Paralegal Advanced Competency Exam (PACE) Practice Exam

In the context of a trust, who is a donor?

1. The individual who receives benefits from the trust

2. The person who donates property for the trust's benefit

3. A legal term for the executor of a will

4. A corporate entity that invests in trusts

The correct answer is: The person who donates property for the trust's benefit

In the context of a trust, the term "donor" refers specifically to the person who donates property or assets to establish the trust for the benefit of others. This person is also commonly known as the grantor or trustor. The donor's role is crucial as they are the one providing the funds or property that will be managed within the structure of the trust. The benefits derived from the trust will typically go to the beneficiaries, who are distinct from the donor. Without the donor's contribution, the trust would not exist, as its primary foundation is built upon the assets transferred by the donor for future management and allocation according to the terms outlined in the trust document. Understanding the role of the donor is essential in trust law, especially when it comes to questions of intent, control, and the distribution of trust assets, as well as tax considerations that may be applicable to the transfer of property into a trust.