Sample Trusts & Forms
Summary of Sample Trust Documents
This section contains a compilation of sample forms for consideration by legal counsel. Not only is each designed for a different purpose, the dispositive and non dispositive provisions vary from form to form. For example, the class of beneficiaries under one form may differ from the class in another. Furthermore, some have provisions for Trust Protectors (who can remove and replace trustees) and others do not. However, each is intended to be an Alaska trust. The client’s attorney will select such provisions, which are appropriate for the client.
(1) Perpetual Alaska Megatrusts1: This form provides for transfers to the Trust to be divided into a GST (generation-skipping transfer) exempt portion (an amount not exceeding the amount which can be protected from generation-skipping transfer tax by reason of the allocation of GST exemption) and non-exempt portion. Each portion is divided into stirpital perpetual trusts for the Grantor’s descendants and their families. The Grantor may be added as a discretionary beneficiary of the trust.
(2) Alaska Perpetual Family Trust: This form provides for the trust to be held for the benefit of the Grantor, the Grantor’s spouse, and descendants, perpetually. There is a contingent QTIP trust for the grantor’s spouse if the trust is includible in the Grantor’s estate. The document may be structured so transfers to the trust are made complete, or alternatively, incomplete for Federal gift tax purposes.
(3) Alaska Perpetual Annual Exclusion (Crummey) Trust: This form is designed to allow transfers to the trust to qualify for the gift tax annual exclusion and to hold a policy of insurance on the grantor alone or to hold other (non-insurance policy) assets. The trust provides for having the Grantor alone or to hold other (non-insurance policy) assets. The trust provides for having the grantor be a discretionary beneficiary of the trust.
(4) Alaska Perpetual Extra-Crummey Trust2: This form is designed to allow transfers to the trust to qualify for the gift tax annual exclusion with one trust for the benefit of each of the Grantor’s descendants, including children, grandchildren and more remote descendants. (A direction for the creation of a trust for each spouse of each descendant also could be added). The trusts designed so that transfers to grandchildren, more remote descendants, and others assigned to their generations (referred to for generation-skipping transfer tax purposes as “skip persons”), may also qualify for the non-taxable (annual exclusion) transfer exclusion for generation-skipping transfer tax purposes for transfers in trusts under IRC § 2642(c)(2).3
(5) Alaska Perpetual Grantor Retained Annuity Trust: In order for a Grantor Retained Annuity Trust (GRAT) described in U.S. Treasury Regulations § 25.2702-3 to be effective as an estate planning strategy, the Grantor’s entitlement to annuity payments must end prior to his or her death. When the entitlement to those payments cease, the property in the ORAT may pass outright to others or remain in trust. As a general rule it is preferable for the property to remain in trust. The attached form so provides. It alternatively provides for the Grantor to be eligible or not to be eligible to receive distributions from the continuing trust after the annuity term. The form can be modified to be a Grantor Retained Unitrust although it is preferable, as a general rule, to use a GRAT.
(6) Perpetual Alaska Qualified Personal Residence Trust: A qualified personal residence trust described in U.S. Treasury Reg. § 25.2702-5, may be an efficient estate planning arrangement in certain circumstances. In order to be effective, the Grantor’s entitlement to the use of the property or the income it generates must end prior to the Grantor’s death. Otherwise, the property will be includible in the Grantor’s estate under IRC § 2036(a)(l ). When the Grantor’s entitlement to the use of and income from the property ceases, the trust may be paid outright to others or remain in trust. As a general rule, it will be preferable for the property to remain in trust. The attached form provides for that and for the Grantor to be eligible to receive distributions in the discretion of the trustee from the continuing trusts. However, the trustee is prohibited from allowing the Grantor to use any real estate held by the trust outside of the State of Alaska or to distribute to the Grantor any income such property generates. It may be appropriate to note that in certain circumstances, the nature of real property can be changed to an intangible by contributing it to another entity, such as a cooperative (housing) association (corporation) or a partnership.
