ESTATE PLANNING

Appendix D

Trust for Individual: Short Form

Description

Drafters occasionally encounter situations, including situations involving clients with terminal illnesses, in which there is a high level of certainty about the facts that will exist at the time of death. It may be certain that no estate taxes will be payable, that all beneficiaries will be adults, that there will be no need for continuing trusts after the settlor’s death, that there will be no additions to the trust that the trustee would refuse, that at least one of the nominated trustees and successor trustees will live long enough to complete the administration of the trust, and that the trust will not have cotrustees. In most of these situations the settlor’s deteriorated physical condition will make it desirable to produce a document that is short and easily understood. This appendix provides a bare bones form that can be used in such situations. This form assumes that, because of the settlor’s deteriorated health, the settlor is not the initial trustee. If the settlor is the trustee, the form for removing an incompetent settlor should be added. The drafter must insert provisions for the disposition on the settlor’s death in Division IV.

WARNING: The trust in this Appendix is a sample only. For the purpose of presenting a complete, streamlined trust, the trust does not include every possible alternative or option that could be used. Alternative or additional optional forms, if any, are set out in the body of the text of the book. Each form is numbered to refer to the counterpart form in the body of the text. Some of the forms, however, are not exact replicas of their counterparts in the text; they have been modified to comport with the specific requirements of the type of trust created in this Appendix. If the trust benefits a “disqualified person” or names such a person as a trustee or successor trustee, it usually will be necessary to provide or obtain a “Certificate of Independent Review.” Prob C §21351.

THE _ _[NAME OF TRUST]_ _ TRUST

OPENING DECLARATION

DIVISION I. CREATION OF TRUST

DIVISION II. PURPOSES, TRUSTEES, AND FAMILY DECLARATIONS

A. Purposes of Trust

B. Initial Trustee

C. Successor Trustees

D. Family Information

DIVISION III. DISTRIBUTIONS DURING SETTLOR’S LIFETIME

DIVISION IV. DISTRIBUTION ON DEATH

A. Distribution on Death

B. _ _[Specify.]_ _

DIVISION V. ADDITIONAL DISTRIBUTION PROVISIONS

A. Trustee Distribution Powers

B. Distributions to Young Persons

DIVISION VI. DEBTS

A. Debts of Settlor’s Estate

B. Limitations on Sources of Payments

DIVISION VII. OFFICE OF TRUSTEE

A. Definition of Trustee

B. Scope of Trustee Provisions

C. Resignation of Trustee

D. Removal of Any Trustee

E. Power to Name Successor Trustee

F. Temporary Trustee

G. Trustee’s Power to Delegate

H. Compensation of Trustees

DIVISION VIII. TRUSTEE POWERS

A. General Powers of Trustee

B. Specific Powers of Trustee

DIVISION IX. TRUSTEE DUTIES, LIMITATIONS ON DUTIES, EXCULPATION

A. Duties of Trustee

B. Limitations on Trustee’s Duty of Loyalty

C. Acceptance of Additions

D. Exculpation of Trustee

E. Cotrustee’s Duty to Act

F. Limitation on Duty to Investigate Predecessor or Cotrustee

DIVISION X. NO-CONTEST CLAUSE

DIVISION XI. REVOCATION, AMENDMENT, AND EXERCISE OF APPOINTMENT POWERS

A. Settlor’s Power to Revoke and Amend

B. Exercise of Powers of Appointment

Signatures; Acknowledgment

EXHIBIT A

Initial Trust Property

5.19-1           Opening declaration

The _ _[Name of Trust]_ _ Trust

I, _ _[name of settlor]_ _, sometimes hereafter called “settlor,” residing in _ _[name of County]_ _, California, hereby create The _ _[Name of Trust]_ _ Trust, declaring:

5.19-2           Creation of trust

DIVISION I
CREATION OF TRUST

The property described in the attached listing of “Initial Trust Property,” marked “Exhibit A,” is now held by me in trust. This property and any other property later transferred to the trust is hereafter referred to as the “trust property” and shall be held, administered, and distributed as provided in this document and any subsequent amendments to this document.

5.19-3           Purposes, trustees, and family declarations

DIVISION II
PURPOSES, TRUSTEES, AND FAMILY DECLARATIONS

A. Purposes of Trust. The primary purposes of this trust are:

1. Care of Settlor. To provide for my care and maintenance as long as I am living;

2. Avoid Conservatorship. To facilitate management of the trust property in the event of my incapacity; and

3. Transfer Property at Death. To facilitate transfer of the trust property on my death.

B. Initial Trustee. _ _[I am/_ _[Name]_ _ is]_ _ the initial trustee of this trust.

C. Successor Trustees. When the initial trustee ceases to act, _ _[name of first successor trustee]_ _ shall become trustee. If this nominated successor fails to qualify or ceases to act, _ _[name of second successor trustee]_ _ shall become the trustee.

