VIEWS: 148 PAGES: 7 CATEGORY: Family and Estate Planning POSTED ON: 7/17/2012
An Irrevocable Trust is a trust that can't be modified or terminated without the permission of the beneficiary. The trustor, having transferred assets into the trust, effectively removes all of his or her rights of ownership to the assets and the trust. After the insured’s death, the death benefit proceeds can be used to support the surviving spouse. The trustee may pay income or principal to the extent necessary for the health, maintenance and comfortable support of the spouse. The trust might also provide that the trustee may pay the trust income and principal to the insured’s children and/or grandchildren. This allows the trustee to spread the trust income among several taxpayers who may be taxed at lower tax brackets than the insured’s spouse. (It is important to note that distributions for the benefit of grandchildren may be subject to an additional tax, the generation-skipping tax, and must be appropriately planned for.) Upon the death of both the insured and the insured’s spouse, the trust can be divided into shares for the children, and distributed according to the terms of the trust.
Irrevocable Trust Funded by Life Insurance Trust Agreement made on (date), between (Name of Trustor), of (street address, city, county, state, zip code), hereinafter called Trustor, and (Name of Trustee, a banking corporation of the United States with its principal place to of (street address, city, county, state, zip code), hereinafter called Trustee. For and in consideration of the mutual promises set forth in this Agreement, Trustor and Trustee agree as follows: I. Trust Estate. Trustor transfers and delivers to Trustee the property described in Exhibit A (the Property), which is attached hereto and incorporated herein by reference. The receipt of the Property is acknowledged by Trustee. Also transferred and delivered by Trustor are the life- insurance policies on the life of Trustor, which policies are listed and described in Exhibit B, which is attached hereto and incorporated herein by reference. Receipt of the policies is acknowledged by Trustee. Trustor releases to Trustee all rights in the insurance policies described in Exhibit B. Such insurance policies, securities, and other Property set forth in Exhibits A and B, together with all insurance policies and other Property subsequently subject to this Trust, shall constitute the Trust Estate and shall be held, managed, administered, and distributed by Trustee as provided in this Agreement. II. Rights of Trustee in Polices. Trustee shall be vested with all rights, powers, options and privileges in and to the insurance policies that are or may become part of the Trust Estate, and may exercise any and all of such rights, powers, options, and privileges as fully as any owner of the policies might. Trustor shall execute any and all instruments necessary to permit Trustee to exercise any such rights, powers, options, or privileges. III. Payment of Premiums and Disposition during Trustor’s Lifetime. During the lifetime of Trustor, Trustee shall hold the insurance policies and shall hold, manage, invest, and reinvest such securities or other property, collect the income derived from them, and after payment of all proper charges and expenses, apply the income in the following manner: A. The net income of the Trust shall be applied to the payment of premiums and other charges on any and all insurance policies that are, or may become, part of the Trust Estate. B. Any net income in excess of the amount needed to pay the premiums and other charges during the year, if any, shall be accumulated and added to principal of the Trust Estate at the end of the year. C. Should the net income derived by Trustee be at any time insufficient to pay the premiums and other charges, Trustee shall promptly notify Trustor in writing of the amount necessary to pay the premiums and charges. If Trustor shall fail to advance sufficient funds for the same, Trustee may, but shall be under no obligation to, sell at public or private sale a sufficient portion of the principal of the Trust Estate to obtain the necessary funds to pay the premiums and charges, or to borrow on the collateral of the principal, or any part for such purpose as provided in this Agreement. If at any time the net income derived by Trustee, together with any sums furnished by Trustor, is insufficient to pay the premiums or other charges, Trustee shall be under no obligation to pay the premiums or other charges and shall not be liable to any extent whatsoever if any such premiums or other charges are not paid. Trustee is further authorized, but is not obligated, to surrender any insurance policies for their cash surrender value or to borrow on the policies and to make premium payments or payments of other charges from the funds so derived, or to convert any policy on which Trustee is unable, by reason of insufficient funds to pay the premiums or other charges, into a paid-up policy in whatever amount may be provided by the terms of the policy. IV. Collection of Insurance Proceeds. A. On the death of Trustor, Trustee shall take all necessary steps to collect the proceeds of any and all insurance policies in the Trust Estate, including