How is a trust defined in the material?

• A. A testamentary trust or a lifetime trust
• B. A trust for the sole purpose of paying dividends
• C. A trust created by court decree
• D. A trust created during the grantor's lifetime

Answer: (A)

Trusts are legal arrangements where property is held by a trustee for the benefit of one or more beneficiaries. In the material, a trust can be created either by a will (testamentary trust) or during the grantor’s lifetime (inter vivos or lifetime trust). This broad definition is why the option that includes both testamentary and lifetime trusts is the best answer. A trust aimed only at paying dividends narrows the purpose too much, a trust created by court decree describes a different mechanism, and limiting creation to lifetime trusts omits those that arise at death.