Irrevocable Funded Life-Insurance Trust where Beneficiaries Have
Crummey Right of Withdrawal with First-to-Die Policy with Survivorship Rider
Trust agreement made ________________ (date) , between
________________________ (Name of Grantor 1) and ________________________
(Name of Grantor 2) , of _____________________________________________ (street
address, city, county, state, zip code) , hereinafter called the Grantors, and
________________________ (Name of Trustee) , of
_____________________________________________ (street address, city, county,
state, zip code) , hereinafter called the Trustee .
I. Purposes; Assets of Trust.
A. The Grantors create this Trust as a means by which assets, which may
include one or more policies of insurance on their lives, may be held for the
benefit of their family, on the terms and conditions set forth in this instrument. It is
the Grantors' intent in creating this Trust that all gifts made to this Trust be both
complete and gifts of present interests for federal gift-tax purposes, and that the
assets of this Trust, including any life-insurance proceeds, be excluded from the
Grantors' gross estates for federal estate tax purposes. All provisions of this
Trust shall be construed in such a manner as best to effect these intents.
B. The Grantors do now transfer to the Trustee property that may be listed in
Schedule A, attached to and by this reference made a part of this Trust, such
property to be held and administered according to the terms of this Trust. The
Grantors and anyone else may transfer additional property to the Trustee at any
time, whether during the lifetimes of the Grantors or after the death of the later of
them to die, to be held and administered according to the Trust's terms. The
Grantors retain no right, title, or interest in any Trust property. The Trustee may
refuse to accept any gift to a Trust under this instrument if the Trustee deems it
to be in the best interests of the Trust and its beneficiaries, and the Trustee may
accept it subject to one or more conditions imposed by the donor or the Trustee,
if the Trustee deems it to be in the best interests of the Trust and the
beneficiaries. No condition imposed on a gift and accepted by the Trustee may in
any way alter, amend, or change the rights of a beneficiary with respect to any
prior gifts.
II. Irrevocability. This Trust and all interests in it are irrevocable, and no Grantor
has any power to alter, amend, revoke, or terminate any Trust provision or interest,
whether under this Trustor any statute or other rule of law.
III. Annual Demand Power. The following demand powers shall exist with respect
to contributions to the Trust made while either or both of the Grantors are alive:
A. Immediately following any contribution to the Trust, each of the Grantors'
then-living children shall have the right to withdraw an amount equal to a
proportionate share of such contribution. Such proportionate share will be the
amount of such contribution, divided by the number of the Grantors' children
living at the time of the contribution. If any of the Grantors' children demands and
receives a distribution in excess of the amount authorized under this paragraph,
the Trustee shall immediately notify such child in writing, requiring the prompt
repayment of such excess amount. This demand power takes precedence over
any other power or discretion granted the Trustee or any other person.
B. With respect to the demand powers created under this Section III, the
following rules shall apply:
1. Each of the Grantors' then-living children can exercise this demand
power by a written request delivered to the Trustee. If any such child is
unable to exercise this demand power because of a legal disability, his or
her legally authorized personal representative, including (but not limited
to) a guardian, committee, or conservator, may make the demand on such
child's behalf, and if there be no such legally authorized personal
representative active, the Trustee will designate an appropriate adult
individual who may make the demand on such child's behalf. However, in
no event can either Grantor make the demand for any child, regardless of
their relationship.
2. The Trustee must reasonably notify the person who would exercise
a child's demand power of its existence and of any contributions made to
the Trust that are subject to the power. After receiving such notice at least
once, a competent adult beneficiary may waive further notice by an
instrument in writing delivered to the Trustee.
3. The maximum amount that any child of the Grantors may withdraw
with respect to all contributions made by the same donor during a single
calendar year shall be the lesser of the total amount of such contributions
and the amount of the federal gift-tax annual exclusion in effect on the
date of the earliest of such contributions. If a donor is married on the date
of a contribution, the alternative limitation based on the gift-tax annual
exclusion shall be two times the amount of the gift-tax annual exclusion.
