Q.1 What is a trust?
A type of contract for the sale of goods
A legal arrangement where one party holds property for another
A document granting power of attorney
A criminal liability for mismanagement of assets
Explanation - A trust is a legal arrangement in which the trustee holds property for the benefit of the beneficiaries.
Correct answer is: A legal arrangement where one party holds property for another
Q.2 Who creates a trust?
The trustee
The beneficiary
The settlor
The executor
Explanation - The settlor is the person who creates a trust and transfers property to the trustee for the benefit of beneficiaries.
Correct answer is: The settlor
Q.3 Which of the following is NOT a type of trust?
Express trust
Implied trust
Constructive trust
Derivative trust
Explanation - Derivative trust is not a recognized type of trust. Common types are express, implied, and constructive trusts.
Correct answer is: Derivative trust
Q.4 Who manages the trust property?
Settlor
Beneficiary
Trustee
Executor
Explanation - The trustee is legally responsible for managing the trust property in accordance with the trust terms.
Correct answer is: Trustee
Q.5 Which document typically governs the distribution of a deceased person's estate?
Trust deed
Will
Power of attorney
Contract
Explanation - A will is a legal document specifying how a person's estate should be distributed after death.
Correct answer is: Will
Q.6 What is a beneficiary in trust law?
Person who creates a trust
Person who manages the trust
Person entitled to benefit from the trust
Person who signs the trust deed
Explanation - A beneficiary is someone who has the right to benefit from the assets held in a trust.
Correct answer is: Person entitled to benefit from the trust
Q.7 What is the primary duty of a trustee?
To create a will
To act in the best interest of beneficiaries
To pay taxes for the settlor
To inherit the trust property
Explanation - The trustee has a fiduciary duty to act in the best interest of the beneficiaries and manage the trust prudently.
Correct answer is: To act in the best interest of beneficiaries
Q.8 Which type of trust is created by a will?
Inter vivos trust
Testamentary trust
Charitable trust
Constructive trust
Explanation - A testamentary trust is created by a will and comes into effect after the settlor's death.
Correct answer is: Testamentary trust
Q.9 Which of the following is a feature of an express trust?
Created by law without explicit declaration
Created intentionally by the settlor
Exists only in charitable purposes
Cannot be enforced by courts
Explanation - An express trust is deliberately created by the settlor, usually in writing or verbally.
Correct answer is: Created intentionally by the settlor
Q.10 What does 'fiduciary duty' mean in trust law?
Trustee must act in their own interest
Trustee must act in the beneficiary's interest
Beneficiary must act in the trustee's interest
Settlor must act in court proceedings
Explanation - Fiduciary duty requires the trustee to prioritize the interests of beneficiaries over their own interests.
Correct answer is: Trustee must act in the beneficiary's interest
Q.11 Which of the following is an example of a charitable trust?
Trust for paying debts of settlor
Trust to build a hospital
Trust for a family vacation fund
Trust to benefit only the settlor
Explanation - Charitable trusts are set up for public benefit, such as education, healthcare, or poverty relief.
Correct answer is: Trust to build a hospital
Q.12 What is the role of an executor?
To manage a living trust
To carry out the directions of a will
To draft a new trust
To act as a beneficiary
Explanation - An executor is appointed by a will to administer and distribute the deceased's estate according to the will.
Correct answer is: To carry out the directions of a will
Q.13 Which of the following can be held in trust?
Only real estate
Only money
Any form of property
Only stocks
Explanation - A trust can hold various types of property including real estate, money, stocks, or other assets.
Correct answer is: Any form of property
Q.14 Which is a primary characteristic of a testamentary trust?
Effective during the settlor’s lifetime
Created by a will
Cannot have a trustee
Automatically revokes after one year
Explanation - A testamentary trust is created by a will and takes effect upon the death of the settlor.
Correct answer is: Created by a will
Q.15 What is the doctrine of ‘resulting trust’?
Trust automatically created to benefit settlor
Trust created for charitable purposes
Trust only for minors
Trust that terminates after 5 years
Explanation - A resulting trust arises by operation of law to return property to the settlor or their estate when the trust fails or is incomplete.
Correct answer is: Trust automatically created to benefit settlor
Q.16 Which of the following best describes a ‘revocable trust’?
Cannot be changed once created
Can be altered or revoked by the settlor during lifetime
Created only for charitable purposes
Only for minors
Explanation - A revocable trust allows the settlor to change or revoke the trust at any time during their lifetime.
Correct answer is: Can be altered or revoked by the settlor during lifetime
Q.17 Which is true about an ‘irrevocable trust’?
Settlor can easily revoke it at any time
Cannot be revoked or modified without beneficiary consent
Exists only in corporate settings
Automatically ends on settlor’s death
Explanation - An irrevocable trust cannot be modified or revoked by the settlor without the consent of all beneficiaries.
Correct answer is: Cannot be revoked or modified without beneficiary consent
Q.18 Who benefits from a constructive trust?
Only the settlor
Beneficiary determined by court
Only charities
Only minors
Explanation - A constructive trust is imposed by law to prevent unjust enrichment, with beneficiaries determined by the court.
Correct answer is: Beneficiary determined by court
Q.19 What is the purpose of an estate plan?
To avoid paying taxes illegally
To manage and distribute assets after death
To prevent creating a trust
To write business contracts
Explanation - An estate plan outlines how a person’s assets will be managed and distributed upon death.
Correct answer is: To manage and distribute assets after death
Q.20 Which type of trust is imposed to prevent fraud or wrongdoing?
Express trust
Constructive trust
Resulting trust
Testamentary trust
Explanation - A constructive trust is imposed by courts to prevent unjust enrichment resulting from fraud or wrongdoing.
Correct answer is: Constructive trust
Q.21 In trust law, the term ‘corpus’ refers to:
The trustee
The assets held in trust
The beneficiaries
The will document
Explanation - The corpus is the property or assets that make up the trust.
Correct answer is: The assets held in trust
Q.22 Which of the following is a duty of a trustee?
To misappropriate funds
To invest prudently
To ignore the beneficiaries
To revoke the will
Explanation - A trustee has a duty to invest and manage the trust property prudently in the best interest of the beneficiaries.
Correct answer is: To invest prudently
Q.23 What happens if a trustee breaches their fiduciary duty?
Beneficiaries can take legal action
Trust automatically ends
Settlor becomes trustee
Trust becomes irrevocable
Explanation - If a trustee breaches fiduciary duty, beneficiaries may seek legal remedies including removal of the trustee and recovery of losses.
Correct answer is: Beneficiaries can take legal action