IRREVOCABLE TRUST AGREEMENT
(State of Maine – Draft Template)
[// GUIDANCE: This template is drafted to comply with the Maine Uniform Trust Code (“MUTC”), 18-B M.R.S. § 101 et seq., and incorporates jurisdiction-specific considerations for irrevocable trusts, state tax treatment, and beneficiary rights. All bracketed items must be completed or revised by counsel prior to execution.]
TABLE OF CONTENTS
- Document Header
- Definitions
- Establishment of Trust & Irrevocability
- Trust Purpose & Beneficial Interests
- Funding the Trust
- Trustee Powers, Duties & Standards of Care
- Tax Allocation & Elections
- Distributions to Beneficiaries
- Representations & Warranties
- Covenants & Restrictions
- Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
1. DOCUMENT HEADER
1.1 Title and Parties
This Irrevocable Trust Agreement (“Agreement”) is made effective as of [EFFECTIVE DATE] (the “Effective Date”) by and among:
(a) [SETTLOR NAME], of [SETTLOR ADDRESS] (“Settlor”); and
(b) [TRUSTEE NAME], of [TRUSTEE ADDRESS], as the initial Trustee (together with any successor trustee, the “Trustee”).
The parties hereby create the “[TRUST NAME]” (the “Trust”) pursuant to the laws of the State of Maine.
1.2 Recitals
A. Settlor desires to transfer certain property to Trustee to hold, manage, and distribute in strict accordance with this Agreement.
B. Settlor intends this Trust to be irrevocable, except as expressly provided herein or as otherwise permitted under 18-B M.R.S. § 411–417.
C. Trustee is willing to accept such property and hold it in trust subject to the terms of this Agreement.
2. DEFINITIONS
For purposes of this Agreement, the following capitalized terms shall have the meanings set forth below. Terms defined in one Section shall have the same meaning when used elsewhere.
“Accountant” – [ACCOUNTING FIRM/CPA NAME] or any successor designated pursuant to Section 7.5.
“Beneficiary” – Each individual or entity identified in Schedule A, as the same may be updated in accordance with Section 8.4.
“Code” – The Internal Revenue Code of 1986, as amended.
“Discretionary Distribution” – Any distribution subject to Trustee’s sole and absolute discretion.
“Income” and “Principal” – As determined under 18-B M.R.S. § 103(15) & (19) and Title 18-B, Ch. 8.
“Irrevocability Rules” – The statutory rules governing modification or termination of irrevocable trusts under 18-B M.R.S. §§ 411-418.
“Maine Probate Court” – The Probate Court of [COUNTY], Maine, or any successor court exercising jurisdiction over trusts.
“Permissible Appointee” – Any person to whom a power of appointment may be exercised under Section 8.6.
“Trust Assets” – All property transferred to and held by Trustee from time to time, including earnings and accretions.
“Trustee” – The individual or corporate fiduciary then serving pursuant to Section 6.8.
[// GUIDANCE: Add or remove definitions as appropriate for specific client circumstances.]
3. ESTABLISHMENT OF TRUST & IRREVOCABILITY
3.1 Creation. Settlor hereby transfers, assigns, and delivers to Trustee the property listed on Schedule B (the “Initial Corpus”), receipt of which Trustee acknowledges. Additional property may be added at any time by Settlor or any third party with Trustee’s consent.
3.2 Irrevocability. This Trust is irrevocable. Settlor expressly waives all rights, powers, and interests, legal or equitable, to alter, amend, revoke, or terminate the Trust, except:
(a) As provided under Sections 3.3 or 14.4; or
(b) As might be permitted by law pursuant to a nonjudicial settlement agreement under 18-B M.R.S. § 111 or by court order under §§ 411-417.
3.3 Limited Power to Amend for Tax Qualification. Trustee, with written consent of all Beneficiaries (or their representatives under Article 5 of the MUTC), may amend this Agreement solely to:
(i) Comply with changes in state or federal tax law; or
(ii) Maintain the Trust’s intended tax treatment under Subchapter J of the Code.
