Document Security Default Settings in Admin Settings

If the 'Replace rights on subfolder' is checked and 'Replace rights on existing files' checkbox is unchecked in 'Documents' tab under 'Admin Settings'.

Then, create a folder under 'Documents' object definition and open its properties.

Navigate to its 'Security' tab and observe that the settings saved in 'Admin Settings >> Documents' are set by default under 'Security' tab of 'Folder properties'.