Wills and trusts form assessment criterion AC3.2 of CeMAP® FRE1, the first unit of CeMAP 1 (FSRE) set by Walbrook (LIBF). The official wording is "Apply the laws related to wills, intestacy, and trusts". AC3.1 sits beside it, covering powers of attorney and property ownership. Unless we say otherwise, the rules below are the law of England and Wales. Scotland has its own succession law, and we set out the main differences. For where this unit sits in the module, see the CeMAP 1 (FSRE) hub, and for the full syllabus and format, the FRE1 unit guide.
| AC3.1 and AC3.2 sub-bullet | Covered on this page |
|---|---|
| Powers of attorney (AC3.1) | Ordinary, lasting and enduring powers; Scotland's continuing powers |
| Property ownership (AC3.1) | Joint tenants and tenants in common, as they affect death |
| Wills and intestacy (AC3.2) | Validity, revocation, the intestacy order in England and Wales and in Scotland |
| Structure and purpose of trusts (AC3.2) | Settlor, trustees, beneficiaries; why trusts are used |
| Types of trusts (AC3.2) | Bare, interest in possession and discretionary |
Why are wills and trusts in CeMAP FRE1?
Wills and trusts are in CeMAP FRE1 because a mortgage adviser must know who owns a property, who inherits it and who can act for a client. FRE1 LO3 tests these rules in AC3.1 and AC3.2, often through case studies.
The practical links to mortgage advice are direct:
- Death of a borrower. The mortgage debt does not die with the borrower. Whether the survivor inherits the house, and whether they can keep up the payments, depends on how the property was owned and on the will or intestacy.
- Protection. Life cover is often written in trust so that it pays out quickly, outside the estate, to clear the mortgage.
- Capacity. An older client who loses mental capacity cannot sign a mortgage or equity release deed. Only an attorney with the right power can.
- Equity release. Lifetime mortgages reduce what passes on death, which is why advisers encourage clients to involve their families. Our equity release guide covers the products.
Inheritance tax interacts with all of this. For the 2026/27 nil-rate band, residence nil-rate band and gift rules, see the CeMAP tax tables.
Exam tip: In FRE1 case studies, read the ownership facts first. "Joint tenants", "tenants in common", "married" and "partner" usually decide the answer before any law is applied.
What makes a will valid?
A will is valid in England and Wales under section 9 of the Wills Act 1837 if it is in writing and signed by a testator aged 18 or over with capacity, in front of two witnesses present together, who then sign.
The full requirements, from section 9 of the Wills Act 1837:
- The will is in writing, handwritten or typed.
- The testator signs it, or someone signs it in their presence and at their direction.
- The testator intends the signature to give effect to the will.
- The testator signs, or acknowledges the signature, in the presence of two witnesses present at the same time.
- Each witness signs, or acknowledges their signature, in the testator's presence.
The testator must be 18 or over and have testamentary capacity: they understand what a will does, roughly what they own and who might expect to benefit.
Witnesses, revocation and changes
- Beneficiary witnesses. If a beneficiary, or their spouse or civil partner, witnesses the will, the will stays valid but that person loses their gift (section 15).
- Marriage or civil partnership revokes an earlier will in England and Wales, unless the will was made in contemplation of that marriage.
- Divorce does not revoke the will, but the former spouse is treated as if they had died before the testator.
- Changes need a codicil, which is signed and witnessed like a will, or a new will. Destroying a will with the intention of revoking it also revokes it.
Scotland
In Scotland a person can make a will from age 12, and one witness aged 16 or over is enough. Marriage does not revoke a Scottish will.
Key fact: A will witnessed by a beneficiary is still valid. Only the gift to that witness fails.
What happens if someone dies without a will in England and Wales?
Someone who dies without a will in England and Wales is intestate, and the Administration of Estates Act 1925 decides who inherits. A spouse or civil partner with children takes the personal chattels, the first £322,000 and half the rest.
The £322,000 statutory legacy has applied to deaths on or after 26 July 2023, under the Administration of Estates Act 1925 (Fixed Net Sum) Order 2023. If there are no children or other descendants, the spouse or civil partner takes the whole estate.
Who inherits, in order
If there is no surviving spouse or civil partner, the estate passes to the first class of relatives that exists:
- children and other descendants (the share of a child who died first passes to their children);
- parents;
- brothers and sisters of the whole blood, then of the half blood;
- grandparents;
- uncles and aunts of the whole blood, then of the half blood;
- the Crown, if there is no one.
