Cannon Trust School I Exam 2026/2027 | Complete
Exam-Style Questions | 100% Verified – Detailed
Rationales – Pass Guaranteed – A+ Graded |
BRANDNEW UPDATES !!!! WITH EXAM PLANS FOR
REVISIONS
A client owns a $200,000 residence titled as joint tenancy, a $15,000 automobile titled
solely in his name, an $8,000 certificate of deposit titled solely in his name, and a $100,000
life insurance policy with a $10,000 cash value payable to his spouse. What is the value of
the client's probate estate?
A. $23,000
B. $33,000
C. $223,000
D. $333,000
Correct Answer: A. $23,000
Rationale
A probate estate consists only of assets owned individually by the decedent that do not
automatically transfer to another person by operation of law or contractual beneficiary
designation.
The assets must be analyzed individually:
• Residence owned as joint tenancy ($200,000): This property passes automatically
to the surviving joint tenant and avoids probate.
• Automobile owned individually ($15,000): This is individually titled property and
becomes part of the probate estate.
• Certificate of deposit owned individually ($8,000): This is also included in probate.
• Life insurance policy payable to spouse: Life insurance proceeds generally pass
directly to the named beneficiary and avoid probate. The cash value may be
relevant for estate tax purposes if ownership rights exist, but it is not included in
the probate estate.
Therefore:
$15,000 automobile + $8,000 CD = $23,000 probate estate
,Why the other options are incorrect
B. $33,000
Incorrect because it improperly includes the $10,000 cash value of the life insurance
policy. Although cash value may have estate tax implications under certain circumstances,
it does not pass through probate when there is a named beneficiary.
C. $223,000
Incorrect because it improperly includes the jointly owned residence.
D. $333,000
Incorrect because it incorrectly includes all assets, including nonprobate assets.
Key Estate Planning Principle
Probate assets generally include:
• Individually owned property
• Property without a beneficiary designation
• Property requiring court administration
Nonprobate assets commonly include:
• Joint tenancy property
• Life insurance proceeds with beneficiaries
• Retirement accounts with beneficiaries
• Payable-on-death accounts
A simple trust earns $27,000 in dividends during the year. The trustee charges $4,000 in
fees, with $2,000 paid from income and $2,000 paid from principal. What is the trust
accounting income?
A. $0
B. $23,000
C. $25,000
D. $27,000
Correct Answer: C. $25,000
Rationale
,Trust accounting income refers to the income available for distribution to beneficiaries
under trust accounting principles. It generally includes income-producing receipts such as:
• Dividends
• Interest
• Rental income
Expenses allocated against income reduce trust accounting income.
The trust earned:
Dividend income: $27,000
The trustee fee allocation:
• $2,000 charged against income
• $2,000 charged against principal
Only expenses charged against income reduce trust accounting income.
Calculation:
$27,000 income
− $2,000 income expense allocation
= $25,000 trust accounting income
Why the other options are incorrect
A. $0
Incorrect because the trust generated substantial dividend income.
B. $23,000
Incorrect because this subtracts the entire $4,000 trustee fee. Only the portion charged to
income reduces accounting income.
D. $27,000
Incorrect because it ignores the trustee fees allocated against income.
Key Trust Principle
Trust expenses must be allocated between:
• Income: affects beneficiary distributions
• Principal: affects trust corpus but not accounting income
, If a trust document is silent regarding the treatment of a specific cash transaction, what
source should the trust administrator consult first for guidance?
A. Court of jurisdiction
B. State Principal and Income Law
C. Grantor
D. Office of the Comptroller of the Currency (OCC)
Correct Answer: B. State Principal and Income Law
Rationale
When a trust instrument does not provide instructions regarding allocation of receipts or
expenses between income and principal, the trustee must follow applicable state Principal
and Income Acts.
These laws provide default rules regarding:
• Allocation of dividends
• Interest payments
• Capital gains
• Expenses
• Trustee compensation
• Extraordinary receipts
The trust document always controls when provisions exist, but statutory law provides
guidance when the document is silent.
Why the other options are incorrect
A. Court of jurisdiction
Courts may interpret trust provisions, but they are not the first source of authority for
routine administration.
C. Grantor
The grantor cannot provide instructions after death and may not have authority to modify
an irrevocable trust.
D. OCC
The OCC regulates national banks but does not provide general trust accounting rules.
