Paralegal Advanced Competency Exam (PACE) Practice Exam

What is the primary function of a Declaration of Trust?

1. To outline the responsibilities of a guardian

2. To establish a trust with a settlor as trustee

3. To declare bankruptcy

4. To settle disputes among beneficiaries

The correct answer is: To establish a trust with a settlor as trustee

The primary function of a Declaration of Trust is to establish a trust, where a settlor (the person creating the trust) designates a trustee (who may be the settlor themselves or another individual) to manage the assets of the trust for the benefit of designated beneficiaries. This legally binding document outlines the terms and conditions under which the trust operates, including the roles and responsibilities of the trustee, how the assets are to be managed, and the rights of the beneficiaries. It serves to formalize the intent of the settlor to create the trust and provides necessary legal clarity. Other options, while relating to various legal concepts, do not accurately describe the core function of a Declaration of Trust. The role of a guardian falls under family law and has no direct connection to the establishment of a trust. Declaring bankruptcy pertains to insolvency proceedings, distinctly separate from trust law. Lastly, while a Declaration of Trust may indirectly lead to the resolution of disputes by clarifying beneficiary rights and trustee duties, settling disputes is not its primary function.