4. Each beneficiary's unexercised right to withdraw a contribution shall
lapse on December 31 of each year (whether or not a contribution was
made in that year), to the extent of the greater of $5,000 or 5% of the
value of the Trust fund on that December 31. To the extent that a
withdrawal power does not lapse on a particular December 31, the
withdrawal power continues to be exercisable in all later years, subject to
the same lapse provisions. Withdrawal rights for contributions made in
December shall not lapse in the year when the contribution was made, but
shall continue to be exercisable in the following year or years.
5. The Trustee may satisfy a demand for a distribution by distributing
cash, other assets, or fractional interests in other assets, as the Trustee
deems appropriate. Without limiting the Trustee's power to select assets to
satisfy a demand, the Grantors prefer that cash or tangible assets be
distributed before life-insurance policies and intangible assets, unless the
Trustee decides that another selection is warranted.
6. Contribution means any cash or other assets transferred to the
Trustee to be held as part of the Trust funds and the payment of any
premiums on life-insurance policies owned (in whole or in part) by the
Trust. The amount of any contribution is its federal gift-tax value, as
determined by the Trustee at the time of the contribution.
IV. Distributions.
A. Until the death of the first of the Grantors to die, the Trustee will hold and
administer all Trust funds remaining after the exercise or lapse of the demand
power granted in Section III, and may use some or all of the Trust's net income
and principal to pay premiums on such policies of insurance on the lives of either
or both of the Grantors, as the Trustee deems appropriate. The Trustee shall add
to principal any income not so used. The Trustee may also pay to and among the
Grantors' children and more remote descendants (in whatever proportions the
Trustee deems appropriate), so much of the Trust principal and income
(including all or none) as the Trustee deems appropriate for any purpose;
provided, however, that no Trustee may make any payment for the benefit of any
individual which distribution would discharge the legal obligation of either Grantor
to support such individual. Furthermore, the Trustee will not use any Trust
income or principal in a manner that would give either Grantor any pecuniary
benefit.
B. Upon the death of the first of the Grantors to die, the Trustee shall set
aside as a separate Trust fund such of the Trust funds as are not applied to buy
additional insurance on the life of the surviving Grantor and which the Trustee
does not deem appropriate to retain for the payment of future premium costs on
such insurance. With respect to this separate fund, the Trustee shall, during the
administration under applicable state law of the estate of the first Grantor to die,
use the Trust funds, in the Trustee's discretion, to lend money to and buy assets
from such estate, on such terms and conditions as the Trustee deems to be in
the best interests of the Trust. The Trustee will not, however, make grants to the
estate of the first Grantor to die or otherwise distribute funds to anyone other
than as provided in this Section IV, except through bona fide loans or purchases,
it not being the Grantors' intent to make any persons the beneficiaries of this
Trust, except as specifically indicated under this instrument. Upon the termination
of the administration of the estate of the first Grantor to die, or upon such earlier
date as the Trustee determines that the purposes of this paragraph have been
effectuated, the Trustee will hold these Trust assets pursuant to the provisions of
Paragraph D.
C. If, upon the death of the first Grantor to die, the Trustee applies any
portion of the Trust funds to buy additional insurance on the life of the surviving
Grantor, then upon the death of the surviving Grantor, during the administration
of his or her estate under applicable state law, the Trustee will use such separate
Trust fund, including all proceeds of life-insurance policies received on account of
the death of the surviving Grantor, in the Trustee's discretion, to lend money to
and buy assets from such estate, on such terms and conditions as the Trustee
deems to be in the best interests of the Trust. The Trustee will not, however,
make grants to the estate of the surviving Grantor or otherwise distribute funds to
anyone other than as provided in this Section IV, except through bona fide loans
or purchases, it not being the Grantors' intent to make any persons the
beneficiaries of this Trust, except as specifically indicated under this instrument.
Upon the termination of the administration of the estate of the surviving Grantor,
or upon such earlier date as the Trustee determines that the purposes of this
paragraph have been effectuated, the Trustee will add these Trust funds to the
amounts held and administered pursuant to the provisions of Paragraph D, in
the same proportions and for the benefit of the same persons as if no amounts
had been held under the provisions of Paragraph D upon the death of the first
Grantor to die.
