IRREVOCABLE TRUST AGREEMENT
(Commonwealth of Pennsylvania)
[// GUIDANCE: This template is intentionally drafted for Pennsylvania practitioners. All bracketed items must be completed, modified, or deleted before execution.]
TABLE OF CONTENTS
I. Document Header (Title, Parties, Recitals)
II. Definitions
III. Operative Provisions
IV. Representations & Warranties
V. Covenants & Restrictions
VI. Default & Remedies
VII. Risk Allocation
VIII. Dispute Resolution
IX. General Provisions
X. Execution Block
I. DOCUMENT HEADER
1.1 Title
IRREVOCABLE TRUST AGREEMENT (the “Agreement”)
1.2 Parties
This Agreement is entered into and made effective as of [EFFECTIVE DATE] (the “Effective Date”) by and between:
- Settlor: [SETTLOR LEGAL NAME], residing at [ADDRESS] (“Settlor”);
- Trustee: [TRUSTEE LEGAL NAME], having a mailing address at [ADDRESS] (“Trustee”); and
- Beneficiary(ies): The individuals and/or entities identified in Schedule A (collectively, “Beneficiaries”).
1.3 Recitals
A. Settlor wishes to create an irrevocable trust under the Pennsylvania Uniform Trust Act, 20 Pa. Cons. Stat. § 7701 et seq. (the “Act”).
B. Trustee is willing to hold and administer the Trust Estate (defined below) for the exclusive benefit of the Beneficiaries in accordance with the terms herein.
C. Settlor desires that all property transferred to the Trust be removed from Settlor’s taxable estate and shielded from creditor claims to the maximum extent permitted under applicable law.
D. Trustee agrees to accept such property and perform all duties imposed by this Agreement and the Act.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
II. DEFINITIONS
For purposes of this Agreement, capitalized terms have the meanings set forth below. Terms defined in one Section have the same meaning when used elsewhere.
“Accountant” – [NAME OR “Any certified public accountant retained pursuant to Section 5.3”].
“Act” – The Pennsylvania Uniform Trust Act, 20 Pa. Cons. Stat. § 7701 et seq.
“Administrative Trustee” – Any additional trustee appointed solely to perform ministerial or administrative functions.
“Advisor” – A person described in Section 4.8 vested with trustee-like powers but not serving as a fiduciary.
“Beneficiaries” – Those individuals or entities listed on Schedule A, including any Supplemental Beneficiaries added pursuant to Section 3.6.
“Distribution Year” – The twelve-month period ending each December 31.
“Irrevocable” – As described in Section 3.1; the Trust cannot be revoked by Settlor absent a judicial order or as otherwise permitted by the Act.
“Person” – Any natural person, corporation, partnership, limited liability company, trust, or other legal entity.
“Trust” or “Trust Estate” – All property contributed to, and all reinvestments, substitutions, accretions, and proceeds thereof, held under this Agreement.
“Trustee” – The initial trustee and any successor trustee(s) appointed in accordance with Section 4.7.
[// GUIDANCE: Add additional defined terms as needed for complex assets or specialized provisions.]
III. OPERATIVE PROVISIONS
3.1 Creation; Irrevocability
a. Settlor hereby irrevocably transfers and assigns to Trustee the property described on Schedule B, together with any future property that Settlor or any other Person may contribute, to hold in trust for the purposes and upon the terms set forth herein.
b. Except as expressly provided in Sections 3.4 and 9.2, this Trust is irrevocable. Settlor expressly waives all rights, powers, and privileges to alter, amend, revoke, or terminate the Trust.
3.2 Trust Purpose
The Trust is created to: (i) provide for the welfare of the Beneficiaries; (ii) achieve legitimate tax planning objectives, including potential estate and gift tax minimization; and (iii) protect Trust assets from creditors to the fullest extent permitted by law.
3.3 Distributions to Beneficiaries
a. Mandatory Income. Commencing on the Effective Date, Trustee shall distribute all net income of the Trust Estate, at least annually, to or for the benefit of the Beneficiaries in equal or such other shares as Schedule A may specify.
b. Discretionary Principal. Trustee may distribute principal for the health, education, maintenance, or support (“HEMS Standard”) of any Beneficiary, taking into account other resources known to Trustee.
c. Spendthrift Protection. No Beneficiary may anticipate, alienate, pledge, or otherwise encumber any interest in the Trust; and such interests shall be protected from voluntary or involuntary transfer, including creditors’ claims, to the maximum extent permitted under 20 Pa. Cons. Stat. § 7742.
d. Right to Information. Consistent with 20 Pa. Cons. Stat. § 7780.3, Trustee shall provide annual statements and other information reasonably requested by Qualified Beneficiaries, subject to any confidentiality restrictions in Section 5.4.
