What are the duties of trustees?
The CII exam on trusts is J02; the exam is 2 hours long with 15 short-answer questions giving a total of 130 marks. Here is an example question that will help exam candidates answer questions on the duties of trustees.
This article is correct as at 8 October 2024.
One question that often appears in the exam tests the duties of trustees:
Example Question
State the relevant duties and responsibilities of the trustees in respect of a discretionary trust invested mainly in individual shares.
Model answers:
- Hold trust property and administer it for the benefit of the beneficiaries
- Protect the trust property
- Ensure they are registered as legal owners
- Hold title documents to trust property e.g. share certificates
- Must adhere to the trust deed/Trustee Act 2000
- Use utmost diligence to avoid losses
- Act in the best interests of the beneficiaries with due diligence and integrity
- Avoid conflicts of interest
- Treat property as if it were their own
- Keep proper accounts/shown to beneficiaries if required
- Monitor investments
- Ensure investments are suitable/diversified (standard investment criteria)
- Obtain professional advice if appropriate
- Invest any cash appropriately
The statutory position regarding replacement trustees could also be tested. An example question could include:
The model answer to this would be:
- When a trustee has died
- When a trustee is outside the UK for more than a year
- When a trustee wish to be discharged
- When a trustee is refusing to act
- When a trustee is unfit or incapable to act
Remember that trustees are the legal owners of the trust property; therefore they must be over the age of 18 and of sound mind. Any number can be appointed (unless the trust property is land, where the minimum is two, unless one is a trust corporation, and the maximum is 4).
Trusts are of course also tested in AF1, so having knowledge of a trustee’s duties is important for anyone studying either of these exams.
Grab the resources you need!
If you’re studying for your CII J02 exam, and you’re aiming for a comfortable pass, you need to get all the practice you can. 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!
Alternatively, you can download taster resources for AF1, AF5, R01, R05 or R06 if you are planning to sit any of these exams.
