Paralegal Advanced Competency Exam (PACE) Practice Exam

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What does a Declaration of Trust primarily involve?

Transferring property to a beneficiary
Creating a trust by a settlor
Obtaining a court order for distribution
Establishing a legal partnership

The correct answer is: Creating a trust by a settlor

A Declaration of Trust primarily involves the creation of a trust by a settlor. This legal document outlines the terms and conditions of the trust, including the roles of the trustee, the beneficiaries, and the property that will be managed within the trust. The settlor is the individual who establishes the trust, determining how the trust will be governed and how the assets will be allocated among the beneficiaries. In essence, the Declaration of Trust serves as a foundational element that delineates the intentions of the settlor and the framework for the management of the assets held in trust. In contrast, transferring property to a beneficiary focuses more on the distribution aspect rather than the establishment of the trust itself. Obtaining a court order for distribution pertains to judicial processes which are irrelevant to the initial creation of a trust. Lastly, establishing a legal partnership differs significantly from the concept of a trust, as partnerships involve an agreement between two or more parties to conduct business together, rather than the management of assets on behalf of beneficiaries.