Cannon Trust School I Exam | Complete Certified
Questions and Correct Verified Answers |
2025/2026 Edition
Cannon Trust School I Comprehensive Exam Review | 2025/2026 Updated Edition | Includes
the full set of actual exam questions with correct, verified answers and detailed explanations |
Covers Fundamentals of Trust Administration, Introduction to Fiduciary Law, Basic Taxation of
Trusts, Trust Investments Principles, and Ethical & Professional Responsibilities.
Introduction
This document contains the complete graded A+ set of Cannon Trust School I exam questions
and answers, updated for the 2025/2026 testing cycle. Each answer is fully certified correct,
with in-depth reasoning based on current trust law, fiduciary principles, IRS tax guidance, and
Cannon curriculum content.
Answer Format
Each question is followed by the correct answer in bold green, with a detailed explanation,
relevant statutory or regulatory citations, and key application insights to prepare you for both
exam success and practical fiduciary work.
Cannon Trust School I Exam | 2025/2026 | Complete Q&A | Certified, Graded A+, and
Exam-Ready
1. What is the primary purpose of a trust?
a) To avoid all taxes
b) To manage and distribute assets according to the grantor’s wishes
c) To create a charitable organization
d) To hold life insurance policies only
b) To manage and distribute assets according to the grantor’s wishes
Rationale: A trust is a fiduciary arrangement where a trustee manages assets for beneficiaries as
per the grantor’s instructions, governed by the Uniform Trust Code (UTC §401). It ensures
assets are protected and distributed according to the grantor’s intent.
2. Who is the grantor of a trust?
a) The person who receives trust distributions
b) The person who creates and funds the trust
c) The person who manages trust assets
d) The person who oversees trust compliance
b) The person who creates and funds the trust
,Rationale: The grantor, also called the settlor, is the individual who establishes and funds the
trust, defining its terms (UTC §103(15)).
3. What is a trustee’s primary fiduciary duty?
a) To maximize trust income
b) To act in the best interests of the beneficiaries
c) To invest only in low-risk assets
d) To distribute all assets immediately
b) To act in the best interests of the beneficiaries
Rationale: UTC §801 requires trustees to administer the trust in good faith, prioritizing the
beneficiaries’ interests, known as the duty of loyalty.
4. What is a revocable trust?
a) A trust that cannot be changed or terminated
b) A trust that the grantor can modify or revoke
c) A trust that distributes all assets upon creation
d) A trust only for charitable purposes
b) A trust that the grantor can modify or revoke
Rationale: A revocable trust allows the grantor to amend or terminate it during their lifetime,
offering flexibility (UTC §602).
5. How is income from a non-grantor trust taxed?
a) Taxed only to the grantor
b) Taxed to the trust or beneficiaries, depending on distributions
c) Tax-exempt
d) Non-reportable
b) Taxed to the trust or beneficiaries, depending on distributions
Rationale: In a non-grantor trust, income retained by the trust is taxed to the trust, while
distributed income is taxed to the beneficiaries (IRC §661-662).
6. What is the role of a beneficiary in a trust?
a) To manage trust assets
b) To receive distributions as per trust terms
c) To create the trust document
d) To oversee trustee actions
b) To receive distributions as per trust terms
Rationale: Beneficiaries are entitled to receive distributions from the trust according to its terms
(UTC §103(3)).
7. What is the Uniform Prudent Investor Act (UPIA)?
a) A law governing trust taxation
b) A standard for prudent trust investment management
c) A rule for trust termination
d) A regulation for trust creation
b) A standard for prudent trust investment management
, Rationale: The UPIA provides guidelines for trustees to manage investments prudently,
balancing risk and return (UPIA §2).
8. What is a spendthrift trust?
a) A trust requiring immediate distributions
b) A trust protecting assets from beneficiary creditors
c) A trust for charitable purposes
d) A trust for life insurance only
b) A trust protecting assets from beneficiary creditors
Rationale: A spendthrift trust includes a clause preventing beneficiaries from assigning trust
interests to creditors (UTC §502).
9. What is the trustee’s duty of impartiality?
a) To favor the grantor’s interests
b) To treat all beneficiaries fairly
c) To invest only in low-risk assets
d) To distribute all income annually
b) To treat all beneficiaries fairly
Rationale: UTC §803 requires trustees to act impartially, balancing the interests of all
beneficiaries, such as income and remainder beneficiaries.
10. What form is used to report a trust’s income?
a) Form 1040
b) Form 1041
c) Form 1099
d) Form 3520
b) Form 1041
Rationale: Non-grantor trusts file Form 1041 to report income, deductions, and distributions
(IRC §6012).
11. What is an irrevocable trust?
a) A trust that can be changed by the grantor
b) A trust that cannot be modified or revoked
c) A trust that distributes all assets immediately
d) A trust only for charitable purposes
b) A trust that cannot be modified or revoked
Rationale: An irrevocable trust cannot be altered or terminated by the grantor once established,
offering tax and asset protection benefits (UTC §602).
