CEA Trusts & Probate Administration 3

Question 1

What is the 'prudent investor rule' as it applies to trustees?

Accepted Answer

Trustees must invest trust assets with reasonable care, skill, and caution considering the overall portfolio

Answer

The prudent investor rule requires trustees to make investment decisions that a prudent person would make considering risk, return, diversification, and the trust's purposes.

Question 2

In probate, what is a 'creditor's claim period'?

Accepted Answer

The statutory deadline by which creditors must file claims against the estate

Answer

State law sets a creditor's claim period — typically 3 to 6 months after notice — after which untimely claims are generally barred.

Question 3

A testamentary trust differs from a living trust because it:

Accepted Answer

Is created by a will and only takes effect at death

Answer

A testamentary trust is established within a will and does not come into existence until the testator dies and the will is admitted to probate.

Question 4

Which trust provision prevents a beneficiary's creditors from attaching trust distributions before the beneficiary receives them?

Accepted Answer

Spendthrift clause

Answer

A spendthrift clause restricts beneficiaries from assigning their interest and prevents creditors from reaching trust assets before distribution.

Question 5

What is 'ancillary probate'?

Accepted Answer

A secondary probate proceeding in a state where the decedent owned real property but was not domiciled

Answer

Ancillary probate is required in each state where a decedent owned real property, in addition to the primary (domiciliary) probate in the home state.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Trusts & Probate Administration 3