3.4 Special Power of Appointment
The primary Beneficiary, [NAME], retains a limited testamentary power of appointment exercisable by specific reference in a duly executed will or other testamentary instrument, permitting the appointment of Trust assets among Settlor’s issue or qualified charities. This power does not enable appointment to the Beneficiary, Beneficiary’s estate, or creditors thereof.
3.5 Termination
Unless earlier terminated pursuant to law, this Trust shall terminate upon the first to occur of: (i) exhaustion of the Trust Estate; or (ii) the date [TERMINATION DATE OR EVENT]. Upon termination, Trustee shall distribute remaining assets outright to the then-living Beneficiaries in equal shares, subject to final expenses and taxes.
3.6 Additions and Supplemental Beneficiaries
Settlor or any Person may make additional contributions, provided Trustee consents in writing. Supplemental Beneficiaries may be added by Settlor’s written instrument delivered to Trustee prior to Settlor’s death, provided such instrument expressly references this Section.
IV. REPRESENTATIONS & WARRANTIES
4.1 Settlor
a. Authority. Settlor has full legal capacity to execute and deliver this Agreement and to contribute the property described herein.
b. No Conflicts. Execution of this Agreement does not violate any agreement, court order, or applicable law binding upon Settlor.
c. Tax Advice. Settlor acknowledges having been advised to obtain independent tax counsel regarding the transfer and its consequences.
4.2 Trustee
a. Authority & Capacity. Trustee is legally competent and has accepted the trusteeship.
b. Fiduciary Compliance. Trustee will administer the Trust in good faith, in accordance with the Act and this Agreement.
c. Bond. Unless required by a court of competent jurisdiction, no bond shall be required of any Trustee.
4.3 Survival
All representations and warranties survive the execution of this Agreement and remain in effect throughout the Trust term.
V. COVENANTS & RESTRICTIONS
5.1 Trustee Duties
Trustee shall:
1. Administer the Trust exclusively for the benefit of the Beneficiaries;
2. Act with prudence, loyalty, and impartiality in accordance with 20 Pa. Cons. Stat. § 7771;
3. Maintain complete and accurate records;
4. Furnish annual fiduciary accounting statements within [90] days after each Distribution Year.
5.2 Trustee Powers
Subject to the Act and any limitations herein, Trustee may, without court order, exercise all powers available to trustees under Pennsylvania law, including but not limited to:
1. Invest and reinvest Trust assets (modern portfolio theory standard);
2. Buy, sell, lease, or exchange real or personal property;
3. Participate in reorganizations, mergers, or liquidations;
4. Borrow funds and encumber Trust property;
5. Employ professionals and delegate investment authority in compliance with 20 Pa. Cons. Stat. § 7775;
6. Make tax elections and manage tax matters;
7. Allocate receipts and disbursements between income and principal under 20 Pa. Cons. Stat. § 8101 et seq.
5.3 Tax Matters
a. Grantor/Non-Grantor Status. [SELECT: “This Trust shall be treated as a grantor trust under I.R.C. §§ 671-679” OR “This Trust shall be treated as a non-grantor trust.”]
b. Tax Identification. Trustee shall obtain and use a separate taxpayer identification number as required.
c. Tax Liaison. Trustee may appoint an Accountant to prepare and file all required returns and elections, and may rely conclusively on such professional advice.
5.4 Confidentiality
Trustee and all Advisors must maintain strict confidentiality regarding Trust matters except (i) as required by law; (ii) to the extent necessary for administration; or (iii) with written consent of all Qualified Beneficiaries.
5.5 Notice & Cure
Trustee shall promptly notify Settlor (if living) and Qualified Beneficiaries of any breach of this Agreement or the Act. Trustee shall have a [30]-day cure period prior to Beneficiaries invoking remedies under Article VI.
