Cannon Financial Institute Trust School II
Exam Test Questions And Correct Answers
(Verified Answers) Plus Rationale 2027
Q&A| Instant Download Pdf
1. Which fiduciary duty requires a trustee to administer a trust solely
in the interests of the beneficiaries?
A. Duty of impartiality
B. Duty of loyalty
C. Duty to diversify
D. Duty to account
Answer: B. Duty of loyalty
Rationale: The duty of loyalty is the trustee's most fundamental
fiduciary obligation. It requires trustees to avoid conflicts of interest and
always place the beneficiaries' interests above their own. Self-dealing
and transactions involving personal gain generally violate this duty
unless specifically authorized.
, 2. The primary purpose of a revocable living trust is to:
A. Eliminate estate taxes
B. Avoid probate and provide lifetime management of assets
C. Prevent all creditor claims
D. Replace life insurance
Answer: B. Avoid probate and provide lifetime management of assets
Rationale: A revocable living trust allows the grantor to retain control
over assets while alive and facilitates probate avoidance upon death. It
generally does not provide creditor protection or estate tax savings
because the grantor retains control.
3. Which document typically names the executor of an estate?
A. Trust agreement
B. Power of attorney
C. Last will and testament
D. Beneficiary designation
Answer: C. Last will and testament
,Rationale: A will appoints the executor (or personal representative),
who is responsible for administering the decedent's probate estate
according to state law and the terms of the will.
4. A trustee's duty of prudence primarily relates to:
A. Tax preparation
B. Investment and administration decisions
C. Insurance underwriting
D. Loan origination
Answer: B. Investment and administration decisions
Rationale: The duty of prudence requires trustees to exercise reasonable
care, skill, and caution when managing trust assets. Decisions should
reflect sound judgment, appropriate diversification, and consideration
of the trust's objectives.
5. Which party creates a trust?
A. Trustee
B. Beneficiary
, C. Grantor
D. Guardian
Answer: C. Grantor
Rationale: The grantor, also called the settlor or trustor, establishes the
trust by transferring assets into it and defining its governing terms.
6. A corporate trustee is generally selected because it:
A. Guarantees investment returns
B. Offers professional fiduciary management and continuity
C. Eliminates taxes
D. Prevents litigation
Answer: B. Offers professional fiduciary management and continuity
Rationale: Corporate trustees provide expertise, institutional
experience, regulatory oversight, and continuity of administration
regardless of personnel changes.
7. The Uniform Prudent Investor Act emphasizes:
A. Individual investment performance only
Exam Test Questions And Correct Answers
(Verified Answers) Plus Rationale 2027
Q&A| Instant Download Pdf
1. Which fiduciary duty requires a trustee to administer a trust solely
in the interests of the beneficiaries?
A. Duty of impartiality
B. Duty of loyalty
C. Duty to diversify
D. Duty to account
Answer: B. Duty of loyalty
Rationale: The duty of loyalty is the trustee's most fundamental
fiduciary obligation. It requires trustees to avoid conflicts of interest and
always place the beneficiaries' interests above their own. Self-dealing
and transactions involving personal gain generally violate this duty
unless specifically authorized.
, 2. The primary purpose of a revocable living trust is to:
A. Eliminate estate taxes
B. Avoid probate and provide lifetime management of assets
C. Prevent all creditor claims
D. Replace life insurance
Answer: B. Avoid probate and provide lifetime management of assets
Rationale: A revocable living trust allows the grantor to retain control
over assets while alive and facilitates probate avoidance upon death. It
generally does not provide creditor protection or estate tax savings
because the grantor retains control.
3. Which document typically names the executor of an estate?
A. Trust agreement
B. Power of attorney
C. Last will and testament
D. Beneficiary designation
Answer: C. Last will and testament
,Rationale: A will appoints the executor (or personal representative),
who is responsible for administering the decedent's probate estate
according to state law and the terms of the will.
4. A trustee's duty of prudence primarily relates to:
A. Tax preparation
B. Investment and administration decisions
C. Insurance underwriting
D. Loan origination
Answer: B. Investment and administration decisions
Rationale: The duty of prudence requires trustees to exercise reasonable
care, skill, and caution when managing trust assets. Decisions should
reflect sound judgment, appropriate diversification, and consideration
of the trust's objectives.
5. Which party creates a trust?
A. Trustee
B. Beneficiary
, C. Grantor
D. Guardian
Answer: C. Grantor
Rationale: The grantor, also called the settlor or trustor, establishes the
trust by transferring assets into it and defining its governing terms.
6. A corporate trustee is generally selected because it:
A. Guarantees investment returns
B. Offers professional fiduciary management and continuity
C. Eliminates taxes
D. Prevents litigation
Answer: B. Offers professional fiduciary management and continuity
Rationale: Corporate trustees provide expertise, institutional
experience, regulatory oversight, and continuity of administration
regardless of personnel changes.
7. The Uniform Prudent Investor Act emphasizes:
A. Individual investment performance only