3.4 No Reversionary Interest. No part of the Trust Assets or income shall revert to Settlor or become subject to the claims of Settlor’s creditors.
4. TRUST PURPOSE & BENEFICIAL INTERESTS
4.1 Purpose. The Trust is established for the health, education, maintenance, and support (“HEMS”) of the Beneficiaries and for any additional purpose stated in Schedule C.
4.2 Beneficial Interests. The Beneficiaries’ respective interests are set forth in Schedule A. Such interests shall be enforceable per 18-B M.R.S. § 201(3).
4.3 Spendthrift Provision. Beneficiaries’ interests are subject to a spendthrift clause under 18-B M.R.S. § 502. No voluntary or involuntary alienation shall be permitted.
5. FUNDING THE TRUST
5.1 Additional Transfers. Subsequent contributions shall vest immediately in Trustee and be governed by this Agreement.
5.2 Acceptance. Trustee may refuse any property that (i) would impose undue liability, (ii) cannot be held in trust without violating applicable law, or (iii) is inconsistent with the investment policy adopted under Section 6.4.
6. TRUSTEE POWERS, DUTIES & STANDARDS OF CARE
6.1 General Powers. Trustee shall have all powers granted under 18-B M.R.S. § 815 and 18-B M.R.S. § 816, including powers to invest, reinvest, sell, exchange, lease, borrow, and otherwise manage Trust Assets.
6.2 Fiduciary Standard. Trustee shall administer the Trust solely in the interests of the Beneficiaries and with the prudence reasonably expected of a fiduciary familiar with trust administration under 18-B M.R.S. § 802.
6.3 Delegation. Trustee may delegate investment and administrative functions consistent with 18-B M.R.S. § 807, provided Trustee exercises reasonable care in selecting, instructing, and monitoring any agent.
6.4 Investment Policy. Within 90 days of the Effective Date, Trustee shall adopt a written investment policy consistent with the Maine Prudent Investor Rule, Title 18-B, Ch. 9.
6.5 Accountings. Trustee shall provide annual written accounts to each current Beneficiary and to the Settlor (until Settlor’s death), satisfying 18-B M.R.S. § 813.
6.6 Compensation & Expenses. Trustee shall be entitled to reasonable compensation and reimbursement of properly incurred expenses as described in Schedule D or, if silent, as permitted by court order.
6.7 Resignation & Removal.
(a) Resignation. Trustee may resign upon 30 days’ written notice to all Qualified Beneficiaries and to any co-trustee.
(b) Removal. A court of competent jurisdiction or unanimous written consent of the Qualified Beneficiaries may remove Trustee for cause per 18-B M.R.S. § 706.
6.8 Successor Trustee. Upon vacancy, the next successor named in Schedule E shall serve. If no successor is named or willing, the Maine Probate Court may appoint a successor pursuant to 18-B M.R.S. § 704.
7. TAX ALLOCATION & ELECTIONS
7.1 Federal and State Taxes. All income, gains, losses, deductions, and credits shall be reported in accordance with Subchapter J of the Code and Title 36 of the Maine Revised Statutes.
7.2 Grantor vs. Non-Grantor Status. [SELECT: “This Trust shall be treated as a non-grantor trust.” / “Settlor elects grantor-trust status under Code §§ 671-679.”]
7.3 Tax Reimbursement Clause. If treated as a grantor trust, Trustee may in its sole discretion reimburse Settlor for income tax attributable to Trust earnings, provided such reimbursement is not inconsistent with Rev. Rul. 2004-64.
7.4 Allocation of Taxes Among Beneficiaries. Taxes attributable to Distributable Net Income (“DNI”) distributed to a Beneficiary shall be borne by that Beneficiary. Any remaining tax shall be paid from Trust Assets.
