Free CISI UK RPI Practice Questions: UK Contract and Trust Legislation

Use this focused CISI UK RPI page as a short practice test for UK Contract and Trust Legislation. The items are original Finance Prep sample exam questions built for scenario-based practice, not trivia, puzzle questions, official CISI questions, copied live-exam content, or exam dumps.

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These are original Finance Prep practice questions aligned to this topic area. They are not official CISI questions, copied live-exam content, or exam dumps. Use them to preview question style and explanation depth before continuing with topic drills, mixed sets, and timed mock exams in Finance Prep.

Question 1

Topic: UK Contract and Trust Legislation

A retail client has a general investment account in her sole name with an FCA-authorised investment firm. The firm holds a registered property and financial affairs lasting power of attorney naming her son as attorney. The son emails the firm to say the client died yesterday and asks it to sell the holdings to pay funeral expenses. Which action should the firm take?

• A. Execute the sale because a registered property and financial affairs lasting power of attorney covers investment decisions.
• B. Accept the email instruction if the son confirms that the will names him as executor.
• C. Transfer the holdings to the son as next of kin because the assets are needed for funeral costs.
• D. Decline to act on the attorney instruction and seek evidence of death and authority from the personal representatives before dealing with the account.

Best answer: D

What this tests: UK Contract and Trust Legislation

Explanation: Powers of attorney are relevant while the donor is alive, particularly where incapacity affects their ability to give valid instructions. A property and financial affairs lasting power of attorney can allow an attorney to manage investments during the donor’s lifetime, but that authority ends when the donor dies. After death, the assets form part of the estate. The firm should verify the death and then take instructions from those entitled to administer the estate, such as executors under a will or administrators where there is intestacy, usually supported by the appropriate grant. Funeral costs may be a practical concern, but they do not allow an attorney or next of kin to bypass estate-administration authority for a sole-name investment account.

• A registered lasting power of attorney is not sufficient after death because the attorney’s authority has ended.
• Being named as executor in an email is not the same as the firm verifying estate authority before accepting investment instructions.
• Next of kin status alone does not give power to transfer or sell assets held in the deceased client’s sole name.

A lasting power of attorney ceases on death, so the firm should deal with the estate only through properly verified personal representatives.

Question 2

Topic: UK Contract and Trust Legislation

A retail investment firm is completing client take-on and ownership checks before advising Ms Blake. The file shows:

• A platform portfolio is registered in the name of ABC Nominees Ltd - Blake. The platform statement says Ms Blake is the sole beneficial owner, receives all income, and may instruct transfers at any time.
• A life assurance policy is subject to a signed trust deed naming Ms Blake’s sister and solicitor as trustees, with Ms Blake’s children as beneficiaries.

A trainee says both assets should be opened as trust accounts because legal title is not held directly by Ms Blake. What is the best next step in the take-on process?

• A. Treat the policy as the trust arrangement needing trustee authority checks, and treat the platform portfolio as a nominee/bare holding for Ms Blake after verifying the nominee authority.
• B. Ask the life policy trustees to provide suitability objectives for both assets because trustees must control any asset not registered directly to Ms Blake.
• C. Open both assets as trust accounts in the name of ABC Nominees Ltd - Blake because that is the registered legal holder of the portfolio.
• D. Treat both assets as Ms Blake’s personal assets because she funded them and receives the portfolio income.

Best answer: A

What this tests: UK Contract and Trust Legislation

Explanation: Legal title being held by another person does not, by itself, mean there is a substantive trust arrangement for client take-on. A genuine trust normally involves trustees holding property for beneficiaries under trust terms, such as a life policy written in trust for children or family members. The firm should check the trust deed, trustee powers, and authority to act. By contrast, a nominee or bare holding is commonly used for custody and administration: the nominee is the registered holder, but the client remains the beneficial owner and can direct sales or transfers. Here, Ms Blake retains beneficial ownership and control of the platform portfolio, so the firm should not treat the nominee company or the life policy trustees as the beneficial owner of that portfolio.

• Registering an asset through a nominee does not make the nominee the client for trust-administration purposes.
• Funding an asset does not override a signed life policy trust deed naming trustees and beneficiaries.
• Trustee authority for the life policy does not extend to a separate nominee portfolio beneficially owned by Ms Blake.

The policy has a trust deed with trustees and beneficiaries, while the platform portfolio is a nominee/bare arrangement with Ms Blake as beneficial owner.

