Trust LawWills and Probate

Trusts, Wills and the Administration of Estates (including principles of taxation) | SQE1 – SQE2 Questions and Answers Examples

1-Trust fund with portfolio of shares

A man died leaving a will by which he left all his estate to three trustees to hold on trust for the four children of his best friend. The children are to inherit at the age of 18. Two of the children have reached the age of 18 and have received their share of the trust fund. The other two children are still under the age of 18. The trust fund comprises a portfolio of shares. One of the trustees has just died.

Which of the following best describes whether it is necessary for a replacement trustee to be appointed?

Answers:

A. A replacement trustee must be appointed because some of the beneficiaries are still under the age of 18.

B. A replacement trustee must be appointed because three trustees were originally appointed and there are now only two trustees.

C. There is no requirement to appoint a replacement trustee because the trust came into effect after the man’s death and not during his lifetime.

D. There is no requirement to appoint a replacement trustee because there is no land in the trust investments.

E. There is no requirement to appoint a new trustee because there are two surviving trustees.

Correct answer:

E. There is no requirement to appoint a new trustee because there are two surviving trustees.

2-Claims of unknown creditors

A man died one month ago leaving a will by which he appointed his friend as his sole executor. The executor has not yet applied for a grant of probate. He wishes to protect himself against claims of unknown creditors and has decided to place advertisements in the London Gazette, a newspaper circulating in the district in which any land forming part of the estate is situated and any other newspaper or publication he considers might be appropriate.

Which of the following best describes how the executor can protect himself against claims from unknown creditors through advertising as above?

Answers:

A. He should place the advertisements and must wait for two months from the date of the grant of probate before distributing the estate.

B. He should place the advertisements and must wait for two months from the date of the advertisements before distributing the estate.

C. He should place the advertisements and must wait for two months from the date of death before distributing the estate.

D. He should place the advertisements but must wait for two months from the date of death before doing so.

E. He should place the advertisements but must wait for two months from the date of the grant of probate before doing so.

 

Correct answer:

B. He should place the advertisements and must wait for two months from the date of the advertisements before distributing the estate.

 

3-Grant of representation to the testator’s estate

By his will, a testator appointed his spouse, his friend and his adult son to be his executors. The testator has now died. The testator and his wife divorced after the will was executed. The son predeceased the testator and a grant of probate to the son’s estate was obtained by his nephew. The testator left all of his estate to his niece who is 20 years of age.

Who has the best right to apply for a grant of representation to the testator’s estate?

Answers:

A. The testator’s ex-spouse, the testator’s friend and the nephew of the son only.

B. The testator’s friend and the testator’s niece only.

C. The testator’s friend, the nephew of the son and the testator’s niece only.

D. The testator’s friend only.

E. The testator’s friend and the nephew of the son only.

 

Correct answer:

D. The testator’s friend only.

4-Validity of a gift

Under the terms of a will a company director’s estate is to be held on trust to pay the income to his daughter for her life and after her death to be divided between all the present and former employees of his company. The daughter consults a solicitor to ask whether the gift is valid. The daughter objects to the terms of her father’s will and is also concerned that it is not workable. Although the daughter has a complete list of past and present employees of the company she is not sure that all of them can be traced.

Which of the following statements provides the best advice regarding the gift?

Answers:

A. The gift is not valid because the class of beneficiaries is administratively unworkable.

B. The gift is not valid because a company cannot be a beneficiary.

C. The gift is valid because the company still exists.

D. The gift is valid because there are a large number of employees of the company who can benefit from it.

E. The gift is valid because there is a complete record of past and present employees.

 

Correct answer:

E. The gift is valid because there is a complete record of past and present employees.

5-Permitting mother to live in property

A will trust contains the following provision: “My Trustees shall hold my property on trust to permit my mother to live in the property for the remainder of her life and after her death to hold the property upon trust for such of my nephew and niece as survive my mother and attain the age of 21 years in equal shares.” The nephew is now aged 20 years and the niece is aged 22 years.

Which of the following statements best describes the beneficial interests in the trust fund?

