Irrevocable Life Insurance Trust (ILIT)

IRREVOCABLE LIFE INSURANCE TRUST (ILIT) AGREEMENT

("[TRUST NAME]")

(Governed by the Missouri Uniform Trust Code, Mo. Rev. Stat. ch. 456)

TABLE OF CONTENTS

1. Document Header
2. Definitions
3. Creation, Funding & Irrevocability
4. No Incidents of Ownership; Three-Year Rule
5. Contributions, Premiums & Crummey Withdrawal Rights
6. Beneficiaries & Spendthrift Protection
7. Trustee Provisions & Insurance Powers
8. Distributions
9. Perpetuities (Dynasty), Generation-Skipping & Termination
10. Tax Administration
11. Trustee Indemnification & Limitation of Liability
12. General Provisions
13. Execution Block
14. Schedule A; Exhibit 1 (Crummey Notice)

1. DOCUMENT HEADER

1.1 Parties.

• Grantor / Insured: [GRANTOR FULL LEGAL NAME], residing at [ADDRESS] ("Grantor" or "Insured").
• Trustee: [TRUSTEE FULL LEGAL NAME], with principal address at [ADDRESS] ("Trustee"), being a person or entity other than the Grantor.
• Trust: The irrevocable trust created herein (the "Trust").

1.2 Recitals.
A. Grantor desires to create an irrevocable trust to acquire, own, and hold one or more policies of insurance on Grantor's life and to administer the proceeds for the Beneficiaries.
B. Grantor intends that all proceeds payable to the Trust be excluded from Grantor's gross estate under 26 U.S.C. § 2042, and that no incident of ownership in any Policy be held by Grantor.
C. Trustee is willing to accept the trusteeship under the Missouri Uniform Trust Code ("MUTC").

1.3 Effective Date. This Agreement is effective as of [EFFECTIVE DATE] (the "Effective Date").

1.4 Governing Law & Jurisdiction. This Agreement and the Trust shall be governed by, and construed in accordance with, the laws of the State of Missouri, including the MUTC, without regard to conflict-of-laws principles. The principal place of administration shall be in [COUNTY] County, Missouri, and the circuit court (probate division) for that county shall have jurisdiction over trust matters.

2. DEFINITIONS

"Beneficiary" or "Beneficiaries" – Each person or entity identified in Section 6.1 and any successor Beneficiary.

"Crummey Withdrawal Right" – The limited power of withdrawal granted under Section 5.4.

"Insurance Policy" or "Policy" – Each policy of insurance on the life of the Grantor described in Schedule A or hereafter acquired by or transferred to the Trustee.

"Internal Revenue Code" or "IRC" – The Internal Revenue Code of 1986, as amended.

"Independent Trustee" – A Trustee who is neither the Grantor nor a beneficiary and who is not a "related or subordinate party" to the Grantor within the meaning of IRC § 672(c).

"Spendthrift Provision" – The restriction on transfer of a Beneficiary's interest described in Section 6.3.

"Trust Estate" – All property held by the Trustee, including each Insurance Policy, premium contributions, and all proceeds and additions thereto.

3. CREATION, FUNDING & IRREVOCABILITY

3.1 Transfer of Property. Grantor hereby irrevocably assigns, conveys, and delivers to the Trustee the property listed on Schedule A, which may include one or more Insurance Policies and cash to fund initial premiums. Receipt is acknowledged by the Trustee.

3.2 Acquisition of Insurance. The Trustee is authorized, but not required, to apply for, purchase, and own one or more Insurance Policies on the Grantor's life. Wherever practicable, the Trustee (not the Grantor) shall be the original applicant, owner, and beneficiary of any new Policy, so the Grantor never holds an incident of ownership.

3.3 Additional Contributions. Grantor or any other person may, with the Trustee's consent, transfer additional cash or property to the Trust to enable premium payments. All contributions become part of the Trust Estate. No contribution creates any power of amendment, revocation, or control in the Grantor.

3.4 Irrevocability. This Trust is irrevocable. Grantor relinquishes all right, power, and authority, whether alone or in conjunction with others, to alter, amend, revoke, or terminate the Trust, or to reacquire or control any Policy. Grantor reserves no power of appointment, reversion, or beneficial interest.

