CANNON TRUST SCHOOL I EXAM 2026/2027
CERTIFIED QUESTIONS, VERIFIED CORRECT ANSWERS & DETAILED
EXPLANATIONS
TRUST ADMINISTRATION FUNDAMENTALS | FIDUCIARY LAW BASICS | TRUST TAXATION |
INVESTMENTS & ETHICS
Aligned with the Cannon Trust School I Curriculum | ABA Trust Administration Standards | Internal Revenue Code (IRC)
Trust Tax Provisions | Uniform Trust Code (UTC) Standards - 2026/2027 Edition
150 Questions | 7 Sections | Multiple Choice (A-D), One Correct Answer | Verified Answers with Detailed Rationales
Exam profile: 75 percent scenario-based and 25 percent direct knowledge items; cognitive mix of 25 percent recall, 50 percent
application, and 25 percent analysis. Includes 15 tax calculation questions, 10 investment allocation and fiduciary standard
scenarios, and 10 ethics and professional conduct case studies.
Section 1: Trust Administration Fundamentals
*Q1:* Which of the following best describes a trust as defined in the Uniform Trust Code and the Cannon
Trust School I curriculum?
A. A contract between the grantor and the state attorney general authorizing charitable administration
of assets
B. A corporation that is formed to hold investment accounts for minor children until they reach the age
of majority
C. A fiduciary arrangement in which a trustee holds legal title to trust property and manages it for the
benefit of one or more beneficiaries *[CORRECT]*
D. A joint tenancy arrangement in which two spouses each hold an undivided one-half interest with
rights of survivorship
Correct Answer: C
Rationale: A trust is a fiduciary relationship in which the trustee holds legal title to the trust property (corpus) for
the benefit of beneficiaries, creating divided title: legal title in the trustee and equitable (beneficial) title in the
beneficiaries. Option A misstates the trust as a government contract, which describes none of the trust's features
under UTC Section 402. Option B describes a custodial or corporate arrangement, not a trust, and Option D
describes joint tenancy, a form of concurrent ownership with no fiduciary duties. Cannon Trust School I introduces
the trust through this divided-title model because every later duty, from loyalty to accounting, flows from the
separation of legal and equitable ownership.
*Q2:* Under UTC Section 402, which of the following is NOT a requirement for creating a valid private
express trust?
A. The settlor must have capacity to create the trust
B. The trust instrument must be notarized and recorded in the county where the settlor resides
*[CORRECT]*
C. The settlor must manifest a present intent to create the trust
D. The trust must have a definite or reasonably ascertainable beneficiary
Correct Answer: B
Cannon Trust School I - Certified Examination 2026/2027 Page 1 of 55
,CANNON TRUST SCHOOL I EXAM 2026/2027 TRUST ADMINISTRATION | FIDUCIARY LAW | TAXATION | INVESTMENTS | ETHICS
Rationale: UTC Section 402 requires capacity, intent to create the trust, a definite or ascertainable beneficiary, and
duties for the trustee, but it nowhere requires notarization or recording; a written trust instrument is sufficient to
create a testamentary or irrevocable trust, and an oral trust can be valid for personal property in many states. Options
A, C, and D each state genuine Section 402 elements. Recording is associated with real estate transactions generally,
but failure to record a trust deed does not invalidate the trust itself, a distinction Cannon emphasizes when teaching
how trusts are created and funded.
*Q3:* Helen writes to her son: 'I would like you to have my lake house someday, so please take care of it for
me,' but she never transfers title, delivers a deed, or executes any trust instrument. She later dies, and her son
claims the property under a theory of trust. What is the most likely result?
A. A valid inter vivos trust was created because the son accepted the duties in the letter
B. A constructive trust automatically arises whenever a parent expresses a wish about property
C. A resulting trust arises because the son is the natural object of the settlor's bounty
D. No trust exists because the letter is precatory language lacking present intent and no trust res was
ever transferred *[CORRECT]*
Correct Answer: D
Rationale: The letter expresses only a hope ('I would like you to have') rather than a present command imposing
enforceable duties, which courts such as Markosian v. Curtin treat as precatory language insufficient to create a trust.
