The CII J02 March 2023 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 June 2023. 

You can find the exam guide here.

Question 1

The exam began with a very standard theory question which asked for six reasons why a trust may be created.  This should have been a very nice start for candidates.

Question 2

This question asked how trust law differs from contract law.  This has been asked many times in the past, and again candidates should have been able to offer enough differences to score well.

Question 3

The exam then tested a more technical area which was secret trusts. Candidates were given a mini-case study and had to describe how someone could keep a gift in her Will secret from other members of the family after her death.  This may have caused some difficulty for the less prepared candidates.

Question 4

Next, candidates have to give eight specific purposes for which a charitable trust can be set up, according to the Charities Act 2006.  Even if candidates had not studied this in depth, they should have been able to offer some examples.

Question 5

The exam continued with a question on the advantages and disadvantages of making a gift into a bare trust compared to a discretionary trust when the beneficiaries were adults.  This should also be standard trust knowledge.

Question 6

The next question was on the duties of a trustee, which again should not have caused difficulties for candidates.

Question 7

Next came the power of attorney question, a topic usually tested in this exam.  Candidates were asked to explain the impact of one attorney moving overseas and secondly, how the answer would have been different if the attorneys had been appointed to act jointly and severally.

Question 8

Another common area was tested next; candidates had to explain how the laws of intestacy operate for someone who dies leaving a partner and children.

Question 9

Then came a question on deeds of variation and disclaimers; another subject that candidates should have expected.

Question 10

This question tested investments for children where the capital has come from the parents.  Candidates had to explain the Income Tax implications if they invested in firstly an onshore bond written under a bare trust where the trustees withdraw 6% each policy year and also in a building society nominee account in the child’s name which pays £190 a year in interest. The parental settlement rules aren’t a common topic for testing, so this question may have been more challenging.

Question 11

Next came a discretionary trust question where the capital gains tax situation for the trustees was tested.  This involved a calculation and explanation of when the CGT must be paid.  As there was a property, this was testing the relatively new rule regarding the reporting.

Question 12

Then came another question on bonds, this time one that was held in trust, and candidates were asked to explain who will be liable to pay any Income Tax on a chargeable gain.

Question 13

Here, we had a question on a discounted gift trust – this time asking for the factors that should be considered prior to taking one out for IHT planning.  Factors questions are becoming mainstream across written papers and this one on a straightforward IHT scheme should have scored well.

Question 14

The penultimate question tested the transferable nil rate band.  Candidates had to do a calculation as well as explain how it would be claimed on the second death.

Question 15

The final question is often a review question and this was no exception; candidates had to describe eight events that may mean a discretionary trust will need to be reviewed.

Overall, this paper tested some very standard topics from the syllabus which candidates should have answered well.  A few questions, such as the parental settlement rules, may have been more challenging.  Future students should ensure that they put in place a well-structured study plan, which covers all the main topics as well as some of the more technical areas to ensure exam success.

Comparison with the September 2022 Exam Paper

If we look at what was tested in September 2022’s paper, we can see if there has been any overlap. This question paper can be found here.

The topics covered were:

• The three certainties
• How trustees can be appointed and replaced under trust law
• Joint tenants vs tenants in common
• Accumulation and maintenance trusts
• Trustee investment powers
• IHT advantages of a non-UK domiciled electing to be UK domiciled
• General power of attorney
• Key principles of the Mental Capacity Act 2005
• Bankruptcy restrictions
• Duties of an executor of a Will
• Periodic and exit charge calculations
• Personal pension nominations
• Income tax liability on a discretionary trust
• Back-to-back arrangements
• Disputes between beneficiaries and trustees

Grab the resources you need!

If you’re studying for your CII J02 exam, and you’re wanting to be thoroughly prepared, grab our free taster to try out one of Brand Financial Training’s resources for yourself. Click the link to download the J02 mock paper taster now!