VI. DEFAULT & REMEDIES
6.1 Events of Default
The following constitute Events of Default:
1. Trustee’s willful misconduct, gross negligence, or material breach of fiduciary duty;
2. Failure to provide required notices or accountings within the cure period;
3. Misappropriation or self-dealing with Trust assets;
4. Insolvency or incapacity of Trustee without timely appointment of a successor.
6.2 Remedies
Upon an Event of Default and after expiration of the cure period, any Qualified Beneficiary may:
1. Petition the [COUNTY] Orphans’ Court Division for removal of Trustee and appointment of a successor;
2. Seek injunctive relief to preserve Trust assets;
3. Demand an accounting or surcharge;
4. Recover reasonable attorneys’ fees and costs.
VII. RISK ALLOCATION
7.1 Trustee Indemnification
Trustee and its agents are indemnified out of the Trust Estate against all claims, liabilities, and expenses (including reasonable attorneys’ fees) arising from the administration of the Trust, except to the extent resulting from Trustee’s willful misconduct or gross negligence.
7.2 Limitation of Liability
Trustee’s liability under this Agreement is limited to the value of the Trust Estate; no personal liability shall attach to Trustee for any action taken in good faith under this Agreement.
7.3 Insurance
Trustee may purchase fiduciary liability insurance payable from Trust assets, naming Trustee and any co-trustees or Advisors as insureds.
7.4 Force Majeure
Neither Trustee nor any Advisor shall be liable for delay or failure to act caused by acts of God, war, terrorism, civil unrest, governmental action, or other events beyond reasonable control, provided they act diligently upon cessation of the event.
VIII. DISPUTE RESOLUTION
8.1 Governing Law
This Agreement and all administration of the Trust shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania, without regard to conflict-of-laws principles.
8.2 Forum Selection
Exclusive jurisdiction and venue for all matters arising under or relating to this Trust shall lie in the Orphans’ Court Division of the [COUNTY] Court of Common Pleas.
8.3 Arbitration (Optional)
a. Election. If all Qualified Beneficiaries and Trustee consent in writing, any dispute may be submitted to binding arbitration administered by [ARBITRATION AGENCY] under its Commercial Arbitration Rules.
b. Injunctive Relief. Nothing herein limits a party’s right to seek temporary, preliminary, or permanent injunctive relief from the Orphans’ Court to secure Trust assets pending arbitration.
8.4 Jury Waiver
Because probate matters are tried without a jury, the parties acknowledge any jury rights are waived by operation of Pennsylvania law.
IX. GENERAL PROVISIONS
9.1 Amendment & Waiver
Except as permitted under the Act for non-material administrative modifications or as expressly provided in Section 9.2, no amendment or waiver of any provision of this Agreement shall be effective unless set forth in a written instrument executed by Trustee and all Qualified Beneficiaries.
9.2 Judicial Reformation; Decanting
Notwithstanding Section 3.1, Trustee may petition the Orphans’ Court for reformation, or decant Trust assets to a substantially similar trust, to: (i) correct scrivener’s errors; (ii) achieve tax objectives; or (iii) comply with changes in law, provided Beneficiaries are not materially disadvantaged.
9.3 Assignment & Delegation
No party may assign its rights or delegate its duties hereunder except as permitted for successor trustees under Section 4.7 or as expressly authorized by the Act.
9.4 Successors & Assigns
This Agreement binds and inures to the benefit of the parties and their respective heirs, executors, administrators, successors, and permitted assigns.
9.5 Severability
If any provision is held unenforceable, the remaining provisions shall remain in full force, and the unenforceable provision shall be construed to effectuate original intent to the maximum extent permitted.
9.6 Entire Agreement
This Agreement constitutes the entire agreement of the parties regarding the subject matter and supersedes all prior or contemporaneous writings or understandings.
9.7 Counterparts; Electronic Signatures
This Agreement may be executed in any number of counterparts, each of which is deemed an original, and all of which constitute one instrument. Delivery of an executed counterpart by facsimile, PDF, or secure electronic signature platform shall be as effective as physical delivery.
X. EXECUTION BLOCK
IN WITNESS WHEREOF, the parties have executed this Irrevocable Trust Agreement effective as of the date first above written.
Settlor:
[SETTLOR NAME]
Date: ____
Trustee:
[TRUSTEE NAME], Trustee
Date: ____
Notarization (Recommended)
Commonwealth of Pennsylvania )
County of _______ ) 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 within this instrument, and acknowledged that they executed the same for the purposes therein contained.
Notary Public
My Commission Expires: _____
Schedule A – Beneficiaries
[Name, address, relationship, and birth date of each Beneficiary]
Schedule B – Initial Trust Property
[Detailed description of property (cash, securities, real estate, life insurance policies, etc.)]
[// GUIDANCE: Verify asset descriptions, tax elections, and fiduciary appointments for each client matter. Confirm that any desired Pennsylvania elective share waivers, marital deduction planning, or generation-skipping transfer tax provisions are properly incorporated before final execution.]