FRE1 LO3: Legal concepts - entities, attorneys, contract, property, insolvency, wills and trusts

Learning outcome 3 asks you to apply the legal concepts relevant to financial advice. AC3.1 covers legal entities, powers of attorney, contract and agency, property ownership and insolvency. AC3.2 covers wills, intestacy and trusts. Because the syllabus says "apply", expect CeMAP® case studies about families: who owns the house, who inherits, who can act for an elderly parent. Unless stated otherwise, the rules below are for England and Wales; key Scottish differences are flagged.

Legal entities

A legal person can own property, make contracts, sue and be sued.

Entity	Separate legal person?	Owners' liability
Individual (natural person)	Yes	Unlimited
Sole trader	No - the business is the individual	Unlimited
Ordinary partnership (Partnership Act 1890)	No in England and Wales; yes in Scotland	Unlimited; partners are jointly liable for firm debts
Limited liability partnership (LLP Act 2000)	Yes	Limited to what members put in
Private limited company (Ltd)	Yes	Limited to unpaid share capital
Public limited company (plc)	Yes; can offer shares to the public	Limited
Trust	No - trustees hold the property	Trustees act in their own names

Capacity

• In England and Wales a person can make most contracts and a will from 18. A minor cannot hold a legal estate in land.
• The Mental Capacity Act 2005 presumes that adults have capacity. A person is not treated as lacking capacity just because they make an unwise decision, and all practicable steps must be taken to help them decide.
• Personal representatives deal with a dead person's estate: executors are named in a will; administrators are appointed when there is no valid will.