1. A trust is an arrangement by which property is transferred from one person to a trustee to be administered for the transferor’s or another party’s benefit.
2. The essential elements of a trust are a designated legatee
to receive the income or principal of the trust, a designated executor
to manage the trust, a fund sufficiently identified to enable benefits
to pass to the trustee, and actual intent
by the settlor to the trustee with the intention of passing title.
3. Another name for a living trust is:
a. excellent trust
b. nuncupative trust
c. inter vivos trust
d. life trust
4. An inter vivos trust is executed by a grantor at the end of his or her lifetime in his or her will.
5. Select the two types of living trusts.
a. Revocableb. Irrevocablec. Nuncupatived. Holographice. Retrievable
6. Match the term with the correct definition.
A trust created by will and which comes into existence upon the death of the settlorCharitable trust
A trust created to provide for the maintenance of a beneficiary by allowing her or him to receive only a certain portion of the total amount at any one timeInter vivos trust
A trust executed by a settlor during his or her lifetime, which may be revocable or irrevocableTestamentary trust
A trust designed for the benefit of a specific, but potentially unidentified, population of the public or for the public in general
7. A trust that arises by court order, typically when one party wrongfully takes title to property, is called a resulting
trust. Another trust created by court order when it is apparent that the parties intended for a trust to be created but some technical aspect was wrong, is called a resulting
8. A trustee’s specific duties include maintaining clear and accounts of the trust’s administration; furnishing and correct information to the beneficiary; keeping trust assets from personal assets; paying income to an income beneficiary at reasonable intervals; and limiting the risk of loss from investments by reasonable .
Fill in the blanks with words that would best complete the passage.
diversification financial complete perfect accurate separate regulated
9. A trustee is legally obligated to do all of the following except:
a. furnish complete and accurate information to beneficiaries
b. provide sound investment advice to beneficiaries
c. keep accurate accounts of the trust’s administration
d. act with honesty, good faith, and prudence while administering the trust
10. Typically, a trustee is able to manage the trust assets, or invest, with total discretion based on the trustee’s experience in investing as a default under state law.
11. Sometimes a trust provides for income to a beneficiary for life, and then the principal goes to a different beneficiary after the death of the first beneficiary. The general rule in allocating expenses is that extraordinary
expenses are chargeable to the income beneficiary and extraordinary
expenses are allocated to the principal beneficiary.
12. If a trust instrument does not provide for the termination of the trust, the death of either the trustee or the beneficiary will terminate the trust.