Children inherit on the "statutory trusts": a child under 18 takes their share outright at 18. An unmarried partner inherits nothing, but may claim reasonable provision from the court under the Inheritance (Provision for Family and Dependants) Act 1975.
Worked example: intestacy with a spouse and children
Daniel dies intestate in 2026, leaving his wife Ruth and two adult children. His estate, after debts and funeral costs, is £600,000 plus personal chattels.
| Step | Calculation | Result |
|---|---|---|
| 1. Personal chattels | Car, furniture, personal belongings | To Ruth |
| 2. Statutory legacy | First £322,000 | To Ruth |
| 3. Residue | £600,000 − £322,000 | £278,000 |
| 4. Half of residue | £278,000 ÷ 2 | £139,000 to Ruth |
| 5. Other half | £278,000 ÷ 2 | £139,000 shared by the children, £69,500 each |
Ruth receives £461,000 plus the chattels. If Daniel and Ruth had owned their home as joint tenants, the house would not be in the £600,000 at all: it would have passed to Ruth by survivorship before the intestacy rules applied.
Exam tip: Work out what passes outside the estate first: joint tenancy property and life policies in trust. Only then apply the £322,000 rule to what is left.
How do the intestacy rules differ in Scotland?
The intestacy rules differ in Scotland because the Succession (Scotland) Act 1964 gives a surviving spouse or civil partner "prior rights" first: the house up to £473,000, furnishings up to £29,000 and cash of £50,000 with children or £89,000 without. "Legal rights" come next.
| Stage | What the survivor or children receive |
|---|---|
| 1. Prior rights (spouse or civil partner) | The home up to £473,000; furniture and plenishings up to £29,000; £50,000 if there are children, £89,000 if not |
| 2. Legal rights (moveable estate only) | Spouse: one-third with children, one-half without. Children (legitim): one-third with a surviving spouse, one-half without |
| 3. Free estate | Passes to relatives in the order in section 2 of the 1964 Act, starting with children |
The amounts have applied since 1 February 2012, set by the Prior Rights of Surviving Spouse and Civil Partner (Scotland) Order 2011. "Moveable" estate means everything except land and buildings, which are "heritable".
Two differences matter most in exams. First, legal rights also apply when there is a will: a spouse or child can claim them instead of what the will gives, so a Scot cannot fully disinherit them from moveable property. Second, a cohabitant has no automatic share, but can apply to the court within 6 months of the death for financial provision.
Key fact: Scottish legal rights apply whether or not there is a will. English law has no equivalent fixed share.
How does joint ownership affect what passes on death?
Joint ownership affects what passes on death because beneficial joint tenants own the whole together, so the survivor takes it by survivorship. Tenants in common own separate shares, which pass under each owner's will or intestacy. Up to 4 people can hold the legal title.
| Joint tenants | Tenants in common | |
|---|---|---|
| Shares | No separate shares; each owns the whole | Defined shares, equal or unequal (for example 60:40) |
| On death | Passes automatically to the survivor | The share passes under the will or intestacy |
| Will effect | None on the property | Decides who gets the share |
| Typical use | Married couples and civil partners | Unequal contributions, second marriages, friends buying together |
A joint tenancy can be severed during life, for example by written notice to the other owner, which turns it into a tenancy in common. The register at HM Land Registry shows whether a restriction records a tenancy in common. Scotland uses a different mechanism, a "survivorship destination" written into the title deeds.
The mortgage itself is separate from ownership. If one joint borrower dies, the survivor owns the house but still owes the whole debt, because joint borrowers are jointly and severally liable. That is why life cover is matched to the mortgage. The full comparison of the two forms of co-ownership is a topic in its own right; for how title is registered, see our conveyancing process guide.
Exam tip: "Who inherits the house?" questions often hinge on survivorship. If the couple were joint tenants, the will is irrelevant to the house.
What is a trust, and who are the parties?
A trust is a legal arrangement in which a settlor transfers assets to trustees, who hold the legal title and manage them for one or more beneficiaries. FRE1 AC3.2 names its "structure and purpose", and the trust deed sets the trustees' powers.
| Party | Role |
|---|---|
| Settlor | Creates the trust and puts assets into it (called the testator for a will trust) |
| Trustees | Legal owners; must act in the beneficiaries' interests, follow the deed and act together |
| Beneficiaries | Entitled to the benefit: income, capital or both |
| Protector (optional) | Oversees the trustees in some trusts |
Why trusts are used
- Control. Assets are held for children or vulnerable people who cannot manage them yet.