Answers:

A. The mother has a vested interest but the nephew and niece have contingent interests.

B. The mother has a contingent interest but the nephew and niece have vested interests.

C. The mother, nephew and niece all have contingent interests.

D. The mother, nephew and niece all have vested interests.

E. The mother and niece have vested interests but the nephew has a contingent interest.

 

Correct answer:

A. The mother has a vested interest but the nephew and niece have contingent interests.

6-Time for registration at the Land Registry

A solicitor is acting for the purchaser of a property with registered title. The purchaser is buying the property with the aid of a mortgage. Contracts have been exchanged, requisitions on title made, and the solicitor has conducted a pre-completion priority search of the title. Following completion the solicitor will need to deal with post-completion matters involving payment of Stamp Duty Land Tax (SDLT) to HM Revenue & Customs and registration of the dealing at the Land Registry.

Registration at the Land Registry must take place within 30 working days of which date?

Answers:

A. The date contracts are exchanged, to avoid interest become payable on outstanding SDLT.

B. The date of completion, to avoid interest becoming payable on outstanding completion monies.

C. The date of completion, to avoid the equitable title in the property reverting to the seller.

D. The date of the result of the priority search, to avoid subsequent entries being made on the title which bind the purchaser.

E. The date of completion, to avoid the mortgagee’s power of sale arising under the legal charge.

Correct answer:

D. The date of the result of the priority search, to avoid subsequent entries being made on the title which bind the purchaser.

 

7-Dying intestate with partner

A man died intestate a month ago. He had never been married or in a civil partnership. At the time of his death, the man was living with his partner, with whom he had been cohabiting for 20 years, and her daughter (aged 23 years). The partner’s daughter has lived with the man and his partner throughout their relationship. The man had a son (aged 25 years) from a previous relationship and a daughter (aged 19 years) whom he and his partner adopted ten years ago.

Who is entitled to share in the distribution of the man’s estate?

Answers:

A. The partner, the son and the man’s daughter only.

B. The son, the man’s daughter and the partner’s daughter only.

C. The son and the man’s daughter only.

D. The son only.

E. The man’s daughter only.

 

Correct answer:

C. The son and the man’s daughter only.

8-Separating after purchase of a house

A husband, wife, and the wife’s mother bought a house together 20 years ago. The transfer deed stated that they held the property as joint tenants in law and equity. The husband and wife separated a month ago, and the husband moved out of the house. Last week the wife was killed in a car accident. A few days before her death, the wife had made a will leaving all her property to her new boyfriend.

How is the title to the house now held?

Answers:

A. The husband and the wife’s mother are joint tenants in law and tenants in common in equity.

B. The husband, the wife’s mother and the new boyfriend are joint tenants in law and tenants in common in equity.

C. The wife’s mother and the new boyfriend are joint tenants in law and equity.

D. The wife’s mother and the husband are joint tenants in law and equity.

E. The wife’s mother and the new boyfriend are joint tenants in law and tenants in common in equity.

Correct answer:

D. The wife’s mother and the husband are joint tenants in law and equity.

9-Argument with son after division of the estate

A man died leaving an estate comprising two bank accounts and a freehold property. His will divided the residue of his estate equally between his son and his daughter. Five years ago the man and his son (who was then 22) had a serious argument and his son left the family home. None of the family has seen him since. The personal representatives (‘PRs’) have questioned other relatives and friends to attempt to ascertain the son’s whereabouts but with no success. Three months ago the PRs placed advertisements complying with s.27 Trustee Act 1925 in the London Gazette and in a local newspaper. The PRs have had no responses to these notices from either the man’s son or anyone claiming to be a creditor of the estate. They propose to distribute the entire residue to the man’s daughter and pay only the creditors they currently know about.

Which of the following statements best describes the PRs’ protection from claims by creditors and beneficiaries as a result of the enquiries made and s.27 Trustee Act 1925 notices placed?

