IRREVOCABLE TRUST AGREEMENT
(Texas – Draft Template)
[// GUIDANCE: This template is drafted under Texas law (Texas Trust Code, Tex. Prop. Code Ann. Title 9, Subtitle B) and is designed for use by licensed attorneys. Bracketed items MUST be customized. Remove all guidance comments prior to execution.]
TABLE OF CONTENTS
- Document Header
- Definitions
- Operative Provisions
3.1 Creation and Funding
3.2 Purpose of Trust
3.3 Irrevocability & Limited Administrative Amendments
3.4 Trustee Provisions
3.5 Beneficiary Rights & Interests
3.6 Tax Matters - Representations & Warranties
- Covenants & Restrictions
- Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
1. DOCUMENT HEADER
IRREVOCABLE TRUST AGREEMENT
This Irrevocable Trust Agreement (“Agreement”) is entered into and made effective as of [EFFECTIVE DATE] (the “Effective Date”), by and between:
a. [GRANTOR NAME], an individual with a principal residence at [ADDRESS] (“Grantor”); and
b. [TRUSTEE NAME], [individual / Texas-chartered trust company], with a principal address at [ADDRESS] (“Trustee”).
Recitals
A. Grantor desires to establish an irrevocable trust (the “Trust”) pursuant to Texas law for the benefit of the persons identified herein.
B. Trustee is willing to accept the trusteeship on the terms set forth below.
C. The parties intend that all transfers to the Trust constitute completed gifts for federal gift and estate tax purposes and that the Trust be administered in accordance with the Texas Trust Code and other applicable law.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein, the parties agree as follows:
2. DEFINITIONS
The following terms, when capitalized, have the meanings assigned below. Defined terms appear alphabetically.
“Accounting Period” – Each calendar year ending December 31, unless otherwise stated.
“Beneficiary” or “Beneficiaries” – Collectively, the persons or entities identified in Schedule A, and any lawful successors thereto.
“Code” – The Internal Revenue Code of 1986, as amended.
“Dispositive Provisions” – The distribution terms set forth in Section 3.5.
“Distribution Standard” – The standard described in Section 3.5(b).
“Grantor” – As identified in the Document Header, including his/her/their successors by operation of law.
“Independent Trust Protector” – The person or institution appointed under Section 3.4(h).
“Investment Advisor” – Any advisor appointed under Section 3.4(g).
“State Trust Law” – The Texas Trust Code, Tex. Prop. Code Ann. Title 9, Subtitle B, and any applicable successor statute.
“Trust” – The irrevocable trust created by this Agreement, including all property held from time to time under its provisions (“Trust Estate”).
“Trustee” – The trustee(s) acting hereunder at any time, including any Successor Trustee.
[// GUIDANCE: Add or delete definitions as necessary; ensure all defined terms are used consistently.]
3. OPERATIVE PROVISIONS
3.1 Creation and Funding
(a) Establishment. Grantor hereby transfers, assigns, and delivers to Trustee the property described in Schedule B, receipt of which Trustee acknowledges, to constitute the initial Trust Estate.
(b) Additional Contributions. The Trust Estate may be augmented by additional property acceptable to Trustee from any person at any time. All such property shall be administered as part of the Trust and shall be subject to the same terms unless expressly agreed otherwise in writing.
3.2 Purpose of Trust
The purpose of this Trust is to:
1. Provide long-term financial security for the Beneficiaries;
2. Effectuate Grantor’s lifetime estate planning objectives, including potential transfer-tax efficiencies; and
3. Preserve the Trust Estate from claims of Beneficiaries’ creditors to the maximum extent permitted by law.
3.3 Irrevocability & Limited Administrative Amendments
(a) Irrevocable. The Trust is irrevocable. Grantor expressly waives all rights, whether statutory or equitable, to alter, amend, revoke, or terminate the Trust, except as provided in Subsection (b).
