How To Setup An Irrevocable Trust

By: Ramon De Leon

Overview

An irrevocable trust can be a versatile legal arrangement used for tax-sheltering, protecting assets and other purposes. Irrevocable trusts are legal entities operated according to a trust agreement which is followed by the trustee. Irrevocable trusts cannot be modified, amended or terminated, except in very limited circumstances. Assets transferred into a irrevocable trust become the property held in trust for the beneficiaries. The person creating the trust loses control and possession of the asset. /media/insert-embed/dropbox

Download Example Trust Agreement: https://www.dropbox.com/scl/fi/m13lbkcnx9c24e533720u/Trust-Agreement-ExecutedExample.docx?dl=0

Step-by-step

1. Plan the purpose and scope of the irrevocable trust. Because an irrevocable trust contains important legal rights, it must be thought out and carefully planned, with the

understanding that any asset transferred into the trust is no longer yours to own or control. 2. Choose a trustee. This might be a close friend or commercial entity, such as a trust company. Note that commercial entities charge fees for their services. 3. Prepare an irrevocable trust agreement. This is a legal document that creates the trust.

Templates are available, but they should only be used as a guide. The specific terms of the trust must be tailored to your individual needs. 4. Obtain a taxpayer identification number for the trust from the Internal Revenue Service.

As a separate legal entity, your trust must account for any income it earns through interest on investments or additions of assets. 5. Check your state laws for specific requirements, such as the need to register the trust with the district court. Comply as necessary. 6. Transfer the assets into the trust. Transferring assets might require additional legal documents such as deeds for real estate transfers or a written acknowledgement.

Tip: Good trustee's must have the mindset of mission first, troop welfare second. Responsibility is a duty that cannot be abdicated from.

Sample Trust Agreement Template Language

This TRUST AGREEMENT (the "Agreement"), made this [ N] day of [ MONTH], [ YEAR] (the "Effective Date"), is executed by and between the following parties:

1. [NAME OF TRUSTOR], of legal age and a citizen of [ STATE/COUNTRY], currently residing in [ SPECIFY RESIDENTIAL ADDRESS] (the "Trustor"); and

2. [NAME OF TRUSTEE], of legal age and a citizen of [ STATE/COUNTRY], currently residing in [ SPECIFY RESIDENTIAL ADDRESS] (the "Trustee").

WHEREAS, the Trustor is the owner of several assets legally made and attached to their name, and wishes to transfer the said assets to the Trustee for the future use of the Trustor's legal successors and/or assigns in the event of the Trustor's death or disability

WHEREAS, the Trustee acknowledges and accepts the responsibilities of administering the Trustor's assets by establishing a trust in the name of the Trustor (the "Trust") and acting as the Trustor's legal trustee in relation to the assets covered in this Agreement

NOW, THEREFORE, in light of all the foregoing premises and acknowledgments, and for all other good and valuable consideration, the Trustor and the Trustee hereby accept to be bound by the following terms and conditions:

THE TRUST

1. Establishment of the Trust: On the Effective Date, the Trustor assigns, transfers, and delivers to the Trustee the assets listed in Annex A (hereinafter referred to as the "Trust

Assets") for the purposes stated herein. The Trustee is only connected with the Trust in relation to the administration and maintenance of the Trust Assets.

2. Purpose of Trust: The Trustee acknowledges that the Trustor has established this Trust for the purpose of maintenance and safekeeping of the Trust Assets for the future use of any legal beneficiary that the Trustor expressly indicates in this Agreement.

3. Legal Beneficiaries: Subject to any future changes, the Trustor will provide a list of all the persons and parties who will be entitled to claim their respective share of the Trust

Assets according to the schedule of distribution stated in this Agreement. The list of all

Legal Beneficiaries, including their respective share distribution schedules, is attached to this Agreement as Annex B.

