CANNON TRUST SCHOOL I — COMPLETE QUESTIONS &
ANSWERS WITH RATIONALES LATEST UPDATE THIS
YEAR. JUST RELEASED
Below is one complete practice set for Cannon Trust School I. Cannon Financial Institute
describes Trust School I as the first course in its three-part Personal Trust series, covering
trust business, property law, principal and income law, fiduciary income taxation,
fiduciary law, U.S. estate and gift taxation, investments, estate/trust administration,
and types of trusts.
SECTION 1 — TRUST FUNDAMENTALS & TRUST CREATION
Q1. What is the primary purpose of a trust?
A. To eliminate all taxes
B. To hold and manage property for beneficiaries according to governing terms
C. To replace every insurance policy
D. To avoid all creditor claims
Answer: B
Rationale: A trust is a fiduciary arrangement in which property is managed for beneficiaries
under governing terms.
Q2. Who is the grantor of a trust?
A. The beneficiary
B. The trustee
,C. The person who creates the trust
D. The trust protector
Answer: C
Rationale: The grantor, also called the settlor or trustor, establishes the trust.
Q3. Who generally holds legal title to trust property?
A. Beneficiary
B. Trustee
C. Grantor's attorney
D. Remainderman
Answer: B
Rationale: The trustee generally holds legal title and manages trust property for
beneficiaries.
Q4. Who receives benefits from a trust?
A. Beneficiary
B. Trustee only
C. Grantor only
D. Probate court
Answer: A
Rationale: Beneficiaries are the persons or entities entitled to trust benefits.
Q5. Which is essential to creating a valid trust?
,A. A trust purpose and identifiable trust property
B. A corporate trustee in every case
C. A charitable beneficiary
D. A probate proceeding
Answer: A
Rationale: A valid trust generally requires intent, trust property, beneficiaries or appropriate
purpose, and a trustee or mechanism for administration.
Q6. What is trust property commonly called?
A. Corpus or principal
B. Probate tax
C. Income beneficiary
D. Fiduciary fee
Answer: A
Rationale: Corpus and principal refer to property held within the trust.
**Q7. A revocable trust generally allows whom to retain the power to change or terminate
the trust?
A. Trustee
B. Beneficiary
C. Grantor
D. Remainderman
, Answer: C
Rationale: A revocable trust is generally subject to the grantor's retained power to revoke or
amend it.
**Q8. What generally happens to a revocable trust at the grantor's death?
A. It automatically disappears
B. It may become irrevocable under its terms
C. It becomes a corporation
D. It must always be distributed immediately
Answer: B
Rationale: A revocable living trust commonly becomes irrevocable when the grantor dies,
depending on its terms.
**Q9. What distinguishes an irrevocable trust?
A. It can always be revoked by the grantor
B. The grantor generally does not retain unrestricted revocation power
C. It cannot have beneficiaries
D. It cannot own investments
Answer: B
Rationale: Irrevocable trusts generally restrict the grantor's ability to revoke or modify the
trust unilaterally.
Q10. What is a testamentary trust?
ANSWERS WITH RATIONALES LATEST UPDATE THIS
YEAR. JUST RELEASED
Below is one complete practice set for Cannon Trust School I. Cannon Financial Institute
describes Trust School I as the first course in its three-part Personal Trust series, covering
trust business, property law, principal and income law, fiduciary income taxation,
fiduciary law, U.S. estate and gift taxation, investments, estate/trust administration,
and types of trusts.
SECTION 1 — TRUST FUNDAMENTALS & TRUST CREATION
Q1. What is the primary purpose of a trust?
A. To eliminate all taxes
B. To hold and manage property for beneficiaries according to governing terms
C. To replace every insurance policy
D. To avoid all creditor claims
Answer: B
Rationale: A trust is a fiduciary arrangement in which property is managed for beneficiaries
under governing terms.
Q2. Who is the grantor of a trust?
A. The beneficiary
B. The trustee
,C. The person who creates the trust
D. The trust protector
Answer: C
Rationale: The grantor, also called the settlor or trustor, establishes the trust.
Q3. Who generally holds legal title to trust property?
A. Beneficiary
B. Trustee
C. Grantor's attorney
D. Remainderman
Answer: B
Rationale: The trustee generally holds legal title and manages trust property for
beneficiaries.
Q4. Who receives benefits from a trust?
A. Beneficiary
B. Trustee only
C. Grantor only
D. Probate court
Answer: A
Rationale: Beneficiaries are the persons or entities entitled to trust benefits.
Q5. Which is essential to creating a valid trust?
,A. A trust purpose and identifiable trust property
B. A corporate trustee in every case
C. A charitable beneficiary
D. A probate proceeding
Answer: A
Rationale: A valid trust generally requires intent, trust property, beneficiaries or appropriate
purpose, and a trustee or mechanism for administration.
Q6. What is trust property commonly called?
A. Corpus or principal
B. Probate tax
C. Income beneficiary
D. Fiduciary fee
Answer: A
Rationale: Corpus and principal refer to property held within the trust.
**Q7. A revocable trust generally allows whom to retain the power to change or terminate
the trust?
A. Trustee
B. Beneficiary
C. Grantor
D. Remainderman
, Answer: C
Rationale: A revocable trust is generally subject to the grantor's retained power to revoke or
amend it.
**Q8. What generally happens to a revocable trust at the grantor's death?
A. It automatically disappears
B. It may become irrevocable under its terms
C. It becomes a corporation
D. It must always be distributed immediately
Answer: B
Rationale: A revocable living trust commonly becomes irrevocable when the grantor dies,
depending on its terms.
**Q9. What distinguishes an irrevocable trust?
A. It can always be revoked by the grantor
B. The grantor generally does not retain unrestricted revocation power
C. It cannot have beneficiaries
D. It cannot own investments
Answer: B
Rationale: Irrevocable trusts generally restrict the grantor's ability to revoke or modify the
trust unilaterally.
Q10. What is a testamentary trust?