(b) Administrative Amendments. The Trustee, with the written consent of the Independent Trust Protector, may execute an instrument to:
i. Correct scrivener’s errors;
ii. Conform the Trust to changes in State Trust Law or federal tax law; or
iii. Facilitate efficient administration (e.g., change accounting period, modify notice methods),
provided that no such amendment shall (1) enlarge or diminish any Beneficiary’s beneficial interest, (2) confer any beneficial interest upon Grantor, or (3) cause inclusion of Trust assets in Grantor’s gross estate under the Code.
[// GUIDANCE: Administrative amendment power drafted narrowly to comply with irrevocability rules and avoid adverse tax consequences.]
3.4 Trustee Provisions
(a) Acceptance & Fiduciary Capacity. By executing this Agreement, Trustee accepts the office of trustee and undertakes to perform the duties herein in a fiduciary capacity subject to the “prudent investor” rule under State Trust Law.
(b) General Powers. Subject to fiduciary duties, Trustee possesses all powers granted to a trustee under State Trust Law, including, without limitation, the powers enumerated in Tex. Prop. Code Ann. § 113.001 et seq., as may be amended, and may exercise them in Trustee’s discretion.
(c) Specific Powers. Without limiting the foregoing, Trustee may:
1. Invest and reinvest the Trust Estate in any kind of property;
2. Employ agents and professionals (including affiliates) and pay reasonable compensation from the Trust Estate;
3. Make distributions in cash or in kind, pro rata or non-pro rata;
4. Lend money to or borrow money for the Trust upon commercially reasonable terms;
5. Merge, decant, or otherwise modify the Trust pursuant to applicable statute, subject to Section 3.3.
(d) Successor Trustees.
1. Resignation. Trustee may resign upon [30/60] days’ written notice to Grantor (if living) and to all current Beneficiaries.
2. Removal. Grantor (if living) or a majority in interest of the adult Beneficiaries may remove Trustee for “Cause” (gross negligence, willful misconduct, or material breach of fiduciary duty) upon written notice.
3. Appointment. A Successor Trustee shall be appointed pursuant to Schedule C or, if none, by majority vote of the adult Beneficiaries; provided that any Successor Trustee must be (i) a Texas-resident individual or (ii) a trust institution qualified to act as trustee in Texas.
(e) Compensation. Trustee shall be entitled to reasonable compensation in accordance with its published fee schedule or as separately agreed in writing.
(f) Bond. No bond shall be required of any Trustee unless mandated by the appointing court.
(g) Investment Advisor.
1. Appointment. Trustee may delegate investment authority to an Investment Advisor via written instrument.
2. Liability. Trustee shall not be liable for any act or omission of an Investment Advisor if the delegation meets the standard set forth in State Trust Law.
(h) Independent Trust Protector. Grantor appoints [TRUST PROTECTOR NAME] as Independent Trust Protector to exercise the limited powers set forth in Schedule D.
3.5 Beneficiary Rights & Interests
(a) Dispositive Provisions. Distributions shall be made in accordance with Schedule A.
(b) Distribution Standard. Except as otherwise provided in Schedule A, Trustee may make distributions for a Beneficiary’s health, education, maintenance, and support, considering other resources reasonably available to such Beneficiary (“HEMS Standard”).
(c) Mandatory Termination. The Trust shall terminate on the earlier of:
1. The date specified in Schedule A; or
2. The final day permitted under the applicable rule against perpetuities, if any.
(d) Spendthrift Protection. No Beneficiary may voluntarily or involuntarily transfer, anticipate, or encumber his or her interest before actual receipt. Trust assets shall not be subject to any Beneficiary’s creditors, insolvency proceedings, or marital claims, to the fullest extent permitted by law.
(e) Right to Information & Accountings.
1. Annual Report. Trustee shall furnish each current Beneficiary with an annual written statement of receipts, disbursements, and assets within [90] days after the close of each Accounting Period.
2. Inspection. Each current Beneficiary may inspect Trust records during reasonable business hours upon [15]-day written notice.
3.6 Tax Matters
(a) Completed Gift. Grantor intends that the transfer of property to the Trust constitute a completed gift for federal gift-tax purposes under Code § 2511.
(b) Separate Taxable Entity. Unless otherwise elected under Subsection (c), the Trust shall be treated as a non-grantor trust.