D. Family Information. In connection with the administration of this trust, the trustee may rely on the following family information:

1. Marital Status. I am not married and do not have a registered domestic partner.

2. Children. _ _[I have no children/The names and birthdates of my children are _ _[list names and birthdates]_ _]_ _.

3. Deceased Children. _ _[I have no deceased children who are survived by issue now living/My child, _ _[name]_ _, is deceased and is _ _[not]_ _ survived by issue now living]_ _.

DIVISION III
DISTRIBUTIONS DURING SETTLOR’S LIFETIME

6.14-1           Distributions to single settlor

During my lifetime, the trustee shall pay to or apply for my benefit as much of the income and principal of this trust as I request, plus such additional sums as the trustee in its discretion determines are appropriate for my health, education, maintenance, and support in accordance with my accustomed standard of living.

DIVISION IV
DISTRIBUTION ON DEATH

8.32-1           Introduction to dispositive provisions

A. Distribution on Death. On my death, the trustee shall distribute the remaining trust property in accordance with the provisions in paragraph B. of this Division.

B. _ _[Specify.]_ _

DIVISION V
ADDITIONAL DISTRIBUTION PROVISIONS

A. Trustee Distribution Powers. For purposes of making distributions, the trustee’s powers include the following:

11.50-1         Power to make nonprorata distribution

1. Nonprorata Distributions. When the trustee must divide any trust property into parts or shares for the purpose of distribution or otherwise, the trustee may, in the trustee’s discretion, make the division and distribution in undivided interests, in kind, or partly in kind and partly in money, prorata or nonprorata. The trustee may make sales of the trust property that the trustee considers appropriate to accommodate such distributions.

8.70-1           Power to delay distributions

2. Power to Delay Distributions. When an event occurs on which the trustee is required to divide or distribute trust property, the trustee may delay the division or distribution of all or part of the property for the period of time necessary to ascertain and provide for the payment of any tax claim or other liability, contingent or otherwise, against the trust property. During this period, the trustee may pay the net income of the trust to the beneficiaries entitled to it, and any income not distributed shall on resolution of any tax claim or other liability be payable to the person entitled to it immediately after the trustee receives the income. This provision shall not be deemed to postpone or defer the vesting of any interest created by the dispositive clauses of the trust. Nor does this provision authorize a delay in any distribution that might result in a transfer’s losing eligibility for a federal estate tax marital deduction or charitable deduction.

8.30-1           Retention in further trust until specified age

B. Distributions to Young Persons. If any person otherwise entitled to outright distribution of any property from any trust created by this document is under the age of _ _[age]_ _ at the time the right to distribution vests, the trustee shall not make the distribution, but shall, instead, retain the property that would otherwise be distributed in a separate trust for the benefit of the underaged person (“Beneficiary”). The separate trust shall be administered as follows:

1. Unproductive Property. The trustee shall hold as unproductive property any property that the trustee in its discretion determines should be preserved for distribution in kind to Beneficiary, including, in particular, tangible personal property of sentimental value. Such property shall be distributed to Beneficiary at such time as the trustee deems appropriate, but no later than the time of distribution of the remaining property.

2. Periodic Distributions. The trustee shall pay to or for the benefit of Beneficiary, quarter-annually or at more-frequent intervals, as much of the income and principal of the trust as the trustee in its discretion considers advisable for Beneficiary’s support, health, and education, including professional education, after taking into consideration other resources of Beneficiary, the resources of the trust, and the likely future needs of Beneficiary within the trust term.

3. Additional Distributions of Principal. When Beneficiary attains the age of _ _[first age]_ _, the trustee shall distribute to Beneficiary one-third of the then-remaining trust property. When Beneficiary attains the age of _ _[second age]_ _, the trustee shall distribute to Beneficiary half of the then-remaining trust property. When Beneficiary attains the age of _ _[third age]_ _, the trustee shall distribute to Beneficiary the entire remaining trust property. If any of the specified ages have been attained at the time of the initial funding of the trust, the appropriate distributions shall be made immediately.

