Oregon 30-Hour Real Estate Law Practice Test

How is a land trust created according to Peter's intentions for his children?

1. By establishing a formal will

2. By Peter conveying the real estate to Tom

3. By creating a partnership agreement

4. By making a property deed transfer

The correct answer is: By Peter conveying the real estate to Tom

In the context of establishing a land trust, the correct approach involves the direct transfer of real estate to the trustee, who will manage the property on behalf of the beneficiaries—in this case, Peter's children. By conveying the real estate to Tom, who would act as the trustee of the land trust, Peter ensures that the property is held for the benefit of his children. This method aligns with typical practices in setting up land trusts, where the trustee holds title to the property and manages it according to the trust's terms, ultimately preserving the property for the intended beneficiaries. In contrast, creating a formal will does not establish a land trust; instead, it specifies the distribution of assets upon death. While a property deed transfer might seem relevant, it is not sufficient on its own to create a land trust unless it designates a trustee to manage and protect the interests of the beneficiaries. Similarly, a partnership agreement is unrelated to land trusts, as it pertains to business arrangements rather than the management and holding of real estate for individual beneficiaries. Thus, the transfer of real estate to Tom aligns directly with Peter's intent to manage and safeguard the property for his children's future.