- Speed. A life policy written in trust pays the trustees directly on death, without waiting for probate, so a mortgage can be cleared quickly.
- Inheritance tax planning. Assets in many trusts fall outside the settlor's estate.
- Co-ownership. In England and Wales, co-owners of land automatically hold it on a "trust of land".
Most express trusts must now be registered with HMRC's Trust Registration Service, a rule that comes from the money laundering regime.
Key fact: Trustees are the legal owners; beneficiaries are the beneficial owners. A question that asks who can sign a sale or mortgage deed is asking about the trustees.
What types of trust must you know?
The three types of trust FRE1 AC3.2 expects are the bare (absolute) trust, the interest in possession trust and the discretionary trust. They differ in who can benefit, when, and how much control the trustees have.
| Type | How it works | Typical use |
|---|---|---|
| Bare (absolute) | The beneficiary is absolutely entitled to the assets and can take them at 18 (16 in Scotland) | Gifts to grandchildren; nominee holdings |
| Interest in possession | A life tenant receives the income or use of the assets for life or a period; the remainderman gets the capital afterwards | Letting a second spouse live in the home, then passing it to children of a first marriage |
| Discretionary | Trustees decide which of a class of beneficiaries benefits, when and how much | Flexibility; protecting vulnerable or spendthrift beneficiaries |
Worked example: an interest in possession
Margaret, a widow, remarries. Her will leaves her home to trustees on an interest in possession trust: her husband Tom may live there for life, and on his death it passes to her two children. Tom has the use of the house but cannot sell it and keep the money or leave it in his own will. The children's interest is fixed, but they wait until Tom dies.
Discretionary trusts usually fall under the "relevant property" inheritance tax regime, with charges on entry and every ten years. The detail belongs to protection and tax study; for the 2026/27 IHT figures, see the CeMAP tax tables.
Exam tip: Fixed entitlement means bare or interest in possession. Trustee choice means discretionary.
What is a power of attorney, and how does it affect a mortgage?
A power of attorney lets one person, the attorney, act for another, the donor. An ordinary power ends if the donor loses mental capacity. A lasting power of attorney under the Mental Capacity Act 2005, available since 1 October 2007, continues.
| Power | Survives loss of capacity? | Notes |
|---|---|---|
| Ordinary (general) power | No | For temporary needs, such as being abroad at completion |
| Lasting power of attorney (LPA): property and financial affairs | Yes | Can be used, once registered, while the donor still has capacity, with consent |
| LPA: health and welfare | Yes | Used only when the donor lacks capacity; cannot deal with money |
| Enduring power of attorney (EPA) | Yes, once registered | Could only be made before 1 October 2007; existing ones remain valid |
An LPA must be registered with the Office of the Public Guardian before it can be used. As of October 2026, registration costs £92 for each LPA, or £184 for both types, according to gov.uk. If someone loses capacity without an LPA, a family member must apply to the Court of Protection to be appointed a deputy, which is slower and costlier. The governing Act is the Mental Capacity Act 2005.
Powers of attorney and mortgages
- Signing. An attorney under a registered property and financial affairs LPA can sign a mortgage application or deed for the donor, if the LPA does not restrict it. Lenders check the registered LPA before accepting the signature.
- Best interests. The attorney must act in the donor's best interests and must not benefit personally, so using the donor's home as security for the attorney's own borrowing is not allowed.
- Co-owned homes. If the donor co-owns the home, there are extra rules: proceeds of a sale generally need two trustees, so an attorney who is also the other owner cannot act alone.
- Scotland. The equivalents are continuing (financial) and welfare powers of attorney under the Adults with Incapacity (Scotland) Act 2000, registered with the Office of the Public Guardian (Scotland).
Key fact: A health and welfare LPA cannot be used to sign a mortgage. Only a property and financial affairs LPA, or a registered EPA, covers money and property.
Your FRE1 legal concepts study plan for wills and trusts
Your FRE1 legal concepts study plan for wills and trusts takes about four sessions: validity and intestacy, then Scotland and joint ownership, then trusts and attorneys, then timed questions until you score 85% or more three times in a row.
