IRREVOCABLE TRUST AGREEMENT
(Vermont – Title 14A V.S.A. (Vermont Uniform Trust Code))
TABLE OF CONTENTS
- Document Header
- Definitions
- Operative Provisions
- Representations & Warranties
- Covenants & Restrictions
- Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
1. DOCUMENT HEADER
THIS IRREVOCABLE TRUST AGREEMENT (this “Agreement”) is made and entered into as of [EFFECTIVE DATE] (the “Effective Date”) by and among:
• [SETTLOR LEGAL NAME], of [ADDRESS] (“Settlor”); and
• [TRUSTEE LEGAL NAME], of [ADDRESS], in its capacity as trustee hereunder (“Trustee”).
The trust created pursuant to this Agreement shall be known as the “[TRUST NAME]” (the “Trust”).
Recitals
A. Settlor desires to establish an irrevocable trust under the laws of the State of Vermont for the benefit of the Beneficiaries (defined below).
B. Trustee is willing to hold, administer, and distribute the Trust Estate (defined below) in accordance with the terms and conditions set forth herein.
C. The parties intend that this Trust be treated as [GRANTOR / NON-GRANTOR] for federal and Vermont state income tax purposes.
NOW, THEREFORE, in consideration of the mutual promises herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Settlor irrevocably transfers, assigns, and delivers to Trustee the property described on Schedule A attached hereto, in trust, subject to the terms set forth below.
2. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings set forth below. Any term used but not defined herein shall have the meaning assigned under the Vermont Uniform Trust Code, 14A V.S.A. § 101 et seq.
“Accounting Period” means each calendar year, unless Trustee selects a different period permitted under applicable law.
“Administrative Trustee” has the meaning set forth in Section 3.02(b).
“Arbitration Rules” means the Commercial Arbitration Rules of the American Arbitration Association then in effect.
“Beneficiaries” means, collectively, the individuals or entities listed on Schedule B, and any Permitted Successor Beneficiary.
“Distribution Committee” has the meaning set forth in Section 3.04(a).
“Force Majeure Event” has the meaning set forth in Section 7.04.
“Permitted Successor Beneficiary” means any person who becomes entitled to receive Trust distributions upon the death, resignation, or disqualification of an existing Beneficiary, pursuant to this Agreement or applicable law.
“Principal” means the assets comprising the Trust Estate other than income.
“Probate Court” means the Vermont Probate Division having jurisdiction over the Trust pursuant to 4 V.S.A. § 111a.
“Trust Assets” or “Trust Estate” means all property, real or personal, tangible or intangible, now or hereafter held in or added to the Trust, and all proceeds and replacements thereof.
“Vermont UTC” means the Vermont Uniform Trust Code, 14A V.S.A. §§ 101–1204.
[// GUIDANCE: Insert additional defined terms alphabetically as needed.]
3. OPERATIVE PROVISIONS
3.01 Irrevocability
(a) This Trust is irrevocable. Settlor expressly waives any right or power, whether under 14A V.S.A. § 602 or otherwise, to revoke, amend, or terminate the Trust in whole or in part.
(b) Any attempt by Settlor to exercise retained powers inconsistent with this Section shall be void ab initio.
3.02 Appointment & Acceptance of Trustee
(a) Trustee hereby accepts the duties of trustee and acknowledges receipt of the property described in Schedule A.
(b) Trustee may appoint one or more additional or successor trustees (each, an “Administrative Trustee”) subject to Section 5.03, provided that at least one trustee shall be a Vermont resident or have a place of business in Vermont to maintain local situs.
3.03 Trust Purpose
The primary purposes of this Trust are (i) to hold and manage property for the benefit of the Beneficiaries; (ii) to protect such property from potential creditors of the Beneficiaries to the extent permitted by law; and (iii) to accomplish legitimate estate and tax planning objectives, including without limitation potential reduction of Vermont estate tax and federal estate tax exposure.
3.04 Distributions
(a) Distribution Committee. Settlor hereby establishes a Distribution Committee consisting of [NUMBER] members initially comprising [NAMES]. The committee shall direct Trustee regarding discretionary distributions of income and/or Principal among the Beneficiaries, subject to the ascertainable standard of health, education, maintenance, and support.
(b) Mandatory Distributions. Trustee shall distribute all net income annually to [BENEFICIARY NAME] until such Beneficiary attains [AGE], after which income distributions shall be discretionary.
(c) Protective Provisions. Trustee shall withhold any distribution that would be subject to a Beneficiary’s creditors or governmental claims, instead applying such amounts for the Beneficiary’s benefit. See 14A V.S.A. § 506.
