Advising Trustees

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1. Alison’s husband died recently leaving his entire estate to a trust created in his Will. The Will states the estate is to be held on trust “for the benefit of my wife during her lifetime, thereafter for my children Sapphire and Bannon in equal shares absolutely” What type of trust has been created?

a) Bare

b) Discretionary

c) Interest in possession

 

2. Stuart established two discretionary trusts in 2015. He has no other trusts in place. The trustees of one of the trusts have invested in a portfolio of OEICs which is expected to generate dividend income of £3,000 in the 2023/24 tax year. If the income assumption is correct and the trustees decide to accumulate the income, what rate of tax will initially need to be paid by the trustees when they complete their tax return?

a) The first £1,000 of dividends are taxed at 8.75%, the remaining £2,000 is taxed at 45%

b) The first £1,000 of dividends are taxed at 8.75%, the remaining £2,000 is taxed at 39.35%

c) The first £500 of dividends are taxed at 8.75%, the remaining £2,500 is taxed at 39.35%

d) The full £3,000 of dividend income will be taxed at 45%

 

3. Mr and Mrs O’Malley who are UK resident set up a trust for the benefit of their children, Amy aged 7 and Michael aged 10, to pay for education costs. The trust is an absolute trust. The trustees have invested in OEICs and an investment bond. The OEICs have generated dividend income of £2,000 and there has been a chargeable gain on encashing part of the bond in the 2023/24 tax year. Who will be assessed on the income and chargeable gain?

a) Amy and Michael will be assessed on half the income and half the chargeable gain each

b) The trustees will be assessed on all of the income and the full chargeable gain

c) Mr and Mrs O’Malley will be assessed on half the income and half the chargeable gain each

 

4. Alasdair and Susan set up a discretionary gift trust for the benefit of their family in 2018. The trust holds an investment bond which has Alasdair and his son as lives assured. Alasdair dies in March 2020 and the trustees encash the bond in September later that year. Susan is still alive and UK resident. Who is the chargeable gain assessed on?

a) Alasdair

b) The trustees

c) Susan

d) 50% against Susan and 50% against the trustees

1. Alison’s husband died recently leaving his entire estate to a trust created in his Will. The Will states the estate is to be held on trust “for the benefit of my wife during her lifetime, thereafter for my children Sapphire and Bannon in equal shares absolutely” What type of trust has been created?

a) Bare

b) Discretionary

c) Interest in possession

 

2. Stuart established two discretionary trusts in 2015. He has no other trusts in place. The trustees of one of the trusts have invested in a portfolio of OEICs which is expected to generate dividend income of £3,000 in the 2023/24 tax year. If the income assumption is correct and the trustees decide to accumulate the income, what rate of tax will initially need to be paid by the trustees when they complete their tax return?

a) The first £1,000 of dividends are taxed at 8.75%, the remaining £2,000 is taxed at 45%

b) The first £1,000 of dividends are taxed at 8.75%, the remaining £2,000 is taxed at 39.35%

c) The first £500 of dividends are taxed at 8.75%, the remaining £2,500 is taxed at 39.35%

d) The full £3,000 of dividend income will be taxed at 45%

 

3. Mr and Mrs O’Malley who are UK resident set up a trust for the benefit of their children, Amy aged 7 and Michael aged 10, to pay for education costs. The trust is an absolute trust. The trustees have invested in OEICs and an investment bond. The OEICs have generated dividend income of £2,000 and there has been a chargeable gain on encashing part of the bond in the 2023/24 tax year. Who will be assessed on the income and chargeable gain?

a) Amy and Michael will be assessed on half the income and half the chargeable gain each

b) The trustees will be assessed on all of the income and the full chargeable gain

c) Mr and Mrs O’Malley will be assessed on half the income and half the chargeable gain each

 

4. Alasdair and Susan set up a discretionary gift trust for the benefit of their family in 2018. The trust holds an investment bond which has Alasdair and his son as lives assured. Alasdair dies in March 2020 and the trustees encash the bond in September later that year. Susan is still alive and UK resident. Who is the chargeable gain assessed on?

a) Alasdair

b) The trustees

c) Susan

d) 50% against Susan and 50% against the trustees

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