IRREVOCABLE TRUST AGREEMENT
(District of Columbia – Uniform Trust Code Jurisdiction)
[// GUIDANCE: Practicing attorneys should review all bracketed items, defined terms, and optional provisions for consistency with the client’s estate plan, tax objectives, and fiduciary preferences before final execution.]
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TABLE OF CONTENTS
- Document Header
- Definitions
- Operative Provisions
- Representations & Warranties
- Covenants & Restrictions
- Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
- Schedule A – Trust Property
- Schedule B – Beneficiaries
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1. DOCUMENT HEADER
IRREVOCABLE TRUST AGREEMENT (this “Agreement”) is executed and made effective as of [EFFECTIVE DATE] (the “Effective Date”) by and between:
• [SETTLOR LEGAL NAME], an individual residing at [SETTLOR ADDRESS] (“Settlor”); and
• [TRUSTEE LEGAL NAME], [individual | District of Columbia corporation | national bank], having a principal address at [TRUSTEE ADDRESS] (“Trustee”).
Recitals
A. Settlor, desiring to provide for the long-term benefit of the Beneficiaries (as defined below) and to remove assets from Settlor’s taxable estate, wishes to create an irrevocable trust under the laws of the District of Columbia.
B. Trustee is willing to accept the trust created hereby and to hold and administer the Trust Estate (as defined below) for the purposes and upon the terms set forth herein.
C. Settlor is transferring to Trustee the property described in Schedule A contemporaneously with the execution of this Agreement as consideration for Trustee’s undertakings herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, Settlor hereby irrevocably delivers, assigns, transfers, and conveys to Trustee all property described in Schedule A to be held IN TRUST, subject to the following terms and conditions:
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2. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings set forth below. Defined terms appear in initial capital letters throughout this Agreement. Singular includes the plural and vice-versa.
“Accounting Period” – Each calendar year ending December 31, or such other period selected by Trustee that is permissible under applicable law.
“Agreement” – This Irrevocable Trust Agreement, as amended from time to time in strict accordance with Section 9.1.
“Applicable Law” – The District of Columbia Uniform Trust Code and all other District of Columbia statutes, regulations, and common law governing trusts, together with applicable federal law.
“Beneficiaries” – Those individuals and/or entities listed on Schedule B, together with any Permitted Issue (as defined therein).
“Distributable Net Income” or “DNI” – Income determined under Subchapter J of the Internal Revenue Code, as amended, or any successor provision.
“Independent Trustee” – A Trustee who is not (i) Settlor, (ii) a Beneficiary, or (iii) a related or subordinate party within the meaning of Section 672(c) of the Internal Revenue Code.
“Trust Estate” – All property, real or personal, tangible or intangible, together with all additions, accretions, substitutions, and reinvestments thereof, now or hereafter held by Trustee pursuant to this Agreement.
“Trustee” – Each initial, additional, successor, or co-trustee acting hereunder from time to time.
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3. OPERATIVE PROVISIONS
3.1 Creation and Funding
(a) Settlor hereby irrevocably transfers to Trustee the property set forth in Schedule A.
(b) The Trust shall be known as the “[SETTLOR SURNAME] IRREVOCABLE TRUST” (the “Trust”).
3.2 Purpose
The primary purpose of the Trust is to hold, protect, and manage Trust assets for the health, education, maintenance, and support (“HEMS Standard”) of the Beneficiaries, and to achieve estate- and income-tax efficiencies consistent with Applicable Law.
3.3 Irrevocability
This Trust is intended to be irrevocable. Settlor expressly waives any right or power, whether alone or in conjunction with any other person, to alter, amend, revoke, or terminate the Trust, except as permitted by Applicable Law upon petition to the Superior Court of the District of Columbia, Probate Division (“DC Probate Court”) with the written consent of all Beneficiaries.
[// GUIDANCE: DC has adopted the Uniform Trust Code provisions permitting modification or termination upon unanimous consent of beneficiaries and with court approval when appropriate. Drafting attorneys should determine whether to opt out of or limit these statutory rights.]
3.4 Distributions
(a) Mandatory Distributions – During Settlor’s lifetime, Trustee [SHALL | SHALL NOT] distribute all Trust income to [PRIMARY BENEFICIARY] at least annually.
(b) Discretionary Distributions – Trustee may distribute principal or income to any Beneficiary, in Trustee’s sole and absolute discretion, for the HEMS Standard.
(c) Termination Distributions – Upon the [earlier of Settlor’s death | reaching stated termination date | occurrence of specified event], Trustee shall distribute the remaining Trust Estate to the Beneficiaries per [per stirpes | per capita | custom allocation].