(7) Perpetual Alaska Charitable Lead Unitrust: A charitable lead trust provides for annuity or unitrust payments to be made to qualified charitable organizations for a period of years or until the death of certain specified individuals. In limited circumstances, a charitable lead trust can be used to increase the amount of property which becomes distributable to or for individuals whom the Grantor wishes to benefit, such as his or her descendants. See generally, Blattmachr, “A Primer on Charitable Lead Trusts: Basic Rules and Uses”, Trusts & Estates (April 1995). When the charitable term ends, the property may pass outright to others or remain in trust. It may be preferable for the property to remain in trust-the attached form so provides. It provides for the Grantor to be eligible, but not entitled to receive the distributions from the continuing trust after the charitable term, in the discretion of the trustee.
(8) Alaska Completed Gift Discretionary Charitable Remainder Trust: Charitable Remainder Trusts provide for payments of (a) an annuity, (b) a unitrust amount, or (c) an amount equal to the lessor of: the trust’s accounting income for the year, or the unitrust amount to be made each year to or among a class consisting of certain persons, at least one of whom is not a qualified charitable organization, with the remainder passing to charity. Under IRC § 664 and its regulations, charitable remainder trusts may not last for more than a fixed term of 20 years or until the death of a certain specified individual or individuals. Therefore, a charitable remainder trust cannot be perpetual although it can provide for the property to remain in a perpetual charitable trust once the annuity, or unitrust, term ends. As indicated, charitable remainder trusts can provide for payments to be made to one or more named individuals or authorize the trustee to make the payment among a class consisting of individuals. Usually, if the Grantor has retained the right, or eligibility, to receive distributions from the trust, the Grantor will retain the power to revoke the successor interest of successor individual beneficiaries who will succeed to payments when the Grantor dies. The reason is that the trust will be inpludible in the Grantor’s estate, in whole or in part at the Grantor’s death. The benefit in such a case of retaining the power to revoke the interests of the successor beneficiaries is that it prevents the initial transfer to the trust from being a taxable gift. The adverse result, of course, is that the trust will be included in the Grantor’s estate and the value of the interests of the successor non-charitable beneficiaries will be subject to estate tax (unless the Grantor’s spouse is the only successor non-charitable beneficiary and is a U.S. citizen). This estate tax inclusion may occur even if the Grantor is only eligible along with others to receive distributions because, under the law of most states, the Grantor’s creditors can attach the Grantor’s interest in the trust and that causes estate tax inclusion. See Restatement (2d) Trusts,§ 156.2; Rev. Rul. 77-378, 1977-2 CB 346. Generally, it may be preferable from an estate planning viewpoint for the transfer to the trust to be a completed gift and not be in the Grantor’s estate at death. But, as explained above, that would require, under the law of most states, that the Grantor not even be an eligible beneficiary to whom the trustee could choose to distribute the annuity or unitrust amount. However, if the trust is formed in Alaska, the Grantor may be such an eligible beneficiary and make transfers to the trust complete so not to be includible in the Grantor’s estate at death.
(9) Alaska QTIP Trust: This form is designed to permit transfers to qualify, by election, for the gift tax marital deduction under IRC §2523(c) but only if the Grantor’s spouse is a Untied States citizen. After the spouse dies, the property may remain in trust for the benefit of the Grantor and the Grantor’s descendants perpetually without being includible in the Grantor’s estate. (10) Alaska Community Property Trust: This form is designed to permit assets (of couples who live in separate property states) to qualify as community property; which should allow for a double step-up in basis on the death of the first spouse.
1Megatrust is a servicemark held by Jonathan G. Blattmachr and is licensed to New York Life Insurance Company and the Alaska Trust Company.
2Extra-Crummey Trust is a servicemark of Jonathan G. Blattmachr and is licensed to the New York Life Insurance Company and the Alaska Trust Company.
3Transfers to this type of trust are preferable to transfers to Uniform Transfers (Gift) to Minors Accounts or trusts described in IRC § 2503(c), among other reasons, because the beneficiary in those cases will hold a unilateral right to the property by age 21 and that may turn out not to be appropriate.