Requirements for a Irrevocable Family Trust Agreement

By David Carnes

An irrevocable trust is an arrangement whereby a grantor relinquishes legal ownership of property and places it under the administration of a trustee, who administers it for the benefit of the trust beneficiaries. A family trust is a trust in which the beneficiaries are all relatives of the grantor. A grantor creates a trust deed by drafting a deed of trust and signing it. A deed of trust does not require the agreement of trust beneficiaries.

Revocability

In most states, a trust is presumed to be revocable unless the trust deed specifically states that it is irrevocable. Since the assets of a revocable trust can be reached by your creditors, it is important to state that the trust is irrevocable. To the extent possible, you should title all trust assets in the name of the trust — by opening a bank account in the name of the trust, for example — and list the trust's initial assets and dates of transfer in the trust deed.

Beneficiaries

The beneficiaries (family members in the case of a family trust) should be listed by name in the trust deed. It is acceptable to name yourself as a beneficiary. Assets may be distributed to beneficiaries in lump sum, through regular periodic payments, or at the discretion of the trustee. When planning distributions, take into account the fact that creditors of a beneficiary may not reach trust assets until they are actually distributed to the debtor beneficiary.

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The Trustee

The trust deed should appoint a trustee and an alternate trustee, after you obtain their consent to the appointments. A trustee may be an individual or a company, such as a bank or a trust company. The disadvantage of using an individual as a trustee is that if the trust is set to endure for many years, the trustee will have to be changed when the original trustee dies. Companies, by contrast, may exist beyond the lifetime of any individual. The trust deed should tell the trustee how to distribute trust assets, and define the trustee's discretionary authority, if any. It is acceptable to name yourself as trustee.

Assets

Your creditors may attempt to reach trust assets by claiming that your transfer of assets to the trust was a fraudulent attempt to avoid your debts. Consequently, you should transfer assets to the trust in a manner that raises no doubt about the legitimacy of the transfer. A transfer of assets may be deemed fraudulent (and reversible by court order) if you were insolvent at the time of the transfer, if you became insolvent because of the transfer, or if you anticipated immediate creditor collection action at the time you made the transfer.

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Amending an Irrevocable Trust Agreement & Uniform Trust Code
 

References

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Amending a Florida Trust

A trust is an instrument that allows one party, known as the settlor, to contribute assets to the trust and to name another party, known as the trustee, to administer them for the benefit of named beneficiaries. Trusts are governed by state law, and Florida's trust code can be found in Chapter 736 of the Florida Statutes. The procedure for amending a trust depends on whether the trust is revocable or irrevocable.

How to Prepare a Living Trust at Home

A living trust allows you to place assets under the care of a trustee who then distributes the assets to the beneficiaries of your choosing, in accordance with the terms you've set forth in your trust document. A living trust is often used to protect assets from the expense and delays of the probate process. A revocable trust is taxed as the grantor's personal assets, while an irrevocable trust is taxed as an independent legal entity. You may establish a living trust by executing a trust document and placing assets into the trust. Although it is best to retain an attorney to draft the living trust, it is possible to draft it yourself with the aid of an online legal document provider.

How to Create a Revocable Trust

A revocable living trust allows you to provide for the distribution of your property after your death. When you set up a trust, you help your heirs and family avoid the probate courts, which must review and authorize any will. “Revocable” means that you can change the trust at any time, or cancel it altogether. Creating a trust is a straightforward matter of preparing and signing a document, which contains certain provisions and conforms to the law.

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