3.5 Spendthrift & Creditor Protection
No interest of any Beneficiary shall be subject to voluntary or involuntary transfer, anticipation, assignment, pledge, or seizure by legal or equitable process prior to actual receipt by such Beneficiary.
3.6 Trustee Powers
Except as limited herein, Trustee shall have all powers granted to a trustee under Applicable Law, including, without limitation, the powers to:
1. Invest and reinvest pursuant to the prudent investor rule;
2. Employ agents, custodians, and professionals;
3. Buy, sell, lease, or exchange Trust assets;
4. Borrow, encumber, or pledge Trust assets, limited solely to the Trust Estate;
5. Determine income and principal allocations; and
6. Sign tax returns and other filings on behalf of the Trust.
3.7 Tax Treatment
(a) [Grantor | Non-Grantor] Trust Election – It is the intent of Settlor that the Trust be treated as a [grantor | non-grantor] trust under Subpart E of Subchapter J of the Internal Revenue Code.
(b) DC Fiduciary Income Tax – Trustee shall file District of Columbia fiduciary income tax returns as required, utilizing deductions, exemptions, and credits available under DC law.
(c) Generation-Skipping Transfer Tax – [INCLUDE | OMIT] GST tax provisions as necessary.
3.8 Trustee Succession
(a) Resignation – Trustee may resign upon sixty (60) days’ written notice to Settlor (if living) and all adult Beneficiaries.
(b) Removal – Settlor (if living) or a majority of adult Beneficiaries may remove Trustee with or without cause and appoint an Independent Trustee.
(c) Successor Trustee – Failing such appointment, the DC Probate Court shall appoint a successor. Each successor Trustee shall have all rights, powers, and duties of Trustee hereunder.
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4. REPRESENTATIONS & WARRANTIES
4.1 Settlor represents and warrants to Trustee and the Beneficiaries that:
(a) Settlor has full legal right, power, and authority to transfer the property described in Schedule A, free and clear of all liens and encumbrances;
(b) No provision of this Agreement violates any contract, court order, or Applicable Law binding upon Settlor; and
(c) Settlor understands that the Trust is irrevocable and that Settlor retains no beneficial ownership in the Trust Estate.
4.2 Trustee represents and warrants to Settlor and the Beneficiaries that:
(a) Trustee has full power and authority to execute and perform under this Agreement;
(b) Trustee possesses the requisite fiduciary expertise and is qualified to act as Trustee under Applicable Law; and
(c) Trustee is not conflicted from serving under existing legal or regulatory restrictions.
These representations and warranties shall survive execution and continue throughout Trustee’s tenure.
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5. COVENANTS & RESTRICTIONS
5.1 Trustee shall:
(a) Administer the Trust Estate with the care, skill, and prudence of a prudent person dealing with the property of another;
(b) Maintain complete and accurate books and records and provide an annual written accounting to each adult Beneficiary within ninety (90) days after each Accounting Period;
(c) File all required federal and District of Columbia tax returns and timely pay all taxes owed directly from the Trust Estate; and
(d) Furnish prompt written notice to the Beneficiaries of any material litigation or governmental inquiry involving the Trust.
5.2 Trustee shall not:
(a) Engage in any act of self-dealing or conflict of interest prohibited by Applicable Law;
(b) Loan Trust assets to Settlor, Beneficiaries, or related parties, except upon arm’s-length terms approved in writing by an Independent Trustee; or
(c) Participate in any investment that would jeopardize the Trust’s tax status or violate the HEMS Standard.
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6. DEFAULT & REMEDIES
6.1 Events of Default – The occurrence of any of the following shall constitute a default by Trustee:
1. Material breach of fiduciary duty;
2. Failure to provide required accountings within the time specified;
3. Fraud, gross negligence, or willful misconduct; or
4. Insolvency or appointment of a receiver for Trustee.
6.2 Notice & Cure – Any Beneficiary may deliver written notice of default to Trustee. Trustee shall have thirty (30) calendar days to cure the default, unless the default is incapable of cure.
6.3 Remedies – Upon an uncured default, the following remedies shall be available, singly or in combination:
(a) Removal and replacement of Trustee;
(b) Surcharge against Trustee’s compensation;
(c) Specific performance or injunctive relief; and
(d) Recovery of reasonable attorneys’ fees and costs incurred in enforcing this Agreement.
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7. RISK ALLOCATION
7.1 Indemnification of Trustee
To the fullest extent permitted by Applicable Law, Settlor and the Trust Estate shall indemnify and hold harmless Trustee against any and all claims, liabilities, expenses, and damages arising out of Trustee’s good-faith administration of the Trust, except for losses resulting from Trustee’s fraud, gross negligence, or willful misconduct.
