Cannon Trust School Level II Practice Exam 2026 – Complete Study Resource

The distribution approach being tested is about how much control the trustee has over paying beneficiaries. When distributions are discretionary, the trustee has the power to decide whether to distribute money or property, and when to do so, based on the trust terms and the beneficiary’s situation. This flexibility lets the trustee tailor decisions to needs, preservation of the trust, and other fiduciary considerations, while still acting in good faith and in the beneficiaries’ best interests. In contrast, non-discretionary distributions are fixed by the trust instrument and the trustee must make payments as specified, leaving little room for judgment.

An example helps: if the trust says the trustee “may distribute at their discretion,” that is discretionary; if it says the trustee “shall distribute $1,000 annually,” that is non-discretionary and mandatory. The correct choice captures the idea of the trustee’s freedom to decide whether to distribute, which is what discretionary distributions are all about.

The other options don’t fit because equal sharing is not the defining feature of discretion, non-discretionary distributions are not about withholding entirely but about following fixed terms, and discretionary distributions are not prohibited in trusts.