4. NO INCIDENTS OF OWNERSHIP; THREE-YEAR RULE

4.1 No Incidents of Ownership (IRC § 2042). Neither the Grantor nor any person acting on the Grantor's behalf shall hold or exercise any "incident of ownership" in any Policy, including the power to change beneficiaries, surrender or cancel the Policy, assign or revoke an assignment, pledge the Policy, or borrow against cash value. Each such power is vested exclusively in the Trustee and may never be exercised by, for, or at the direction of the Grantor.

4.2 Three-Year Lookback (IRC § 2035). If the Grantor transfers an existing Policy to the Trust and dies within three (3) years of the transfer, the proceeds may be included in the Grantor's gross estate under IRC § 2035(a). To avoid this exposure, the Trustee should, where feasible, acquire new Policies in the name of the Trust rather than accept assignment of Policies the Grantor already owns.

4.3 Prohibition on Grantor Involvement. The Grantor shall not serve as Trustee, vote or direct Trust investments, receive any distribution, or control any Policy term or beneficiary. Violation may cause inclusion of the proceeds in the Grantor's estate under IRC §§ 2036, 2038, or 2042.

5. CONTRIBUTIONS, PREMIUMS & CRUMMEY WITHDRAWAL RIGHTS

5.1 Premium Payments. The Trustee shall apply contributions and Trust income to pay premiums on each Policy. The Trustee is under no duty to advance personal funds and shall not be liable for a lapse caused by insufficient contributions.

5.2 Notice of Contribution. Promptly upon each contribution, the Trustee shall give written notice (the "Crummey Notice," substantially in the form of Exhibit 1) to each Beneficiary holding a withdrawal right, stating the amount contributed, the withdrawal right and its amount, and the deadline for exercise.

5.3 Withdrawal Period. Each withdrawal right may be exercised within [30] days after the Crummey Notice is given. A right not exercised within that period lapses, subject to Section 5.5.

5.4 Crummey Withdrawal Rights (IRC §§ 2503(b), 2514). Upon each contribution, each Beneficiary designated in Schedule A shall have the noncumulative right to withdraw an amount equal to that Beneficiary's pro-rata share of the contribution, not to exceed the annual gift tax exclusion under IRC § 2503(b) for each donor (and, where gift-splitting applies, twice that amount).

5.5 Five-and-Five Limitation; Hanging Power. To prevent a lapse from being treated as a taxable gift or release under IRC §§ 2514(e) and 2041, the lapse of any withdrawal right in a calendar year shall be limited to the greater of $5,000 or 5% of the Trust Estate. Any excess shall not lapse but shall remain exercisable ("hang over") until it lapses within the five-and-five limit.

5.6 Records. The Trustee shall maintain written records of every Crummey Notice given and of each exercise or lapse for federal gift tax audit purposes.

6. BENEFICIARIES & SPENDTHRIFT PROTECTION

6.1 Primary Beneficiaries.

• [BENEFICIARY NAME #1], born [DOB];
• [BENEFICIARY NAME #2], born [DOB]; and
• [ETC.]

6.2 Contingent Beneficiaries. If a Primary Beneficiary fails to survive, that share passes to [CONTINGENT BENEFICIARY / per stirpes to that Beneficiary's descendants].

6.3 Spendthrift Provision. To the maximum extent permitted by Mo. Rev. Stat. §§ 456.5-502 and 456.5-503, a Beneficiary's interest shall not be subject to voluntary or involuntary transfer, assignment, pledge, alienation, or attachment, and shall not be reached by any creditor before actual receipt.

6.4 Beneficiary Information Rights. The Trustee shall keep the qualified Beneficiaries reasonably informed as required by the MUTC, subject to the Crummey notice obligations of Section 5.

7. TRUSTEE PROVISIONS & INSURANCE POWERS

7.1 Acceptance. The Trustee accepts the office. The Grantor shall not serve as Trustee or Co-Trustee. An Independent Trustee is strongly recommended.

7.2 General Powers. The Trustee shall have all powers granted to trustees under the MUTC, including the powers conferred by Mo. Rev. Stat. § 456.8-815 and § 456.8-816, including the power to sell, exchange, or otherwise dispose of Trust property (which power qualifies the Trust for the perpetuities treatment in Section 9.1).

7.3 Insurance Powers. With respect to each Policy, and to the exclusion of the Grantor, the Trustee may:
(a) pay premiums from Trust income or contributions;
(b) receive, hold, and collect death benefit proceeds;
(c) exercise or decline policy options, dividends, and nonforfeiture provisions;
(d) borrow against, pledge, surrender, exchange (including IRC § 1035 exchanges), or convert a Policy;
(e) designate the Trust as owner and beneficiary; and
(f) take any action necessary to keep a Policy in force.

