3 - Laws and Legal Concepts Relevant to Financial Advice – Vocabulary Review

A comprehensive set of vocabulary flashcards summarising the principal legal and financial terms discussed in the lecture.

Binding

Legally enforceable and obligatory until fulfilled or repudiated.

Binding Unless Repudiated

A legal position that remains in force unless it is expressly rejected or overturned.

Good Faith

The duty to disclose fully and honestly all material facts relevant to an insurance contract.

Grant of Letters of Administration

Court authority allowing administrators to handle the estate of someone who died intestate.

Grant of Probate

Legal confirmation that a will is valid and executors may administer the estate.

Grant of Representation

Generic term for either a Grant of Probate or Letters of Administration.

Insurable Interest

A financial stake in the continued life or property of the insured party.

Joint Ownership

Co-ownership of property by two or more persons, either as joint tenants or tenants in common.

Lasting Power of Attorney (LPA)

Authority giving someone power to make decisions about another’s health or finances after loss of capacity.

Laws of Succession

Rules governing how property passes on death via wills or intestacy.

Legal Personal Representative (LPR)

Executor or administrator responsible for settling a deceased person’s estate.

Official Receiver (OR)

Government officer who initially administers bankruptcies and compulsory liquidations.

Power to Contract

The legal ability of a party to enter into a binding agreement.

Trustee in Bankruptcy

Person who controls a bankrupt’s assets for the benefit of creditors.

Sole Trader

Self-employed individual who owns and is personally liable for all business debts.

Partnership

Business owned by two or more self-employed persons sharing profits and liabilities.

Limited Liability Partnership (LLP)

Partnership with separate legal personality and limited liability for its members.

Limited Company (Ltd)

Incorporated business whose shareholders’ liability is limited to their invested capital.

Public Limited Company (PLC)

A limited company that may offer shares to the public and must meet stricter regulatory standards.

Corporation Tax

Tax paid by companies on their profits, including capital gains.

PAYE

Pay-As-You-Earn system through which employees’ income tax is deducted at source.

Class 1 NICs

National Insurance contributions payable by employees and their employers.

Class 2 NICs

Flat-rate National Insurance contributions for self-employed people with small profits.

Class 4 NICs

National Insurance contributions on self-employed profits above a set threshold.

Ordinary Power of Attorney

Authority that ends if the donor loses mental capacity.

Enduring Power of Attorney (EPA)

Pre-2007 authority that continues after the donor’s mental incapacity once registered.

Mental Capacity Act 2005

Legislation governing decision-making and LPAs for individuals lacking capacity.

Consumer Insurance (Disclosure and Representations) Act 2012

Law setting a ‘reasonable care’ duty on consumers to avoid misrepresentation.

Insurance Act 2015

Statute requiring non-consumers to make a fair presentation of risk to insurers.

Freehold

Absolute ownership of land and buildings in perpetuity.

Leasehold

Right to occupy land or property for a fixed term under a lease.

Commonhold

Ownership system where unit-owners hold freehold of their flats and jointly own common areas.

Joint Tenancy

Form of co-ownership where the survivor automatically inherits the whole property.

Tenancy in Common

Co-ownership where each owner holds a distinct share that passes via will or intestacy.

Shared Ownership

Housing-association scheme where buyers purchase a percentage and pay rent on the remainder.

First Homes Scheme

Government initiative giving eligible first-time buyers a 30–50 % property discount.

Mortgage Guarantee Scheme

Government guarantee on high loan-to-value mortgages (91–95 % LTV) to boost lending.

Individual Voluntary Arrangement (IVA)

Formal agreement with creditors as an alternative to bankruptcy, requiring 75 % approval.

Bankruptcy

Court process declaring an individual unable to pay debts; assets vest in a trustee.

Insolvency Act 1986

Primary legislation governing personal and corporate insolvency procedures.

Enterprise Act 2002

Amendment that shortened most bankruptcies to 12 months and updated insolvency rules.

Administration (Insolvency)

Procedure aiming to rescue a company or achieve better returns for creditors than liquidation.

Liquidation

Process of winding-up a company, selling assets and distributing proceeds to creditors/shareholders.

Winding-Up Petition

Court application requesting compulsory liquidation of an insolvent company.

Will

Legal document directing the distribution of a person’s estate after death.

Attestation

Witnessing and signing of a will to validate it.

Revocation of Will

Act of cancelling an existing will by destruction, new will, marriage, or divorce effects.

Intestacy

Situation where a person dies without a valid will; estate distributed by statutory rules.

Statutory Legacy

Fixed sum currently £322,000 paid to a spouse/civil partner under intestacy rules when issue exist.

Trust

Legal arrangement where trustees hold property for beneficiaries per the settlor’s wishes.

Express Trust

Trust deliberately created, usually by deed or will.

Implied Trust

Trust arising from parties’ conduct or circumstances without explicit declaration.

Constructive Trust

Trust imposed by law to prevent unjust enrichment, regardless of parties’ intent.

Resulting Trust

Trust where property reverts to the settlor because the original trust purpose failed.

Bare (Absolute) Trust

Trust where a beneficiary has immediate and absolute right to the capital and income.

Power of Appointment Trust

Trust giving trustees discretion to choose or vary beneficiaries within a defined class.

Interest in Possession Trust

Trust granting a beneficiary immediate right to income or enjoyment of assets.

Discretionary Trust

Trust where trustees decide which beneficiaries receive income or capital and when.

Life Tenant

Beneficiary entitled to trust income for life but not to the capital.

Remainderman

Person who receives trust capital after the life tenant’s interest ends.

Contingent Interest

Beneficial right that only arises if specified conditions are met.

Trustee Act 1925

Key statute outlining trustees’ powers and duties, including Sections 31 and 32.

Trustee Act 2000

Modern legislation updating investment powers and duties of care for trustees.

Section 31 Power

Trustee authority to use income for an infant beneficiary’s maintenance or education.

Section 32 Power

Trustee ability to advance up to half of a beneficiary’s capital entitlement before it vests.

Executor

A person named in a will to administer the deceased person’s estate.

Administrator (Estate)

A person appointed by a court to manage the estate of someone who died intestate.

Limited Liability

A legal status where a business owner's financial responsibility for debts is restricted to their investment in the company.

Estate (Deceased)

The total property, assets, and liabilities of a deceased person.

Right of Survivorship

The principle in joint tenancy where the deceased owner's share automatically passes to the surviving co-owner(s).