AEP AEP Trust Administration & Management 2 — Questions and Answers
Question 1: A Special Needs Trust (SNT) is designed primarily to supplement benefits from which government programs without disqualifying the beneficiary?
- Medicare and Social Security retirement
- Medicaid and Supplemental Security Income (SSI) (Correct answer)
- Veterans benefits and SNAP
- CHIP and unemployment insurance
Correct answer: Medicaid and Supplemental Security Income (SSI)
An SNT supplements Medicaid and SSI benefits by holding assets for a disabled beneficiary without counting those assets as available resources for program eligibility.
Question 2: Which type of SNT is funded with assets belonging to the disabled beneficiary themselves, such as a personal injury settlement?
- Third-party SNT
- Pooled trust
- First-party (d)(4)(A) SNT (Correct answer)
- Testamentary SNT
Correct answer: First-party (d)(4)(A) SNT
A first-party SNT under 42 U.S.C. §1396p(d)(4)(A) is funded with the beneficiary's own assets and must include a Medicaid payback provision at death.
Question 3: A trustee discovers a trust document is silent on a specific administrative power needed to manage trust assets. Under the Uniform Trust Code, what is the trustee permitted to do?
- Petition the court for every action not expressly authorized
- Exercise any power that a prudent person would exercise given the trust's purpose (Correct answer)
- Refuse to act until the trust is amended
- Transfer assets to a custodial account until clarified
Correct answer: Exercise any power that a prudent person would exercise given the trust's purpose
The UTC grants trustees implied administrative powers that a prudent person would exercise to carry out the trust's purposes, even if not expressly listed in the document.
Question 4: A Charitable Remainder Unitrust (CRUT) differs from a Charitable Remainder Annuity Trust (CRAT) in that the CRUT pays the income beneficiary:
- A fixed dollar amount each year
- A fixed percentage of the trust's annually revalued assets (Correct answer)
- 100% of net income only
- Nothing until the charitable remainder is funded
Correct answer: A fixed percentage of the trust's annually revalued assets
A CRUT pays a fixed percentage of the trust's fair market value as revalued annually, so payments fluctuate with asset performance, unlike the fixed-dollar CRAT.
Question 5: Which document typically governs the administration of a revocable living trust during the grantor's incapacity?
- Durable power of attorney
- The trust agreement itself (Correct answer)
- A court-issued guardianship order
- A letter of instruction
Correct answer: The trust agreement itself
The trust agreement itself contains successor trustee provisions that automatically take effect upon the grantor's incapacity, enabling seamless administration without court intervention.
Question 6: A trust protector's primary role in a modern irrevocable trust is to:
- Replace the trustee on a quarterly basis
- Provide investment management services
- Hold certain powers to modify the trust to respond to changing law or circumstances (Correct answer)
- File the trust's annual tax returns
Correct answer: Hold certain powers to modify the trust to respond to changing law or circumstances
A trust protector holds reserved powers (such as to amend, decant, or change situs) to adapt the irrevocable trust to unforeseen changes in law or family circumstances.
AEP AEP Trust Administration & Management 2
A Special Needs Trust (SNT) is designed primarily to supplement benefits from which government programs without disqualifying the beneficiary?