Essay Route to STEP Membership - 2021 Topics

New topics are issued each year. Topics chosen must be submitted to STEP using the Paper Registration Form.

Where applicable, candidates should address questions from the perspective of their own jurisdiction and its relevant legislation. In the case that a question mentions a monetary value, candidates may refer to their local currency.

Question 1: The Use of Anti-Bartlett Clauses

The use of so-called anti- Bartlett clauses has been widespread in the offshore trust industry for the last 40 years.

(a) Examine the history of this type of clause, referencing relevant case law; 
(b) Identify any trends or themes and alternatives to such clauses and explain where the law stands today in your jurisdiction
(c) Reflecting on this, discuss the various issues that the trustees need to take into account if they wish to utilise the protections afforded by such a clause and assess whether such a clause is indeed an appropriate risk mitigation tool in the 21st century.

Your answer should refer to both relevant statute law and case law in your jurisdiction. 

Question 2: The Sham Trust Doctrine

Sham Trusts have become firmly established as a major concern for trustees, settlors and planners alike. 

(a) Examine the history of the sham trust doctrine referencing relevant case law
(b) Identify any trends or themes and explain where the law stands today in your jurisdiction 
(c) Reflecting on this, discuss the various traps that all parties need to avoid to ensure their trust is not deemed a sham.  

Your answer should refer to both relevant statute law and case law in your jurisdiction. 

Question 3: The Family Will Trust

John has died and left £450 000* in his will on trust for his 3 children, Gareth, Diane and Jane. John’s will states the children should receive the £450 000 in equal shares upon reaching the age of 21. John made a simple home-made will that states the names of the executors/trustees, Alan and Frank, the children as beneficiaries at 21, and a cremation clause. It also states that the trustees have been given a right of maintenance and advancement and the right to claim out of pocket expenses.       
      
Please advise the trustees, Alan and Frank, in relation to the following requests by the beneficiaries: 

(a) Gareth is 19 and is a promising opera singer and wants to go to Milan for one year for specialist operate tuition. He has asked for £100 000 to be paid to him now so that he can pay his tuition, meet his living expenses whilst there and take his girlfriend Maria with him 

(b) Diane is 14 and is a promising actress. She has asked for them to pay her fees of £5 000 a year to study acting in a drama school in Vienna for 5 years 

(c) Jane is 20 and has run up gambling debts of £50 000. She has decided to change her ways and become a solicitor. She has requested £50 000 to pay off her debts, as she regards this as her money, and £10 000 to fund her first year at law school as she claims the law books are very expensive 

(d) In the event that the trustees fail to agree when reaching any of the decisions in (a) – (c) above, what advice would you give them and would there be any professional issues here?     

*Any monetary values may be converted into your local currency at the current rate

Question 4: Art Collection Succession

Sara, an 80 year old passionate art collector, owns a number of famous artworks in her personal collection. Sara is seeking a long-term planning solution for her collection, which enables adequate management over the years as well as makes the artworks available to the public after she passes away. Sara’s heirs have never shown interest in the collection.

(a) Analyse the viable solutions in your jurisdiction, which would suit Sara’s wishes
(b) Advise which of these solutions would be best in your jurisdiction, comparing pros and cons of each
(c) Illustrate the factors to be considered at on-boarding and during the administration in relation to the artworks (e.g. authenticity, sale & purchase, proper insurance policy, appointment of an art curator, copy right and AML dimensions)
(d) Examine how the solution identified could affect Sara’s heirs and which measures should be taken to prevent litigation

Please note that the art collection is not intended to be heritage property.

Question 5: Formalities for Execution of Documents

Discuss the formalities required for the valid execution by an individual with capacity and acting as principal of:
(a) Testamentary documents such as wills and codicils
(b) Other, non-testamentary, documents which a TEP is likely to come across during the course of his or her practice such as trusts and powers of attorney

Your answer should address:

i. Any existing or proposed regime for the execution of documents using electronic means (or, if there is no existing or proposed regime in your jurisdiction, how such a regime might operate)

ii. Any alteration or relaxation of the required formalities as a result of the Covid-19 pandemic

Question 6: Will Preparation and Considerations

You are asked to see an 85-year-old testator.  How do you prepare a will to ensure that it is not invalid for:

(a) Lack of testamentary capacity
(b) Lack of knowledge and approval
(c) Undue influence
(d) Fraud

Please explain the relevant legal tests and case law and consider any practical steps you would take. How might your answer change if you were unable to meet your client face-to-face?