Question 3

Topic: UK Contract and Trust Legislation

An FCA-authorised investment firm is onboarding five files. Mrs Evans is an adult investing her own cash. The Baker Trust has two trustees named in the trust deed, and a beneficiary has asked to give instructions alone. The estate of Mr Khan has a grant of probate naming Ms Khan as executor. Greenfield Ltd has a board resolution authorising one director to instruct the firm. Hill LLP has a members’ resolution authorising a designated member to instruct the firm. The firm wants to act professionally by identifying the correct client and authority before giving advice or accepting assets. Which approach best applies this principle?

• A. Treat the trust beneficiary, estate beneficiaries, company shareholders, and LLP members as the asset owners entitled to instruct, because they have the economic interest.
• B. Treat Mrs Evans as the individual client, the trustees as clients for the trust, Ms Khan as personal representative for the estate, and Greenfield Ltd and Hill LLP as clients acting through authorised signatories.
• C. Treat Greenfield Ltd and Hill LLP as unable to contract in their own names, so require their directors or members to own the portfolios personally.
• D. Treat every file as a contract with the individual contact, because advice and client agreements can only be given to natural persons.

Best answer: B

What this tests: UK Contract and Trust Legislation

Explanation: Acting professionally includes identifying the correct legal person and verifying authority before relying on instructions. An adult individual can usually own assets and contract personally. A trust is normally dealt with through its trustees, who hold legal title and act under the trust deed; a beneficiary’s economic interest does not by itself give authority to instruct. A deceased estate is administered by personal representatives, such as an executor named in a grant of probate. Companies and limited liability partnerships have separate legal personality, so the client agreement and advice should be with the company or LLP, signed or instructed through properly authorised agents.

• A personal contact is not always the client; firms may advise non-natural persons through authorised representatives.
• Beneficial or economic interest does not itself give authority over trust, estate, company, or LLP assets.
• Companies and LLPs can own assets and enter contracts in their own names, rather than through personal ownership by directors or members.

This correctly matches each legal status to the person or entity able to own assets, contract, or instruct through verified authority.

Question 4

Topic: UK Contract and Trust Legislation

An adviser is contacted after a client’s spouse dies. The spouse’s will says, “I leave my half of the house to my children.” The ownership records confirm the couple held the beneficial interest in the home as joint tenants. Before discussing investment of any sale proceeds, which ownership feature matches the legal position?

• A. A power of attorney means the surviving spouse can decide how the deceased’s estate is invested.
• B. Personal property rules mean the children own the house proceeds as movable assets.
• C. A tenancy in common means the deceased’s fixed share passes to the children under the will.
• D. The right of survivorship means the deceased’s interest passes automatically to the surviving joint owner.

Best answer: D

What this tests: UK Contract and Trust Legislation

Explanation: The key issue is ownership and legal authority, not investment selection. A home is real property, and where the beneficial interest is held as a joint tenancy, the right of survivorship applies. On death, the deceased joint tenant’s interest passes automatically to the surviving joint tenant, regardless of wording in the will. The will can only dispose of property that forms part of the deceased’s estate. If the couple had held the beneficial interest as tenants in common, the deceased’s identifiable share could pass under the will. An adviser should therefore establish who owns the asset and who has authority to give instructions before considering how proceeds should be invested.

• Tenancy in common would fit only if the deceased had a distinct share capable of passing under the will.
• A power of attorney does not continue after death and does not decide beneficial ownership.
• Personal property concepts do not override the ownership status of real property held as joint tenants.

Joint tenancy carries survivorship, so the deceased’s interest is not disposed of by the will.

Question 5

Topic: UK Contract and Trust Legislation

A retail client has died. His widow contacts the investment firm and asks the adviser to recommend how to reinvest the deceased client’s sole-name portfolio. She explains that she was his attorney under a lasting power of attorney, is named as executor in his will, and also owns the family home with him as joint tenants. The firm has not yet received any probate or estate authority documents.

What is the best next step before giving advice or accepting instructions on the portfolio?

• A. Treat the portfolio as passing automatically to the widow because the family home was held as joint tenants.
• B. Treat the portfolio as an estate asset and obtain evidence of the widow’s authority as personal representative before acting.
• C. Proceed with suitability advice because the widow is named as executor and beneficiary in the will.
• D. Rely on the lasting power of attorney because it gave the widow authority over the client’s assets before death.

Best answer: B

What this tests: UK Contract and Trust Legislation

Explanation: The issue is legal authority, not investment selection. A lasting power of attorney ends on the donor’s death, so it cannot be used to instruct on the deceased client’s portfolio. The portfolio was held in the deceased client’s sole name, so it is personal property forming part of the estate. The firm should establish who has authority to act for the estate, usually by obtaining appropriate personal-representative evidence before accepting instructions or giving advice on those assets. The jointly owned home is different: as real property held as joint tenants, the deceased’s interest normally passes by survivorship to the surviving joint tenant rather than under the will. That does not transfer ownership of separate sole-name investments.

