CRPC Practice Exam 2025 – Complete Test Prep Guide

Question: 1 / 660

What happens to funds in a secular trust in the event of bankruptcy?

The funds remain with the employee

In the context of a secular trust, the funds are designed to be set aside for the benefit of the employee, separate from the employer's assets. If an employer files for bankruptcy, the assets within a secular trust are generally protected, meaning that they do not become part of the bankruptcy estate.

This protection is what allows the funds to remain with the employee despite the employer's financial difficulties. The separation of these funds is crucial since it serves as a safeguard for employee benefits, ensuring that they are not accessible to the employer's creditors during bankruptcy proceedings. Thus, the funds in the trust will continue to belong to the employee, as they are held in a manner that isolates them from the employer's financial liabilities.

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The funds become available to creditors

The funds are transferred to the government

The funds are frozen indefinitely

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