Answers:

A. The PRs will be protected from claims by new creditors and unknown beneficiaries but not from a claim by the son.

B. The PRs will be protected from claims by new creditors but not from unknown beneficiaries or the son.

C. The PRs will be protected from claims by new creditors, unknown beneficiaries and the son.

D. The PRs will not be protected from claims by new creditors but will be protected from claims by unknown beneficiaries and the son.

E. The PRs will not be protected from claims by new creditors or unknown beneficiaries but will be protected from a claim by the son.

Correct answer:

A. The PRs will be protected from claims by new creditors and unknown beneficiaries but not from a claim by the son.

 

10-Brother and sister half share for IHT purposes

A leasehold flat was owned by a brother and sister as tenants in common in equal shares. The sister died last month and under the terms of her will, the whole of her estate is given to her adult daughter absolutely. It is estimated that the flat is worth £200,000 as a very similar flat in the same block sold for that figure last month. The sister’s estate will be subject to inheritance tax (IHT).

If the estimated worth of the flat is correct what will be the value of the sister’s half share for IHT purposes?

Answers:

A. £100,000 less a percentage discount to reflect the fact that the flat was co-owned at the sister’s death.

B. £100,000 as no discount is available because of the application of the related property rules between brothers and sisters.

C. £100,000 as no discount is available because of the application of the related property rules between a mother and daughter.

D. £100,000 as no discount is available because of the application of the related property rules which apply when more than two close relatives are connected with the ownership of a property.

E. £100,000 as no discount is available because the flat is leasehold.

Correct answer:

A. £100,000 less a percentage discount to reflect the fact that the flat was co-owned at the sister’s death.

11-Leaving estate to nephew

A man died on 4 May 2018. He left his entire estate to his nephew. He was a bachelor and did not make any lifetime gifts. His estate comprised a house free of mortgage worth £150,000 which he had lived in for over 20 years and bank and building society accounts with balances totalling £550,000. He also owned a house worth £170,000 free of mortgage which he inherited from his aunt and which has been rented out to tenants for the last 30 years. The man’s debts and funeral expenses totalled £9,000. In the 2018/19 tax year the nil-rate band is £325,000 and the main residence nil-rate band is £125,000.

How much inheritance tax will be payable on the man’s estate?

Answers:

A. £344,400.

B. £214,400.

C. £164,400.

D. £162,000.

E. £114,400.

 

Correct answer:

B. £214,400.

12-Value of shares and capital gains tax

A testator died leaving a will by which all of his estate passed to his two adult children in equal shares. The estate assets included shares in a company quoted on the stock exchange with a probate value of £100,000. Half of the shares were transferred to the son and the other half were transferred to the daughter. At the date of the transfer, the total value of the shares was £150,000. A month later the son sold all of his shares and the net sale proceeds were £85,000. Two months later the daughter sold all of her shares and the net sale proceeds were £45,000. The executor has not yet completed the administration of the estate.

Which of the following statements best describes the capital gains tax position on the shares sold during the administration period?

Answers:

A. The son will make a gain, the daughter will make a loss and the executor will make neither a loss nor a gain.

B. The son will make a gain, the executor and the daughter will make neither a loss nor a gain.

C. The executor and the son will make a gain, the daughter will make a loss.

D. The executor will make a gain, the son and daughter will make neither a loss nor a gain.

E. The executor and the son will make a gain, the daughter will make neither a loss nor a gain.

 

Correct answer:

A. The son will make a gain, the daughter will make a loss and the executor will make neither a loss nor a gain.

13-Trust fund of residuary estate

A woman died and was survived by her husband and son who is aged 30 years. Under the terms of her will, the woman created a trust fund of her residuary estate in the following terms: “to pay the income from my residuary estate to my husband for the remainder of his life and after his death I GIVE my residuary estate to my son if he survives my husband and attains the age of 25 years but if he does not so survive then to my sister absolutely”. The husband is discussing the possibility of bringing the trust to an end with the trustees.

Whose consent is required to bring the trust to an end now?