4. Power to Delay Distributions. Despite the foregoing distribution provisions, the trustee may delay any distribution until a time no later than Beneficiary’s death if the trustee determines that it is reasonably certain that the distributions are not in the Beneficiary’s best interests because the beneficiary is incompetent, suffers from substance abuse, or because Beneficiary’s financial circumstances are such that failure to delay distributions will actually reduce the trust benefits to Beneficiary.

5. Beneficiary’s Failure to Survive. If Beneficiary dies before final distribution, the trust shall terminate and the remaining trust property shall be distributed to such persons, including Beneficiary’s estate and creditors, as Beneficiary may appoint under the provisions of this trust for exercising a power of appointment. If this appointment power is not effectively exercised with respect to any trust property, that property shall be distributed to the then surviving issue of Beneficiary, per capita at each generation; and, if none, then to the then living siblings of the Beneficiary, with the then living issue of deceased siblings taking the shares of deceased siblings per capita at each generation; and, if none, then to the persons entitled to the Beneficiary’s estate under the California laws of succession.

6. Trustee. The trustee of any trust established under this paragraph shall have the power to name successors and may amend the trust to provide for administration of the trust by multiple trustees in such manner as the trustee deems appropriate. The trustee is encouraged to provide a trustee arrangement that results in more than one adult having access to the books and records of the trust during Beneficiary’s minority. The provisions of this document concerning trustees shall continue to apply to this trust to the extent not inconsistent with exercises of the powers of the trustee granted in this subparagraph.

DIVISION VI
DEBTS

15.27-1         Payment of debts: single settlor

A. Debts of Settlor’s Estate. On my death, the trustee may pay from the trust property:

1. Funeral and Last Illness Expenses. My funeral and last illness expenses.

2. Other Debts. My other debts that would be properly payable by my probate estate if the trust property were included in a probate estate rather than this trust and a timely creditor’s claim was filed in that estate.

3. Probate Expenses. Necessary and proper expenses of administration of my probate estate.

B. Limitations on Sources of Payment. Despite the provisions in Paragraph A, the trustee shall not pay any estate or inheritance taxes (including interest or penalties), last illness and funeral expenses, attorney fees, administration expenses, debts, or other obligations of the settlor or the settlor’s estate, from any retirement plan (including individual retirement account) benefits in which the trust acquires an interest as a result of the death of the settlor. Further, the trustee shall not pay any such obligation from any life insurance or other property passing to the trust on the death of the settlor in accordance with a beneficiary designation unless the property would have been liable for the obligation had the property passed to an individual beneficiary rather than the trust.

DIVISION VII
OFFICE OF TRUSTEE

16.3-1           Definition of trustee

A. Definition of Trustee. The term “trustee” as used in this document usually refers to such one or more persons or entities who, alone or in combination, have the power to take action on behalf of the trust, but it may instead refer to any form of limited power or special trustee or one or more individual cotrustees, depending on context.

16.4-1           Scope of trustee provisions

B. Scope of Trustee Provisions. Except as otherwise provided, the provisions of this document concerning the identity of trustees apply to all trusts established by this document. Similarly, except as otherwise provided, the provisions of this document concerning trustee duties, powers, privileges, and protections from liability, apply to all trustees, including successor trustees, of all trusts established by this document.

16.34-1         Trustee resignation

C. Resignation of Trustee. The trustee may resign at any time by mailing notice to the persons entitled by law to receive a trustee’s account. Unless circumstances are such that it is not necessary to replace the resigning trustee, the resignation becomes effective on the acceptance of office by the successor trustee who replaces the resigning trustee.

16.41-1         Removal of any trustee

D. Removal of Any Trustee. Any trustee, including a settlor, may be removed in accordance with California law.

16.55-1         Power to name successor

E. Power to Name Successor Trustee. A trustee of this trust shall have the power to name a person or entity who shall become that trustee’s successor if a successor is required and this document makes no other provision for a successor, or if the successors named in this document are not willing to act. The power shall be exercised as provided in this document for the exercise of a power of appointment.

16.49-1         Temporary trustee

F. Temporary Trustee. If an incumbent trustee or cotrustee is temporarily unable to administer the trust, the person(s) otherwise entitled to be the trustee if the incumbent resigned shall become the trustee until the incumbent can resume the duties of trustee.

17.51-1         Delegation of powers and duties

G. Trustee’s Power to Delegate. The trustee may delegate duties and powers, other than discretionary distribution powers, as long as the trustee exercises reasonable care, skill, and caution in:

1. Selecting an agent;

2. Establishing the scope and terms of the delegation; and

3. Periodically reviewing the agent’s actions in order to monitor the agent’s performance and compliance with the terms of the delegation.

