IRREVOCABLE TRUST AGREEMENT
(Maryland – Draft Template)
[// GUIDANCE: This template is designed for use under the Maryland Trust Act, Md. Code Ann., Est. & Trusts § 14.5-101 et seq. All bracketed fields must be completed and the draft reviewed for client-specific tax, estate-planning, and fiduciary issues before execution.]
TABLE OF CONTENTS
I. Document Header
II. Definitions
III. Creation of Trust & Irrevocability
IV. Trust Estate & Funding
V. Dispositive Provisions
VI. Trustee Powers & Duties
VII. Representations & Warranties
VIII. Covenants & Restrictions
IX. Default & Remedies
X. Risk Allocation
XI. Dispute Resolution
XII. General Provisions
XIII. Execution Block
XIV. Notary Acknowledgment
I. DOCUMENT HEADER
1.1 Parties.
(a) Settlor: [SETTLOR LEGAL NAME], residing at [SETTLOR ADDRESS].
(b) Trustee: [TRUSTEE LEGAL NAME], having a principal address at [TRUSTEE ADDRESS].
(c) Trust Protector (if any): [TRUST PROTECTOR NAME].
(d) Initial Beneficiaries: [BENEFICIARY NAMES].
1.2 Trust Name. This trust shall be known as the “[TRUST NAME] Irrevocable Trust” (“Trust”).
1.3 Effective Date. This Agreement is effective as of [EFFECTIVE DATE] (“Effective Date”).
1.4 Governing Law & Forum.
(a) This Agreement and the Trust shall be governed by the laws of the State of Maryland, including the Maryland Trust Act, Md. Code Ann., Est. & Trusts § 14.5-101 et seq.
(b) Exclusive forum for judicial matters shall be the [COUNTY] Circuit Court (sitting as the Orphans’ Court/Probate Division) or any successor probate court having jurisdiction.
1.5 Consideration & Recitals.
WHEREAS, Settlor desires to create an irrevocable trust to hold certain property for the benefit of the Beneficiaries; and
WHEREAS, Trustee is willing to accept the trust and administer the same according to its terms;
NOW, THEREFORE, Settlor and Trustee agree as follows:
II. DEFINITIONS
For purposes of this Agreement, the following capitalized terms have the meanings set forth below. Terms defined herein include the singular and plural forms.
“Accountings” – Reports prepared by Trustee pursuant to § VI.10.
“Advisor” – Any person engaged pursuant to § VI.7.
“Beneficiaries” – The persons identified in § I.1(d) and any Additional Beneficiaries under § V.4.
“Code” – The Internal Revenue Code of 1986, as amended (26 U.S.C.).
“Distribution Standard” – The standard described in § V.2.
“Event of Default” – Any event listed in § IX.1.
“Fiduciary Duties” – Those duties imposed on Trustee under this Agreement and Title 14.5 of the Estates & Trusts Article.
“Initial Trust Property” – The property described in § IV.1.
“Protected Person” – Each Trustee, Trust Protector, and Advisor, in their fiduciary or advisory capacities.
“Trust Estate” – All property held from time to time by Trustee under this Agreement.
“Trust Protector” – The person (if any) identified in § I.1(c) with powers granted in § VI.8.
[// GUIDANCE: Insert any additional defined terms alphabetically.]
III. CREATION OF TRUST & IRREVOCABILITY
3.1 Creation. Settlor hereby transfers, assigns, and delivers the Initial Trust Property to Trustee, who accepts the same in trust for the uses and purposes herein stated.
3.2 Irrevocability. The Trust is irrevocable. Settlor expressly waives any and all rights or powers, whether under Md. Code Ann., Est. & Trusts § 14.5-411 or otherwise, to amend, revoke, or terminate this Trust, except as expressly provided for (i) Trust Protector modifications under § VI.8 or (ii) non-material administrative changes under § XII.3. Any attempted revocation or amendment by Settlor shall be void.
3.3 Tax Characterization. [GRANTOR/NON-GRANTOR] Election. For federal and Maryland income-tax purposes the parties intend that the Trust [SELECT ONE]:
(a) be treated as a grantor trust under 26 U.S.C. §§ 671–679; or
(b) be treated as a separate taxable entity (non-grantor trust).
[// GUIDANCE: Elect the desired tax treatment; add appropriate tax reimbursement or substitution clauses if grantor-trust status is chosen.]
IV. TRUST ESTATE & FUNDING
4.1 Initial Trust Property. The Trust Estate initially consists of: [DESCRIPTION OF PROPERTY / $ AMOUNT].
4.2 Additional Contributions. Trustee may accept additional property from Settlor or any other person, provided such property is accepted in writing and clearly identified as Trust property.
4.3 Segregation of Assets. Trustee shall keep the Trust Estate separate from Trustee’s personal property and from other trusts, except for common-fund investments permitted by § 14.5-819.