7.5 Tax Advisor. Trustee may employ the Accountant for preparation of all tax returns and for tax planning.
8. DISTRIBUTIONS TO BENEFICIARIES
8.1 Mandatory Distributions. [INSERT if applicable: “Trustee shall distribute net income annually to the Beneficiaries in the percentages stated in Schedule A.”]
8.2 Discretionary Distributions. Trustee may make Discretionary Distributions of income or principal for Beneficiaries’ HEMS or for any purpose Trustee deems advisable.
8.3 Distribution Standards. In exercising discretion, Trustee shall consider Beneficiaries’ other resources and needs, and may consider factors listed in 18-B M.R.S. § 814(2).
8.4 Addition / Withdrawal of Beneficiaries. Changes require unanimous consent of Qualified Beneficiaries and, if none, court approval.
8.5 Beneficiary Rights to Information. Each Qualified Beneficiary is entitled to information outlined in 18-B M.R.S. § 813.
8.6 Limited Power of Appointment. Upon [SETTLOR’S/PRIMARY BENEFICIARY’S] death, [HE/SHE] may, by will expressly referring to this power, appoint any portion of the Trust Assets to one or more Permissible Appointees, provided no appointment may benefit Settlor or Settlor’s estate.
9. REPRESENTATIONS & WARRANTIES
9.1 Settlor Representations. Settlor represents that:
(a) Settlor has full legal capacity and authority to execute and deliver this Agreement and to transfer the property comprising the Initial Corpus;
(b) The execution, delivery, and performance of this Agreement do not violate any contract, court order, or applicable law binding upon Settlor; and
(c) Upon transfer, the Trust acquires good and marketable title to the Initial Corpus, free of liens except as disclosed in Schedule B.
9.2 Trustee Representations. Trustee represents that:
(a) Trustee has accepted the trusteeship and is not disqualified under any provision of law or prior court order;
(b) Trustee will discharge the duties herein in compliance with the MUTC and other applicable law; and
(c) Trustee is bonded in the amount of $[BOND] or will secure such bond within 30 days of the Effective Date, unless waived by all Beneficiaries in writing.
9.3 Survival. All representations and warranties survive the execution of this Agreement and any resignation or removal of Trustee.
10. COVENANTS & RESTRICTIONS
10.1 Settlor Covenant Not to Revoke. Settlor covenants and agrees that Settlor shall not seek to revoke or modify this Trust except as expressly permitted herein.
10.2 Trustee Compliance. Trustee shall at all times comply with applicable federal and state securities, tax, and fiduciary laws.
10.3 Notice of Material Events. Trustee shall promptly notify Beneficiaries of any:
(a) Material litigation involving the Trust;
(b) Notice of deficiency or tax assessment in excess of $[AMOUNT]; or
(c) Event of Default under Section 11.1.
10.4 Record Retention. Trustee shall maintain books and records for a minimum of seven (7) years or as otherwise required by law.
11. DEFAULT & REMEDIES
11.1 Events of Default. Each of the following constitutes an “Event of Default”:
(a) Trustee’s material breach of fiduciary duty;
(b) Trustee’s failure to provide annual accountings within sixty (60) days after written demand;
(c) Insolvency or bankruptcy of Trustee if an individual; or
(d) Revocation attempt by Settlor in violation of Section 3.2.
11.2 Notice and Cure. Any party alleging an Event of Default shall give written notice describing the default in reasonable detail. Trustee shall have thirty (30) days to cure, except that no cure period applies to breaches involving willful misconduct, bad faith, or fraudulent acts.
11.3 Remedies. Upon an uncured Event of Default, any Qualified Beneficiary may:
(a) Seek removal of Trustee in Maine Probate Court;
(b) Pursue surcharge or damages limited as set forth in Section 12.2; or
(c) Seek injunctive or other equitable relief to enforce this Agreement.