- Session 1. Take the free FRE1 diagnostic. Then learn the five Wills Act requirements and work the Daniel example with your own numbers.
- Session 2. Learn the Scottish prior and legal rights table, and the joint tenant and tenant in common comparison. Write out who inherits in a case where the home is jointly owned.
- Session 3. Trusts and powers of attorney: the three parties, the three trust types and the four kinds of power.
- Session 4. Run the FRE1 legal concepts topic drill, which covers AC3.1 and AC3.2 together.
For short sessions, use the free FRE1 quick practice, and print the FRE1 worksheet with an answer key for revision away from a screen. When LO3 feels secure, sit the free FRE1 mock 1 under the real timing: 40 questions in 60 minutes, 28 to pass. Its case studies often test exactly these ownership and capacity facts.
The sample questions below come from our FRE1 bank. Topic drills and mocks 2 to 10 are part of Pro, at £6.99 a week, £11.99 a month or £22.99 for three months, covering all five units. Our readiness rule matches the app: three mocks in a row at 85% or more, with every topic at 80% or more. It is a guide to readiness, not a pass guarantee.
10 free FRE1 practice questions with answers
Try each one, then open the answer. For a timed experience use the free mock exam.
1. Funds already in the banking system are moved quickly through a chain of overseas accounts and shell companies to hide where they came from. Which stage of money laundering is this?
- A. Layering
- B. Placement
- C. Integration
- D. Structuring
Show answer
A. Layering
Layering is the second stage, in which a series of complex transactions separates criminal proceeds from their source and makes the audit trail hard to follow. Shell companies and transfers across borders are common techniques. Placement has already happened because the funds are in the system.
2. Under an interest in possession trust, what is the income beneficiary entitled to?
- A. To take the trust capital whenever she chooses
- B. To whatever income the trustees decide to pay
- C. To nothing until the trust ends
- D. To all trust income as it arises, less expenses
Show answer
D. To all trust income as it arises, less expenses
The trustee must pass all trust income to the interest in possession beneficiary as it arises, less expenses. That beneficiary has no right to the capital itself.
3. Which section of FSMA gives the FCA its general power to make the rules found in its Handbook?
- A. Section 19
- B. Section 137A
- C. Section 166
- D. Section 56
Show answer
B. Section 137A
FSMA s137A gives the FCA power to make general rules that apply to authorised persons, where necessary or expedient to advance its operational objectives. Other sections give specific rule-making powers.
4. Why does a 90-day notice savings account usually pay a higher rate than an instant-access account from the same provider?
- A. It is covered by a higher FSCS limit
- B. Its interest is always tax-free
- C. The saver gives up immediate access to the money
- D. Its capital can grow with the stock market
Show answer
C. The saver gives up immediate access to the money
Notice accounts require the saver to give notice, often between 30 and 120 days, before withdrawing, or to pay a penalty. In return for this loss of access, providers usually pay a higher rate than on instant-access accounts. MoneyHelper sets out this trade-off.
5. A grandmother puts £20,000 into a bare trust for her 10-year-old granddaughter in England. When can the granddaughter demand the assets?
- A. At 16
- B. When the trustees decide
- C. At 18
- D. At 25
Show answer
C. At 18
Under a bare trust the beneficiary has an absolute right to the capital and income. In England and Wales they can take the assets at 18 (16 in Scotland). The trustees have no discretion over who benefits.
6. Under COBS 3, into which three categories are clients classified?
- A. Retail client, professional client, eligible counterparty
- B. Private client, business client, corporate client
- C. Consumer, small business, wholesale customer
- D. Basic client, advised client, discretionary client
Show answer
A. Retail client, professional client, eligible counterparty
COBS 3 classifies clients as retail clients, professional clients or eligible counterparties. The level of protection, such as disclosure and suitability rules, depends on the category.
7. In 2004 Margaret signed an enduring power of attorney appointing her son. She is now showing signs of dementia and losing capacity. What must her son do?
- A. Nothing, as EPAs became invalid in 2007
- B. Apply to the Court of Protection to be made her deputy
- C. Apply to register the EPA with the Office of the Public Guardian
- D. Ask her to sign a new LPA to replace it
Show answer
C. Apply to register the EPA with the Office of the Public Guardian
An attorney under an EPA must apply to register it with the Office of the Public Guardian when the donor is losing, or has lost, mental capacity. Before applying, the attorney must notify the donor and certain relatives, who can object.
