Arkansas State Board of Embalmers and Funeral Directors Service Laws, Rules, and Regulations (LRR) Practice Exam

Under what conditions can trustees disburse money from a trust fund?

1. Upon opening a new contract

2. Upon cancellation of the prepaid contract

3. Only during financial audits

4. At any time without restrictions

The correct answer is: Upon cancellation of the prepaid contract

Trustees are generally allowed to disburse money from a trust fund upon specific conditions that align with the purpose of the trust and the stipulations set forth in the trust agreement or prevailing laws. One of the most common and justifiable reasons for disbursement is when a prepaid contract is canceled. In this context, the funds that were allocated for future services under that contract can be released to the appropriate parties or returned to the trustor or beneficiaries, as necessary. This ensures that the trust is managed in a manner that serves the interests of the beneficiaries while adhering to any contractual obligations that may have been initially agreed upon. Trust funds are typically set up to cater to specific terms—the termination of a prepaid contract triggers a clear and legally recognized reason for disbursal. In contrast, opening a new contract or conducting financial audits typically does not provide justifiable grounds for immediate disbursement of funds from a trust. These actions may require different protocols and processes, and may not directly relate to the fiduciary duty of trustees to manage and safeguard the trust's assets. Additionally, unrestricted disbursement at any time would undermine the purpose of the trust, which is to ensure that funds are available when certain conditions or needs arise, thereby disregarding the financial