Alabama Real Estate Practice Exam

What is the primary purpose of creating a trust for property management?

1. To avoid paying property taxes

2. To allow a trustee to manage the property for the benefit of a third party

3. For the trustor to maintain control over the property

4. To ensure the property sells quickly

The correct answer is: To allow a trustee to manage the property for the benefit of a third party

A trust is created to allow a trustee to manage the property for the benefit of a third party, also known as a beneficiary. This can be useful in situations where the trustor wants to ensure that their property is being managed and used in accordance with their wishes for the benefit of someone else. Option A is incorrect because creating a trust does not necessarily avoid property taxes, as the trust is considered a separate entity from the trustor and may still be subject to taxes. Option C is incorrect because by creating a trust, the trustor is relinquishing control of the property to the trustee. Option D is incorrect because the primary purpose of creating a trust is not to sell the property quickly, but rather to manage it for the benefit of a third party.