8. What does private medical insurance pay for?
- A. A replacement income during illness
- B. A lump sum on diagnosis of a serious illness
- C. The cost of private treatment for eligible conditions
- D. Long-term residential care fees
Show answer
C. The cost of private treatment for eligible conditions
Private medical insurance covers the cost of private medical treatment for eligible conditions, giving the policyholder more choice over when and where they are treated. It does not replace income. MoneyHelper notes it may not be a priority for people with debts and no savings.
9. What is the main aim of a liquidity requirement for a firm?
- A. To ensure it makes a profit each year
- B. To ensure its staff are competent
- C. To ensure its advice is suitable for customers
- D. To ensure it can meet its obligations as they fall due
Show answer
D. To ensure it can meet its obligations as they fall due
Liquidity rules require firms to hold enough liquid assets and stable funding to meet payments as they fall due, including under stress. A firm can be solvent but still fail if it runs out of cash.
10. Under barter, a farmer who wants shoes must find a shoemaker who happens to want his vegetables. Which function of money removes this problem?
- A. Unit of account
- B. Standard of deferred payment
- C. Medium of exchange
- D. Store of value
Show answer
C. Medium of exchange
Barter needs a 'double coincidence of wants': each party must want what the other offers. Money solves this by acting as a medium of exchange that everyone accepts, so the farmer can sell to anyone and buy shoes from anyone. This is one of the three functions of money described by the Bank of England.
Frequently asked questions
+Does a will override joint ownership?
Not for a joint tenancy. A share held as a beneficial joint tenant passes automatically to the surviving joint owner by survivorship, whatever the will says. A will can only pass a share held as a tenant in common, or a joint tenancy that was severed before death.
+Do unmarried partners inherit under intestacy?
No. In England and Wales an unmarried partner has no automatic right to anything under the intestacy rules, however long the relationship. They may be able to claim reasonable provision from the court under the Inheritance (Provision for Family and Dependants) Act 1975. In Scotland a cohabitant can apply to the court within 6 months of the death.
+Can a trust own a house with a mortgage?
Yes. The trustees hold the legal title and can borrow against the property if the trust deed and the law give them power to. In practice few mainstream lenders lend to trustees, and those that do will examine the trust deed and usually want every trustee to sign.
+Who can witness a will?
In England and Wales two witnesses must be present together when the testator signs or acknowledges the signature. A witness should not be a beneficiary or the spouse or civil partner of one: the will stays valid, but that person loses their gift under section 15 of the Wills Act 1837.
+What is a lasting power of attorney?
A lasting power of attorney is a legal document under the Mental Capacity Act 2005 that lets a person, the donor, appoint attorneys to make decisions for them. There are two types: property and financial affairs, and health and welfare. It must be registered with the Office of the Public Guardian before it can be used.
+Is a will made in England valid in Scotland?
Usually yes. Under the Wills Act 1963, a will is formally valid in the UK if it meets the rules of the place where it was made or of the testator's domicile, habitual residence or nationality. But Scottish legal rights still let a spouse and children claim part of the moveable estate, whatever the will says.
Keep reading
- CeMAP FRE1: Industry, Regulation and Key PartiesCeMAP FRE1 mock exam guide: the 40-question format, all five learning outcomes in order, common traps and a four-week plan, with free FRE1 questions.
- CeMAP 1: The FSRE Module and Its Two Unit Exams, FRE1 and FRE2CeMAP 1 is the FSRE module: two 40-question unit exams, FRE1 and FRE2, each 1 hour, pass 28/40. Syllabus, costs, old UKFR mapping and free mocks.
- The Conveyancing Process Step by Step: England, Wales and ScotlandThe conveyancing process step by step for CeMAP 3: exchange and completion in England and Wales, Scottish missives, tenure and land tax returns.
- The FCA, the PRA and UK Financial Regulation for CeMAP FRE1The FCA and PRA for CeMAP FRE1: the 1986–2021 timeline, statutory objectives, the Handbook, Principles for Businesses, SM&CR and enforcement powers.
- Equity Release Explained for CeMAP: Lifetime Mortgages, Home Reversion and RIOEquity release for CeMAP MRT2: lifetime mortgages, home reversion and RIO, a worked roll-up example, Equity Release Council standards and who may advise.