Paralegal Advanced Competency Exam (PACE) Practice Exam

In the context of an irrevocable trust, who manages the trust property?

1. The Settlor

2. The beneficiaries

3. A trustee who is not the Settlor

4. State authorities

The correct answer is: A trustee who is not the Settlor

In the context of an irrevocable trust, the management of the trust property is entrusted to a trustee. The trustee is responsible for the administration of the trust according to the terms established by the settlor. Once the trust becomes irrevocable, the settlor relinquishes control over the assets placed in the trust and cannot alter its terms or reclaim the property. Therefore, the role of a trustee who is not the settlor becomes paramount, as this individual or entity manages the trust assets in the best interest of the beneficiaries, ensuring compliance with the trust's provisions and legal requirements. The other options are not appropriate in this context. The settlor, having created the trust, cannot manage the property once it is transferred to an irrevocable trust. Beneficiaries have a beneficial interest in the trust but typically do not participate in its management. State authorities generally do not manage trust properties unless there is a legal issue or if the trust requires court supervision, which is not the standard practice for the operation of an irrevocable trust.