D. Upon the death of the later of the Grantors to die, after complying with the
provisions of Paragraph C, the Trustee shall divide the Trust funds into as many
separate equal shares as are required to provide one separate equal share for
each of the Grantor's then-living children and one separate equal share for the
then-living descendants, collectively, of each of the Grantor's deceased children
having a descendant then-living. After this division, the Trustee will then:
1. Distribute outright and free of Trust one separate equal share to
each of the Grantor's then-living children who has attained the age of
__________________ (age) years; and
2. Distribute outright and free of Trust, subject to the provisions of
Section VII, one separate equal share to the then-living descendants,
collectively, of each of the Grantor's deceased children, such descendants
to take per stirpes the share that their ancestor, such deceased child of
the Grantor, would have taken if living; and
3. Retain in a separate Trust the separate equal share for each of the
Grantor's then-living children who has not yet attained the age of
__________________ (age) years. With respect to each such separate
Trust, the Trustee will pay to such child of the Grantor so much of his or
her separate Trust's net income and principal (including all or none), as is
appropriate for such beneficiary's health, education, support, and
maintenance, adding to principal any undistributed Trust income. In
making these distributions, the Trustee shall use the Trust funds to assist
the Grantor's children, but not to support them when they are otherwise
capable of their own support, it being the Grantor's intent that these Trust
funds not deprive their children of the motivation to provide for themselves
and to make their own way in the world.
a. When such beneficiary later attains the age of
__________________ (age) years, the Trustee will distribute his or
her Trust funds (including any accumulated income) to such
beneficiary outright and free of trust.
b. If such beneficiary dies before attaining the age of
__________________ (age) years , the Trustee will distribute his
or her Trust funds (including any accumulated income) to such
beneficiary's then-living descendants, if any, per stirpes, or if such
beneficiary dies before attaining the age of __________________
(age) years without leaving then-living descendants, in equal
shares to the Grantor's other then-living children and the then-living
descendants of any of the Grantor's children who have previously
died, per stirpes, or to any then-continuing Trust for such children
or descendants created under this Section IV.
E. If all of the beneficiaries of any Trust created under this Section IV should
die before the Trust assets have vested in them, the Trustee will distribute all of
the remaining assets of each such Trust as follows:
1. One-half (or all, if there are no persons to take under item 2 below)
to the heirs and distributees who would have taken the estate of
__________________ (name of Grantor 1) and in such shares as they
would have taken it, had _______ (he/she) died unmarried and without a
valid will, determined on the later of the death of the last of such
beneficiaries to die or the death of __________________ (name of
Grantor 1) ; and
2. One-half (or all, if there are no persons to take under Item 1 above)
to the heirs and distributees who would have taken the estate of
__________________ (name of Grantor 2) and in such shares as they
would have taken it, had _______ (he/she) died unmarried and without a
valid will, determined on the later of the death of the last of such
beneficiaries to die or the death of __________________ (name of
Grantor 2) .
V. The Trustee.
A. __________________ (Name of Trustee) will be the initial Trustee of this
Trust.
B. Any Trustee may resign by giving written notice specifying the
resignation's effective date to each adult beneficiary of the current Trust income,
to a custodial parent of each minor beneficiary of current Trust income, and to
the legal guardian of any beneficiary of current Trust income having a legal
guardian, each determined at the time such notice is given. A corporation
authorized to render Trust services and having a net capital of at least
$ __________________ shall be named successor Trustee by majority vote of
the income beneficiaries, with the adult beneficiaries voting on their own behalf,
one vote being cast for each minor income beneficiary by his or her custodial
parent, and one vote being cast by the legal guardian for any beneficiary having
a legal guardian. For purposes of this Section V, the right to receive support
from the Trust is a right to current Trust income. Notwithstanding the foregoing, in
no event may either Grantor vote in the election of any Trustee or successor
Trustee.
