Cannon Financial Institute Trust School I
Exam Questions And Correct Answers
(Verified Answers) Plus Rationale 2027
Q&A| Instant Download Pdf
1. Which of the following best describes a trust?
A. A contract for the sale of securities
B. A legal arrangement in which one party holds property for the
benefit of another
C. A type of insurance policy
D. A corporate merger agreement
Answer: B. A legal arrangement in which one party holds property for
the benefit of another
Rationale: A trust is a fiduciary relationship in which a trustee holds and
manages assets for the benefit of one or more beneficiaries according to
the terms established by the grantor. Trusts are widely used in estate
planning, asset management, and charitable giving.
, 2. Which party establishes a trust?
A. Trustee
B. Beneficiary
C. Grantor (Settlor)
D. Custodian
Answer: C. Grantor (Settlor)
Rationale: The grantor, also known as the settlor or trustor, creates the
trust by transferring property into it and establishing its governing
terms.
3. The person responsible for administering a trust is the:
A. Executor
B. Trustee
C. Guardian
D. Conservator
Answer: B. Trustee
Rationale: The trustee has the legal responsibility to administer the
trust according to its terms while acting in the best interests of the
beneficiaries.
, 4. Which duty is considered a fundamental fiduciary responsibility of
a trustee?
A. Maximizing personal profit
B. Delegating all responsibilities permanently
C. Acting solely in the beneficiaries' best interests
D. Favoring one beneficiary without justification
Answer: C. Acting solely in the beneficiaries' best interests
Rationale: The duty of loyalty requires trustees to place beneficiaries'
interests above their own and avoid conflicts of interest.
5. A beneficiary is:
A. The attorney drafting the trust
B. The person who creates the trust
C. The individual or organization receiving benefits from the trust
D. The probate judge
Answer: C. The individual or organization receiving benefits from the
trust
, Rationale: Beneficiaries receive income, principal, or other benefits from
the trust according to its governing document.
6. Which trust generally cannot be changed after it is created?
A. Revocable trust
B. Testamentary trust
C. Irrevocable trust
D. Living trust
Answer: C. Irrevocable trust
Rationale: An irrevocable trust generally cannot be amended or revoked
once established unless specific provisions or applicable laws permit
modifications.
7. A revocable trust is primarily used to:
A. Eliminate all taxes
B. Avoid management during life
C. Allow flexibility during the grantor's lifetime
D. Replace a will entirely in every circumstance
Exam Questions And Correct Answers
(Verified Answers) Plus Rationale 2027
Q&A| Instant Download Pdf
1. Which of the following best describes a trust?
A. A contract for the sale of securities
B. A legal arrangement in which one party holds property for the
benefit of another
C. A type of insurance policy
D. A corporate merger agreement
Answer: B. A legal arrangement in which one party holds property for
the benefit of another
Rationale: A trust is a fiduciary relationship in which a trustee holds and
manages assets for the benefit of one or more beneficiaries according to
the terms established by the grantor. Trusts are widely used in estate
planning, asset management, and charitable giving.
, 2. Which party establishes a trust?
A. Trustee
B. Beneficiary
C. Grantor (Settlor)
D. Custodian
Answer: C. Grantor (Settlor)
Rationale: The grantor, also known as the settlor or trustor, creates the
trust by transferring property into it and establishing its governing
terms.
3. The person responsible for administering a trust is the:
A. Executor
B. Trustee
C. Guardian
D. Conservator
Answer: B. Trustee
Rationale: The trustee has the legal responsibility to administer the
trust according to its terms while acting in the best interests of the
beneficiaries.
, 4. Which duty is considered a fundamental fiduciary responsibility of
a trustee?
A. Maximizing personal profit
B. Delegating all responsibilities permanently
C. Acting solely in the beneficiaries' best interests
D. Favoring one beneficiary without justification
Answer: C. Acting solely in the beneficiaries' best interests
Rationale: The duty of loyalty requires trustees to place beneficiaries'
interests above their own and avoid conflicts of interest.
5. A beneficiary is:
A. The attorney drafting the trust
B. The person who creates the trust
C. The individual or organization receiving benefits from the trust
D. The probate judge
Answer: C. The individual or organization receiving benefits from the
trust
, Rationale: Beneficiaries receive income, principal, or other benefits from
the trust according to its governing document.
6. Which trust generally cannot be changed after it is created?
A. Revocable trust
B. Testamentary trust
C. Irrevocable trust
D. Living trust
Answer: C. Irrevocable trust
Rationale: An irrevocable trust generally cannot be amended or revoked
once established unless specific provisions or applicable laws permit
modifications.
7. A revocable trust is primarily used to:
A. Eliminate all taxes
B. Avoid management during life
C. Allow flexibility during the grantor's lifetime
D. Replace a will entirely in every circumstance