3.05 Tax Matters
(a) Income Tax Characterization. [If Grantor Trust: Settlor retains the power described in IRC § 675(4)(C), causing all Trust income to be taxable to Settlor.]
(b) Tax Reimbursement. Trustee may, in its sole discretion, reimburse Settlor for any income taxes attributable to Trust income, provided such reimbursement is consistent with Rev. Rul. 2004-64.
(c) State Income Tax. Trustee shall file any Vermont income tax returns required under 32 V.S.A. § 5823 and pay any tax due from Trust Assets.
3.06 Trustee Powers
Subject to the fiduciary duties imposed by 14A V.S.A. § 801 et seq., Trustee shall have all powers granted by 14A V.S.A. § 815, including without limitation:
1. To retain, sell, exchange, or lease Trust Assets;
2. To invest in any kind of property or investment consistent with the prudent investor rule (14A V.S.A. § 902);
3. To borrow money and encumber Trust Assets;
4. To appoint custodians or advisors; and
5. All powers reasonably necessary to carry out the Trust purposes.
3.07 Accounting & Information Rights
(a) Annual Account. Within 90 days after each Accounting Period, Trustee shall deliver to each qualified Beneficiary an accounting complying with 14A V.S.A. § 813.
(b) Right to Information. Each qualified Beneficiary may request additional information reasonably related to the Trust administration, and Trustee shall comply within a reasonable time.
3.08 Spendthrift Provision
No Beneficiary shall have power to anticipate, alienate, or assign his or her interest, and such interest shall not be subject to the claims of creditors, pursuant to 14A V.S.A. § 502.
4. REPRESENTATIONS & WARRANTIES
4.01 Settlor
(a) Authority. Settlor has legal capacity to execute and deliver this Agreement and to transfer the property described in Schedule A.
(b) No Conflicts. The execution and performance of this Agreement do not violate any agreement or court order binding upon Settlor.
4.02 Trustee
(a) Due Organization & Authority. If Trustee is a corporate fiduciary, it is duly organized, validly existing, and in good standing in its state of incorporation and authorized to conduct trust business in Vermont.
(b) Fiduciary Duty. Trustee understands and accepts the fiduciary obligations imposed by the Vermont UTC, including the duties of loyalty and prudence.
All representations and warranties shall survive the execution of this Agreement and Trustee’s acceptance of the Trust.
5. COVENANTS & RESTRICTIONS
5.01 Trustee Covenants
(a) Administration. Trustee shall administer the Trust in good faith, in accordance with the purposes of the Trust, and in the interests of the Beneficiaries, consistent with 14A V.S.A. § 801.
(b) Notifications. Trustee shall give written notice to qualified Beneficiaries of any change in Trustee within 30 days.
5.02 Settlor Covenants
Settlor shall execute any documents reasonably requested by Trustee to transfer legal title to property intended to be included in the Trust Estate.
5.03 Restrictions on Trustee Removal & Succession
(a) Removal. Settlor (if living) or a majority of qualified Beneficiaries may remove a Trustee for cause (as defined below) upon 30 days’ written notice, subject to Probate Court approval.
(b) Cause. “Cause” includes (i) breach of fiduciary duty, (ii) incapacity, (iii) felony conviction, or (iv) persistent failure to account.
(c) Successor Trustee. Any successor Trustee shall execute an acceptance in writing and shall not be liable for the acts or omissions of its predecessors.
6. DEFAULT & REMEDIES
6.01 Events of Default
(a) Trustee Default. Material breach of fiduciary duty, failure to provide required accountings after written notice and 30-day cure period, or misappropriation of Trust Assets.
(b) Settlor Default. Failure to convey scheduled property to the Trust within 60 days after written demand.
6.02 Remedies
(a) Removal. Upon an uncured Trustee Default, the Probate Court may remove the Trustee and appoint a successor.
(b) Surcharge. Trustee shall be liable to the Trust and the Beneficiaries for any loss resulting from a breach of trust, limited to the Trust Assets pursuant to Section 7.02.
(c) Equitable Relief. Beneficiaries may seek specific performance or injunctive relief to enforce Trust terms without posting bond, consistent with 14A V.S.A. § 1001(b).
(d) Attorneys’ Fees. The prevailing party in any action concerning this Agreement shall be entitled to reasonable attorneys’ fees and costs charged against the Trust Estate unless otherwise ordered by the court.
