Paralegal Advanced Competency Exam (PACE) Practice Exam

Question: 1 / 555

What does the capital of a trust refer to?

The total interest earned on the investments

The principal amount within the trust

The capital of a trust specifically refers to the principal amount within the trust. This principal is the original sum of money or assets that are placed into the trust and is intended to remain intact while the income generated from it is distributed according to the terms of the trust. The capital serves as the foundational asset that supports the trust's financial functions, including generating income for beneficiaries.

Understanding the distinction between capital and other financial components is essential. While other answers refer to aspects of financial returns or incomes, such as interest earned or dividends, these are derived from the capital itself, not the capital as a standalone concept. The capital remains the core asset that sustains the trust, making it a crucial element in trust administration and financial planning.

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The cash flow from rental properties

The dividends from corporate investments

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