7.4 Successor Trustee. If the office becomes vacant, [ALTERNATE TRUSTEE] shall serve; if unable or unwilling, a majority of the adult Beneficiaries may appoint a successor Independent Trustee. No successor may be the Grantor. Title vests in any successor Trustee without conveyance.

7.5 Trustee Compensation. The Trustee shall be entitled to reasonable compensation under the MUTC or as separately agreed in writing.

8. DISTRIBUTIONS

8.1 No Distributions to Grantor. Under no circumstances shall any income or principal be paid or applied to or for the benefit of the Grantor or used to discharge the Grantor's legal obligations. This restriction is absolute.

8.2 During Grantor's Lifetime. The Trustee shall hold contributions and income primarily to pay Policy premiums. The Trustee may, in its discretion, distribute income or principal to or for the Beneficiaries for health, education, maintenance, or support, subject always to Section 8.1 and the Crummey rights of Section 5.

8.3 Upon Grantor's Death. Upon the Grantor's death, the Trustee shall collect the death benefit and distribute or hold the proceeds as follows:

8.4 Liquidity Powers (Discretionary). The Trustee may, but shall not be required to, lend proceeds to, or purchase assets from, the Grantor's estate on an arm's-length basis. The Trustee shall not be directed or obligated to pay the Grantor's debts, estate taxes, or expenses, so as not to create an incident of ownership or estate inclusion.

9. PERPETUITIES (DYNASTY), GENERATION-SKIPPING & TERMINATION

9.1 Missouri Rule Against Perpetuities — Dynasty Capability. Pursuant to Mo. Rev. Stat. § 456.025, the rule against perpetuities does not apply to this Trust because the Trustee has the power, under Section 7.2 and applicable law, to sell Trust property during the period the Trust continues. Accordingly, the Trust may continue in perpetuity (as a dynasty trust) and is not required to terminate within any common-law perpetuities period.

9.2 Optional Fixed Term. Notwithstanding Section 9.1, the Grantor may elect a fixed maximum term: the Trust shall terminate no later than [____ years after the Effective Date / 21 years after the death of the last survivor of the Grantor's descendants living on the Effective Date]. [SELECT: PERPETUAL DYNASTY / FIXED TERM ABOVE].

9.3 Generation-Skipping Transfer Tax (IRC §§ 2601, 2631). For dynasty use, the Grantor may allocate GST exemption under IRC § 2631 to contributions on a timely Form 709, and the Trustee may divide the Trust into separate GST-exempt and GST-nonexempt shares to maintain an inclusion ratio of zero.

9.4 Distribution on Termination. Upon any termination, the Trustee shall distribute the remaining Trust Estate to the then-living Beneficiaries, per stirpes, and never to the Grantor.

10. TAX ADMINISTRATION

10.1 Taxpayer Identification. The Trustee shall obtain an EIN for the Trust and file IRS Form 1041 if and as required.

10.2 Non-Grantor Trust Intent. The Trust is intended not to cause inclusion of Policy proceeds in the Grantor's gross estate; no power shall be exercised that would do so. The Trustee's tax advisor shall confirm the Trust's status.

10.3 Gift Tax Reporting. Contributions exceeding available annual exclusions shall be reported by the Grantor on IRS Form 709. The Trustee shall retain copies of all Crummey Notices and lapse records.

10.4 Missouri Death Tax. Missouri imposes no state estate tax and no state inheritance tax (its former estate tax was tied to the now-repealed federal state death tax credit). Proceeds of life insurance payable for the benefit of a person other than the insured are free from the claims of the insured's creditors under Mo. Rev. Stat. § 377.090, and unmatured life insurance contracts and their values are exempt from execution under Mo. Rev. Stat. § 513.430(7)-(8) (subject to the $150,000 cap and one-year limitation stated in that statute for bankruptcy).

11. TRUSTEE INDEMNIFICATION & LIMITATION OF LIABILITY

11.1 Indemnification. To the fullest extent permitted by law, the Trust Estate shall indemnify the Trustee against any claim, liability, loss, cost, or expense (including reasonable attorneys' fees) arising from administration, except to the extent caused by the Trustee's bad faith, reckless indifference, or intentional misconduct.