Question 7: The Discretionary Trust and Tax Implications

Oscar set up a discretionary trust 10 years ago for the benefit of his grandchildren. The trust assets were invested into a single premium offshore investment bond. 

Oscar’s youngest grandchild, David, is approaching age 18 and Oscar is seeking your advice on what to do with the trust. 

(a) What would be the impact if Oscar lost capacity now? 
(b) Oscar set the trust up via a deed of variation when he received an inheritance from a late aunt. He was advised that he could also be a beneficiary of the trust. How would this change your answer?
(c) Explain the tax implications of Oscar’s death for the trust if he were the only life assured

Now consider that Oscar’s grandchildren are also lives assured on the policy. They decide to keep the policy until David is 21 and then surrender it. 

(d) Explain how the tax charge on the chargeable gain would differ from your previous answer

Relevant statute and case law in your jurisdiction should be referenced to support your answer.

Question 8: DAC6 Reporting Requirements 

“The new obligation to report cross-border tax arrangements: impact of EU tax Directive 2018/822 (DAC 6)”

(a) Explain the EU framework and background in the field of exchange of information.
(b) Analyse the EU Directive 2018/822 (DAC 6) and its implications.
(c) Review the current status of the transposition of EU Directive 2018/822 and the supplementary amendments on top of the EU Directive guidelines in five different EU member states

Question 9: Trust Analysis

John wants to settle some property on trust. He has instructed his solicitor to draw up a discretionary trust deed for the benefit of his children, Aimee, Jack and Kelly. The default beneficiary is to be his wife, Sharon. The trustees have wide powers to add and remove any beneficiary.

Aimee is 19 years old, Jack and Kelly are aged 7 and 8 respectively. John wants to transfer his holiday home, Osbourne House, worth approximately £250 000, as well as £400 000* in cash into trust. Osbourne House is used by all members of the extended family, including John and Sharon, who stay there the whole of August every year.

John's objectives as settlor are:

(i) to minimise any tax liability (both on the transfer into trust and in the future)
(ii) to protect assets which he might otherwise transfer into his children's names directly

You should assume there is no issue with the proper constitution of the trust.

Advise John on:

(a) The advantages and disadvantages of a trust in the terms proposed to achieve those two objectives
(b) Any alternative action John could take to better achieve his objectives

*Any monetary values may be converted into your local currency at the current rate

Question 10: Marriage and Undue Influence

Fred was married to Wilma for many years, before Wilma died after a long-drawn out illness. Fred took Wilma’s death very badly, and was treated for severe depression for some years. In the last few months of Fred’s life, he seemed to have perked up somewhat, and his family thought he was on the road to recovery, before he was suddenly admitted to hospital suffering from a previously undiagnosed brain tumor. This was a huge surprise as his neighbours had mentioned how well he had seemed recently, and was back to his old, jokey self.

At Fred’s bedside, his family were astonished to discover that he had recently remarried, and that Fred’s attentive new wife was the young lady who had been delivering his meals on wheels to him, Betty. Fred’s family also discovered that Fred had recently made a new will leaving all his worldly possessions to Betty, although Betty seemed to be as surprised as the family when the new will was found, so it is believed she was unaware of its existence. 

Fred’s estate is worth £350 000*, and his only previous will had been made while he was married to Wilma. This earlier will left the family home (now worth £250,000) to Wilma, with the remainder to his two children, Barney and Dino. Tragically, Dino died ten years ago leaving a widow and two infant children, aged 1 and 2.

(a) Explain how Fred’s estate will be distributed if he were to die now, and why
(b) Advise Fred’s family on what, if anything, they can do to protect their position on Fred’s death and examine the way that your chosen jurisdiction deals with so-called “predatory marriages”. Note you are not required to comment on entitlements under the Inheritance Tax (Provision for Family and Dependents) Act 1975 or its equivalent in your jurisdiction

*Any monetary values may be converted into your local currency at the current rate