover specialist subjects, and candidates with experience of working with trusts will do well in some of the more practical applications.  The text book holds all the technical detail necessary to pass the exam, but there is still plenty of it. A successful candidate will be one who has studied the learning outcomes and has carefully prepared a study schedule.

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* The CII has updated their retention policy and now only provides the last two exam papers. Older papers referenced in this article may no longer be available on the CII website.