Ace the Chartered Institute of Stockbrokers Test 2025 – Trade Your Way to Success!

The correct answer is Interests in possession trusts. This type of trust is designed to give beneficiaries the right to receive income generated by the trust assets during their lifetime. The key characteristic of an interests in possession trust is that while the beneficiaries can enjoy the income (such as dividends or interest) from the trust, the capital itself is preserved for others, typically specified as remaindermen, who will inherit the trust assets after the death of the beneficiaries.

This arrangement is particularly beneficial in estate planning, allowing for immediate financial support to beneficiaries while ensuring that the main assets are safeguarded for future generations. In contrast, other types of trusts may offer different handling of income and capital. For instance, discretionary trusts allocate income and capital at the trustee’s discretion, not guaranteeing income to any specific beneficiary. Accumulation and maintenance trusts focus on accumulating income until the beneficiaries reach a certain age, and fixed trusts distribute both income and capital according to predetermined shares.