Funeral Trust Fund Management
Section 1: General Principles & Fiduciary Duties (1-15)
1. The primary fiduciary duty of a funeral trust fund manager is:
A) To maximize profits for the funeral home
B) To act in the best interest of the trust beneficiary (the contract purchaser) ✅
C) To minimize paperwork
D) To invest in high-risk stocks
2. A "fiduciary" is defined as:
A) A person who acts in their own interest
B) A person who holds a position of trust and must act in the best interest of
another ✅
C) A person with no responsibilities
D) A funeral home employee
3. Which of the following is a fundamental duty of a trustee?
A) Duty of loyalty and duty of care ✅
B) Duty to maximize their own compensation
C) Duty to commingle funds
D) Duty to ignore beneficiaries
4. The "duty of loyalty" requires the trustee to:
A) Act solely in the interest of the beneficiaries, not for personal gain ✅
B) Act in their own interest
C) Prefer the funeral home's interest
D) Ignore the trust terms
5. The "duty of care" requires the trustee to:
A) Act with reasonable care, skill, and caution ✅
B) Act recklessly
C) Invest in any asset regardless of risk
D) Avoid all investments
6. A trustee who breaches a fiduciary duty may be:
A) Personally liable for losses and subject to removal ✅
B) Protected from liability
C) Entitled to a bonus
D) Exempt from all penalties
7. Funeral trust funds must be held:
A) Separate from the funeral home's operating accounts ✅
, B) Commingled with the funeral home's operating account
C) In the funeral director's personal bank account
D) In cash under the trustee's desk
8. The primary goal of funeral trust fund management is to:
A) Preserve the principal and ensure funds are available to provide the contracted
funeral services ✅
B) Generate the highest possible returns regardless of risk
C) Allow the funeral home to use funds for operating expenses
D) Eliminate the need for trust funds
9. A trust fund manager must follow:
A) The terms of the trust agreement and applicable state laws ✅
B) Only their own judgment
C) Only the funeral home's instructions
D) No rules
10. The prudent investor rule requires:
A) Investment with reasonable care, skill, and caution, considering the purposes
and terms of the trust ✅
B) Speculative investments
C) All funds in a single volatile stock
D) No investment at all
11. Self-dealing by a trustee (e.g., lending trust funds to the funeral home) is
generally:
A) Prohibited as a breach of fiduciary duty ✅
B) Permitted with disclosure
C) Required by law
D) Encouraged
12. Funeral trust fund management is regulated primarily by:
A) State laws (funeral, banking, and trust codes) ✅
B) Federal law only
C) International treaties
D) Local zoning ordinances
13. The trust fund manager must maintain:
A) Accurate records of all trust transactions ✅
B) No records
C) Records only for tax purposes
D) Verbal records only
14. A conflict of interest occurs when:
A) The trustee has a personal interest that conflicts with the best interest of the
beneficiary ✅
B) The trustee follows the trust terms
Section 1: General Principles & Fiduciary Duties (1-15)
1. The primary fiduciary duty of a funeral trust fund manager is:
A) To maximize profits for the funeral home
B) To act in the best interest of the trust beneficiary (the contract purchaser) ✅
C) To minimize paperwork
D) To invest in high-risk stocks
2. A "fiduciary" is defined as:
A) A person who acts in their own interest
B) A person who holds a position of trust and must act in the best interest of
another ✅
C) A person with no responsibilities
D) A funeral home employee
3. Which of the following is a fundamental duty of a trustee?
A) Duty of loyalty and duty of care ✅
B) Duty to maximize their own compensation
C) Duty to commingle funds
D) Duty to ignore beneficiaries
4. The "duty of loyalty" requires the trustee to:
A) Act solely in the interest of the beneficiaries, not for personal gain ✅
B) Act in their own interest
C) Prefer the funeral home's interest
D) Ignore the trust terms
5. The "duty of care" requires the trustee to:
A) Act with reasonable care, skill, and caution ✅
B) Act recklessly
C) Invest in any asset regardless of risk
D) Avoid all investments
6. A trustee who breaches a fiduciary duty may be:
A) Personally liable for losses and subject to removal ✅
B) Protected from liability
C) Entitled to a bonus
D) Exempt from all penalties
7. Funeral trust funds must be held:
A) Separate from the funeral home's operating accounts ✅
, B) Commingled with the funeral home's operating account
C) In the funeral director's personal bank account
D) In cash under the trustee's desk
8. The primary goal of funeral trust fund management is to:
A) Preserve the principal and ensure funds are available to provide the contracted
funeral services ✅
B) Generate the highest possible returns regardless of risk
C) Allow the funeral home to use funds for operating expenses
D) Eliminate the need for trust funds
9. A trust fund manager must follow:
A) The terms of the trust agreement and applicable state laws ✅
B) Only their own judgment
C) Only the funeral home's instructions
D) No rules
10. The prudent investor rule requires:
A) Investment with reasonable care, skill, and caution, considering the purposes
and terms of the trust ✅
B) Speculative investments
C) All funds in a single volatile stock
D) No investment at all
11. Self-dealing by a trustee (e.g., lending trust funds to the funeral home) is
generally:
A) Prohibited as a breach of fiduciary duty ✅
B) Permitted with disclosure
C) Required by law
D) Encouraged
12. Funeral trust fund management is regulated primarily by:
A) State laws (funeral, banking, and trust codes) ✅
B) Federal law only
C) International treaties
D) Local zoning ordinances
13. The trust fund manager must maintain:
A) Accurate records of all trust transactions ✅
B) No records
C) Records only for tax purposes
D) Verbal records only
14. A conflict of interest occurs when:
A) The trustee has a personal interest that conflicts with the best interest of the
beneficiary ✅
B) The trustee follows the trust terms
