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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Tools for Estate Planning

Mrs. Kapoor creates a private discretionary trust for her two grandchildren. Which statement about the roles in the trust is correct?

In a trust the settlor transfers the property, the trustee holds legal title and manages it in a fiduciary capacity, and the beneficiaries receive the benefits. The trustee does not own the property for personal gain.

  1. AThe settlor transfers the property, the trustee holds and manages it, and the beneficiaries receive the benefitCorrect
  2. BThe beneficiary holds legal title and manages the property while the trustee only receives benefits
  3. CThe settlor must be the sole beneficiary for the trust to be valid
  4. DThe trustee automatically becomes the owner of the property for personal benefit

Explanation

In a trust, the settlor (author) transfers property, the trustee holds legal title and manages it for the beneficiaries, who enjoy the benefit. The trustee does not hold the property for personal benefit.

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