Answers:

A. The husband and the son.

B. The husband, the son and the sister.

C. The husband and the sister.

D. The sister.

E. The son and the sister.

Correct answer:

B. The husband, the son and the sister.

14-Estate divided equally between three children

A woman died six months ago leaving an estate of £60,000 to be divided equally between her three children at the age of 21. Her son is 24 and her two daughters are 19 and 14. Her son is about to receive his share of the estate. The trustees have received a request to advance capital to help set up the elder daughter’s new catering business. The woman’s will does not extend the trustees’ powers of advancement.

What is the maximum amount the trustees can apply in accordance with the request?

Answers:

A. £0.

B. £10,000.

C. £20,000.

D. £30,000.

E. £40,000.

 

Correct answer:

C. £20,000.

15-Claim by a widow

A man died ten months ago domiciled in England and Wales. A grant of representation to his estate was issued seven months ago. By his will, the man left all of his estate to his favourite charity. The man’s widow is considering whether to bring a claim against his estate under the Inheritance (Provision for Family and Dependants) Act 1975 (the Act). There are no circumstances in which a court would give leave for a late application to be made under the Act.

Which of the following statements best explains whether the widow is able to bring a

claim under the Act?

Answers:

A. The widow is able to bring a claim because a grant of representation was issued less than two years ago.

B. The widow is able to bring a claim because the grant of representation was issued less than six months after the date of death.

C. The widow is able to bring a claim because the man died less than two years ago.

D. The widow is not able to bring a claim because the man died more than six months ago.

E. The widow is not able to bring a claim because the grant of representation was issued more than six months ago.

 

Correct answer:

E. The widow is not able to bring a claim because the grant of representation was issued more than six months ago.

16-Disagreement with daughter and validity of will

Under the terms of a man’s will, the whole of his estate was given to his daughter. The man had a serious disagreement with his daughter and decided that he no longer wanted her to be the beneficiary of his will. He tore his original will into four pieces. The man and his daughter are now reconciled and the man regretted his earlier decision. He wants his daughter to inherit the whole of his estate.

Is the man’s will valid?

Answers:

A. No, because the will was revoked by destruction.

B. Yes, because his daughter is the beneficiary named in the will and the man intends her to inherit the whole of his estate.

C. No, because the will must be read as a whole and this is no longer possible.

D. Yes, because a will must be revoked by a revocation clause in a new will executed in accordance with s.9 Wills Act 1837.

E. Yes, because the doctrine of dependent relative revocation will apply.

 

Correct answer:

A. No, because the will was revoked by destruction.

17-Payment of legacies due under a will – ethics

A firm of solicitors is acting on behalf of the executors of a will. The administration of the estate will be completed shortly and the executors have asked the firm to pay the legacies due under the will. As a separate matter the firm also acts for one of the beneficiaries of the will in connection with the beneficiary’s purchase of a property. The beneficiary is entitled to a legacy of £20,000 from the will. The beneficiary intends to use this £20,000 legacy to repay the £2,000 the firm has already incurred in surveyor’s fees and searches (for which the firm has billed the beneficiary) and intends the balance of £18,000 to be retained by the firm as part of the purchase price.

Which of the following statements best explains the action the firm should take?

Answers:

A. The firm cannot transfer the funds from the executors’ client account ledger to the beneficiary’s client account ledger. The firm must send a cheque to the beneficiary for £20,000.

B. The firm can transfer £2,000 from the executors’ client account ledger to the firm’s business account but must send a cheque for £18,000 to the beneficiary.

C. The firm can transfer £2,000 from the executors’ client account ledger to the firm’s business account and then transfer £18,000 to the beneficiary’s stakeholder account ledger.

D. The firm can transfer £20,000 from the executors’ client account ledger to the beneficiary’s client account ledger and then transfer £2,000 to the firm’s business account.

E. The firm can transfer £20,000 from the executors’ client account ledger to the beneficiary’s client account ledger but cannot transfer £2,000 to the firm’s business account until the purchase of the property is completed.

 

Correct answer:

D. The firm can transfer £20,000 from the executors’ client account ledger to the beneficiary’s client account ledger and then transfer £2,000 to the firm’s business account.

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