The CII J02 September 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 13 December 2023.
You can find the exam guide here.
Candidates should have been very pleased with how the September exam started; Question 1 asked for five advantages and five disadvantages of creating a trust. Out of the 10 marks available, most well-prepared candidates should have scored well.
This question should also have been standard knowledge for anyone studying trusts at this level; the question asked for an explanation of how the administration of a trust can be continued in the event of the death of one or more trustees, as outlined in s18 of the Trustee Act 1925.
Part (b) asked for a description of the circumstances, excluding death, in which a new trustee can be appointed to replace an existing trustee, as specified in s36 of the same act. This was perhaps more technical but should again be standard knowledge for those studying trusts.
The exam then asked candidates to state three benefits and three drawbacks of appointing a corporate trustee to administer a trust rather than using a family friend. Even if this particular part of the study text hadn’t been particularly focused on, most candidates could have used their experiences to give some well-thought-through answers.
In this question, candidates were given a mini-case study involving Imran, who was in poor health, and who was considering the transfer of his share portfolio into a discretionary trust for the benefit of his nieces and nephews. The share portfolio was valued at £400,000 and the drawbacks were asked of this course of action. This perhaps needed more analysis of the implications of doing this for someone who is in poor health.Reviewing past papers is a must in any #CII #J02 revision plan. Click To Tweet
In this question, a description was required of the information that should be included in a trust deed. This question has been asked before and again should not have caused too many problems for candidates.
In this question, the definitions of various types of trust were required: an implied trust, a successive trust, and a constructive trust. Examiner comments in past exam guides mentioned that this test of knowledge is often challenging.
More technical knowledge was required for this question, which asked for five categories of beneficiary who may benefit from a trust being varied, under the provisions of the Variation of Trusts Act 1958. Unless candidates had studied this in full, it may have been more difficult to produce some plausible answers without the background knowledge.
This question came with another mini-case study, regarding Lizzie who was leaving for a 12-month round-the-world trip and wanted to give her sister power of attorney. Firstly, candidates had to explain the benefits of a General Power of Attorney and also explain any restrictions that would apply if Lizzie took this action.
Powers of attorney are tested in most exams and with only three types of power to study, future candidates should ensure they cover the main features of all of them: lasting powers, enduring powers, as well as general powers.
In this question, candidates were asked to outline eight duties of an appointed executor and then briefly describe the process that will apply if that sole executor is unable to act. The first part of the question should not have caused too many problems; although the second part was more technical but was only for a small number of marks overall.
Next, candidates had to describe the role of the trustee in bankruptcy and then state four types of debt that remain payable even after the bankrupt has received their discharge from bankruptcy. Candidates will have noticed that the new J02 manual had content stripped from it leaving only the minimum amount of information that can now be tested on this area. With less to revise, it is hoped that candidates would have dealt with this question well.
This question explained another short scenario, this time a settlor setting up a discretionary trust for the benefit of two grandchildren. The question asked how the trustee could distribute the trust fund to the grandchildren and any potential tax implications. It was for 12 marks, so candidates would have had to explain how they could have sold the shares or how they could have transferred them with the resulting tax implications of both scenarios.
This question asked how a relevant life policy is set up and asked for an explanation of the five conditions that must be met for the policy to provide favourable tax treatment for both employers and employees. This subject has been tested before but even so, it may have proved challenging.
This question tested the purpose of the Trust Registration Service (TRS) and relevant timescales as well as four examples of trusts excluded from the TRS requirements. This is topical information and should have been answered well by anyone working with trusts.
This penultimate question asked for the relevant factors that should be considered before advising a client to make a large transfer of capital into a discretionary trust for the benefit of grandchildren. Factors questions appear regularly in this exam so there should have been an opportunity for candidates to score some high marks.
Lastly, we had a review question. We were introduced to Jamil and Amir, the trustees of a discretionary trust. Candidates had to explain the different areas Jamil and Amir should consider when conducting a trust review. Reviews are also often tested, so again candidates should have picked up some high marks on this last question.
Overall, candidates should not have been surprised by this paper with its usual offering of some very standard trust questions together with some more challenging technical areas. Some topics have been tested in the past so the advice, as always, is to ensure that as many past exam guides are studied.
Comparison with the March 2023 Exam Paper
If we look at what was tested in March 2023’s paper, we can see if there has been any overlap. This question paper can be found here.
The topics covered were:
- Why a trust may be created
- How trust law differs from contract law
- Secret trusts
- Charitable trusts
- Gifts into bare trusts and into discretionary trusts
- Duties of a trustee
- Powers of attorney
- Laws of intestacy
- Deeds of variation and disclaimers
- Investments for children
- Capital gains tax on a discretionary trust
- Bonds held in trust
- Discounted gift trusts
- Transferable nil rate bands
- Review of a discretionary trust
Grab the resources you need!
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