C. No Trustee shall be required to obtain the order of any court to exercise
any power or discretion under this Trust. No Trustee shall be required to file any
accounting with any public official. The Trustee must, however, maintain accurate
records concerning the Trust. Each year, furthermore, the Trustee shall furnish
an annual accounting of the Trust's condition, including receipts and
disbursements, to each adult beneficiary of current Trust income, to a custodial
parent of each minor beneficiary of current Trust income, and to the legal
guardian of any beneficiary of current Trust income having a legal guardian, each
determined at the time such notice is given.
D. Each Trustee is entitled to compensation based on its published fee
schedule in effect at the time services are rendered.
E. A Trust's sole income beneficiary may unilaterally, and a Trust's multiple
income beneficiaries may by unanimous action, remove a corporate trustee if the
powers of the trustee would not increase the share of the Trust over which such
removing beneficiary or beneficiaries hold a general power of appointment for
federal estate tax purposes. Whoever may remove a corporate trustee may also
appoint as a successor corporate trustee any corporation authorized to render
Trust services and having a net capital of at least $ __________________ . A
power to remove a corporate trustee shall be exercised by a writing delivered to
the then-serving corporate Trustee, indicating the removal's effective date, the
name of the successor trustee, and the successor trustee's agreement to serve.
The minor and unborn descendants of an individual who are themselves income
beneficiaries shall vote on removal of a corporate trustee through a legally
appointed guardian, who may not be their ancestor who is himself or herself
named as an income beneficiary.
VI. Trustee’s Powers.
A. The Trustee is exclusively empowered to do the following:
1. To hold and retain all or any property received from any source,
without regard to diversification, risk, productivity, or the Trustee's
personal interest in such property in any other capacity, and to keep all or
part of the Trust property at any place within the United States or abroad.
2. To invest and reinvest the Trust funds (or leave them temporarily
uninvested), in any type of property and every kind of investment,
including (but not limited to) corporate obligations of every kind, preferred
or common stocks, securities of any regulated investment trust, and
partnership interests, including securities in any corporation that is serving
as Trustee.
3. To participate in the operation of any business or other enterprise,
and to incorporate, dissolve, or otherwise change the form of such
business.
4. To deposit Trust funds in any commercial savings or savings and
loan accounts, including accounts maintained with a corporate trustee.
5. To borrow money for any reasonable trust purpose and upon such
terms, including (but not limited to) interest rates, security, and loan
duration, as the Trustee deems advisable.
6. To lend Trust funds to such persons (including a Grantor's estate)
and on such terms, including (but not limited to) interest rates, security,
and loan duration, as the Trustee deems advisable; provided, however,
that the Trustee may not lend money to a Grantor's estate without
receiving adequate security and an adequate rate of interest.
7. To sell or otherwise dispose of Trust assets, including (but not
limited to) Trust real property, for cash or credit, at public or private sale,
and with such warranties or indemnifications as the Trustee deems
advisable.
8. To buy assets of any type from any person (including a Grantor's
estate), on such terms, including (but not limited to), cash or credit,
interest rates, and security, as the Trustee deems advisable; provided,
however, that the Trustee may not buy assets from a Grantor's estate
other than at their fair market value.
9. To improve, develop, manage, lease, or abandon any Trust assets,
as the Trustee deems advisable.
10. To hold property in the name of any custodian or nominee, without
disclosing this Trust, but the Trustee is responsible for the acts of any
custodian or nominee so used.
11. To pay and advance money for the Trust's protection and for all
expenses, losses, and liabilities sustained in its administration.
12. To prosecute or defend any action for the protection of the Trust,
the Trustee in the performance of its duties, or both, and to pay, contest,
or settle any claim by or against the Trustor the Trustee in the
performance of its duties.
13. To employ persons, even if they are associated with the Trustee, to
advise or assist the Trustee in the performance of its duties.
14. To determine what is principal or income and what items shall be
charged or credited to either.
15. To distribute Trust assets in kind or in cash.
16. To execute and deliver any instruments necessary or useful in the
exercise of any of these powers.