In addition, no property was ever transferred, so there is no trust res, and UTC Section 402 requires both intent and
trust property as practical matters. Option A fails because acceptance cannot cure the absence of intent and res;
Option B misstates constructive trusts, which arise only to prevent unjust enrichment such as fraud or breach of
confidential relationship; Option C misstates resulting trusts, which arise when an express trust fails or a conveyance
leaves beneficial interest unaccounted for. Cannon teaches this fact pattern as the classic 'intent to create a trust'
examination point.
*Q4:* A client establishes a revocable living trust but dies before retitling her brokerage account or updating
her 401(k) beneficiary designation, although her will contains a pour-over provision to the trust. How will
these two assets reach the trust?
A. The brokerage account passes through probate under the pour-over will, while the 401(k) passes
directly to the trust only if the trust is named beneficiary or the designation defaults to the estate
*[CORRECT]*
B. Both assets pass to the trust automatically because the trust deed controls all property of the settlor
C. Neither asset can ever be transferred to a trust after the settlor's death
D. The successor trustee may simply retitle both accounts without any court or beneficiary-designation
process
Correct Answer: A
Rationale: A pour-over will catches probate assets, such as an individual brokerage account still titled in the settlor's
name, and transfers them to the trust through the probate process. Retirement plan assets pass outside the will
entirely, governed by the plan's beneficiary designation; if the trust is not named, the plan terms control, often
defaulting to a surviving spouse or the estate. Option B is wrong because a trust never automatically sweeps in all
settlor property; Option C overstates the problem because probate and designation procedures can still reach the
trust; and Option D ignores that retirement assets and probate accounts require formal processes. Cannon Trust
School I treats funding, including retitling and beneficiary designations, as the most commonly failed step in
revocable trust planning.
Cannon Trust School I - Certified Examination 2026/2027 Page 2 of 55
,CANNON TRUST SCHOOL I EXAM 2026/2027 TRUST ADMINISTRATION | FIDUCIARY LAW | TAXATION | INVESTMENTS | ETHICS
*Q5:* During her lifetime, Maria's revocable living trust earns $40,000 of taxable interest and dividends.
Who is responsible for reporting and paying the federal income tax on this income, and on what return?
A. The trust, on Form 1041, because the trustee is a separate legal entity
B. Maria, on her individual Form 1040, because a revocable trust is a grantor trust under IRC Sections
671 and 676 *[CORRECT]*
C. The beneficiaries, on Schedule K-1, because income follows the beneficial interest
D. No one owes tax because revocable trusts are exempt from federal income taxation
Correct Answer: B
Rationale: A revocable trust is taxed to the grantor under IRC Sections 671 through 679 because the grantor retains
substantial control and ownership rights; IRC Section 676 specifically attributes income of a revocable trust to the
settlor. The trust therefore does not file a separate income-tax-paying Form 1041 during Maria's life, and
beneficiaries cannot be taxed on income that never leaves the grantor's ownership. Option A confuses the revocable
trust with an irrevocable non-grantor trust, and Option C misapplies the Schedule K-1 regime that applies to estates
and irrevocable trusts. Option D is simply false; the tax is due, but it is Maria's tax. Cannon teaches this as the first
tax principle of trust administration: revocability means tax identity with the grantor.
*Q6:* Which of the following is the PRIMARY benefit a revocable living trust provides compared with a
will-based plan?
A. It removes the assets from the settlor's gross estate for federal estate tax purposes
B. It converts income tax rates to the more favorable trust rate schedule
C. It avoids probate and provides continuity of asset management upon incapacity or death
*[CORRECT]*
D. It provides creditor protection superior to that of individual ownership
Correct Answer: C
Rationale: The principal advantages of a revocable living trust are avoidance of probate, privacy, and seamless
management by a successor trustee when the settlor becomes incapacitated or dies, because the trustee already holds
legal title. Option A is incorrect because a revocable trust is fully includible in the settlor's gross estate under IRC
Sections 2036 and 2038; Option B is backwards because trusts reach the highest federal brackets at very low income
levels. Option D is also wrong because a settlor's creditors can reach revocable trust property under UTC Section 505
and analogous state law. Cannon uses this question to test whether candidates can separate the real
probate-and-management benefits from the marketing myths about taxes and asset protection.