Key Trust Principle
Order of authority:
Exam-Style Questions | 100% Verified – Detailed
Rationales – Pass Guaranteed – A+ Graded |
BRANDNEW UPDATES !!!! WITH EXAM PLANS FOR
REVISIONS
A client owns a $200,000 residence titled as joint tenancy, a $15,000 automobile titled
solely in his name, an $8,000 certificate of deposit titled solely in his name, and a $100,000
life insurance policy with a $10,000 cash value payable to his spouse. What is the value of
the client's probate estate?
A. $23,000
B. $33,000
C. $223,000
D. $333,000
Correct Answer: A. $23,000
Rationale
A probate estate consists only of assets owned individually by the decedent that do not
automatically transfer to another person by operation of law or contractual beneficiary
designation.
The assets must be analyzed individually:
• Residence owned as joint tenancy ($200,000): This property passes automatically
to the surviving joint tenant and avoids probate.
• Automobile owned individually ($15,000): This is individually titled property and
becomes part of the probate estate.
• Certificate of deposit owned individually ($8,000): This is also included in probate.
• Life insurance policy payable to spouse: Life insurance proceeds generally pass
directly to the named beneficiary and avoid probate. The cash value may be
relevant for estate tax purposes if ownership rights exist, but it is not included in
the probate estate.
Therefore:
$15,000 automobile + $8,000 CD = $23,000 probate estate
,Why the other options are incorrect
B. $33,000
Incorrect because it improperly includes the $10,000 cash value of the life insurance
policy. Although cash value may have estate tax implications under certain circumstances,
it does not pass through probate when there is a named beneficiary.
C. $223,000
Incorrect because it improperly includes the jointly owned residence.
D. $333,000
Incorrect because it incorrectly includes all assets, including nonprobate assets.
Key Estate Planning Principle
Probate assets generally include:
• Individually owned property
• Property without a beneficiary designation
• Property requiring court administration
Nonprobate assets commonly include:
• Joint tenancy property
• Life insurance proceeds with beneficiaries
• Retirement accounts with beneficiaries
• Payable-on-death accounts
A simple trust earns $27,000 in dividends during the year. The trustee charges $4,000 in
fees, with $2,000 paid from income and $2,000 paid from principal. What is the trust
accounting income?
A. $0
B. $23,000
C. $25,000
D. $27,000
Correct Answer: C. $25,000
Rationale
,Trust accounting income refers to the income available for distribution to beneficiaries
under trust accounting principles. It generally includes income-producing receipts such as:
• Dividends
• Interest
• Rental income
Expenses allocated against income reduce trust accounting income.
The trust earned:
Dividend income: $27,000
The trustee fee allocation:
• $2,000 charged against income
• $2,000 charged against principal
Only expenses charged against income reduce trust accounting income.
Calculation:
$27,000 income
− $2,000 income expense allocation
= $25,000 trust accounting income
Why the other options are incorrect
A. $0
Incorrect because the trust generated substantial dividend income.
B. $23,000
Incorrect because this subtracts the entire $4,000 trustee fee. Only the portion charged to
income reduces accounting income.
D. $27,000
Incorrect because it ignores the trustee fees allocated against income.
Key Trust Principle
Trust expenses must be allocated between:
• Income: affects beneficiary distributions
• Principal: affects trust corpus but not accounting income
, If a trust document is silent regarding the treatment of a specific cash transaction, what
source should the trust administrator consult first for guidance?
A. Court of jurisdiction
B. State Principal and Income Law
C. Grantor
D. Office of the Comptroller of the Currency (OCC)
Correct Answer: B. State Principal and Income Law
Rationale
When a trust instrument does not provide instructions regarding allocation of receipts or
expenses between income and principal, the trustee must follow applicable state Principal
and Income Acts.
These laws provide default rules regarding:
• Allocation of dividends
• Interest payments
• Capital gains
• Expenses
• Trustee compensation
• Extraordinary receipts
The trust document always controls when provisions exist, but statutory law provides
guidance when the document is silent.
Why the other options are incorrect
A. Court of jurisdiction
Courts may interpret trust provisions, but they are not the first source of authority for
routine administration.
C. Grantor
The grantor cannot provide instructions after death and may not have authority to modify
an irrevocable trust.
D. OCC
The OCC regulates national banks but does not provide general trust accounting rules.
Key Trust Principle
Order of authority:
