Trust and Financial Advisor Certification Flashcards
7 cards from real CTFA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Trust and Financial Advisor Certification flashcards as text
A trustee discovers that the trust document requires annual accountings to beneficiaries, but none have been provided for three years. What is the trustee's immediate obligation?
Answer: Provide the overdue accountings promptly to cure the breach
A trustee must fulfill mandatory accounting obligations promptly; failure to do so constitutes a breach of the duty to inform and account, which must be remedied immediately.
Under the Uniform Trust Code, which standard governs a trustee's investment decisions when the trust is silent on investment authority?
Answer: Prudent investor rule requiring portfolio diversification and risk-return analysis
The Uniform Prudent Investor Act (adopted by most states) requires trustees to manage trust assets as a prudent investor would, considering overall portfolio risk and return.
A CTFA is advising a client with a special needs trust (SNT) for a disabled beneficiary. Which distribution would most likely disqualify the beneficiary from Medicaid?
Answer: Distribution of cash to the beneficiary's bank account
Cash distributions directly to an SNT beneficiary are counted as income and can disqualify them from means-tested government benefits like Medicaid.
When a corporate trustee receives a request from a beneficiary to delegate investment management to the beneficiary's preferred advisor, what fiduciary concern is most significant?
Answer: Whether delegating abdicates the trustee's non-delegable core fiduciary duties
While trustees may delegate certain investment functions, they cannot abdicate non-delegable duties such as overall supervision and accountability for the delegated function.
A decedent's estate includes a retirement account with no designated beneficiary. How is this asset typically treated?
Answer: Becomes a probate asset distributed under the will or intestacy laws
Without a named beneficiary, retirement account proceeds become part of the probate estate and are distributed according to the decedent's will or state intestacy laws.
In the context of CTFA ethics, what does 'duty of loyalty' most specifically require of a trust advisor?
Answer: Acting solely in the interest of the beneficiaries without conflicts of interest
The duty of loyalty requires fiduciaries to act exclusively in the best interest of the beneficiaries, avoiding self-dealing or conflicts of interest.
A trustee holds closely-held business stock representing 80% of the trust's value. Under the prudent investor rule, what is the trustee's most appropriate action?
Answer: Evaluate whether diversification is appropriate and document the analysis
The prudent investor rule requires trustees to review concentrated positions and determine whether diversification serves the beneficiaries' interests, even if the grantor originally contributed the asset.