Fill and Sign the Educational Trust Form

Attorney Name Attorney at Law Address Address Phone Number date Dear : As an attorney licensed to practice law in Virginia, I have personally prepared the irrevocable educational trust that is in your binder. An irrevocable education trust is designed to combine all the advantages and few of the disadvantages of other forms of trust providing for children and grandchildren of a grantor in their needs for college, university, or other post- high school educational needs. Frequently it is difficult to combine tax-free gifts for such purposes without losing control of the assets, or ensuring that the funds will be used for the intended purposes. Article II of the trust agreement deals with the right of withdrawal (called a “Crummey” power, based upon the I.R.S. case this power is based on) that your donee (beneficiary) will have under the trust with respect to donations made by you to the trust. When the grandchild is underage, he would have to withdraw the money via a guardian. Of course, it is anticipated that your grandchild will not exercise this right. Under current case law, the right of withdrawal given to your grandchild makes each donation to the trust a gift of a present interest. In other words, the donation is a gift that your grandchild can enjoy at the time the donation is made if they exercise their rights of withdrawal. This is important because only gifts of a present interest qualify for the annual exclusion from the federal gift tax. The annual exclusion allows each person to give $11,000 per year to each donee without any gift tax consequences. By including the right of withdrawal provisions in the trust agreement, the money you donate to the trust will qualify for the annual exclusion. You will not incur gift taxes on the donations unless the total donations in any one calendar year are greater than $11,000. If the amount of the gifts to the trust exceeds $11,000 per year, a gift tax return must be filed by the due date of your federal income tax return for the year the gift was made, including extensions. I have also enclosed two sample letters. The first is a letter from you to the Trustee indicating that you have made a transfer to the trust and that the transfer is a donation to the trust, subject to the right of withdrawal granted to your grandchild. You should use this sample as a guide and write a similar letter, then sign and date the letter and give it to the Trustee. The Trustee should retain the letter with the trust records. The letter should be dated and the transfer should occur after the execution of the trust agreement. The second letter which I have enclosed is a letter from the Trustee to your beneficiary (grandchild), informing him of his right to withdraw the donation to the trust for a period of 30 days. The Trustee should sign the letters, and each recipient should acknowledge receipt where indicated by signing and dating the letter. The signed and acknowledged letters should be kept with the trust records. The Trustee and donee/beneficiary may each keep a photocopy. I will assume, unless you request otherwise, that you will notify the Trustee of future donations to the trust, and that the Trustee will notify your grandchild of his right to withdraw a portion of such donations. The trust should be funded with the annual gift tax exclusion to the extent possible, and as often as annually. Also enclosed is Form SS-4, Application for Taxpayer Identification Number. This number is required for an irrevocable trust and is used for identification purposes. Please have the Trustee sign as Trustee where indicated and then file with the Internal Revenue Service. With best regards, Sincerely, Attorney Name Form: letter notifying trustee of donation [Date] [Name of Trustee] Trustee under Trust Agreement dated ________________ [Trustee's address] Dear YYY: You are hereby notified that I have made a donation to the irrevocable educational trust created by me dated _________________. Unless otherwise notified by me, these donations, including the initial transfer of the policies to the trust, are subject to the right of withdrawal granted under Article II of the trust agreement to my grandchild. To exercise the right of withdrawal as to any donation, the donee must give written notice to you, as Trustee, within thirty days after the later of (1) the donee receiving notice or otherwise having knowledge that the donation is made, and (2) the date of the donation. Sincerely, XXX [Name of Donee] [Date] Form: letter notifying beneficiary of right of withdrawal [Date] [Name of Donee and Address] Dear BBB: You are hereby notified that XXX has made a donation of $___________ to the trust created by her dated ______________. Each year she will be making donations to the trust for the benefit of your education. These donations are subject to the right of withdrawal granted to you as a donee under Article II of the trust agreement. To exercise the right of withdrawal as to any donation you must give written notice to the trustee within thirty days after the later of (1) receiving this notice or your otherwise having knowledge of the donation, and (2) the date of the donation. Your right to withdraw further donations will continue unless you are notified in writing that your right no longer exists. Please acknowledge receipt of this notice by signing the acknowledgment below and returning it to me. The copy is for your records. Sincerely, ________________________ YYY, Trustee Acknowledged: ________________________ BBB, Donee _____________________ Date: