CANNON TRUST SCHOOL I EXAM
2026/2027 – 300 PRACTICE
QUESTIONS & VERIFIED ANSWERS
WITH RATIONALES | COMPLETE
TEST BANK FOR CTFA PREP |
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Section 1: Trust Fundamentals, Creation & Types of Trusts
(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
Correct Answer: B. 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 under the Restatement (Third) of
Trusts. Options A, C, and D describe a contract, a statutory entity, and a partnership,
respectively—none capture the split-title fiduciary essence.
2. 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
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. Rationale: UTC Section 402 requires capacity, intent, ascertainable
beneficiary, and identifiable trust property (res). Notarization and recording are not
universal requirements for trust validity. A written instrument is sufficient in most
cases, and oral trusts may be valid for personal property in many states.
,3. Which of the following is the party who creates the trust and transfers
property into it?
A. Trustee
B. Beneficiary
C. Settlor (grantor/trustor)
D. Protector
Correct Answer: C. Rationale: The settlor (also called grantor or trustor) creates the
trust by transferring property to the trustee to hold for beneficiaries. The trustee holds
legal title; the beneficiary holds equitable title; the protector is an optional oversight
role.
4. In a trust relationship, who holds legal title to the trust property?
A. The beneficiary
B. The grantor
C. The trustee
D. The court
Correct Answer: C. Rationale: The trustee holds legal title to the trust property and
manages it for the benefit of the beneficiaries. The beneficiary holds equitable title; the
grantor transfers assets but does not retain legal title after the transfer (unless also
serving as trustee).
5. Who holds equitable title to trust property?
A. The trustee
B. The beneficiary
C. The grantor
D. The state
Correct Answer: B. Rationale: The beneficiary holds equitable (beneficial) title and has
the right to enforce the terms of the trust. The trustee holds legal title.
6. What is the trust corpus?
A. The document that creates the trust
B. The trust property or principal
C. The beneficiary's interest
D. The trustee's fee
Correct Answer: B. Rationale: The trust corpus (also called principal or res) is the
property held in trust. The document is the trust instrument; the beneficiary's interest is
equitable title; the trustee's fee is compensation for services.
7. A trust created by will that takes effect upon the testator's death is called:
A. Inter vivos (living) trust
B. Testamentary trust
C. Revocable trust
D. Charitable trust
Correct Answer: B. Rationale: A testamentary trust is created by will and does not take
,effect until the testator's death and the will is admitted to probate. It is supervised by
the probate court. Inter vivos trusts are created during lifetime; revocable refers to
amendability; charitable refers to purpose.
8. Which type of trust allows the settlor to revoke or amend the trust during his
or her lifetime?
A. Irrevocable trust
B. Revocable trust
C. Testamentary trust
D. Spendthrift trust
Correct Answer: B. Rationale: A revocable trust allows the settlor to revoke or amend
the trust during lifetime per UTC Section 602. The settlor retains significant control, and
trust assets are included in the settlor's gross estate for estate tax purposes and are
reachable by creditors. Irrevocable trusts cannot be amended; testamentary trusts are
irrevocable after death; spendthrift refers to beneficiary protection.
9. A settlor creates a trust for the benefit of "such of my grandchildren as shall
be living at my death." At the time of creation, the settlor has one grandchild.
Is this trust valid?
A. No, because beneficiaries must be identifiable at the time of trust creation
B. Yes, because the class of beneficiaries is ascertainable within the rule against
perpetuities
C. No, because the trust violates the rule against perpetuities
D. Yes, only if the grandchild consents
Correct Answer: B. Rationale: The trust is valid because the class of beneficiaries
(grandchildren living at the settlor's death) is ascertainable within the rule against
perpetuities. The class closes at the settlor's death (a life in being), and all members are
identifiable at that time. Beneficiaries need not be identified at creation, only
ascertainable within the perpetuities period.
10. 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 such a wish
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 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 treat
as precatory language insufficient to create a trust. Additionally, no property was ever
, transferred, so there is no trust res. UTC Section 402 requires both intent and trust
property.
11. A 62-year-old grantor establishes a revocable living trust and names his
eldest daughter as successor trustee. The grantor becomes incapacitated 18
months later. The daughter asks what authority she now holds over trust assets.
Which statement accurately describes her powers?
A. She may manage and distribute trust assets according to the trust terms without
court supervision
B. She must petition the probate court for a conservatorship before acting
C. She can only pay medical bills; all other distributions require beneficiary consent
D. She must liquidate all trust assets and hold proceeds in a court-monitored
account
Correct Answer: A. Rationale: A successor trustee of a revocable living trust steps into
the grantor's role upon incapacity and administers the trust per its terms without court
involvement. A conservatorship is unnecessary because the trust already provides
authority. The trustee's powers are not limited to medical expenses, nor is liquidation
required.
12. 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
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
individually titled brokerage account, and transfers them to the trust through probate.
Retirement plan assets pass outside the will, 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. Funding—including retitling and beneficiary
designations—is the most commonly failed step in revocable trust planning.
