Cannon Trust School I Exam 2025/2026 – Certified Questions, Verified Correct Answers

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Cannon Trust School I Exam 2025/2026 – Certified
Questions, Verified Correct Answers




1. Which of the following best defines a “fiduciary”?

• A) A person who manages their own property

• B) A person who holds a position of trust and confidence involving the management of property
for another

• C) A court officer who oversees probate

• D) A beneficiary of a trust

✔✔ Answer✔✔ B – A fiduciary is someone who acts in a position of trust, managing assets for the
benefit of another (e.g., trustee, executor, guardian).



2. The “remainderman” of a trust is:

• A) The person who creates the trust

• B) The person entitled to receive income from the trust

• C) The person entitled to the principal after the prior interest ends

• D) The trustee who manages the trust

✔✔ Answer✔✔ C – The remainderman receives the remaining trust assets after the life estate or
other preceding interest terminates.



3. Which of the following is a characteristic of a “life estate”?

• A) It lasts forever and can be inherited

• B) It is an interest that lasts only for the life of a designated person

• C) It gives the holder the right to sell the property in fee simple

• D) It cannot be transferred or assigned

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✔✔ Answer✔✔ B – A life estate grants the holder the right to use and enjoy property during their
lifetime (or the life of another), but it terminates upon death.



4. Under common law, a trust is presumed to be:

• A) Revocable unless stated otherwise

• B) Irrevocable unless the power to revoke is specifically reserved

• C) Always revocable by the grantor

• D) Voidable at the beneficiary’s request

✔✔ Answer✔✔ B – Common law presumes trusts are irrevocable; the grantor must expressly
retain the power to revoke if they want revocation rights.



5. A “testamentary trust” is created:

• A) During the grantor’s lifetime

• B) By a provision in a will

• C) By operation of law without a written document

• D) Only for charitable purposes

✔✔ Answer✔✔ B – A testamentary trust is established by the terms of a will and becomes
effective upon the testator’s death.



6. Which form of ownership automatically avoids probate because of the right of survivorship?

• A) Tenancy in common

• B) Joint tenancy with right of survivorship (JTWROS)

• C) Sole ownership

• D) Tenancy in common with a will

✔✔ Answer✔✔ B – Joint tenancy includes survivorship rights; the deceased’s interest passes
directly to the surviving joint tenant(s) without probate.



7. A decedent dies owning a home as a tenant in common with a sibling. What happens to the
decedent’s share?

• A) It passes automatically to the sibling

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• B) It passes according to the decedent’s will or intestacy laws

• C) It escheats to the state

• D) It becomes the property of the remainderman

✔✔ Answer✔✔ B – Tenancy in common has no survivorship; the decedent’s fractional share goes
to heirs or devisees, subject to probate.



8. The “gross estate” for federal estate tax purposes includes:

• A) Only probate assets

• B) All property in which the decedent had an interest at death, including certain lifetime
transfers

• C) Only life insurance proceeds paid to a named beneficiary

• D) Only real estate located in the decedent’s state of residence

✔✔ Answer✔✔ B – The gross estate includes all property interests the decedent owned or
controlled, plus certain transfers, life insurance, and retirement benefits.



9. To qualify for the annual gift tax exclusion, a gift must be a “present interest.” This means:

• A) The donee has immediate, unrestricted right to use, possess, or enjoy the property

• B) The donee must wait five years to use the property

• C) The gift must be in cash only

• D) The donor must retain a reversionary interest

✔✔ Answer✔✔ A – A present interest gives the donee immediate use or enjoyment; future
interests do not qualify for the annual exclusion.



10. A revocable living trust is primarily used to:

• A) Reduce estate taxes

• B) Avoid probate and provide incapacity planning

• C) Shield assets from all creditors

• D) Create a charitable remainder trust

✔✔ Answer✔✔ B – A revocable trust avoids probate (assets pass privately) and allows the
grantor’s successor trustee to manage assets during incapacity.

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11. Under the Uniform Principal and Income Act (UPIA), stock dividends from a corporation are
generally allocated to:

• A) Income

• B) Principal

• C) Half to income and half to principal

• D) Trustee’s discretion

✔✔ Answer✔✔ B – Stock dividends are typically allocated to principal; cash dividends are income.
The UPIA provides specific allocation rules.



12. A trustee who receives a distribution from a mutual fund that includes both dividend income and
capital gains should:

• A) Allocate the entire distribution to income

• B) Allocate the entire distribution to principal

• C) Allocate the dividend portion to income and the capital gains portion to principal

• D) Follow the trust document; if silent, follow state law

✔✔ Answer✔✔ C – Dividends are income; capital gains are generally principal unless the trust
document or state law directs otherwise.



13. Which of the following is NOT a fiduciary duty of a trustee?

• A) Duty of loyalty

• B) Duty to maximize personal profit from trust assets

• C) Duty of prudence in investing

• D) Duty to account to beneficiaries

✔✔ Answer✔✔ B – A trustee has a duty of loyalty to act solely for beneficiaries’ benefit, not for
personal profit.



14. The “prudent investor rule” requires a trustee to:

• A) Invest only in government bonds

• B) Avoid all risk