double indemnity benefits if such are payable. In order to facilitate prompt collection of those sums, Trustee shall furnish the necessary proof of death to the respective insurance companies and is authorized and empowered to do any and all things that in Trustee's discretion are necessary to collect the proceeds, including, but not limited to, the power to execute and deliver releases, receipts, and all other necessary papers; the power to compromise or adjust any disputed claim in such manner as seems just; and the power to bring suit on any policy, the payment of which is contested by the insurer, and to pay the expenses of any such suit, including attorney's fees, from the principal of the Trust Estate or from any other insurance proceeds or from the net income, provided that Trustee shall be under no obligation to bring suit unless it is advisable in the opinion of Trustee's counsel and unless Trustee shall have either adequate funds with which to pay the expenses of the suit or indemnification to Trustee's satisfaction against any laws, liability, or expenses that may be incurred in bringing the suit. B. On the collection of the proceeds of any insurance policy in the Trust Estate, Trustee shall add such proceeds to the Trust Estate and shall hold, manage, invest, and reinvest the proceeds, collect the income, and pay and distribute the income and the principal in the manner provided in the following Section V. V. Disposition after Death of Trustor1. A. Upon the death of the Trustor (Name of Trustor), the Trustee shall pay to my wife, (Name of the Wife of Trustor), during her lifetime, all of the income of the Trust in periodic installments, the frequency of such payments to be determined by my said Wife, except that in no event shall such payments be made less frequently than annually. B. In the event the income from this Trust and the income of my said Wife from sources other than this Trust are insufficient to provide for her support, maintenance and medical needs, the Trustee in its discretion may pay to my said Wife out of the principal of the Trust such additional sum or sums as the Trustee shall deem necessary for such purposes. C. Upon the death of my said Wife, the entire remaining corpus and all accrued income of this Trust shall be turned over outright to, and divided equally between my two children, (Name of Child One) and (Name of Child Two), or if one of my said children should not be living, to the issue of such child or children, per stirpes. If one of my children should not be then living and there be no surviving issue of such child, then that child's share of corpus and accrued income shall be turned over to my other child, or his surviving issue, per stirpes. 1 This is just one of many ways that the proceeds of the insurance may pass to beneficiaries. D. Neither the principal nor the income of the Trust Estate, nor any part of same, shall be liable for the debts of any beneficiary hereunder, nor shall the same be subject to seizure by any creditor of any beneficiary hereunder, and no beneficiary hereunder shall have any power to sell, assign, transfer, or in any manner to anticipate or dispose of his or her interest in the Trust Estate, or any part of same, or the income produced from said Trust Estate or any part of same. VI. Additions to Trust. Trustor, and any other person, shall have the right at any time to add to this Trust any insurance policies on Trustor's life and any other property that is acceptable to Trustee. These policies and other property, when received and accepted by Trustee, shall become part of the Trust Estate. VII. Irrevocability of Trust. This Agreement and the Trust created by it shall be irrevocable, and shall not be altered, amended, revoked or terminated by Trustor or any other person. No part of the principal or income of the Trust shall ever revert to, or be used for, the benefit of Trustor, or be used to satisfy any legal obligations of Trustor. Trustor renounces for himself and his estate any interest, either vested or contingent, including any reversionary right or possibility of reverter, in the principal and income of the Trust, and any power to determine or control, by alteration, amendment, revocation, termination, or otherwise, the beneficial enjoyment of the principal or income of the Trust. VIII. Powers of Trustee. In addition to all other powers and discretions granted by law or by this Agreement, Trustee shall have the following powers and discretions, all of which shall be exercised in a fiduciary capacity: A. To collect, hold and retain an asset of the Trust received from a Trustor until, in the judgment of the Trustee, disposition of the assets should be made; and the assets may be retained even though they include an asset in which the Trustee is personally interested; B. To receive additions to the Estate of the Trust; C. To continue or participate in the operation of any business or other enterprise, and to effect incorporation, dissolution or other change in the form of the organization of the business or enterprise; D. To acquire an undivided interest in a Trust asset in which the Trustee, in any Trust
Pages to are hidden for
"Irrevocable Funded Life Insurance Trust"Please download to view full document