4. INature of Trust: This Agreement establishes a [ SPECIFY IF TESTAMENTARY, INTER VIVOS, REVOCABLE, OR IRREVOCABLE] trust. [INSERT FOLLOW-UP STATEMENT AS PROVIDED BELOW]

For Testamentary Trust: The Trust Assets will only be distributed to the Legal Beneficiaries after the Trustor's death.

For Inter Vivos Trust: Upon the Effective Date, the distribution of the shares of the Trust Assets to their respective Legal Beneficiaries will commence in accordance with the distribution schedule in Annex B.

For Revocable Trust: The administration of the Trust will commence in accordance with the distribution schedule. The Trustor reserves the right to reclaim the Trust Assets upon the Trustor's request and/or to ultimately revoke the Trust.

For Irrevocable Trust: Once this Agreement is effective, the Trustor will not have the right to reclaim the Trust Assets, whether in part or in full.

5. Ownership of the Trust Assets. Upon the activation of the Trust, the Legal Beneficiaries will automatically become the legal owners of the Trust Assets. However, the Legal

Beneficiaries will only be entitled to the Trust to the extent of claiming and benefiting

from their own respective shares. The Legal Beneficiaries also absolutely have no right to the administration of any part of the Trust, including their own shares of the Trust Assets. The Trustee will not be entitled to any share of the Trust Assets unless expressly provided for in this Agreement.

6. Additional Assets. The Trustor reserves the right to add any cash or property to the Trust, by way of a deed or a will. Any additional asset added to the Trust will be deemed part of the Trust Assets and, as such, will be governed by the same terms and conditions provided for in this Agreement. The Trustee agrees to administer all such additional assets in the same manner as the existing Trust Assets under this Agreement.

THE TRUSTEE

1. Rights and Responsibilities. In performing his/her fiduciary duties to the Trust and for the full benefit of the Legal Beneficiaries named herein, the Trustee reserves the right to and is responsible for:

1. Holding and maintaining the Trust Assets as an investment and further investing and/or reinvesting in any property or securities for the purpose of maintaining the Trust and the Trust Assets

1. Renting, leasing, selling or exchanging any of the Trust Assets for appropriate and fair prices or with other properties with a fair value within a given period of time in order to maintain the Trust Assets in a condition that will be most beneficial to the Legal

Beneficiaries

1. Maintaining the Trust Assets in good condition and making all the necessary repairs and improvements that will keep or raise the value of the Trust Assets

1. Using a reasonable amount from the Trust Assets for the purpose of paying all the necessary and appropriate expenses in relation to the administration and operation of the Trust and the Trust Assets, including the Trustee's administrative fees, legal, accounting, business counseling fees, and to determine how to apportion such expenses properly

1. Entering into or approving the transactions with other persons and parties (e.g. the consolidation, establishment, liquidation, merger, readjustment or reorganization of or with a company, corporation or association), which the Trustee deems to be beneficial to the Trust

1. Voting upon all securities belonging to the Trust and representing the Trust in stockholders' agreements that the Trustee deems beneficial for the Trust's securities

1. Loaning from any creditor any amount of money for the purpose of the Trust and securing the payment of such loan through a mortgage, a security interest or a pledge of encumbrance against any part of the Trust Assets

1. Executing a power of attorney for an agent or attorney-in-fact in order for the same to carry out any of the Trustee's authorized powers and duties

1. Lending money from the Trust to any person or party, the returns of which may be deemed by the Trustee as beneficial for the Trust, the Trust Assets, and their respective

Legal Beneficiaries

1. Engaging in business (as a sole proprietor, or as a general or limited partner) and exercising customary powers when fulfilling such given role in a business

1. Arbitrating, compromising, defending, or settling any claim or demand for or against the

Trust and/or any of the Trust Assets

1. Freely acting for the purpose of this Agreement, subject to the terms and conditions herein, in relation to the Trust, the Trust Properties, the Legal Beneficiaries, and all other subjects concerning this Agreement

2. Exercise of Powers: The Trustee may exercise certain rights and perform the responsibilities in whole or in part from time to time, as deemed appropriate and as required by law.

