The CII J02 September 2021 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. 

 You can find the exam guide here.  

The J02 exam covers technical aspects of trusts as well as their practical use in everyday financial planning situations.   

Question 1 

The exam started with a six-mark question on the differences between a contract and trust, with candidates having to state the features of a contract that do not appear in a trust. This is a topic that has been tested before so should not have caused too many difficulties for those using past exam guides as part of their revision. 

Question 2 

This question asked for a description of how a trust can continue if the last surviving trustee has died. This was for five marks and another area frequently tested.  In part (b), candidates had to state two advantages and two disadvantages of appointing a corporate trustee compared to a non-corporate trustee. 

Question 3 

Candidates here had to describe an implied trust for three marks, and it was good to see that this was answered well by candidates.  In part (b), candidates were asked to list five other methods of creating a trust.  

Question 4 

The exam continued with more technical knowledge. Candidates had to state the definition of a perpetuity period and an accumulation period, for three marks and in (b) for four marks, describe the perpetuity period that could apply to a trust created before 6 April 2010. 

 Reviewing past papers is a must in any #CII #J02 revision plan. Click To Tweet 

Question 5 

This question also tested technical areas.  Candidates firstly had to describe the powers given to the court in the Variation of Trusts Act 1958 and those who may benefit.  This was for six marks and seems to have caused some difficulty for candidates and in (b) for another four marks, explain the drawbacks of a beneficiary making an application to vary a trust under the provisions of the Variation of Trusts Act 1958.  

Question 6 

The exam continued with lasting powers of attorney.  Candidates had to describe the main duties of an attorney under a property and financial affairs LPA for seven marks and in (b) for another four marks, explain the consequences of an attorney breaching their duties.  It was interesting to read that part (a) was not answered well, as the examiner guide states, this is a core part of the syllabus and is generally in most exam papers. 

Question 7 

This question posed the first factors question.  Candidates had to identify eight factors the trustees of a life interest trust should consider following the death of the life tenant.  

Question 8 

This was our first mini-case study question.  We were introduced to Ilan who made a Will five years ago, leaving £20,000 to his brother and the remainder of his estate to his wife. The couple had recently divorced. Question (a) asked for the impact of Ilan’s divorce on the provisions in his Will (for 5 marks) and in (b) candidates were asked to explain how Ilan’s estate would be administered if his wife was the sole executor of the Will. This was for a further 4 marks.  This is another area that is frequently tested and should have caused no real issues for candidates. 

Question 9 

In this question, we were introduced to Tom and Harriet who had recently inherited their mother’s estate which was left to them in her Will. Tom wanted his share to go directly to his daughter. Part (a) asked for the conditions that must be satisfied for a Deed of Variation to be effective for Inheritance Tax purposes. This was for eight marks. and in (b) candidates were asked why using a Disclaimer may not be as advantageous as using a Deed of Variation in the circumstances described – this was for two marks.  Again, those candidates that had used previous exam papers would have been well prepared for any question on Wills. 

Question 10 

In this question, we were told that Carlotta, aged 20, lived at home with her parents. She had recently been made redundant and owed £12,000 on various credit cards which she had always managed up until now. State the conditions Carlotta must meet before she can apply for a debt relief order. This was for 7 marks and as it can be seen from the exam guide, it was not answered well.   

Question 11 

In this question, candidates were asked to explain how an existing settlor-interested discretionary trust, holding a residential property and a share portfolio, would be treated for CGT. This was for four marks and in (b) candidates had to explain the trustees’ responsibility for reporting and paying any future CGT due on a discretionary trust, for another four marks. 

Question 12 

This question tested how interest and dividend income received in an interest in possession trust will be treated for Income Tax purposes. This was for seven marks and in (b) explain how trustee expenses are accounted for when calculating taxable income. This second part was for just three marks so those that were not familiar with how trustee expenses are dealt with would have been relieved they would not be losing too many marks.   

Question 13 

This question asked for the benefits of using a discretionary trust compared to a bare trust with a life insurance policy used for family protection. This was for seven marks and in (b) candidates had to state three other uses for a life insurance policy held under trust.  This should be very basic technical knowledge for anyone studying trusts at this level. 

Question 14 

This question was regarding Claude who had died in June 2007 having left 30% of his nil rate band to a discretionary Will trust and the remainder of his estate to his wife Florence. Florence had then died on 1 January 2021 leaving an estate valued at £600,000 to her nieces and nephews. In (a) candidates, for 4 marks, had to explain how the transferable NRB is obtained following Florence’s death and in (b) calculate the IHT liability on Florence’s estate. This was for 7 marks.  It was good to read that the candidates did well in this question and, in some cases, candidates getting full marks in part (b).  

Question 15 

The final question introduced us to Shakiru who was worried about what would happen if he were to lose mental capacity without either a property and financial affairs Lasting Power of Attorney or Enduring Power of Attorney in place.  Candidates in (a) had to describe how Shakiru’s family could apply to manage his affairs. This was for three marks and in (b) explain the drawbacks of this, from Shakiru’s perspective, compared to the position if he had set up a property and financial affairs LPA before losing mental capacity. This was for a further three marks.  

Overall, this exam paper tested a good variety of technical and practical questions regarding trusts with very few topics having not been tested before.   

Comparison with the April 2021 Exam Paper 

If we look at what was tested in April 2021’s paper, we can see if there has been any overlap. This question paper can be found here. 

The topics covered were:  

• Three main parties to a trust 
• Powers of the Appointer 
• Advantages and disadvantages of using a bare trust compared to a discretionary trust 
• Trust deeds 
• Types of trust that are not treated as relevant property 
• Delegation of trustee powers 
• Main functions of the OPG 
• Wills of those unmarried 
• Effects of bankruptcy on a trust 
• Vulnerable beneficiary trusts 
• CGT on an estate in administration 
• Tax treatment of an offshore trust with a UK domiciled settlor and non-UK resident trustees 
• Defined contribution pension schemes under trust 
• Relevant life policies 
• Drawbacks and benefits of using a whole of life policy written under a trust for IHT planning compared to an outright gift 
• Circumstances that would prompt trustees to review a trust

As you can see, this exam tested a different range of topics within the syllabus.  Candidates should use a selection of past papers to ensure that all previously tested topics can be part of the revision programme.   

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!