• The lasting power of attorney is not enough because an attorney’s authority ends when the donor dies.
• Being named in a will does not by itself let the firm ignore its authority checks before acting on estate assets.
• Joint tenancy affects the family home, but it does not make the widow the automatic owner of the deceased’s sole-name portfolio.

The sole-name portfolio is personal property in the estate, so the firm must establish legal authority to instruct before considering investment advice.

Question 6

Topic: UK Contract and Trust Legislation

A UK investment firm is setting up account records governed by English law. Review the onboarding note:

• Sophie Karim: adult individual with no capacity concerns, investing her own savings.
• Oak LLP: registered limited liability partnership; Sarah Patel is its authorised signatory.
• Hale Family Trust: trust deed names Amir and Jo as current trustees.
• Estate of Linda Hale: grant of probate names Tom Hale as sole executor.
• Green Ltd: active private limited company; Mia Chen is its authorised director.

Which action is best supported when recording the contracting party and recipient of advice?

• A. Record Sarah Patel, Mia Chen, Amir, Jo and Tom as personal clients because only natural persons can receive advice.
• B. Record Sophie, Oak LLP and Green Ltd as clients in their own right; record the trustees and executor as acting in their representative capacities.
• C. Record all five named labels as separate legal persons because each identifies a distinct client relationship.
• D. Record the trust beneficiaries and estate beneficiaries as the clients because they have the ultimate beneficial interest in the assets.

Best answer: B

What this tests: UK Contract and Trust Legislation

Explanation: Under English law, an adult individual with capacity can own assets and enter contracts personally. A company and a limited liability partnership have separate legal personality, so they can own assets, contract and receive advice, acting through authorised agents. A trust is different: it is not itself a separate legal person, so the trustees hold legal title and enter contracts in their capacity as trustees. A deceased estate is administered by personal representatives, such as an executor named in a grant of probate; the executor acts in that representative capacity rather than the estate contracting as a separate person. The onboarding record should therefore distinguish the legal client from the person authorised to sign or instruct.

• Recording every label as a separate legal person ignores that a trust and a deceased estate do not contract in their own names under English law.
• Putting the LLP and company in the signatories’ personal names confuses agents with the legal persons they represent.
• Treating beneficiaries as the clients confuses beneficial interest with legal authority to instruct.

Individuals with capacity, companies and LLPs can contract in their own right, while trustees and personal representatives act for the trust or estate in a representative capacity.

Question 7

Topic: UK Contract and Trust Legislation

An adviser is reviewing the following onboarding note for a new advisory dealing account. What is the best supported interpretation or action?

Client: Arden Engineering Ltd, incorporated in England and Wales.
Companies House status: Active.
Board minute supplied: Open an advisory dealing account with the firm.
Account mandate: Trade instructions must be approved by both Priya Shah,
finance director, and Mark Patel, operations director.
Instruction received: Email from Priya only to invest £50,000.
Priya adds: "Mark agrees by phone but is away."
Shareholder call: Majority shareholder asks the firm to proceed today.

• A. Treat the majority shareholder’s call as sufficient authority because shareholders are the company’s owners.
• B. Treat the company as the client and pause the trade until both authorised directors, or a properly changed mandate, approve it.
• C. Refuse the account because only natural persons, not companies, can enter client agreements.
• D. Invest on Priya’s email because a director of an active company can always bind it alone.

Best answer: B

What this tests: UK Contract and Trust Legislation

Explanation: An incorporated company is a separate legal person, so it can enter arrangements and be treated as the client. However, a company acts through agents, so the firm must check who has authority to give instructions. The supplied mandate is the key evidence: trade instructions require approval by both named directors. Priya’s single email and her statement that Mark agreed by phone do not satisfy that authority record. A shareholder’s ownership also does not automatically give authority to instruct trades for the company. The firm should therefore recognise Arden Engineering Ltd as capable of contracting, but should not place the investment until the instruction complies with the mandate or the mandate is properly amended.

• A director’s status alone does not override a specific two-person instruction mandate.
• Shareholder ownership is separate from authority to act as the company’s agent.
• Rejecting the account because the client is not a natural person confuses legal capacity with how a company acts.

The company can be the contracting client, but the evidence restricts trade authority to both named directors.

Question 8

Topic: UK Contract and Trust Legislation

An investment firm is onboarding a local sports club in England. The club is an unincorporated members’ association, and its treasurer asks to sign the client agreement and place dealing instructions in the club’s name. The club constitution says investments require management committee approval and must be operated by two named officers. What is the best next step before opening the account?