(c) Optional Grantor-Trust Election. Grantor may, in Grantor’s sole discretion, retain or relinquish powers under Code §§ 671-679 sufficient to cause or avoid grantor-trust treatment, provided that such election shall be irrevocable upon written notice to Trustee.
(d) Tax Identification. Trustee shall obtain a separate taxpayer identification number for the Trust unless grantor-trust status applies.
(e) Tax Withholding & Filing. Trustee shall withhold and pay all taxes attributable to the Trust Estate and shall file all required federal, state, and local tax returns.
[// GUIDANCE: Subsection (c) allows attorney to toggle grantor vs. non-grantor status. Delete if unnecessary.]
4. REPRESENTATIONS & WARRANTIES
4.1 Grantor
(a) Capacity. Grantor is of legal age and sound mind and has full legal capacity to create this Trust.
(b) Title to Assets. All property transferred to the Trust is owned free and clear of liens, security interests, and adverse claims, except as disclosed on Schedule B.
4.2 Trustee
(a) Authority. Trustee has the legal authority to accept the trusteeship and perform its obligations hereunder.
(b) No Conflict. Trustee’s execution and performance of this Agreement do not violate any governing document, law, or agreement binding on Trustee.
Survival. The representations and warranties herein survive the Effective Date and remain in effect until final termination of the Trust.
5. COVENANTS & RESTRICTIONS
5.1 Grantor
(a) Further Assurances. Grantor shall execute and deliver any additional documents reasonably requested by Trustee to perfect title to Trust assets.
5.2 Trustee
(a) Fiduciary Compliance. Trustee shall administer the Trust in good faith and in accordance with the purposes of the Trust and State Trust Law.
(b) Notice of Material Events. Trustee shall promptly notify the Beneficiaries of any litigation or regulatory action materially affecting the Trust.
5.3 Beneficiaries
(a) Contact Information. Each Beneficiary shall provide Trustee with current contact information and promptly notify Trustee of any changes.
(b) Cooperation. Beneficiaries shall execute instruments reasonably requested by Trustee to facilitate administration and distribution.
6. DEFAULT & REMEDIES
6.1 Events of Default
(a) Trustee Default.
1. Willful misconduct, gross negligence, or material breach of fiduciary duty;
2. Persistent failure to render required accountings; or
3. Insolvency or legal incapacity of Trustee.
(b) Beneficiary Default.
1. Interference with Trust administration;
2. Fraudulent conduct vis-à-vis the Trust.
6.2 Notice & Cure
The non-defaulting party must provide written notice specifying the alleged default and a [30]-day cure period, except for willful misconduct, which is not subject to cure.
6.3 Remedies
(a) Removal or suspension of Trustee;
(b) Appointment of a Special Fiduciary;
(c) Injunctive relief to enforce Trust terms;
(d) Reimbursement or surcharge against the Trustee or Beneficiary at fault;
(e) Recovery of attorney fees and costs from the Trust Estate, or personally against the party in breach if ordered by a court of competent jurisdiction.
[// GUIDANCE: Graduated remedies discourage immediate litigation and align with fiduciary breach standards under State Trust Law.]
7. RISK ALLOCATION
7.1 Indemnification of Trustee
(a) Scope. Trustee (and its officers, directors, employees, and agents) shall be indemnified out of the Trust Estate against any and all claims, liabilities, and expenses (including reasonable attorney fees) arising from the performance of its duties, except to the extent resulting from Trustee’s willful misconduct or gross negligence.
(b) Advancement. Trustee may advance expenses from the Trust Estate, subject to repayment upon final adjudication of misconduct.
7.2 Limitation of Liability
Trustee’s liability to any person under this Agreement is limited to the value of the Trust Estate and shall not extend to Trustee’s separate assets, except as otherwise required by law.
7.3 Insurance
Trustee may procure fiduciary liability insurance at the expense of the Trust Estate.
7.4 Force Majeure
Trustee shall not be liable for delays or failures in performance caused by events beyond its reasonable control, including natural disasters, war, terrorism, or changes in applicable law.
