STEP Diploma common mistakes
STEP Diploma · Understand the traps and how to avoid them.
Treating the STEP Diploma as a test of rote recall and memorising statute sections and definitional lists rather than practising the application of doctrine to a client fact pattern.
Candidates often arrive from earlier, more knowledge-based examinations and assume that reproducing provisions from memory will earn marks, so they under-invest in the analytical, advisory and drafting skills the Diploma actually rewards.
What to do instead
Before revising content, work through two or three past-style scenario questions and mark them against a model answer to see where marks are actually earned, then build a revision plan around issue-spotting, applying law to facts and reaching a reasoned conclusion rather than recitation.
Creating a trust without satisfying the three certainties and the beneficiary principle: drafting a clause that refers to 'such persons as the trustees think fit' without defining a class, or leaving the subject matter of the trust vague.
Candidates conflate a power of appointment with a trust and overlook that certainty of intention, subject matter and objects must all be present, and that a fixed trust needs a complete list of beneficiaries.
What to do instead
For every trust question, run a three-certainty checklist and state expressly whether the interest is fixed or discretionary; for discretionary trusts, confirm the class is conceptually certain and, where relevant, apply the 'any given postulant' test to satisfy the beneficiary principle.
Failing to distinguish a resulting or constructive trust from an express trust, and misapplying the presumption of advancement or the rules on voluntary conveyance into joint names.
The terminology overlaps and candidates memorise the categories without learning the trigger facts, so they label an automatic resulting trust as express or ignore the common intention constructive trust in a cohabitation scenario.
What to do instead
Build a decision tree keyed to the facts: was there an express declaration, a failed express trust, a gratuitous transfer, or a contribution to purchase price? Then apply the relevant presumption and the rebuttal evidence before naming the trust.
Drafting a will or advising on intestacy without checking the interaction between the will, the intestacy rules, survivorship, and the rights of a spouse or civil partner, so the answer ignores the statutory legacy or the order of distribution.
Candidates treat the will in isolation and forget that partial intestacy can apply to the residue, or they apply the old fixed statutory legacy figures and the pre-2020 rules without checking which regime governs the death.
What to do instead
In every succession question, state the date of death, confirm the applicable intestacy regime and current statutory legacy and interest, then map the estate through the will first and the intestacy rules second, showing the arithmetic and who takes what.
Ignoring the procedural steps of probate administration: applying for the grant in the wrong jurisdiction, omitting the oath or the inheritance tax account, or distributing the estate before the creditor period has run.
Candidates focus on the substantive law of succession and under-revise the mechanics, so they miss that the executor's year, the section 27 notice and the order of payment of debts affect the trustee's personal liability.
What to do instead
Learn the administration sequence as a timeline: ascertain assets and liabilities, submit the inheritance tax account and pay tax due, obtain probate, advertise for creditors, pay debts in the statutory order, then distribute and take receipts; apply the timeline to each fact pattern.
Calculating inheritance tax or capital gains tax on a trust without identifying the correct chargeable event, the available nil rate band and annual exemptions, and the relevant rate for a discretionary trust.
Candidates apply the wrong rate or forget that the ten-year anniversary charge, the exit charge and the entry charge are separate computations, and they overlook the interaction with the transferable nil rate band and business or agricultural relief.
What to do instead
Practise a full computation for each chargeable event separately, labelling the nil rate band, the rate, any reliefs and the resulting tax, then check the interaction between events; show the working so a method mark is available even if the arithmetic slips.
Advising on a cross-border estate without addressing the situs of assets, the applicable succession law, double taxation relief and the effect of a foreign grant.
Candidates apply domestic law reflexively and forget that immovable property is governed by the law of its situs, that domicile and residence drive inheritance tax exposure, and that a foreign executor may need resealing or a separate grant.
What to do instead
For every international question, tabulate each asset by situs, identify the governing succession law, the tax residence and domicile status of the deceased and beneficiaries, and then address double taxation treaties and the need for a grant in each jurisdiction.
Recommending a trust or will structure without documenting the client's objectives, capacity, and the source of funds, and without a file note evidencing the advice given.
Candidates treat ethics as a separate topic and do not integrate it into advisory answers, so they miss conflicts of interest, undue influence, money laundering checks and the need to decline instructions where capacity is doubtful.
What to do instead
Adopt a standard advisory template that begins with objectives and capacity, records the source of wealth and any conflict, and ends with a documented recommendation and client confirmation; practise writing the file note as part of the answer.
Preparing trust accounts or a statement of distributable income without reconciling capital and income, or misallocating receipts between the two under the trustee's duty to balance interests.
Candidates apply cash accounting intuition and forget the distinction between capital and income, the treatment of dividends, depreciation and the apportionment rules, so the accounts do not balance or misstate beneficiary entitlements.
What to do instead
Work through a full set of trust accounts from a trial balance, classifying every receipt and payment as capital or income first, then preparing the income statement, the capital account and the reconciliation; check that opening plus movements equals closing.
Designing an investment strategy for a trust without reference to the trust deed's investment powers, the statutory default power, the duty of diversification and the suitability of the portfolio to the beneficiaries.
Candidates default to a generic balanced portfolio and ignore that the trustee's powers and duties constrain what may be held, and that a life tenant and a remainderman may have conflicting interests requiring a balanced approach.
What to do instead
Before recommending any asset, state the source of the investment power, any restriction in the deed, the risk profile and time horizon of the beneficiaries, and the diversification and review requirements; then justify each holding against those criteria.