13. Under most state laws, a creditor of a grantor who funded an irrevocable
trust and retained no powers or benefits will:
A. Succeed because grantor-created trusts are always reachable by the grantor's
creditors
B. Succeed only if the debt existed before the trust was created
C. Fail only if the trust contains a spendthrift clause protecting the grantor
2026/2027 – 300 PRACTICE
QUESTIONS & VERIFIED ANSWERS
WITH RATIONALES | COMPLETE
TEST BANK FOR CTFA PREP |
INSTANT DOWNLOAD
Section 1: Trust Fundamentals, Creation & Types of Trusts
(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
Correct Answer: B. 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 under the Restatement (Third) of
Trusts. Options A, C, and D describe a contract, a statutory entity, and a partnership,
respectively—none capture the split-title fiduciary essence.
2. 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
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. Rationale: UTC Section 402 requires capacity, intent, ascertainable
beneficiary, and identifiable trust property (res). Notarization and recording are not
universal requirements for trust validity. A written instrument is sufficient in most
cases, and oral trusts may be valid for personal property in many states.
,3. Which of the following is the party who creates the trust and transfers
property into it?
A. Trustee
B. Beneficiary
C. Settlor (grantor/trustor)
D. Protector
Correct Answer: C. Rationale: The settlor (also called grantor or trustor) creates the
trust by transferring property to the trustee to hold for beneficiaries. The trustee holds
legal title; the beneficiary holds equitable title; the protector is an optional oversight
role.
4. In a trust relationship, who holds legal title to the trust property?
A. The beneficiary
B. The grantor
C. The trustee
D. The court
Correct Answer: C. Rationale: The trustee holds legal title to the trust property and
manages it for the benefit of the beneficiaries. The beneficiary holds equitable title; the
grantor transfers assets but does not retain legal title after the transfer (unless also
serving as trustee).
5. Who holds equitable title to trust property?
A. The trustee
B. The beneficiary
C. The grantor
D. The state
Correct Answer: B. Rationale: The beneficiary holds equitable (beneficial) title and has
the right to enforce the terms of the trust. The trustee holds legal title.
6. What is the trust corpus?
A. The document that creates the trust
B. The trust property or principal
C. The beneficiary's interest
D. The trustee's fee
Correct Answer: B. Rationale: The trust corpus (also called principal or res) is the
property held in trust. The document is the trust instrument; the beneficiary's interest is
equitable title; the trustee's fee is compensation for services.
7. A trust created by will that takes effect upon the testator's death is called:
A. Inter vivos (living) trust
B. Testamentary trust
C. Revocable trust
D. Charitable trust
Correct Answer: B. Rationale: A testamentary trust is created by will and does not take
,effect until the testator's death and the will is admitted to probate. It is supervised by
the probate court. Inter vivos trusts are created during lifetime; revocable refers to
amendability; charitable refers to purpose.
8. Which type of trust allows the settlor to revoke or amend the trust during his
or her lifetime?
A. Irrevocable trust
B. Revocable trust
C. Testamentary trust
D. Spendthrift trust
Correct Answer: B. Rationale: A revocable trust allows the settlor to revoke or amend
the trust during lifetime per UTC Section 602. The settlor retains significant control, and
trust assets are included in the settlor's gross estate for estate tax purposes and are
reachable by creditors. Irrevocable trusts cannot be amended; testamentary trusts are
irrevocable after death; spendthrift refers to beneficiary protection.
9. A settlor creates a trust for the benefit of "such of my grandchildren as shall
be living at my death." At the time of creation, the settlor has one grandchild.
Is this trust valid?
A. No, because beneficiaries must be identifiable at the time of trust creation
B. Yes, because the class of beneficiaries is ascertainable within the rule against
perpetuities
C. No, because the trust violates the rule against perpetuities
D. Yes, only if the grandchild consents
Correct Answer: B. Rationale: The trust is valid because the class of beneficiaries
(grandchildren living at the settlor's death) is ascertainable within the rule against
perpetuities. The class closes at the settlor's death (a life in being), and all members are
identifiable at that time. Beneficiaries need not be identified at creation, only
ascertainable within the perpetuities period.
10. 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 such a wish
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 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 treat
as precatory language insufficient to create a trust. Additionally, no property was ever
, transferred, so there is no trust res. UTC Section 402 requires both intent and trust
property.
11. A 62-year-old grantor establishes a revocable living trust and names his
eldest daughter as successor trustee. The grantor becomes incapacitated 18
months later. The daughter asks what authority she now holds over trust assets.
Which statement accurately describes her powers?
A. She may manage and distribute trust assets according to the trust terms without
court supervision
B. She must petition the probate court for a conservatorship before acting
C. She can only pay medical bills; all other distributions require beneficiary consent
D. She must liquidate all trust assets and hold proceeds in a court-monitored
account
Correct Answer: A. Rationale: A successor trustee of a revocable living trust steps into
the grantor's role upon incapacity and administers the trust per its terms without court
involvement. A conservatorship is unnecessary because the trust already provides
authority. The trustee's powers are not limited to medical expenses, nor is liquidation
required.
12. 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
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
individually titled brokerage account, and transfers them to the trust through probate.
Retirement plan assets pass outside the will, 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. Funding—including retitling and beneficiary
designations—is the most commonly failed step in revocable trust planning.
13. Under most state laws, a creditor of a grantor who funded an irrevocable
trust and retained no powers or benefits will:
A. Succeed because grantor-created trusts are always reachable by the grantor's
creditors
B. Succeed only if the debt existed before the trust was created
C. Fail only if the trust contains a spendthrift clause protecting the grantor