3. Value of Trust Assets: The Trustee agrees to place into transaction any of the Trust Assets without compromising the overall value of each Trust Asset. The Trustee further agrees that an adequate consideration of money should be placed for or against the Trust Assets that are placed in any transaction. The Trustee will be responsible for making an accurate valuation of the Trust. Such valuation must be declared in a written statement and delivered to the Trustor every [ DATE] of the year commencing after the completion of the first year of this Agreement. In the case of the death or disability of the Trustor, such statement of Trust valuation will be furnished to the Beneficiaries or any such person assigned by the Trustor. The absence of any objection from the recipients of the valuation statement will render such statement as conclusive and irrevocable. All copies of such valuation documents will be included in the Trust's books of records and accounting.

4. Principal and Income: The Trustee acknowledges that in the event that any of the Trust

Assets are placed in transactions where income is expected to return on top of their principal values, the principal and the income earned for each Trust Asset will be computed accordingly, and then distributed to the Legal Beneficiaries as per the schedule in Annex B.

5. Records and Inspection: The Trustee agrees to maintain fully accurate books of account and records of receipts and disbursements and other financial transactions in relation to the Trust and the Trust Assets. All such records will be made according to generally accepted accounting principles and be maintained in confidentiality and in usable and readable condition. The Trustee agrees to make available any record related to the Trust and the Trust Assets for inspection by the Legal Beneficiaries. A Legal Beneficiary must notify the Trustee prior to the inspection. All inspection must be done within reasonable hours and for the purposes only allowable by law.

6. Limitations: The Trustee will conduct himself/herself as a legal custodian and administrator of the Trust Assets. The Trustee may only act as the owner of any part of the Trust Assets if a provision in this Agreement specifically provides that the Trustee has the right to exercise the rights of a Legal Beneficiary under this Agreement. The Trustee may only perform under this Agreement for the benefit of the Trust, the Trust Assets, the

Legal Beneficiaries, and the Trustor.

7. Consideration and Payment: In exchange of the administrative and custodial functions to be performed by the Trustee under this Agreement, the Trustor acknowledges and agrees that the Trustee will be entitled to any and all such reasonable fees chargeable for the performance of such fiduciary duties. The Trustee will furnish to the Trustor a written statement stating the complete details of all the expenses he/she has incurred. The

Trustor authorizes the Trustee to deduct any such amount from the Trust Assets, whether from the principal or the income generated from the Trust Assets. All such payments made for the administration of the Trust will be included in the records to be maintained by the Trustee or the accounting contractor hired by the Trustee for the purpose of this

Agreement.

8. Bond: The Trustee is not required to give any bond or other security for the performance of responsibilities under this Agreement.

9.

10.Limitation of Liability: Except in cases of willful misconduct or gross negligence resulting to losses, the Trustee will not be held personally liable for any mistake or error of judgment in his/her administration of the Trust and any other Trust Assets. The Trustee's guarantee of performance in this Agreement includes the warranty that the Trustee will perform his/her duties and obligations under this Agreement for the benefit of the Trust and the Trust Assets, and in the best interest of the Legal Beneficiaries and the Trustor.

10.Successor Trustees: The Trustee reserves the right to appoint or assign his/her Successor

Trustee and to determine the manner of assigning or appointing the said Successor

Trustee. In the event of the Trustee's death or disability, this Agreement will be automatically assigned to the Successor Trustee in a written assignment agreement

signed by the Trustee and the Successor Trustee. Upon the Successor Trustee's assignment to this Agreement, the Successor Trustee will enjoy the same powers and perform the same duties as the Trustee.

TERMINATION AND SUCCESSION

1. Term: This Agreement will be effective upon the Effective Date and remain in effect until such time that the parties agree to enforce Section 3.3.