16.20-1         Trustee compensation

H. Compensation of Trustees. Trustees are entitled to reasonable compensation.

DIVISION VIII
TRUSTEE POWERS

17.19-1         Broad trustee powers: statement of trustee powers

A. General Powers of Trustee. Subject to any limitations expressly stated in this document, the trustee of each trust established under this document is authorized to exercise the following powers for purposes of discharging the trustee duties imposed by this document and by law:

1. California Law. The powers conferred on trustees by California law in the absence of a limitation in the trust instrument. These powers shall be deemed to include the power to invest in any kind of property without regard to statutory limitations, insurance, or collateralization requirements otherwise applicable, and the power to operate or participate in any business without complying with any otherwise applicable requirement for a court order.

2. Prudent Person. The power to perform any act that a prudent person would take in order to accomplish the objectives of the trust.

3. Prudent Investor. The power to perform any act that a prudent investor would take in investing trust property.

4. Owner of Property. The power to exercise any right or privilege that an unmarried competent adult has over individually owned property.

5. Other Powers. Any other powers appropriate to achieve the proper investment, management, and distribution of the trust property.

6. Uniform Trust Code. Any other powers conferred by the Uniform Trust Code, as revised and amended in 2001 by the National Conference of Commissioners on Uniform State Laws.

B. Specific Powers of Trustee. The powers listed in the previous paragraph include, but are not limited to, those described in this paragraph. The trustee may:

1. Acquire or sell property, for cash or on credit, at public or private sale;

2. Borrow money, with or without security, and mortgage or pledge trust property for a period within or extending beyond the duration of the trust;

3. Abandon or decline to administer property of no value or of insufficient value to justify its collection or continued administration;

4. Make loans from trust property, including loans to a beneficiary on terms and conditions the trustee considers to be fair and reasonable under the circumstances, including imposition of a lien on future distributions for purposes of securing repayment of a loan;

5. Pledge trust property to guarantee loans made by others to the beneficiary;

6. Combine two or more trusts into a single trust or divide a trust into two or more separate trusts;

7. Appoint any person to be an authorized signer (either alone or with others, jointly or severally) for any financial institution account or securities account.

DIVISION IX
TRUSTEE DUTIES, LIMITATIONS ON DUTIES, EXCULPATION

17.36-1         Trustee’s duties

A. Duties of Trustee. Except as expressly provided in this document, the trustee has the duties imposed by law, including the duty to report and account to trust beneficiaries, statutory duties to give notice and copies of this document to trust beneficiaries and heirs at law on the death of a settlor, and the duty to invest property in accordance with the Uniform Prudent Investor Act.

17.41-1         Limitations on trustee duty of loyalty

B. Limitations on Trustee’s Duty of Loyalty. As long as the trustee does not act in bad faith or in disregard of the purposes of the trust, it is not a breach of the trust for the trustee to take any of the following actions:

1. Lend the trustee’s own funds to the trust for any trust purpose, with interest at current rates;

2. Receive reasonable security for such a loan;

3. Purchase trust property from the trust at fair market value, provided the purchase price is paid in full in advance;

4. Lease or sell the trustee’s own property to the trust at a rent or price not in excess of its fair market value;

5. Employ the trustee, a relative of the trustee, or a business in which the trustee has an interest, to perform needed services for the trust or any business in which the trust has an interest and to pay compensation not exceeding fair market value;

6. Acquire or retain an interest in property in which the trust also has an interest;

7. Acquire or retain stock of a corporate trustee or an affiliate of a corporate trustee unless the acquisition or retention would violate the trustee’s duties in the case of stock of a similar corporation other than the trustee or its affiliate;

8. Deposit funds in a bank in which the trustee has an interest;

9. Perform as trustee any action described above with a relative of the trustee or a business in which the trustee has an interest;

10. Hold property of multiple trusts without segregating or dividing the property and without separately titling the property of each trust, but instead keeping accounts sufficient to identify the property of each trust.

17.59-1         Acceptance of additions

C. Acceptance of Additions. The trustee has a duty to accept additions to this trust unless an addition would significantly expand the trustee’s duties, the transferred property is hazardous or otherwise creates a substantial increased risk of trustee liability, or the property is transferred by a competent person other than a settlor who retains the capacity to establish a trust naming a different trustee. If an addition is rejected on the ground of increased duties or liabilities and the transferor is deceased or lacks capacity, the trustee shall give reasonable notice to the persons interested in the trust.