7. RISK ALLOCATION
7.01 Indemnification of Trustee
To the fullest extent permitted by law, Trustee and its officers, directors, employees, and agents (each, an “Indemnified Party”) shall be indemnified and held harmless out of the Trust Assets from and against any loss, liability, or expense incurred by reason of any act or omission performed in good faith and in a manner reasonably believed to be in the best interests of the Trust, except for acts involving willful misconduct or gross negligence.
7.02 Limitation of Liability
Liability of any Indemnified Party shall in all cases be limited to the Trust Assets; no Indemnified Party shall have personal liability to any person.
7.03 Insurance
Trustee may secure fiduciary liability insurance and pay premiums from the Trust Estate.
7.04 Force Majeure
Neither Trustee nor any third-party service provider shall be liable for any failure or delay in performance under this Agreement due to acts of God, war, civil unrest, governmental regulation, epidemic, or any other event beyond reasonable control (“Force Majeure Event”), provided that performance is resumed promptly after cessation of the Force Majeure Event.
8. DISPUTE RESOLUTION
8.01 Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of Vermont, without regard to conflicts-of-laws principles.
8.02 Forum Selection
Exclusive jurisdiction and venue for all judicial proceedings relating to this Trust shall lie in the Vermont Probate Division (the “Probate Court”).
8.03 Optional Arbitration
(a) Election. Any party may elect to submit a dispute arising under this Agreement to binding arbitration by serving written notice on all other interested parties and Trustee.
(b) Rules; Seat. Arbitration shall be conducted in [CITY], Vermont, in accordance with the Arbitration Rules.
(c) Probate Court Oversight. The Probate Court shall retain concurrent jurisdiction to enforce any arbitration award.
8.04 Jury Trial Waiver
Because probate matters are tried without a jury under Vermont law, no party shall demand a jury trial with respect to any proceeding concerning the Trust.
8.05 Injunctive Relief
Nothing in this Section shall limit the right of any party to seek temporary, preliminary, or permanent injunctive relief in the Probate Court to enforce the terms of the Trust.
9. GENERAL PROVISIONS
9.01 Amendments & Waivers
No amendment or waiver of any provision of this Agreement shall be effective unless (i) made in writing, (ii) signed by all Trustees and all qualified Beneficiaries, and (iii) approved by the Probate Court, except as otherwise expressly provided herein.
9.02 Assignment & Delegation
Except as expressly permitted by Section 3.02 or applicable law, no Trustee may assign or delegate its rights or obligations under this Agreement without Probate Court approval.
9.03 Successors & Assigns
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, subject to the restrictions herein.
9.04 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 reformed to the minimum extent necessary to render it valid and enforceable.
9.05 Entire Agreement
This Agreement, together with Schedules A and B, constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior understandings, whether written or oral.
9.06 Counterparts; Electronic Signatures
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one instrument. Signatures transmitted by electronic means (e.g., DocuSign, PDF) shall be deemed original signatures for all purposes.
10. EXECUTION BLOCK
IN WITNESS WHEREOF, Settlor and Trustee have executed this Irrevocable Trust Agreement as of the Effective Date.
Settlor
[SETTLOR NAME], Settlor
State of Vermont
County of _______, ss.
On this ___ day of ____, 20__, before me, the undersigned notary, personally appeared [SETTLOR NAME], known to me or satisfactorily proven to be the person whose name is subscribed to the within instrument, and acknowledged that they executed the same for the purposes therein contained.
Notary Public: ___
My Commission Expires: ______
Trustee
[TRUSTEE NAME], Trustee
State of Vermont
County of _______, ss.
On this ___ day of ____, 20__, before me, the undersigned notary, personally appeared [TRUSTEE NAME], known to me or satisfactorily proven to be the person who executed the foregoing instrument in said capacity, and acknowledged the same to be Trustee’s free act and deed.
Notary Public: ___
My Commission Expires: ______
SCHEDULE A – Initial Trust Property
[LIST DESCRIPTION OF PROPERTY, ACCOUNT NUMBERS, REGISTRATION INFORMATION, ETC.]
SCHEDULE B – Beneficiaries
- [NAME, RELATIONSHIP, DATE OF BIRTH]
- [ADDITIONAL BENEFICIARIES]
[// GUIDANCE: Practitioners should confirm Vermont estate and income tax consequences based on the Trust’s intended grantor status and update Schedule A and Schedule B before execution. Obtain separate written acceptance from any successor trustee named but not signing above. Consider filing a Notice of Existence under 14A V.S.A. § 1013 if confidentiality is desired.]