7.2 Limitation of Liability
Trustee’s personal liability shall in all events be limited to the Trust Estate; no personal assets of Trustee shall be subject to attachment or execution for any obligation or liability incurred in the proper administration of the Trust.
[// GUIDANCE: Practitioners should confirm that liability caps comport with local public policy and any mandatory bonding requirements for corporate trustees.]
7.3 Insurance
Trustee may, at the expense of the Trust Estate, procure fiduciary liability insurance in such amounts as Trustee deems appropriate.
7.4 Force Majeure
Trustee shall not be liable for any delay or failure in performance caused by acts beyond Trustee’s reasonable control, including, without limitation, acts of God, war, terrorism, epidemic, governmental action, or disruption of financial markets, provided Trustee takes commercially reasonable steps to mitigate the effects thereof.
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8. DISPUTE RESOLUTION
8.1 Governing Law – This Agreement and all claims arising hereunder shall be governed by and construed in accordance with the laws of the District of Columbia, without regard to conflict-of-law principles.
8.2 Forum Selection – Subject to Section 8.3, the parties submit to the exclusive jurisdiction of the DC Probate Court for all proceedings concerning the Trust.
8.3 Arbitration (Optional) – By initialing here ___ and here ___, Settlor and Trustee agree to submit any dispute not exclusively within the statutory jurisdiction of the DC Probate Court to binding arbitration administered by [AAA | JAMS] pursuant to its Trust & Estate Arbitration Rules. The seat of arbitration shall be Washington, DC. Judgment on the award may be entered in any court of competent jurisdiction.
8.4 Jury Waiver – The parties acknowledge that probate matters in the District of Columbia are tried without a jury; accordingly, no jury waiver is required or provided.
8.5 Injunctive Relief – Nothing herein shall impair the DC Probate Court’s authority to grant temporary, preliminary, or permanent injunctive relief necessary to protect the Trust Estate.
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9. GENERAL PROVISIONS
9.1 Amendments – Due to the irrevocable nature of the Trust, this Agreement may be amended only (i) as expressly provided in Section 3.3 or (ii) by written instrument executed by Trustee and all Beneficiaries, and approved by the DC Probate Court if required by Applicable Law.
9.2 Waiver – No waiver of any breach shall be deemed a waiver of any subsequent breach. Any waiver must be in writing and signed by the waiving party.
9.3 Assignment – No party may assign or delegate any right or obligation hereunder except as expressly provided by this Agreement or Applicable Law.
9.4 Successors & Assigns – This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors, and assigns.
9.5 Severability – If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall remain in full force and effect, and the invalid provision shall be deemed modified to the minimum extent necessary to render it valid and enforceable.
9.6 Entire Agreement – This instrument constitutes the entire agreement of the parties with respect to the Trust and supersedes all prior discussions, negotiations, and writings.
9.7 Counterparts; Electronic Signatures – This Agreement may be executed in one or more counterparts (including by electronic signature), each of which shall constitute an original and all of which, when taken together, shall constitute one and the same instrument.
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10. EXECUTION BLOCK
IN WITNESS WHEREOF, Settlor and Trustee have executed this Irrevocable Trust Agreement as of the Effective Date.
SETTLOR
[SETTLOR NAME]
Date: _______
TRUSTEE
[TRUSTEE NAME], as Trustee
Date: _______
NOTARY ACKNOWLEDGMENT
District of Columbia, ss:
On this ___ day of ____, 20__, before me, the undersigned notary public, personally appeared [SETTLOR NAME] and [TRUSTEE NAME], known to me or satisfactorily proven to be the persons whose names are subscribed to the foregoing instrument, and acknowledged that they executed the same for the purposes therein contained.
Notary Public
My commission expires: _______
[// GUIDANCE: DC does not require witnesses for trust instruments, but practitioners may add witness lines for additional evidentiary assurance.]
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11. SCHEDULE A – TRUST PROPERTY
[Detailed description of cash, securities, life insurance policies, real property, or other assets being transferred to the Trust.]
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12. SCHEDULE B – BENEFICIARIES
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[PRIMARY BENEFICIARY NAME] – Date of Birth: [DOB] – Relationship: [RELATIONSHIP]
• Permitted Issue: Biological and legally adopted descendants. -
[CONTINGENT BENEFICIARY NAME] – Date of Birth: [DOB] – Relationship: [RELATIONSHIP]
[// GUIDANCE: Attach additional schedules or disclosure statements if Beneficiaries are minors, subject to special needs considerations, or located in foreign jurisdictions.]
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