11.4 Attorneys’ Fees. The prevailing party in any action arising under this Agreement shall be entitled to reasonable attorneys’ fees and costs, payable from the Trust if Trustee prevails, or from Trustee individually if Trustee is found liable for breach of trust.
12. RISK ALLOCATION
12.1 Indemnification of Trustee. Except for Trustee’s willful misconduct or gross negligence, Trustee shall be indemnified from the Trust Assets against all claims, liabilities, and expenses, including attorneys’ fees, incurred in connection with the administration of the Trust.
12.2 Limitation of Liability. Trustee’s liability for breach of trust shall not exceed the value of the Trust Assets, provided such limitation is not applied to losses resulting from Trustee’s bad faith or intentional wrongdoing.
12.3 Insurance. Trustee may procure fiduciary liability insurance at the expense of the Trust.
12.4 Force Majeure. Trustee shall not be liable for delays or failures in performance due to events beyond Trustee’s reasonable control, including but not limited to natural disasters, acts of war, terrorism, or changes in applicable law.
13. DISPUTE RESOLUTION
13.1 Governing Law. This Agreement and the Trust shall be governed by and construed in accordance with the laws of the State of Maine, including the MUTC, without regard to conflict-of-law principles.
13.2 Forum Selection. The Maine Probate Court for [COUNTY] shall have exclusive jurisdiction over all judicial proceedings concerning the Trust, subject to the right of appeal as provided by Maine law.
13.3 Optional Arbitration. Any dispute that all Qualified Beneficiaries and Trustee agree in writing to submit to arbitration shall be resolved in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) then in effect. The arbitral tribunal shall consist of a single arbitrator with at least ten (10) years’ experience in trust and estate law.
13.4 Jury Waiver. Because probate matters are tried without a jury under Maine law, the parties waive any right to a jury trial to the extent one might otherwise apply.
13.5 Injunctive Relief. Nothing in this Article shall preclude any party from seeking temporary, preliminary, or permanent injunctive relief in Maine Probate Court to protect Trust Assets or enforce fiduciary duties.
14. GENERAL PROVISIONS
14.1 Amendment & Waiver. No amendment or waiver of any provision of this Agreement shall be effective unless made in accordance with Section 3.3 or applicable law and is in a writing executed by all required parties.
14.2 Assignment. Except as otherwise provided herein, no Beneficiary may assign, encumber, or transfer any interest in the Trust.
14.3 Successors & Assigns. This Agreement shall bind and inure to the benefit of the parties and their respective successors and assigns.
14.4 Severability & Reformation. If any provision is held invalid, the remaining provisions shall remain enforceable, and the invalid provision shall be reformed to the minimum extent necessary to effectuate the Settlor’s intent.
14.5 Integration. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, or representations.
14.6 Counterparts; Electronic Signatures. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original. Signatures delivered via DocuSign, PDF, or similar electronic means shall be deemed effective.
15. EXECUTION BLOCK
IN WITNESS WHEREOF, Settlor and Trustee have executed this Irrevocable Trust Agreement as of the Effective Date.
15.1 Settlor
[SETTLOR NAME], Settlor
Date: _______
15.2 Trustee
[TRUSTEE NAME], Trustee
Date: _______
[// GUIDANCE: Maine does not require notarization for validity of an inter vivos trust instrument; however, notarization is recommended for evidentiary purposes. Add a notarial acknowledgment block if desired.]
SCHEDULES (Attach as applicable)
Schedule A – Beneficiaries and Percentage Interests
Schedule B – Initial Corpus Description
Schedule C – Additional Trust Purposes/Provisions
Schedule D – Trustee Compensation
Schedule E – Successor Trustees
[// GUIDANCE: Verify all schedules are fully completed before execution. Attach any ancillary documents (e.g., Certification of Trust) required for account opening or asset transfers.]
© [YEAR] [LAW FIRM NAME]. This template is provided for informational purposes only and must be tailored by qualified legal counsel to the specific facts and objectives of the client.