IRREVOCABLE TRUST AGREEMENT
(State of California)
[// GUIDANCE: This template is drafted for use by California counsel in creating a stand-alone irrevocable trust.
All bracketed items MUST be reviewed and customized before execution.]
Effective Date: [___]
Settlor/Grantor: [Full Legal Name, Address]
Initial Trustee: [Full Legal Name, Address]
Trust Name: “[___] Irrevocable Trust”
Principal Place of Administration: [County], California
TABLE OF CONTENTS
- Definitions
- Creation and Funding of Trust
- Irrevocability
- Trustees and Successor Trustees
- Administration; Distribution Standards
- Beneficiary Rights and Protections
- Trustee Powers
- Tax Matters
- Representations & Warranties
- Covenants
- Default; Removal; Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution
Schedules:
A. Initial Trust Estate
B. Trustee Compensation Schedule (optional)
1. DEFINITIONS
For ease of reference, capitalized terms are defined below and used consistently throughout this Agreement.
“Accounting Period” – The twelve-month period ending each [December 31] unless the Trustee, in its discretion, adopts a different fiscal year.
“Applicable Law” – The California Probate Code, California common law of trusts, and any controlling federal law.
“Beneficiary” – Each person or entity identified in Section 5.1 and any other person who becomes entitled to distributions hereunder.
“Investment Advisor” – Any person appointed pursuant to Section 7.4 to direct the Trustee as to investments.
“Trust” – The irrevocable trust created by this Agreement, known as the “[___] Irrevocable Trust.”
“Trust Estate” – All property, tangible or intangible, real or personal, held from time to time by the Trustee under this Agreement, together with all income thereon not distributed.
“Trustee” – The Initial Trustee and any duly appointed successor or co-trustee.
[// GUIDANCE: Add, delete, or modify definitions to match the drafting attorney’s design.]
2. CREATION AND FUNDING OF TRUST
2.1 Creation. The Settlor hereby irrevocably transfers, assigns, and delivers to the Trustee the property described on Schedule A (the “Initial Trust Estate”), to hold, manage, and distribute under the terms of this Agreement.
2.2 Additional Contributions. The Settlor or any other person, with the Trustee’s consent, may irrevocably add property to the Trust at any time. Such property shall become part of the Trust Estate and be administered as provided herein.
2.3 Purpose. The primary purposes of the Trust are:
(a) to provide for the Beneficiaries in accordance with Section 5;
(b) to achieve transfer-tax efficiencies; and
(c) to protect Trust assets from unnecessary depletion.
3. IRREVOCABILITY
3.1 Express Irrevocability. Pursuant to Cal. Prob. Code § 15400, a trust is revocable unless expressly made irrevocable. This Trust is expressly declared to be irrevocable, and neither the Settlor nor any other person shall have any power, right, or authority to alter, amend, revoke, or terminate this Agreement except as specifically provided herein or by court order.
3.2 Limited Judicial Modification. To the extent permitted by Applicable Law, the Trustee or any Beneficiary may petition the superior court sitting in probate to modify administrative provisions of the Trust (but not dispositive provisions) if continuation without modification would defeat or substantially impair the Trust’s purposes.
4. TRUSTEES AND SUCCESSOR TRUSTEES
4.1 Acceptance and Standard of Care. By executing this Agreement, the Trustee accepts the office and agrees to administer the Trust with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity would use.
4.2 Resignation. The Trustee may resign by giving at least thirty (30) days’ written notice to the Settlor (if living) and the adult, competent Beneficiaries.
4.3 Removal. The Settlor (if living and competent) or, after the Settlor’s death, a majority in interest of adult Beneficiaries may remove any Trustee for (a) breach of trust, (b) incapacity, or (c) other good cause, by delivering written notice and simultaneously appointing a qualified successor.
4.4 Successor Trustee. Any successor trustee shall sign an Acceptance of Trust, whereupon title to the Trust Estate shall vest in such successor without further conveyance.
4.5 Co-Trustees; Majority Action. If more than one Trustee is serving, a majority may act for all. Any Trustee may delegate ministerial acts to a co-trustee.
4.6 Compensation and Expenses. The Trustee is entitled to reasonable compensation as set forth on Schedule B or, if none, as provided by law, and to reimbursement of properly incurred expenses.
5. ADMINISTRATION; DISTRIBUTION STANDARDS
5.1 Beneficiaries.
Primary Beneficiary(ies): [Name(s), DOB]
Contingent/Residual Beneficiary(ies): [Name(s), DOB]
[// GUIDANCE: Insert detailed class gifts or generation-skipping provisions as needed.]