*Q7:* A testamentary trust differs from an inter vivos (living) trust principally in which of the following
ways?
A. It is created during the settlor's life and takes effect immediately upon funding
B. It is created by the settlor's will and comes into existence and is funded only at death, after the
probate process begins *[CORRECT]*
C. It is never subject to probate court supervision because the trust instrument is private
D. It can only be used for charitable purposes under state trust law
Correct Answer: B
Rationale: A testamentary trust is created by the terms of the will and springs into existence at death, funded with
probate assets passing under the will, so it necessarily involves probate and public court proceedings. Option A
describes an inter vivos trust, the opposite category. Option C incorrectly describes revocable living trusts, which
avoid probate precisely because they are funded before death. Option D is wrong because testamentary trusts are
routinely used for minor children, marital planning, and credit-shelter planning. Cannon emphasizes the practical
consequences: a testamentary trust receives no income tax savings during life, and the probate delay means the trust
Cannon Trust School I - Certified Examination 2026/2027 Page 3 of 55
, CANNON TRUST SCHOOL I EXAM 2026/2027 TRUST ADMINISTRATION | FIDUCIARY LAW | TAXATION | INVESTMENTS | ETHICS
cannot manage assets in the interim.
*Q8:* A corporate trustee purchases a commercial building held in trust from the trust at 30 percent below
its appraised market value, titling the property in the name of an affiliate bank. What is the most accurate
characterization of this transaction?
A. A permitted transaction so long as the trustee paid some consideration for the property
B. A breach only if the beneficiaries can prove the price was unfair by clear and convincing evidence
C. A breach of the duty of loyalty under UTC Section 602 that is prohibited absent court approval or
informed consent of all beneficiaries, even at a fair price *[CORRECT]*
D. A permissible arm's-length sale because affiliated fiduciaries are exempt from the self-dealing rules
Correct Answer: C
Rationale: The duty of loyalty under UTC Section 602 requires the trustee to administer the trust solely in the
interests of the beneficiaries and prohibits direct or indirect self-dealing, including buying or selling trust property
for the trustee's own account, regardless of the fairness of the price. The established exceptions are court
authorization or informed consent of all beneficiaries, neither of which exists here. Option A is wrong because
partial consideration does not cure a self-dealing transaction; Option B misstates the rule, which is a per se
prohibition subject to the two exceptions, not a fairness test; Option D invents an exemption that does not exist.
Cannon drills this rule because self-dealing is the most litigated breach of fiduciary duty in trust practice.
*Q9:* A professional corporate trustee with an experienced investment department manages a trust with the
same care it would use for its own passive personal savings account, and the portfolio underperforms
significantly. Under the duty of care, what is the most accurate assessment?
A. The trustee has met its duty because the prudent person standard only requires acting as a reasonable
person would for personal accounts
B. The standard of care never depends on the trustee's profession or held-out expertise
C. A trustee with special skills or professional status must use those special skills and is held to a higher
standard of care than an ordinary lay trustee *[CORRECT]*
D. The duty of care is satisfied whenever the trustee avoids self-dealing, regardless of investment
performance
Correct Answer: C
Rationale: UTC Section 802 and the prudent person rule require a trustee to exercise the care, skill, and caution of a
prudent person, and UTC Section 802(b) expressly elevates the standard for a trustee who has special skills or is
named trustee on the basis of representations of special expertise. A corporate fiduciary with an investment
department cannot retreat to a layperson's standard. Option A misstates the rule by ignoring the special-skills
elevation; Option B contradicts Section 802(b); Option D confuses the duty of loyalty with the duty of care, which
are separate obligations. Cannon teaches that the professional trustee's higher duty applies both to investment
management and to general administration, including recordkeeping and tax compliance.