12. What is the purpose of a trust’s governing instrument?
a) To outline investment strategies
b) To define the trust’s terms and administration
c) To appoint a successor trustee
d) To distribute all assets
b) To define the trust’s terms and administration
Questions and Correct Verified Answers |
2025/2026 Edition
Cannon Trust School I Comprehensive Exam Review | 2025/2026 Updated Edition | Includes
the full set of actual exam questions with correct, verified answers and detailed explanations |
Covers Fundamentals of Trust Administration, Introduction to Fiduciary Law, Basic Taxation of
Trusts, Trust Investments Principles, and Ethical & Professional Responsibilities.
Introduction
This document contains the complete graded A+ set of Cannon Trust School I exam questions
and answers, updated for the 2025/2026 testing cycle. Each answer is fully certified correct,
with in-depth reasoning based on current trust law, fiduciary principles, IRS tax guidance, and
Cannon curriculum content.
Answer Format
Each question is followed by the correct answer in bold green, with a detailed explanation,
relevant statutory or regulatory citations, and key application insights to prepare you for both
exam success and practical fiduciary work.
Cannon Trust School I Exam | 2025/2026 | Complete Q&A | Certified, Graded A+, and
Exam-Ready
1. What is the primary purpose of a trust?
a) To avoid all taxes
b) To manage and distribute assets according to the grantor’s wishes
c) To create a charitable organization
d) To hold life insurance policies only
b) To manage and distribute assets according to the grantor’s wishes
Rationale: A trust is a fiduciary arrangement where a trustee manages assets for beneficiaries as
per the grantor’s instructions, governed by the Uniform Trust Code (UTC §401). It ensures
assets are protected and distributed according to the grantor’s intent.
2. Who is the grantor of a trust?
a) The person who receives trust distributions
b) The person who creates and funds the trust
c) The person who manages trust assets
d) The person who oversees trust compliance
b) The person who creates and funds the trust
,Rationale: The grantor, also called the settlor, is the individual who establishes and funds the
trust, defining its terms (UTC §103(15)).
3. What is a trustee’s primary fiduciary duty?
a) To maximize trust income
b) To act in the best interests of the beneficiaries
c) To invest only in low-risk assets
d) To distribute all assets immediately
b) To act in the best interests of the beneficiaries
Rationale: UTC §801 requires trustees to administer the trust in good faith, prioritizing the
beneficiaries’ interests, known as the duty of loyalty.
4. What is a revocable trust?
a) A trust that cannot be changed or terminated
b) A trust that the grantor can modify or revoke
c) A trust that distributes all assets upon creation
d) A trust only for charitable purposes
b) A trust that the grantor can modify or revoke
Rationale: A revocable trust allows the grantor to amend or terminate it during their lifetime,
offering flexibility (UTC §602).
5. How is income from a non-grantor trust taxed?
a) Taxed only to the grantor
b) Taxed to the trust or beneficiaries, depending on distributions
c) Tax-exempt
d) Non-reportable
b) Taxed to the trust or beneficiaries, depending on distributions
Rationale: In a non-grantor trust, income retained by the trust is taxed to the trust, while
distributed income is taxed to the beneficiaries (IRC §661-662).
6. What is the role of a beneficiary in a trust?
a) To manage trust assets
b) To receive distributions as per trust terms
c) To create the trust document
d) To oversee trustee actions
b) To receive distributions as per trust terms
Rationale: Beneficiaries are entitled to receive distributions from the trust according to its terms
(UTC §103(3)).
7. What is the Uniform Prudent Investor Act (UPIA)?
a) A law governing trust taxation
b) A standard for prudent trust investment management
c) A rule for trust termination
d) A regulation for trust creation
b) A standard for prudent trust investment management
, Rationale: The UPIA provides guidelines for trustees to manage investments prudently,
balancing risk and return (UPIA §2).
8. What is a spendthrift trust?
a) A trust requiring immediate distributions
b) A trust protecting assets from beneficiary creditors
c) A trust for charitable purposes
d) A trust for life insurance only
b) A trust protecting assets from beneficiary creditors
Rationale: A spendthrift trust includes a clause preventing beneficiaries from assigning trust
interests to creditors (UTC §502).
9. What is the trustee’s duty of impartiality?
a) To favor the grantor’s interests
b) To treat all beneficiaries fairly
c) To invest only in low-risk assets
d) To distribute all income annually
b) To treat all beneficiaries fairly
Rationale: UTC §803 requires trustees to act impartially, balancing the interests of all
beneficiaries, such as income and remainder beneficiaries.
10. What form is used to report a trust’s income?
a) Form 1040
b) Form 1041
c) Form 1099
d) Form 3520
b) Form 1041
Rationale: Non-grantor trusts file Form 1041 to report income, deductions, and distributions
(IRC §6012).
11. What is an irrevocable trust?
a) A trust that can be changed by the grantor
b) A trust that cannot be modified or revoked
c) A trust that distributes all assets immediately
d) A trust only for charitable purposes
b) A trust that cannot be modified or revoked
Rationale: An irrevocable trust cannot be altered or terminated by the grantor once established,
offering tax and asset protection benefits (UTC §602).
12. What is the purpose of a trust’s governing instrument?
a) To outline investment strategies
b) To define the trust’s terms and administration
c) To appoint a successor trustee
d) To distribute all assets
b) To define the trust’s terms and administration