5.2 Mandatory Income Distribution. The Trustee shall distribute all net income, at least annually, to [the Primary Beneficiary].
5.3 Discretionary Principal Distributions. The Trustee may distribute principal to or for the benefit of any Beneficiary for health, education, maintenance, or support (“HEMS”) in the Trustee’s sole discretion.
5.4 Termination. Unless earlier terminated by operation of law, the Trust shall terminate on the death of the last surviving Beneficiary or on [specific date/event], whichever occurs first. Upon termination, the remaining Trust Estate shall be distributed outright to the then-living Beneficiaries, per stirpes.
5.5 Spendthrift Protection. To the maximum extent permitted by Applicable Law, no Beneficiary may voluntarily or involuntarily assign, alienate, or encumber any interest in the Trust, and such interest shall be free from the claims of creditors.
6. BENEFICIARY RIGHTS AND PROTECTIONS
6.1 Duty to Inform and Account. Consistent with Cal. Prob. Code § 16060, the Trustee shall keep the Beneficiaries reasonably informed of the Trust’s administration and shall provide annual written accountings within sixty (60) days after each Accounting Period.
6.2 Right to Request Information. On reasonable written request, any Beneficiary is entitled to a true and complete copy of this Agreement and the most recent accounting.
6.3 Non-Judicial Settlement Agreements. The Trustee and Beneficiaries may, to the extent permitted by law, resolve matters through a binding non-judicial settlement agreement.
7. TRUSTEE POWERS
7.1 Incorporation of Statutory Powers. The Trustee shall have all powers granted by Cal. Prob. Code §§ 16220–16249, as amended, in addition to those granted herein.
7.2 Specific Powers. Without limiting the foregoing, the Trustee may:
(a) invest in any prudent investment (including derivatives, options, real estate, and interests in entities);
(b) lease, sell, or exchange Trust property;
(c) borrow money and encumber Trust assets;
(d) engage agents and professionals and delegate investment functions in accordance with the Uniform Prudent Investor Act;
(e) vote securities and participate in reorganizations; and
(f) exercise all elections and options relating to taxes.
7.3 Investment Advisor. The Trustee may appoint an Investment Advisor whose written directions shall, if the appointment so states, relieve the Trustee of liability for investment decisions.
7.4 Decanting. The Trustee may, to the extent permitted by statute, distribute all or part of the Trust assets to a new trust for the benefit of one or more Beneficiaries on substantially similar terms.
8. TAX MATTERS
8.1 Grantor-Trust Status. [SELECT ONE]
☐ The Trust is intended to be treated as a grantor trust for federal and California income-tax purposes under Internal Revenue Code §§ 671–679.
☐ The Trust is intended to be a non-grantor trust.
8.2 Tax Identification Number. The Trustee shall obtain a separate taxpayer identification number unless the Trust is wholly a grantor trust and the Settlor’s Social Security Number is used.
8.3 Tax Filings and Payments. The Trustee shall timely prepare and file all required federal, state, and local tax returns and shall pay any tax liabilities from the Trust Estate.
8.4 Allocation of Taxes Among Beneficiaries. The Trustee may make equitable adjustments among principal and income to offset the economic effect of taxes attributable to the Trust.
[// GUIDANCE: Consult a qualified tax professional. Significant transfer-tax consequences (gift, estate, GST) attach to irrevocable trusts.]
9. REPRESENTATIONS & WARRANTIES
9.1 Settlor. The Settlor represents and warrants that:
(a) the Settlor has full legal capacity and authority to create this Trust;
(b) the property transferred is free of undisclosed liens; and
(c) execution of this Agreement does not violate any court order or contract.
9.2 Trustee. The Trustee represents and warrants that:
(a) the Trustee is qualified and willing to serve;
(b) the Trustee will administer the Trust in good faith and in accordance with Applicable Law; and
(c) the Trustee is not currently suspended, removed, or otherwise disqualified from fiduciary service by any court.
9.3 Survival. The representations and warranties herein shall survive execution and remain in effect for the duration of the Trust.
10. COVENANTS
10.1 Trustee Covenants. The Trustee covenants to:
(a) carry out the purposes of the Trust;
(b) keep full and accurate books and records;
(c) maintain adequate insurance on trust assets where commercially reasonable;
(d) provide notices and accountings required by Section 6; and
(e) comply with all applicable securities, environmental, and other regulatory laws.