V. DISPOSITIVE PROVISIONS
5.1 Beneficiaries. The Beneficiaries are entitled to distributions as provided herein.
5.2 Distribution Standard. Trustee may distribute to or for the benefit of any Beneficiary such amounts of income and/or principal as Trustee, in Trustee’s sole and uncontrolled discretion, deems necessary or advisable for the Beneficiary’s health, education, maintenance, and support (“HEMS”).
5.3 Mandatory Termination. Upon the earliest of (a) [DATE], (b) [EVENT], or (c) thirty (30) years after the Effective Date, Trustee shall distribute the remaining Trust Estate outright, free of trust, to the then-living Beneficiaries per stirpes.
5.4 Additional Beneficiaries. [OPTIONAL] Settlor may, by signed written instrument delivered to Trustee prior to the Effective Date, designate additional Beneficiaries, provided such designation does not violate § III.2.
5.5 Spendthrift. No interest of any Beneficiary shall be subject to voluntary or involuntary transfer, assignment, or anticipation, nor to legal process, prior to actual receipt. Md. Code Ann., Est. & Trusts § 14.5-502 is incorporated by reference.
5.6 Special-Needs Savings Clause. Distributions intended for a Beneficiary eligible for means-tested public benefits shall be made in Trustee’s discretion so as not to disqualify the Beneficiary, unless Trustee, in good faith, determines otherwise.
VI. TRUSTEE POWERS & DUTIES
6.1 General Powers. Subject to Fiduciary Duties, Trustee shall have all powers granted fiduciaries under Md. Code Ann., Est. & Trusts Title 14.5, Subtitle 8, including, without limitation, the powers to:
(a) retain, purchase, or sell Trust assets;
(b) invest in any property Trustee deems advisable;
(c) borrow money on secured or unsecured basis; and
(d) execute and deliver instruments incident to the administration of the Trust.
6.2 Standard of Care. Trustee shall exercise reasonable care, skill, and caution and shall comply with the prudent-investor rule (§ 14.5-804).
6.3 Compensation & Reimbursement. Trustee is entitled to reasonable compensation and reimbursement of expenses from the Trust Estate, subject to court review.
6.4 Co-Trustees. [INSERT if applicable—mechanisms for joint decision-making, tie-breakers, resignation procedures.]
6.5 Resignation & Removal.
(a) Trustee may resign by 30 days’ written notice to Settlor (if living) and Beneficiaries.
(b) Settlor (if living) or a majority in interest of the adult Beneficiaries may remove Trustee with or without cause by written notice and appointment of a successor Trustee.
(c) Successor Trustee acceptance shall be in writing. Title vests automatically in the successor upon qualification.
6.6 Successor Trustee Liability. A successor Trustee shall not be liable for acts of a predecessor, absent actual knowledge of a breach and failure to take reasonable remedial action.
6.7 Appointment of Advisors. Trustee may engage investment managers, accountants, attorneys, or other Advisors, and may rely on their advice without independent investigation.
6.8 Trust Protector.
(a) Powers. The Trust Protector may (i) remove and appoint Trustees, (ii) amend administrative provisions to maintain tax advantages or comply with law, and (iii) resolve ambiguities.
(b) Limitations. The Trust Protector shall not have any power that would render the Trust revocable or cause adverse tax consequences inconsistent with § III.3.
6.9 Beneficiary Information Rights. In accordance with § 14.5-813:
(a) Within 60 days after accepting trusteeship, Trustee shall notify the current Beneficiaries of Trustee’s name and address.
(b) Trustee shall annually provide Accountings covering all receipts, disbursements, and assets in reasonable detail.
(c) A Beneficiary age 25 or older may request additional information reasonably related to the Trust’s administration.
6.10 Accountings & Judicial Approval. Trustee may petition the probate court for approval of Accountings; notice to Beneficiaries shall be as statute requires.
VII. REPRESENTATIONS & WARRANTIES
7.1 Settlor. Settlor represents that:
(a) Settlor owns the Initial Trust Property free of encumbrances;
(b) Settlor has full capacity and authority to create this Trust; and
(c) Transferring the Initial Trust Property will not violate any contractual or legal restriction.
7.2 Trustee. Trustee represents that:
(a) Trustee is duly qualified under Maryland law to serve;
(b) Trustee has reviewed this Agreement and understands the fiduciary duties imposed; and
(c) Trustee is not aware of any conflict that would materially impair administration.
7.3 Survival. The representations and warranties in this Article survive execution and continue until final termination of the Trust.
VIII. COVENANTS & RESTRICTIONS
8.1 Tax Filings. Trustee shall timely file all required federal, state, and local tax returns and pay all taxes from the Trust Estate.
8.2 Insurance. Trustee shall maintain reasonable insurance (including fiduciary liability coverage) if available at commercially reasonable cost.
8.3 Compliance with Law. Trustee will administer the Trust in compliance with applicable law, including anti-money-laundering regulations and Maryland fiduciary statutes.
8.4 Notice of Legal Proceedings. Trustee shall promptly notify the Beneficiaries and Trust Protector of any litigation or governmental inquiry involving the Trust.