11.2 Liability Cap. No Trustee shall be personally liable for any obligation of the Trust except to the extent of the Trust Estate under the Trustee's control.

11.3 Policy Performance. The Trustee shall not be liable for the financial performance of any insurer or Policy, provided the Trustee periodically reviews each Policy's status.

12. GENERAL PROVISIONS

12.1 Amendment & Reformation. Because the Trust is irrevocable, it may be modified only as permitted by the MUTC (including §§ 456.4-410 through 456.4-416) or other applicable law, and never to restore any power or benefit to the Grantor.

12.2 Severability. If any provision is held invalid, the remaining provisions remain in full force, and a court may reform the invalid provision to the minimum extent necessary to achieve the Grantor's intent.

12.3 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, each deemed an original, and signature pages may be exchanged electronically.

13. EXECUTION BLOCK

IN WITNESS WHEREOF, the Grantor and the Trustee have executed this Irrevocable Life Insurance Trust Agreement as of the Effective Date.

EIN (once obtained): [____________________________]

NOTARY ACKNOWLEDGMENT

State of Missouri
County of [COUNTY]

On this ____ day of __________, 20__, before me, the undersigned authority, personally appeared [GRANTOR NAME] and [TRUSTEE NAME], personally known to me or proved on the basis of satisfactory evidence to be the persons whose names are subscribed to this instrument, and acknowledged that they executed the same for the purposes therein contained.

__________________________________
Notary Public
My Commission Expires: _____________

SCHEDULE A – INITIAL TRUST PROPERTY AND BENEFICIARIES HOLDING WITHDRAWAL RIGHTS

Insurance Policies / Property Transferred:

1. Life insurance Policy issued by [INSURER], Policy No. [________], face amount $[________].
2. Cash for initial premium: $[________].
3. [ADDITIONAL PROPERTY]

Beneficiaries holding Crummey withdrawal rights (Section 5):

1. [NAME] — pro-rata share: [____]
2. [NAME] — pro-rata share: [____]

EXHIBIT 1 – FORM OF CRUMMEY WITHDRAWAL NOTICE

[DATE]

To: [BENEFICIARY NAME] (or [GUARDIAN], as natural guardian of [MINOR BENEFICIARY])

Re: [TRUST NAME] — Notice of Contribution and Right of Withdrawal

Dear [NAME]:

As Trustee of the above Trust, I notify you that on [__/__/____] a contribution of $[________] was made to the Trust. Under the Trust Agreement, you have the right to withdraw your pro-rata share of this contribution, in an amount up to $[________] (the available annual gift tax exclusion).

You may exercise this right by delivering a written request to the Trustee at the address below on or before [__/__/____] (the [30th] day after the date of this notice). If you do not exercise this right by that date, it will lapse to the extent permitted under the Trust's five-and-five and hanging-power provisions, and the contribution will remain in the Trust.

Trustee: [TRUSTEE NAME]
Address: [ADDRESS]

Sincerely,

_______________________________
[TRUSTEE NAME], Trustee

Acknowledgment of Receipt (optional):
I acknowledge receipt of this notice on [__/__/____].
_______________________________ [BENEFICIARY NAME]

SOURCES AND REFERENCES

Missouri Statutes:

• Mo. Rev. Stat. ch. 456 — Missouri Uniform Trust Code — https://revisor.mo.gov/main/OneChapter.aspx?chapter=456
• Mo. Rev. Stat. § 456.025 — Inapplicability of the rule against perpetuities — https://revisor.mo.gov/main/OneSection.aspx?section=456.025
• Mo. Rev. Stat. § 513.430 — Property exempt from attachment and execution (life insurance) — https://revisor.mo.gov/main/OneSection.aspx?section=513.430
• Mo. Rev. Stat. § 377.090 — Insurance for benefit of another; proceeds free from creditors

Federal Authority:

• 26 U.S.C. § 2042 — Proceeds of life insurance
• 26 U.S.C. § 2035 — Three-year lookback
• 26 U.S.C. §§ 2503(b), 2514 — Annual exclusion; Crummey powers
• 26 U.S.C. §§ 2601, 2631 — Generation-skipping transfer tax
• Crummey v. Commissioner, 397 F.2d 82 (9th Cir. 1968)
• Estate of Headrick v. Commissioner, 93 T.C. 171 (1989)

Note on State Death Tax: Missouri imposes no state estate tax and no state inheritance tax.