Lesson 10

Question 1

Allocation of Benefits Rule

Answer 1

Trust accounting income is payable to the income beneficiary while trust capital
belongs to the remainder beneficiaries

Question 2

Allocation of Proceeds From Sale of Trust Assets Rule

Answer 2

Proceeds obtained from the sale of most trust assets are principal—i.e., become part of the trust capital account; no part thereof is apportionable to the income beneficiary

Question 3

Wasting Assets

Answer 3

A wasting asset is any property that is depletable or perishable through use

Question 4

Allocation of Burdens Rule

Answer 4

The general rule is that the trustee should pay the ordinary, current expenses of trust administration out of trust income, whereas expenses that are “extraordinary” or solely beneficial to the remainder beneficiaries should be paid from the capital account