CEA Trusts & Probate Administration

Question 1

What is a trust?

Accepted Answer

Legal arrangement for asset management

Answer

A trust is a legal arrangement where a grantor transfers assets to a trustee, who then holds and manages those assets for the benefit of designated beneficiaries. This structure provides a flexible and powerful tool for asset management and distribution. Trusts can offer advantages such as avoiding probate, providing privacy, and allowing for specific control over how and when assets are distributed.

Question 2

What is probate?

Accepted Answer

Legal validation of a will

Answer

Probate is the legal process that validates a deceased person's will and oversees the administration of their estate. During probate, a court confirms the will's authenticity, appoints an executor, and ensures that debts are paid and assets are distributed to the rightful heirs according to the will or state law. This process can be lengthy and public, which is why many estate plans aim to avoid it.

Question 3

Who is a trustee?

Accepted Answer

Trust manager

Answer

A trustee is an individual or institution legally appointed to hold and manage assets placed into a trust. Their primary responsibility is to administer the trust according to the specific instructions outlined by the grantor in the trust document. The trustee acts as a fiduciary, meaning they must always act in the best financial interests of the trust's beneficiaries.

Question 4

What is the purpose of probate administration?

Accepted Answer

Estate management and distribution

Answer

The purpose of probate administration is to legally manage and distribute a deceased person's estate under court supervision. This comprehensive process involves identifying and inventorying all assets, paying off any outstanding debts and taxes, and ultimately distributing the remaining assets to the rightful heirs or beneficiaries. It ensures that the deceased's wishes, as expressed in a will, are carried out, or that state law is followed if no will exists.

Question 5

What is a revocable trust?

Accepted Answer

Trust that can be changed by the grantor

Answer

A revocable trust, also known as a living trust, is a type of trust that the grantor can modify, amend, or completely revoke during their lifetime. This flexibility allows the grantor to retain control over their assets and make changes as their circumstances or wishes evolve. Upon the grantor's death, the trust typically becomes irrevocable and its assets are distributed according to its terms, often bypassing probate.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Trusts & Probate Administration