2. Succession: In the event of the Trustor's death or disability, the Legal Beneficiaries listed herein will become the immediate successors of this Agreement. The Legal Beneficiaries may agree to become individual Trustors signing an amended version of this Agreement or to appoint among them a representative who will become one signatory for and on behalf of all the Trustors-then-Legal Beneficiaries.

3. Termination: The Trustor reserves the right to terminate this Agreement for any cause.

This Agreement will terminate upon the death or disability of the Trustee, provided that there is no person or party to whom the Trustee can legally assign this Agreement.

MISCELLANEOUS

1. Communication: All notices, demands, instructions, and other information to be communicated under this Agreement must be done in writing and sent through personal courier, postage or first class mail, or electronic mail. For physically mailed communication, the names and addresses of the parties provided herein will suffice. Electronic mail must be sent to the following names and email addresses:

1. To the Trustor: [NAME OF TRUSTOR] [EMAIL ADDRESS OF TRUSTOR]

1. To the Trustee: [NAME OF TRUSTEE]

[EMAIL ADDRESS OF TRUSTEE]

2. Waiver, Amendment, or Modification: No waivers, amendments, and/or modifications to this Agreement will be deemed valid and/or binding unless expressed in writing, agreed upon, and signed voluntarily by both the Trustor and the Trustee.

3. Severability and Waiver of Provisions: Any invalidity, in whole or in part, of any provision of this Agreement, will not affect the validity of any other provisions. The failure of either party to exerciseany right or enforce a provision in this Agreement will not be construed as a waiver of the same right or provision.

4. Dispute Resolution: The parties agree to first and foremost resolve any dispute in relation to this Agreement through negotiation in good faith. If the dispute is not resolved by such, the parties agree to enforce either Section 4.5 or Section 4.6 depending on the gravity of the dispute.

5. Arbitration: The parties have the option to employ arbitration as a means to resolve a dispute not resolved by negotiation. The arbitration will be conducted by a third person chosen by the parties to act as the arbiter and will be held at a date, time, and place chosen by the arbiter. The arbiter must be a person who is an expert, or at least is fairly knowledgeable and experienced in the area of dispute. The arbiter must make a decision based on his/her fair and equitable judgment, the laws applicable to such dispute, and common sense. The arbiter's decision will be final and irrevocable unless the parties agree to disregard the result of the arbitration and enforce Section 4.6.

6. Choice of Law and Venue: This Agreement is governed by and construed according to the laws of [STATE/COUNTRY]. Any and all disputes from this Agreement which are not resolved through Section Section 4.4 or 4.5 will be brought to the proper courts of [ COURT OF JURISDICTION].

7. Interpretation: All marginal headings and numbers to the articles, sections, and subsections in this Contract are for the sole purpose of convenience of reference and will not, in any way, affect the construction or interpretation of this Agreement. In case of any inconsistency between the parties' interpretation of this Agreement and the worded content herein, the one which is supported by law or close to the interpretation of the law will prevail.

8. Advice of Counsel: The parties represent that prior to the execution of this Agreement, each of them has sought the help and assistance of an appropriate legal counsel and that the parties enter into this Agreement aware of all the provisions contained herein, including their interpretations, expressions, and implications.

9. Entire Agreement: This Agreement constitutes the entire understanding and agreement by and between the Trustor and the Trustee, and supersedes all other communication, understanding, representation, covenant, and promises made by both prior to the

Effective Date.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed upon the Effective Date:

The Trustor The Trustee

Name:

Title: Name:

Title:

Signature:

Witness

Name:

Title: Signature:

Witness

Name:

Title:

Signature: Signature:

Insert Annex A: List of All Trust Assets Insert Annex B: List of Legal Beneficiaries and the Distribution Schedule

FAQs

Irrevocable Trust Vs. Revocable Trust, Which is better?

Depends on your objective.

How can I find people to trust for my TRUST?

Interview Them!

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