• A. Require every club member to sign each dealing instruction before any trade can be placed.
• B. Obtain evidence of committee approval and the two officers’ authority, then contract with the authorised individuals acting for the club.
• C. Accept the treasurer’s signature because an officer of the club has apparent authority to bind the association.
• D. Open the account in the club’s name because an unincorporated association contracts in the same way as a limited company.

Best answer: B

What this tests: UK Contract and Trust Legislation

Explanation: A firm should establish both capacity and authority before entering client arrangements or accepting instructions. In England, an unincorporated association is not a separate legal person in the same way as a company or LLP. It cannot simply contract in its own name. The firm should therefore identify who is legally able and authorised to act, using the constitution, committee resolution, mandate, or similar evidence. Here, the constitution gives a clear process: committee approval is needed and two named officers operate the investments. The next step is to obtain and record that authority before opening the account or accepting dealing instructions.

• Treating the treasurer alone as having authority skips the stated constitutional safeguard.
• Treating the club like a limited company is wrong because it has no separate corporate personality.
• Requiring every member to sign each instruction is usually unnecessary where the constitution provides a valid mandate through authorised officers.

An unincorporated association is not a separate legal person, so the firm must verify who has authority to bind and instruct on behalf of the members or club property.

Question 9

Topic: UK Contract and Trust Legislation

An investment platform holds listed shares through a nominee company. The nominee’s name appears on the company register, but each client is absolutely entitled to the shares and income allocated to them and may instruct sale or transfer. There is no class of beneficiaries and no discretion over who benefits. Which description best matches this function?

• A. A nominee or bare trust holding that separates legal title from beneficial ownership
• B. An interest in possession trust that gives one beneficiary a present right to trust income
• C. An accumulation trust that retains income for future distribution to beneficiaries
• D. A discretionary trust that lets trustees choose which beneficiaries receive income or capital

Best answer: A

What this tests: UK Contract and Trust Legislation

Explanation: A nominee arrangement is commonly used for investment administration and custody. The nominee is the registered legal owner, but the client remains the beneficial owner and is absolutely entitled to the assets allocated to them. This is often described as a bare trust or nominee holding because the holder has no discretion to decide who benefits or when benefits are paid. By contrast, more substantive trust structures, such as discretionary or interest in possession trusts, involve trustees administering property under a trust deed for beneficiaries with defined rights or trustee powers.

• A discretionary trust involves trustee choice over distributions, which is absent where the client is absolutely entitled.
• An interest in possession trust gives a beneficiary a current right to income, not merely nominee registration for custody.
• An accumulation trust is used to retain income for future beneficiaries, not to record legal title for an existing beneficial owner.

The nominee holds legal title for administration, while the client remains the beneficial owner with an absolute entitlement.

Question 10

Topic: UK Contract and Trust Legislation

A client asks whether two proposed arrangements have the same trust effect.

• Arrangement 1: The client signs a trust deed transferring an investment portfolio to trustees. The trustees may decide which of the client’s children or grandchildren receive income or capital, and when.
• Arrangement 2: The client’s shares are registered in a broker’s nominee company to simplify settlement and administration. The client remains entitled to all dividends and sale proceeds and can instruct a transfer at any time.

Which comparison best matches the decisive difference between the arrangements?

• A. Arrangement 1 is a bare trust for an absolutely entitled beneficiary; Arrangement 2 is a discretionary trust because the registered holder is the nominee.
• B. Arrangement 1 is a life interest trust giving a fixed income right; Arrangement 2 is a full transfer of beneficial ownership to the nominee.
• C. Arrangement 1 and Arrangement 2 both give the holder of legal title the same discretion over income and capital.
• D. Arrangement 1 is a discretionary trust for flexible family provision; Arrangement 2 is a nominee or bare holding with the client retaining beneficial ownership.

Best answer: D

What this tests: UK Contract and Trust Legislation

Explanation: A substantive trust is identified by the equitable duties and powers created for trustees, not simply by whose name appears on the register. In Arrangement 1, the trust deed gives trustees discretion over which members of a class benefit and when they receive income or capital. That is characteristic of a discretionary trust, often used for flexible family provision and succession planning. In Arrangement 2, the nominee company is the registered legal holder for administrative convenience. The client remains the beneficial owner and can require transfer or sale, so the nominee does not have independent discretion over who benefits from the assets.

• A bare trust requires an absolutely entitled beneficiary who can call for the assets; a class of potential family beneficiaries with trustee discretion points to a discretionary trust.
• A life interest trust gives a person a present right to income, which is not described in either arrangement.
• Legal title in another name does not by itself create trustee discretion; the nominee arrangement leaves the economic benefit with the client.

The trustees in Arrangement 1 have active discretion over beneficiaries, while the nominee in Arrangement 2 holds legal title for administration only.

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