Cannon Trust School I - Certified Examination 2026/2027 Page 4 of 55
CERTIFIED QUESTIONS, VERIFIED CORRECT ANSWERS & DETAILED
EXPLANATIONS
TRUST ADMINISTRATION FUNDAMENTALS | FIDUCIARY LAW BASICS | TRUST TAXATION |
INVESTMENTS & ETHICS
Aligned with the Cannon Trust School I Curriculum | ABA Trust Administration Standards | Internal Revenue Code (IRC)
Trust Tax Provisions | Uniform Trust Code (UTC) Standards - 2026/2027 Edition
150 Questions | 7 Sections | Multiple Choice (A-D), One Correct Answer | Verified Answers with Detailed Rationales
Exam profile: 75 percent scenario-based and 25 percent direct knowledge items; cognitive mix of 25 percent recall, 50 percent
application, and 25 percent analysis. Includes 15 tax calculation questions, 10 investment allocation and fiduciary standard
scenarios, and 10 ethics and professional conduct case studies.
Section 1: Trust Administration Fundamentals
*Q1:* Which of the following best describes a trust as defined in the Uniform Trust Code and the Cannon
Trust School I curriculum?
A. A contract between the grantor and the state attorney general authorizing charitable administration
of assets
B. A corporation that is formed to hold investment accounts for minor children until they reach the age
of majority
C. A fiduciary arrangement in which a trustee holds legal title to trust property and manages it for the
benefit of one or more beneficiaries *[CORRECT]*
D. A joint tenancy arrangement in which two spouses each hold an undivided one-half interest with
rights of survivorship
Correct Answer: C
Rationale: A trust is a fiduciary relationship in which the trustee holds legal title to the trust property (corpus) for
the benefit of beneficiaries, creating divided title: legal title in the trustee and equitable (beneficial) title in the
beneficiaries. Option A misstates the trust as a government contract, which describes none of the trust's features
under UTC Section 402. Option B describes a custodial or corporate arrangement, not a trust, and Option D
describes joint tenancy, a form of concurrent ownership with no fiduciary duties. Cannon Trust School I introduces
the trust through this divided-title model because every later duty, from loyalty to accounting, flows from the
separation of legal and equitable ownership.
*Q2:* Under UTC Section 402, which of the following is NOT a requirement for creating a valid private
express trust?
A. The settlor must have capacity to create the trust
B. The trust instrument must be notarized and recorded in the county where the settlor resides
*[CORRECT]*
C. The settlor must manifest a present intent to create the trust
D. The trust must have a definite or reasonably ascertainable beneficiary
Correct Answer: B
Cannon Trust School I - Certified Examination 2026/2027 Page 1 of 55
,CANNON TRUST SCHOOL I EXAM 2026/2027 TRUST ADMINISTRATION | FIDUCIARY LAW | TAXATION | INVESTMENTS | ETHICS
Rationale: UTC Section 402 requires capacity, intent to create the trust, a definite or ascertainable beneficiary, and
duties for the trustee, but it nowhere requires notarization or recording; a written trust instrument is sufficient to
create a testamentary or irrevocable trust, and an oral trust can be valid for personal property in many states. Options
A, C, and D each state genuine Section 402 elements. Recording is associated with real estate transactions generally,
but failure to record a trust deed does not invalidate the trust itself, a distinction Cannon emphasizes when teaching
how trusts are created and funded.
*Q3:* Helen writes to her son: 'I would like you to have my lake house someday, so please take care of it for
me,' but she never transfers title, delivers a deed, or executes any trust instrument. She later dies, and her son
claims the property under a theory of trust. What is the most likely result?
A. A valid inter vivos trust was created because the son accepted the duties in the letter
B. A constructive trust automatically arises whenever a parent expresses a wish about property
C. A resulting trust arises because the son is the natural object of the settlor's bounty
D. No trust exists because the letter is precatory language lacking present intent and no trust res was
ever transferred *[CORRECT]*
Correct Answer: D
Rationale: The letter expresses only a hope ('I would like you to have') rather than a present command imposing
enforceable duties, which courts such as Markosian v. Curtin treat as precatory language insufficient to create a trust.