16.23-1         Exculpation of trustee

D. Exculpation of Trustee. A trustee of any kind nominated by this document, otherwise designated by a settlor, or designated as authorized in this document, shall not be liable to any beneficiary for the trustee’s acts or omissions, except in cases of willful misconduct, bad faith, or gross negligence. The previous sentence does not relieve a trustee of any obligation to restore to the trust any benefits received by the trustee as a result of a breach of the trust. This paragraph does not apply to a person who regularly engages in the business of acting as a trustee.

16.25-1         Cotrustee’s duty to act

E. Cotrustee’s Duty to Act. A cotrustee must participate in the performance of a trustee’s function unless the cotrustee is unavailable to perform the function because of absence, illness, disqualification under other law, or other temporary incapacity or unless the cotrustee has properly delegated the performance of the function to another trustee.

16.26-1         Limitation on duty to investigate predecessor or cotrustee

F. Limitation on Duty to Investigate Predecessor or Cotrustee. A successor trustee or cotrustee has no duty to audit or investigate the administration or accounts of any prior trustee or cotrustee unless an audit or investigation is demanded in writing by a beneficiary. Each trustee shall exercise reasonable care to (1) prevent a cotrustee from committing a serious breach of trust, and (2) compel a cotrustee to redress a serious breach of trust.

DIVISION X
NO-CONTEST CLAUSE

19.5-1           No-contest clause

If any beneficiary under a trust created by this document shall, singly or in conjunction with any other person or persons, contest in any court the validity of any trust created by this document, or any will or other document making a transfer to this trust, or shall seek to obtain an adjudication in any proceeding in any court that this trust or any of its dispositive provisions are void, or otherwise seek to void, nullify, or set aside the trust or any of its provisions, then the right of that person to take any interest given to him or her by this document shall be determined as it would have been determined had the person predeceased the execution of this declaration of trust _ _[without surviving issue]_ _.

DIVISION XI
REVOCATION, AMENDMENT, AND EXERCISE
OF APPOINTMENT POWERS

20.2-1           Sole settlor’s power to revoke or amend

A. Settlor’s Power to Revoke and Amend. During the settlor’s lifetime, the settlor may revoke or amend _ _[this trust/all trusts created by this document]_ _ at any time. On revocation, the trust property shall be delivered to the settlor or as the settlor directs. _ _[This trust/All trusts created by this document]_ _ become irrevocable on the settlor’s death.

7.87-1           Exercise of powers of appointment (modified)

B. Exercise of Powers of Appointment. A power of appointment conferred by this document, other than a power held in a fiduciary capacity by a trustee, may be exercised only by an instrument that specifically refers to both this trust and the specific power being exercised. Such a power must be exercised by will, codicil, or a “qualified lifetime instrument.” For purposes of this paragraph, a qualified lifetime instrument is a written document signed by the power holder. Except in the case of a document executed in accordance with a court order, the document must be personally acknowledged before a notary public by the person signing the document. The document must be delivered during the lifetime of the settlor to each then-acting trustee of the trust. It being a purpose of this trust to avoid probate, the trustee may distribute trust property in accordance with a will or codicil that has not been probated.

19.20-1         Execution of trust; signature

Executed at _ _[city]_ _, California, on _ _[date]_ _.

__[Signature of settlor]__
_ _[Typed name]_ _
Settlor and Trustee

19.20-2         Acknowledgment

State of California County of _ _[name]_ _ ___________________________

) ) ) )

On _ _[date]_ _, before me, _ _[name and title of officer]_ _, personally appeared _ _[name(s)]_ _, who proved on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the instrument in his/her/their authorized capacit(y/ies) and that by his/her/their signature(s) on the instrument the person(s), or the entity on behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

__[Signature of officer]__                [Officer's seal]

5.38-1           Schedule of assets

THE _ _[Name of Trust]_ _ TRUST

Exhibit A

Initial Trust Property

The initial trust estate consists of all right, title, and interest of the settlor in or to any and all of the following property.

[Edit as appropriate]

1. The residence commonly known as _ _[street address]_ _.

2. The contents of that residence.

3. All other real property.

4. All bank, stock brokerage, and other financial and securities accounts of any kind.

5. All stocks, bonds, and other securities of any kind.

6. All intangible property, including any indebtedness of any person or entity.

7. Vehicles, boats, _ _[other known tangible property]_ _.

8. Small business interest: _ _[Identify]_ _.

Despite the foregoing, the initial trust estate does not include the following property: _ _[Specify]_ _.