B. With respect to any life-insurance policies held as part of the Trust funds,
the Trustee shall hold and be authorized to exercise all incidents of ownership,
and the following special rules shall apply:
1. The Trustee may, in its discretion, pay any premiums or other
charges from Trust income or principal. If the Trust funds are inadequate
to pay such premiums or charges, the Trustee may, in its discretion, do
one or more of the following: (a) use any automatic premium loan feature;
(b) borrow against any policy cash reserves (whether or not on the policy
for which premium or charges will be paid); or (c) elect any automatic
nonforfeiture feature. The Trustee has no duty to do any of these unless it
has received specific written notice that a premium or charge has not been
paid.
2. Any additional insurance policies, no matter how acquired
(including, but not limited to acquisition by gift, conversion, reissue,
consolidation), should be listed on Schedule A, but failure to do so does
not affect the Trust's policy ownership.
3. The Trustee may, in its discretion, refuse to enter into or maintain
any litigation, endorse policy payments, or take other action respecting
any Trust insurance policies, until it has been indemnified against all
expenses and liabilities which, in its judgment, may be involved in such
action.
4. The Trustee need not inquire whether or not he or she or the Trust
has been designated the beneficiary of any insurance policy or other
death benefit, and the Trustee needs to act with respect to such policies
only after receipt of written notice that it or the Trust is a beneficiary.
5. The Trustee may exercise any option to purchase additional
insurance available to the Trustee, whether or not such option comes into
existence upon the death of a Grantor.
C. In making any payment to a minor or disabled beneficiary required or
permitted by any trust created under this instrument, the Trustee may make such
payments to or for the benefit of such beneficiary, or to his or her parent,
guardian, personal representative, or the person with whom he or she resides,
without having to look to the proper application of those payments. This
paragraph does not limit the Trustee's powers and must be construed to enable it
to give each beneficiary the fullest possible benefit and enjoyment of all of the
Trust income and principal to which such beneficiary is entitled.
VII. Interests Vesting in a Minor. If, when any trust created by this instrument ends,
any principal vests in absolute ownership in any minor beneficiary, the Trustee may, if
the Trustee deems it appropriate to do so, hold such interest in trust until the beneficiary
attains the age of __________________ (18/21) years, paying so much (including all or
none) of the Trust's net income and principal to the beneficiary as the Trustee deems
appropriate for the beneficiary's health, education, support, and maintenance, adding to
principal any undistributed income. The Trustee may make such payments to the
beneficiary, or to his or her parent, guardian, or the person with whom the beneficiary
resides, without having to look to the proper application of those payments. The Trustee
may also make any payments to a custodian (who may be the Trustee) under any
applicable Uniform Transfers to Minors Act. When the beneficiary attains the age
of __________________ (18/21) years, the Trustee will pay him or her all of the
remaining Trust funds and this Trust will end. If the beneficiary dies before attaining the
age of __________________ (18/21) years, the Trustee will pay all of such funds to the
beneficiary's estate. The authority conferred on the Trustee is a power only and will not
operate to suspend absolute vesting of any property in such beneficiary.
VIII. Spendthrift Limitations. To the greatest extent permitted by law, no interest of
any beneficiary of any Trust created under this instrument shall be subject to the
beneficiary's liabilities or creditor claims or to assignment or anticipation. If the Trustee
of any Trust created under this instrument believes that a beneficiary shall not benefit as
greatly from any distribution of Trust income or principal to such beneficiary because of
the availability of such distributed funds to the beneficiary's creditors, the Trustee shall
expend such funds for the benefit of such beneficiary, instead of distributing them to him
or her, it being the Grantors' intention to insulate all Trust funds from the claims of the
creditors of that Trust's beneficiaries, to the greatest extent possible under applicable
law. This Section VIII does not limit the Trustee's powers and must be construed to
enable the Trustee to give each beneficiary the fullest possible benefit and enjoyment of
all of the Trust income and principal to which he or she is entitled under this instrument.