In addition, no property was ever transferred, so there is no trust res, and UTC Section 402 requires both intent and
trust property as practical matters. Option A fails because acceptance cannot cure the absence of intent and res;
Option B misstates constructive trusts, which arise only to prevent unjust enrichment such as fraud or breach of
confidential relationship; Option C misstates resulting trusts, which arise when an express trust fails or a conveyance
leaves beneficial interest unaccounted for. Cannon teaches this fact pattern as the classic 'intent to create a trust'
examination point.
*Q4:* A client establishes a revocable living trust but dies before retitling her brokerage account or updating
her 401(k) beneficiary designation, although her will contains a pour-over provision to the trust. How will
these two assets reach the trust?
A. The brokerage account passes through probate under the pour-over will, while the 401(k) passes
directly to the trust only if the trust is named beneficiary or the designation defaults to the estate
*[CORRECT]*
B. Both assets pass to the trust automatically because the trust deed controls all property of the settlor
C. Neither asset can ever be transferred to a trust after the settlor's death
D. The successor trustee may simply retitle both accounts without any court or beneficiary-designation
process
Correct Answer: A
Rationale: A pour-over will catches probate assets, such as an individual brokerage account still titled in the settlor's
name, and transfers them to the trust through the probate process. Retirement plan assets pass outside the will
entirely, governed by the plan's beneficiary designation; if the trust is not named, the plan terms control, often
defaulting to a surviving spouse or the estate. Option B is wrong because a trust never automatically sweeps in all
settlor property; Option C overstates the problem because probate and designation procedures can still reach the
trust; and Option D ignores that retirement assets and probate accounts require formal processes. Cannon Trust
School I treats funding, including retitling and beneficiary designations, as the most commonly failed step in
revocable trust planning.
Cannon Trust School I - Certified Examination 2026/2027 Page 2 of 55
,CANNON TRUST SCHOOL I EXAM 2026/2027 TRUST ADMINISTRATION | FIDUCIARY LAW | TAXATION | INVESTMENTS | ETHICS
*Q5:* During her lifetime, Maria's revocable living trust earns $40,000 of taxable interest and dividends.
Who is responsible for reporting and paying the federal income tax on this income, and on what return?
A. The trust, on Form 1041, because the trustee is a separate legal entity
B. Maria, on her individual Form 1040, because a revocable trust is a grantor trust under IRC Sections
671 and 676 *[CORRECT]*
C. The beneficiaries, on Schedule K-1, because income follows the beneficial interest
D. No one owes tax because revocable trusts are exempt from federal income taxation
Correct Answer: B
Rationale: A revocable trust is taxed to the grantor under IRC Sections 671 through 679 because the grantor retains
substantial control and ownership rights; IRC Section 676 specifically attributes income of a revocable trust to the
settlor. The trust therefore does not file a separate income-tax-paying Form 1041 during Maria's life, and
beneficiaries cannot be taxed on income that never leaves the grantor's ownership. Option A confuses the revocable
trust with an irrevocable non-grantor trust, and Option C misapplies the Schedule K-1 regime that applies to estates
and irrevocable trusts. Option D is simply false; the tax is due, but it is Maria's tax. Cannon teaches this as the first
tax principle of trust administration: revocability means tax identity with the grantor.
*Q6:* Which of the following is the PRIMARY benefit a revocable living trust provides compared with a
will-based plan?
A. It removes the assets from the settlor's gross estate for federal estate tax purposes
B. It converts income tax rates to the more favorable trust rate schedule
C. It avoids probate and provides continuity of asset management upon incapacity or death
*[CORRECT]*
D. It provides creditor protection superior to that of individual ownership
Correct Answer: C
Rationale: The principal advantages of a revocable living trust are avoidance of probate, privacy, and seamless
management by a successor trustee when the settlor becomes incapacitated or dies, because the trustee already holds
legal title. Option A is incorrect because a revocable trust is fully includible in the settlor's gross estate under IRC
Sections 2036 and 2038; Option B is backwards because trusts reach the highest federal brackets at very low income
levels. Option D is also wrong because a settlor's creditors can reach revocable trust property under UTC Section 505
and analogous state law. Cannon uses this question to test whether candidates can separate the real
probate-and-management benefits from the marketing myths about taxes and asset protection.