8.5 Prohibited Acts. Trustee shall not:
(a) engage in self-dealing except as permitted by § 14.5-806;
(b) commingle Trust funds with non-trust assets; or
(c) delegate discretionary distribution decisions unless expressly authorized herein.
IX. DEFAULT & REMEDIES
9.1 Events of Default.
(a) Breach of Fiduciary Duties;
(b) Willful misconduct or gross negligence;
(c) Failure to provide required Accountings within 60 days after written notice;
(d) Insolvency or incapacity of Trustee.
9.2 Notice & Cure. Beneficiaries must give written notice specifying the default. Trustee shall have 30 days to cure, unless the default is incapable of cure or immediate relief is required to protect the Trust Estate.
9.3 Remedies.
(a) Removal of Trustee by Beneficiaries or court order;
(b) Surcharge against Trustee to the extent of damages;
(c) Injunctive relief to prevent further breach;
(d) Recovery of reasonable attorneys’ fees and costs from the Trust Estate, or from Trustee personally in the event of willful misconduct or gross negligence.
X. RISK ALLOCATION
10.1 Indemnification. Except as limited by § 10.2, the Trust Estate shall indemnify and hold harmless each Protected Person from and against all claims, liabilities, and expenses arising out of or in connection with administration of the Trust.
10.2 Exclusions. No indemnification shall apply to losses resulting from a Protected Person’s (a) willful misconduct, (b) gross negligence, or (c) bad-faith breach of duty.
10.3 Limitation of Liability. Liability of any Protected Person in any capacity shall not exceed the value of the Trust Estate, except to the extent liability is not indemnified under § 10.2.
10.4 Force Majeure. No Protected Person shall be liable for delay or failure in performance caused by events beyond reasonable control, including acts of God, war, terrorism, civil unrest, or changes in applicable law.
XI. DISPUTE RESOLUTION
11.1 Governing Law. Maryland law governs all questions arising under this Agreement.
11.2 Forum Selection. All judicial proceedings shall be commenced in the state probate court identified in § 1.4(b).
11.3 Arbitration. [OPTIONAL – COMPLETE]
“Arbitration Election”: [YES / NO]
If “YES,” then:
(a) Any dispute not resolved informally within 30 days after written notice shall be submitted to binding arbitration administered by the American Arbitration Association in Baltimore, Maryland, in accordance with its Commercial Arbitration Rules.
(b) The arbitrator shall have authority to award equitable relief consistent with § 11.4.
(c) Judgment on the award may be entered in any court of competent jurisdiction.
11.4 Injunctive Relief. Nothing herein limits a party’s right to seek temporary, preliminary, or permanent injunctive relief from the probate court to protect the Trust Estate.
11.5 Jury Trial Waiver. Not applicable—probate matters in Maryland are tried without a jury pursuant to Md. Rule 6-452.
XII. GENERAL PROVISIONS
12.1 Amendment & Waiver. Except as expressly permitted in § VI.8, no amendment or waiver of any provision shall be effective unless in writing and signed by Trustee and the Trust Protector (if any) with probate court approval where required by law.
12.2 Assignment. Interests of Beneficiaries are non-assignable per § 5.5. Trustee may not delegate duties except as authorized herein.
12.3 Severability & Reformation. If any provision is invalid or unenforceable, the remaining provisions shall remain in effect, and the invalid provision shall be interpreted to best effectuate the Settlor’s intent consistent with law.
12.4 Entire Agreement. This instrument constitutes the entire agreement of the parties concerning the Trust and supersedes all prior discussions or writings.
12.5 Counterparts & Electronic Signatures. This Agreement may be executed in counterparts, each of which is deemed an original, and signatures transmitted electronically (e.g., PDF, DocuSign) shall be binding.
12.6 Headings. Headings are for convenience only and do not affect interpretation.
XIII. EXECUTION BLOCK
IN WITNESS WHEREOF, the parties have executed this Irrevocable Trust Agreement as of the Effective Date.
Settlor:
[SETTLOR NAME]
Trustee:
[TRUSTEE NAME], Trustee
[If Trust Protector is appointed:]
Trust Protector:
[TRUST PROTECTOR NAME]
[// GUIDANCE: For corporate trustees, add officer title and include corporate authority certification.]
XIV. NOTARY ACKNOWLEDGMENT
State of Maryland
County of ___
On this _ day of __, 20_, before me, the undersigned Notary Public, personally appeared ________ [name(s) of signer(s)], known to me (or satisfactorily proven) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged that he/she/they executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Notary Public
My commission expires: _____
[Seal]
[// GUIDANCE:
1. File the fully executed original (or a certified copy) with the Register of Wills in the county of situs, if and as required.
2. Consider obtaining an EIN for the Trust and establishing separate accounts immediately after execution.
3. Consult with tax counsel regarding grantor-trust powers (e.g., substitution power under § 675(4)(C)) and any state-level income-tax elections.]