CANNON TRUST SCHOOL I PRACTICE EXAM Most Tested 250
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SECTION 1: TRUST FUNDAMENTALS & CREATION (Questions 1–50)
1. Which of the following best defines a trust under common law principles?
A) A contract between two parties for the management of property
B) A fiduciary relationship in which one person holds legal title to property subject to an
equitable obligation to hold or use it for the benefit of another
C) A business entity formed under state statute for the purpose of holding assets
D) A partnership between a grantor and trustee for investment purposes
Answer: B – A fiduciary relationship in which one person holds legal title to property
subject to an equitable obligation to hold or use it for the benefit of another
Rationale: A trust is a fiduciary relationship in which the trustee holds legal title to trust
property (the res) subject to an equitable obligation to administer it for the benefit of the
beneficiaries. This dual-title concept (legal vs. equitable) is the historical foundation of trust
law.
,2. Which of the following is NOT a required element for creating a valid private
express trust?
A) Intent to create a trust by the settlor
B) Ascertainable beneficiaries
C) Trust property (res)
D) Notarization and recording of the trust instrument
Answer: D – Notarization and recording of the trust instrument
Rationale: The essential elements of a valid trust are intent, ascertainable beneficiaries,
trust property, and lawful purpose. Notarization and recording are not universally required
and are not among the essential elements.
3. A settlor transfers property to a trustee with instructions to hold it for the benefit of
the settlor's nephew. The nephew is the:
A) Settlor
B) Trustee
C) Beneficiary
D) Grantor
Answer: C – Beneficiary
Rationale: The beneficiary is the person for whose benefit the trust property is held.
,4. Which party holds legal title to trust property?
A) Settlor
B) Beneficiary
C) Trustee
D) Grantor
Answer: C – Trustee
Rationale: The trustee holds legal title to trust property, while beneficiaries hold equitable
title.
5. A trust that is created during the settlor's lifetime is called a:
A) Testamentary trust
B) Inter vivos trust
C) Constructive trust
D) Resulting trust
Answer: B – Inter vivos trust
Rationale: An inter vivos (living) trust is created during the settlor's lifetime.
, 6. A trust created by a will is called a:
A) Inter vivos trust
B) Testamentary trust
C) Revocable trust
D) Irrevocable trust
Answer: B – Testamentary trust
Rationale: A testamentary trust is created by a will and takes effect upon the settlor's death.
7. Which type of trust can be amended or revoked by the settlor?
A) Irrevocable trust
B) Revocable trust
C) Testamentary trust
D) Charitable trust
Answer: B – Revocable trust
Rationale: A revocable trust can be amended or revoked by the settlor during their lifetime.
8. In a spendthrift trust, the beneficiary:
A) Can freely transfer their interest
B) Cannot voluntarily or involuntarily transfer their interest
Questions with Answers & Rationales latest update this year |
INSTANT PDF DOWNLOAD
SECTION 1: TRUST FUNDAMENTALS & CREATION (Questions 1–50)
1. Which of the following best defines a trust under common law principles?
A) A contract between two parties for the management of property
B) A fiduciary relationship in which one person holds legal title to property subject to an
equitable obligation to hold or use it for the benefit of another
C) A business entity formed under state statute for the purpose of holding assets
D) A partnership between a grantor and trustee for investment purposes
Answer: B – A fiduciary relationship in which one person holds legal title to property
subject to an equitable obligation to hold or use it for the benefit of another
Rationale: A trust is a fiduciary relationship in which the trustee holds legal title to trust
property (the res) subject to an equitable obligation to administer it for the benefit of the
beneficiaries. This dual-title concept (legal vs. equitable) is the historical foundation of trust
law.
,2. Which of the following is NOT a required element for creating a valid private
express trust?
A) Intent to create a trust by the settlor
B) Ascertainable beneficiaries
C) Trust property (res)
D) Notarization and recording of the trust instrument
Answer: D – Notarization and recording of the trust instrument
Rationale: The essential elements of a valid trust are intent, ascertainable beneficiaries,
trust property, and lawful purpose. Notarization and recording are not universally required
and are not among the essential elements.
3. A settlor transfers property to a trustee with instructions to hold it for the benefit of
the settlor's nephew. The nephew is the:
A) Settlor
B) Trustee
C) Beneficiary
D) Grantor
Answer: C – Beneficiary
Rationale: The beneficiary is the person for whose benefit the trust property is held.
,4. Which party holds legal title to trust property?
A) Settlor
B) Beneficiary
C) Trustee
D) Grantor
Answer: C – Trustee
Rationale: The trustee holds legal title to trust property, while beneficiaries hold equitable
title.
5. A trust that is created during the settlor's lifetime is called a:
A) Testamentary trust
B) Inter vivos trust
C) Constructive trust
D) Resulting trust
Answer: B – Inter vivos trust
Rationale: An inter vivos (living) trust is created during the settlor's lifetime.
, 6. A trust created by a will is called a:
A) Inter vivos trust
B) Testamentary trust
C) Revocable trust
D) Irrevocable trust
Answer: B – Testamentary trust
Rationale: A testamentary trust is created by a will and takes effect upon the settlor's death.
7. Which type of trust can be amended or revoked by the settlor?
A) Irrevocable trust
B) Revocable trust
C) Testamentary trust
D) Charitable trust
Answer: B – Revocable trust
Rationale: A revocable trust can be amended or revoked by the settlor during their lifetime.
8. In a spendthrift trust, the beneficiary:
A) Can freely transfer their interest
B) Cannot voluntarily or involuntarily transfer their interest