8. DISPUTE RESOLUTION
8.1 Governing Law
This Agreement and all disputes arising hereunder shall be governed by and construed in accordance with State Trust Law and other applicable Texas statutes.
8.2 Exclusive Forum
Subject to Section 8.3, the Probate Court of [COUNTY], Texas** (or, if such court lacks jurisdiction, another Texas court of competent jurisdiction) shall have exclusive jurisdiction over all proceedings concerning the Trust.
8.3 Optional Arbitration
[SELECT ONE by initialing]
☐ Arbitration Elected ☐ Arbitration Declined
If elected, any dispute shall be finally resolved by binding arbitration administered by [AAA/JAMS] in accordance with its [Rules], seated in [CITY, Texas]. The arbitrator shall have authority to grant equitable relief. Judgment on the award may be entered in any court of competent jurisdiction.
8.4 Jury Waiver
To the extent a matter is heard in a civil court of record, the parties waive any right to a jury trial on issues triable to a jury under Texas law.
8.5 Injunctive Relief
Nothing herein shall limit the right of the Trustee or any Beneficiary to seek temporary or permanent injunctive relief from a court of competent jurisdiction to enforce the terms of this Trust.
9. GENERAL PROVISIONS
9.1 Amendment & Waiver
Except as provided in Section 3.3, no amendment or waiver of any provision of this Agreement shall be effective unless in writing and signed by the party against whom enforcement is sought.
9.2 Assignment
No party may assign its rights or delegate its duties hereunder except as expressly permitted by this Agreement or applicable law.
9.3 Successors & Assigns
This Agreement binds and benefits the parties and their respective heirs, legal representatives, successors, and permitted assigns.
9.4 Severability
If any provision of this Agreement is found invalid or unenforceable, the remaining provisions shall remain in full force, and the invalid provision shall be reformed to the minimum extent necessary to effectuate the parties’ intent.
9.5 Integration
This Agreement, together with all Schedules attached hereto, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior understandings.
9.6 Counterparts; Electronic Signatures
This Agreement may be executed in counterparts, each of which is deemed an original, and all of which together constitute one instrument. Signatures delivered by electronic means (e.g., DocuSign®, PDF, facsimile) shall be deemed original signatures for all purposes.
10. EXECUTION BLOCK
IN WITNESS WHEREOF, the parties have executed this Irrevocable Trust Agreement as of the Effective Date.
| Grantor | Trustee |
|---|---|
| _________ | _________ |
| [GRANTOR NAME] | [TRUSTEE NAME, Title] |
Date: ___ | Date: ___ |
Notary Acknowledgment – Grantor
State of Texas §
County of [__] §
On this _ day of _, 20__, before me, the undersigned notary public, personally appeared [GRANTOR NAME], proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to this instrument, and acknowledged that he/she executed the same for the purposes therein contained.
Notary Public, State of Texas
My Commission Expires: ____
Notary Acknowledgment – Trustee
State of Texas §
County of [__] §
On this _ day of _, 20__, before me, the undersigned notary public, personally appeared [TRUSTEE NAME], proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to this instrument and acknowledged that he/she executed the same in the capacity indicated and for the purposes therein contained.
Notary Public, State of Texas
My Commission Expires: ____
SCHEDULE A – Beneficiaries and Dispositive Provisions
[PLACEHOLDER: Insert detailed beneficiary list, interests, and distribution schedule. Include contingent and remainder interests.]
SCHEDULE B – Initial Trust Property
[PLACEHOLDER: Describe cash amounts, securities, real property (with legal descriptions), or other assets being transferred.]
SCHEDULE C – Successor Trustee Designation
[PLACEHOLDER: List priority of successor trustees and procedure for appointment.]
SCHEDULE D – Independent Trust Protector Powers
- Consent to administrative amendments under Section 3.3;
- Remove and replace Trustee for Cause or incapacity;
- Approve trust decanting or nonjudicial settlement agreements;
- Resolve deadlocks among co-trustees;
- Exercise tax elections to preserve intended tax status.
[// GUIDANCE: Tailor Protector powers to client’s needs. Too much authority may create unintended tax consequences.]
END OF DOCUMENT