*Q7:* A testamentary trust differs from an inter vivos (living) trust principally in which of the following
ways?
A. It is created during the settlor's life and takes effect immediately upon funding
B. It is created by the settlor's will and comes into existence and is funded only at death, after the
probate process begins *[CORRECT]*
C. It is never subject to probate court supervision because the trust instrument is private
D. It can only be used for charitable purposes under state trust law
Correct Answer: B
Rationale: A testamentary trust is created by the terms of the will and springs into existence at death, funded with
probate assets passing under the will, so it necessarily involves probate and public court proceedings. Option A
describes an inter vivos trust, the opposite category. Option C incorrectly describes revocable living trusts, which
avoid probate precisely because they are funded before death. Option D is wrong because testamentary trusts are
routinely used for minor children, marital planning, and credit-shelter planning. Cannon emphasizes the practical
consequences: a testamentary trust receives no income tax savings during life, and the probate delay means the trust
Cannon Trust School I - Certified Examination 2026/2027 Page 3 of 55
, CANNON TRUST SCHOOL I EXAM 2026/2027 TRUST ADMINISTRATION | FIDUCIARY LAW | TAXATION | INVESTMENTS | ETHICS
cannot manage assets in the interim.
*Q8:* A corporate trustee purchases a commercial building held in trust from the trust at 30 percent below
its appraised market value, titling the property in the name of an affiliate bank. What is the most accurate
characterization of this transaction?
A. A permitted transaction so long as the trustee paid some consideration for the property
B. A breach only if the beneficiaries can prove the price was unfair by clear and convincing evidence
C. A breach of the duty of loyalty under UTC Section 602 that is prohibited absent court approval or
informed consent of all beneficiaries, even at a fair price *[CORRECT]*
D. A permissible arm's-length sale because affiliated fiduciaries are exempt from the self-dealing rules
Correct Answer: C
Rationale: The duty of loyalty under UTC Section 602 requires the trustee to administer the trust solely in the
interests of the beneficiaries and prohibits direct or indirect self-dealing, including buying or selling trust property
for the trustee's own account, regardless of the fairness of the price. The established exceptions are court
authorization or informed consent of all beneficiaries, neither of which exists here. Option A is wrong because
partial consideration does not cure a self-dealing transaction; Option B misstates the rule, which is a per se
prohibition subject to the two exceptions, not a fairness test; Option D invents an exemption that does not exist.
Cannon drills this rule because self-dealing is the most litigated breach of fiduciary duty in trust practice.
*Q9:* A professional corporate trustee with an experienced investment department manages a trust with the
same care it would use for its own passive personal savings account, and the portfolio underperforms
significantly. Under the duty of care, what is the most accurate assessment?
A. The trustee has met its duty because the prudent person standard only requires acting as a reasonable
person would for personal accounts
B. The standard of care never depends on the trustee's profession or held-out expertise
C. A trustee with special skills or professional status must use those special skills and is held to a higher
standard of care than an ordinary lay trustee *[CORRECT]*
D. The duty of care is satisfied whenever the trustee avoids self-dealing, regardless of investment
performance
Correct Answer: C
Rationale: UTC Section 802 and the prudent person rule require a trustee to exercise the care, skill, and caution of a
prudent person, and UTC Section 802(b) expressly elevates the standard for a trustee who has special skills or is
named trustee on the basis of representations of special expertise. A corporate fiduciary with an investment
department cannot retreat to a layperson's standard. Option A misstates the rule by ignoring the special-skills
elevation; Option B contradicts Section 802(b); Option D confuses the duty of loyalty with the duty of care, which
are separate obligations. Cannon teaches that the professional trustee's higher duty applies both to investment
management and to general administration, including recordkeeping and tax compliance.
Cannon Trust School I - Certified Examination 2026/2027 Page 4 of 55
