VIEWS: 87 PAGES: 5 CATEGORY: Family and Estate Planning POSTED ON: 12/22/2012
A Trust is an entity which owns assets for the benefit of a third person (beneficiary). Trusts can be revocable or irrevocable. An irrevocable trust is an arrangement in which the grantor departs with ownership and control of property. Usually this involves a gift of the property to the trust. The trust then stands as a separate taxable entity and pays tax on its accumulated income. Trusts typically receive a deduction for income that is distributed on a current basis. Because the grantor must permanently depart with the ownership and control of the property being transferred to an irrevocable trust, such a device has limited appeal to most taxpayers.
Irrevocable Trust Agreement for Benefit of Trustor's Children and Grandchildren This Trust Agreement is made on (date), between (Name of Trustor), of (street address, city, county, state, zip code), hereinafter referred to as Trustor, and (Name of Trustee) of (street address, city, county, state, zip code), hereinafter referred to as Trustee. The Trustor, in consideration of the Agreements and undertakings set forth below made and assumed by the Trustee, and other valuable consideration, does assign, convey, and set over to the Trustee and the Trustee's successors the property listed and described in Schedule A, which is attached and incorporated by reference. The Trustee is authorized to and agrees that it will receive and hold that property and such additional property as may be transferred, assigned, or bequeathed to the Trustee from time to time by any person or organization, to become a part of the principal of the Trust created by this Agreement, and all investments and reinvestments of the same and income for the uses and Trusts set forth below. I. Initial Distribution. The Trustee shall promptly distribute $________ from the principal of the Trust Estate to each of Trustor's grandchildren who shall then be living, subject to postponement of possession as provided below. II. Division into Trusts for Children. After making or providing for the foregoing distributions, the Trustee shall promptly divide the Trust Estate into equal Trusts to provide one Trust for each child of the Trustor who is either then living or then deceased, leaving one or more descendants then living. Each Trust shall be held and disposed of as provided below. III. Children Trusts. If a child survives the Trustor, then commencing with the death of the Trustor the Trustee shall pay the income from his or her Trust in convenient installments, at least quarterly, to the child during his or her lifetime. The Trustee may also pay to the child such sums from the principal of his or her Trust as the Trustee deems necessary or advisable from time to time for his or her health and maintenance in reasonable comfort, considering his or her income from all sources known to the Trustee. IV. Division into Shares for Grandchildren. A. On the death of a child or on the death of the Trustor if the child is not then living, the Trustee shall divide the child's Trust into equal shares to create one share for each then living child of the child (referred to as a grandchild) and one share for the then living descendants, collectively, of each deceased child of the child (referred to as a deceased grandchild), or if there is no descendant of the child living at his or her death, the Trustee shall distribute the child's Trust per stirpes to the then living descendants of the Trustor, subject to postponement of possession as provided below, except that each portion otherwise distributable for whom a share of the Trust Estate is then held under this Agreement shall be added to that share. B. Each share created for the descendants of a deceased grandchild shall be distributed per stirpes to such descendants, subject to postponement of possession as provided below. Each share created for a living grandchild shall be held as a separate Trust and disposed of as provided below. V. Grandchildren’s Trusts. The income from a grandchild's share shall be paid in convenient installments, at least quarterly, to the grandchild until complete distribution of the share or his or her prior death. The Trustee may also pay to the grandchild such sums from the principal of his or her share as the Trustee deems necessary or advisable from time to time for his or her health, maintenance in reasonable comfort, education (including postgraduate education), and best interests, considering the income of the grandchild from all sources known to the Trustee. VI. Right of Withdrawal. After creation of a grandchild's share and after the grandchild has reached the age of (e.g., 25 years), he or she may withdraw any part or all of his or her share at any time or times. The Trustee shall make payment without question on the grandchild's written request. The right of withdrawal shall be a privilege which may be exercised only voluntarily and shall not include an involuntary exercise. VII. Power of Appointment. If a grandchild dies before receiving his or her share in full, then on the grandchild's death the principal and any accrued and undistributed income of his or her share shall be held in Trust or distributed to or in Trust for such appointee or appointees (including the estate of the grandchild), with such powers and in such manner and proportions as the grandchild may appoint by his or her will making specific reference to this power of appointment. VIII. Distribution to Descendants. On the death of a grandchild any part of the principal and accrued and undistributed income of his or her share not effectively appointed shall be distributed per stirpes to his or her then living descendants, or if none, then per stirpes to the then living descendants of the grandchild's parent who was a child of the Trustor, or if also none, then per stirpes to Trustor's then living descendants, subject to postponement of possession as provided below, except that each portion otherwise distributable to a descendant for whom a share of the Trust Estate is then held shall be added to that share. IX. Distribution to Minors. Each share of the Trust Estate which is distributable to a descendant who has not reached the age of (e.g., 21) years shall immediately vest in the descendant, but the Trustee shall (i) establish a custodianship for the descendant under a Uniform Transfers (or Gifts) to Minors Act, or (ii) retain possession of the share as a separate Trust until the descendant reaches the age of (e.g., 25 years), meanwhile paying to or for the benefit of the descendant so much or all of the income and principal of the share as the Trustee deems necessary or advisable from time to time for his or her health, maintenance in reasonable comfort, education (including postgraduate), and best interests, and adding to principal any income not so paid. X. Payments to Minors or Incompetents. If income or discretionary amounts of principal become payable to a minor or to a person under legal disability or to a person not adjudicated incompetent but who, by reason of illness or mental or physical disability, is in the opinion of the Trustee unable properly to manage his or her affairs, then such income or principal shall be paid or expended only in such of the following ways as the Trustee deems best: (i) to the beneficiary directly; (ii) to the legally appointed guardian or conservator of the beneficiary; (iii) to a custodian for the beneficiary under a Uniform Transfers (or Gifts) to Minors Act; (iv) by the Trustee directly for the benefit of the beneficiary; and (v) to an adult relative or friend in reimbursement for amounts properly advanced for the benefit of the beneficiary. XI. Spendthrift Provisions. The interests of beneficiaries in principal or income shall not be subject to the claims of any creditor, any spouse for alimony or support, or others, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered. This provision shall not limit the exercise of any power of appointment. XII. Accrued and Undistributed Income. Income received after the last income payment date and undistributed at the termination of any estate or interest shall, together with any accrued income, be paid by the Trustee as income to the persons entitled to the next successive interest in the proportions in which they take that interest. XIII. Common Fund; Merger of Trusts. For convenience of administration or investment, the Trustee may hold the several Trusts as a common fund, dividing the income proportionately among them, assign undivided interests to the several Trusts, and make joint investments of the funds belonging to them. The Trustee may consolidate any separate Trust with any other Trust with similar provisions for the same beneficiary or beneficiaries. XIV. Powers of Trustee A. The Trustee may retain any property (including stock of any corporate trustee under this Agreement or of a parent or affiliate company) originally constituting the Trust or subsequently added to it, although not of a type, quality, or diversification considered proper for Trust investments. B. The Trustee shall have power: 1. To invest and reinvest the Trust property in bonds, stocks, notes, or other property, real or personal, suitable for th
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