The CII J02 October 2019 Exam in Review

Next in line for our exam paper analysis is J02, the exam that sits in the Diploma in Financial Planning and covers trusts – useful for those preparing to sit CII J02 in April.

You can find the latest exam – October 2019 – by visiting the CII website.

The first overall impression of this exam is that it was quite a tough one.

Question 1

The first question asked for five pieces of legislation (excluding the Trustee Act 2000) that are used to govern trusts under English law.  The second part asked for a brief description of the general power of investment that should be applied by trustees for trusts governed by the Trustee Act 2000.  It was a tough start for 9 marks.

Questions 2 and 3

The second question tested how trust powers would be exercised following the death of trustees and Question 3, for 10 marks, asked for 5 benefits and 5 drawbacks for a settlor of making a gift into a discretionary trust compared to making a direct outright gift.  Question 3 should have been a welcome reprieve after the first two!

Question 4

Question 4 asked for the conditions that must be visible to a court for a fully secret trust to exist, and the second part was a brief explanation of what happens if the communication for a fully secret trust is not carried out during the testator’s lifetime.  Again, this might have been a difficult area for some.

Question 5

Luckily Question 5 was testing intestacy rules for a single person with two minor children, so this would have been a welcome area for the 6 marks on offer.

Question 6

Question 6 was also on trust law – the Perpetuities and Accumulations Act of 2009 and the statutory duty of care contained within the Trustee Act 2000.

Question 7

The effects of Saunders v Vautier (1841) were tested in Question 7 as well as the Variation of Trusts Act 1958 for a total of 8 marks.  Both these areas have come up frequently in the past, so those using past papers will have found these familiar.

Questions 8 and 9

Candidates then had to explain the benefits of an excluded property trust – this was for 7 marks.  The expected question on powers of attorney came next which included the process and circumstances that would lead to it being revoked.

Question 10

Question 10 asked for an explanation of the rule and duties of an Independent Mental Capacity Advocate for 4 marks, and another 4 marks were available for stating 4 changes in the Mental Health Act 2007, compared to the Mental Health Act 1983, that relate to those affected by dementia.

Question 11

Question 11 tested an inheritance which included a beneficiary that was financially dependent on the deceased but was not left anything in the will.  This area may not have been overly tested in the past so may have been challenging.

Question 12

The taxation of trusts appeared in Question 12 and included a calculation of the income tax as well as a brief description of how a tax liability will be paid to HMRC.

Question 13

Question 13 tested a practical application of trusts and would have been a welcome question to most candidates who had to give 5 common needs for placing a life policy in trust.

Questions 14 and 15

Onto the home straight and next candidates were asked for a description of how a discretionary loan trust works, and finally, Question 15 introduced us to some unhappy beneficiaries of a discretionary trust; delegates were asked to state the steps that need to be taken by the trustees once they are aware of the beneficiaries concerns as well as the main options available to trustees and beneficiaries.

All in all, this felt like a challenging paper, so it will be interesting to see the pass rate when they are released by the CII.

Comparison with the April 2019 Paper

Let’s compare this paper with the one candidates sat last April which can be found here.

This paper tested:

• The differences between contract law and trust law
• Appointing a new trustee to replace a trustee under s36 of the Trustee Act 1925
• Benefits of using an immediate post-death interest trust
• How a trust can be created by a will and who the trustees would be
• Implied trusts and express trusts
• Advantages of holding investment bonds in a relevant property trust
• Trustee considerations for managing cash
• Varying beneficial interests
• Comparison of an EPA and an LPA
• Discretionary will trusts
• Alternatives to bankruptcy
• CGT for a vulnerable beneficiary
• Types of trusts for relevant minors
• Taxation of capital gains made by a deceased person in the year of death
• Income tax on interest received during the administration period
• Factors SIPP trustees consider in deciding how to distribute lump-sum death benefits
• Chargeable gains on an onshore bond held in a discretionary trust

Future candidates of J02 should ensure they use as many previous exam guides as possible to get a good feel of the technical aspects that are tested as well as the more practical uses of trusts.

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!