10.2 Beneficiary Covenants. Each Beneficiary covenants not to institute frivolous legal actions and agrees to cooperate with the Trustee in good faith.
11. DEFAULT; REMOVAL; REMEDIES
11.1 Events of Default. The following constitute a breach of trust:
(a) material violation of this Agreement;
(b) self-dealing not authorized herein;
(c) failure to provide required accountings within ninety (90) days after written demand; or
(d) incapacity or prolonged neglect of duties.
11.2 Notice and Cure. Unless immediate relief is necessary to prevent substantial harm, a written notice specifying the breach and a thirty (30) day cure period shall precede any petition for removal or damages.
11.3 Remedies. Remedies include but are not limited to:
(a) removal and surcharge of the Trustee;
(b) appointment of a special fiduciary;
(c) injunction against improper acts; and
(d) recovery of reasonable attorneys’ fees and costs from the Trustee individually or from the Trust Estate, as the court deems just.
12. RISK ALLOCATION
12.1 Trustee Indemnification. The Trust Estate shall indemnify and hold harmless the Trustee from any claim, loss, liability, or expense, including attorneys’ fees, arising from the proper administration of the Trust, except to the extent resulting from the Trustee’s gross negligence, willful misconduct, or bad faith.
12.2 Limitation of Liability. Any liability of the Trustee shall be satisfied solely from the Trust Estate; no Trustee shall incur personal liability except for acts or omissions constituting gross negligence, willful misconduct, or bad faith.
12.3 Insurance. The Trustee may purchase fiduciary liability insurance with premiums payable from the Trust Estate.
12.4 Force Majeure. The Trustee shall not be liable for delays or failures in performance caused by events beyond the Trustee’s reasonable control, including acts of God, pandemics, or governmental actions.
13. DISPUTE RESOLUTION
13.1 Governing Law. This Agreement and all matters arising hereunder shall be governed by and construed in accordance with the laws of the State of California without regard to its conflicts-of-laws principles.
13.2 Exclusive Forum. The superior court of the State of California sitting in probate in [County] shall have exclusive jurisdiction over all proceedings concerning the Trust.
13.3 Optional Arbitration. If permissible under Cal. Prob. Code § 17200 and applicable case law, the parties may agree in a separate, signed writing to submit any dispute to binding arbitration administered by [Arbitration Organization] under its then-current rules. Unless all parties consent, this clause does not limit the probate court’s jurisdiction.
13.4 Injunctive Relief. Nothing herein shall impair the court’s power to grant temporary restraining orders, preliminary injunctions, or other equitable relief to protect the Trust Estate.
13.5 Jury Trial Waiver. Trust matters in California probate court are ordinarily tried without a jury; accordingly, no jury waiver is required.
14. GENERAL PROVISIONS
14.1 Amendment. Because this Trust is irrevocable, no amendment is permitted except by court order under Section 3.2 or as otherwise expressly allowed by Applicable Law.
14.2 Assignment. Except as expressly provided herein, no party may assign any rights or obligations under this Agreement.
14.3 Severability. If any provision is held invalid or unenforceable, the remaining provisions shall remain in full force, and the court shall reform the invalid provision to the minimum extent necessary to effectuate the Settlor’s intent.
14.4 Entire Agreement. This document constitutes the entire agreement among the parties concerning the Trust and supersedes all prior agreements or understandings, whether written or oral.
14.5 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original. Signatures transmitted electronically (e.g., via PDF or secure e-signature platform) shall be effective.
14.6 Headings. Headings are for convenience only and shall not affect interpretation.
15. EXECUTION
IN WITNESS WHEREOF, the Settlor and the Trustee have executed this Irrevocable Trust Agreement as of the Effective Date first written above.
SETTLOR/GRANTOR
[Name]
State of _ }
County of __ } On __ before me, ______, Notary Public, personally appeared ______, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged …
[Notarial Certificate]
TRUSTEE
[Name], as Trustee
State of _ }
County of __ } On __ before me, ______, Notary Public, personally appeared ______, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged …
[Notarial Certificate]
SCHEDULE A
Initial Trust Estate
• Cash: $[_]
• Marketable Securities: [_]
• Real Property: [legal description]
• Other Assets: [__]
SCHEDULE B (Optional)
Trustee Compensation Schedule
[Insert fee grid or reference to published corporate fiduciary fee schedule.]
[// GUIDANCE: Attach additional schedules—disclaimer statements, GST allocation, life insurance policy assignments, etc.—as needed.]