IX. Rules Against Perpetuities. Notwithstanding anything in this instrument to the
contrary, all Trusts created under this instrument shall terminate and their funds be
distributed if all interests in such Trusts have not vested __________________
(number) years after the death of the last to die of those of the descendants of the
Grantors who shall have been alive on the date this Trust was created. Distribution
under this Section IX shall be made to the persons to whom the Trustee must or may
then pay the Trust's income, in proportion to their interests in Trust income or, if such
interests are indefinite, equally to such beneficiaries without regard to their relationship
to the Grantors. For purposes of this Section IX, any beneficiary entitled to receive
support is entitled to receive income.
Section X. Uneconomical. If, after the death of the later of the Grantors to die, any
trust created under this instrument ever shall have a fair market value of
$ __________________ or less, the Trustee may terminate such Trust and distribute the
Trust funds to the persons to whom the Trustee then must or may pay the Trust's
income, in proportion to their interests in Trust income or, if such interests are indefinite,
equally to such beneficiaries without regard to their relationship to the Grantor. For
purposes of this Section X, any beneficiary entitled to receive support is entitled to
receive income.
Section XI. Merger, Consolidation, and Division. For convenience of administration
or investment, the Trustee of any Trusts created under this instrument may:
A. Invest the assets of multiple trusts in a single fund, assigning them
undivided interests in such common fund, dividing the income proportionately
and accounting for them separately;
B. Merge or consolidate any trust created under this instrument together with
any other trusts having the same trustee and substantially the same dispositive
provisions; and
C. Divide any trust created under this instrument into two or more separate
trusts, each such trust to contain a fractional share of the assets of the Trust
before such division.
XII. Miscellaneous.
A. The Grantors are married to each other at the time this Trust is executed.
B. At the time this Trust is executed, the Grantors have ______________
(number) children: _____________________________________________
(names of children) . In all respects, child, children, and descendants include both
those now and subsequently born or legally adopted. A person in gestation who
is later born alive shall be treated as alive during the period of gestation for
purposes of determining (1) whether any person has died without leaving
descendants surviving him or her; (2) the right to distributions on the termination
of a Trust created under this instrument; and (3) any person's right to share in
required principal distributions, although for all other purposes such person's
rights accrue only from the date of birth.
C. Health, education, support, and maintenance shall be construed in such a
manner as to be an ascertainable standard for federal estate and gift-tax
purposes, such that the exercise, release, or lapse of a power which is limited by
this standard will not be taxable for federal estate and gift-tax purposes. In this
regard, support and maintenance are synonymous, shall not be limited to the
bare necessities of life, and shall be the same as support and maintenance in
reasonable comfort. Education shall include (but not be limited to) college and
professional education. Health shall include (but not be limited to) medical,
dental, hospital, and nursing expenses and expenses of invalidism. Unless
expressly indicated to the contrary elsewhere in this instrument, no Trustee shall
be required to consider a beneficiary's other readily available resources in
making a distribution for such beneficiary's health, education, support, and
maintenance.
D. All tax-related terms mean the same things in this Trust instrument as they
mean in the Internal Revenue Code of 1986, as amended.
E. There is only one signed original of this Trust. Anyone may rely on a copy
of the document as certified by a notary public or similar official to be a true copy
of the signed original (and of the amendments or other writings, if any, endorsed
on or attached to the same) to the same effect as if such copy were the signed
original. Anyone may rely upon any statement of fact certified by anyone who
appears from the original document or a certified copy of it to be a Trustee under
this Trust.
F. This Trust shall be governed by and construed according to the laws
of ________________________ (name of state) .
G. Whenever the context of this Trust requires, the masculine gender
includes the feminine and neuter, and vice versa, and the singular number
includes the plural, and vice versa.
WITNESS our signatures as of the day and date first above stated.
_____________________________
(Signature of Grantor 1)
________________________
(Printed Name of Grantor 1)
_____________________________
(Signature of Grantor 2
________________________
(Printed Name of Grantor 2)
_____________________________
(Signature of Trustee)
________________________
(Printed Name of Trustee)
(Acknowledgments) (Attachment of schedule)
