July 12, 2018
Author: Ronald W. Marblestone
Organization: Branson, Brinkop, Griffith & Strong, LLP
Sample Allocation Agreement For The Revocable Trust Of Very Rich Person
DATED MARCH 13, 2001
This Agreement is made as of January ___, 2013 by Wife (“Trustee”) as Trustee of the Revocable Trust of Very Rich Person dated March 13, 2001 (“the Trust”), and as Trustee of the Wife's Survivor’s Trust, the Last Name Marital Trust and the Last Name Family Bypass Trust established thereunder.
1. Division of Family Trust Estate into Shares. Very Rich Person (“Decedent”), died on February 25, 2009. The Trust provides that, on Decedent’s death, the Trustee shall divide the trust estate into three separate trusts: a Survivor’s Trust, a Marital QTIP Trust and a Family Bypass Trust. The separate trusts shall contain the following:
a. Survivors Trust. One share to the Wife's Survivors Trust, consisting of Wife’s share of community property and her separate property.
b. Family Bypass Trust. One share to the Last Name Family Bypass Trust, consisting of the largest amount that can pass free of federal estate tax, after allowance of all other deductions, by reason of the allowable unified credit and state death tax credit (provided this latter credit does not increase the state death taxes paid) reduced by the sum of (a) the federal estate tax value of all other gifts passing under this instrument and outside this instrument included in the deceased spouse's gross taxable estate but not qualified as federal estate tax marital or charitable deduction gifts; and (b) all debts, administration expenses, and charges to principal not allowed or utilized as federal estate tax deductions;
c. Marital QTIP Trust. One share to the Last Name Marital QTIP Trust consisting of the balance of the trust estate.
2. Survival Requirements. The Survivor has survived the Decedent for more than 30 days, and allocation of the Trust Estate shall be made as set forth above.
3. Allocation of Expenses of Administration to Family Bypass Trust.
To date, the Trustee has incurred $18,834.00 of administration expenses, of which $18,834.00 has been paid, all of which have been allocated to the Last Name Family Bypass Trust. All unpaid or contingent administration expenses or liabilities shall be charged exclusively to, and are hereby assumed by, the Last Name Family Bypass Trust. The Trustee of the Family Bypass Trust hereby agrees to reimburse the Family Bypass Trust and/or any other trust established under the Last Name Bypass Trust, as the case may be, for any expenses of administration paid by such trust or trusts that are properly chargeable to the Last Name Family Bypass Trust. The Trustee of the Last Name Family Bypass Trust may (but shall not be required to) retain a reserve as part of the Last Name Family Bypass Trust for payment of unpaid or contingent expenses and liabilities.
4. Funding of Trusts at Date-of-Distribution Values. All assets allocated to the various trusts established under the terms of the Trust have been valued for purposes of such allocation as of March 31, 2010, the date-of-distribution values.
5. Calculation of Trust Estate Available for Distribution. The total dateof- distribution value of the community property in the Trust Estate is $xxxxxxxxxx. The Survivor’s interest in the Trust Estate at date of distribution is $_________.00. The Decedent’s interest in the Trust Estate at date of distribution is $____________. Of said amount, $3,500,000 constitutes the Family Bypass Trust. After deductions taken on the Federal Estate Tax Return, the amount allocated to the Family Bypass Trust is $3,500,000.00.
6. Allocation of GST Exemption. No allocation of Decedent’s unused generation-skipping transfer (GST) exemption has been made.
7. Allocation of the Assets of the Family Trust Estate. The Trustee hereby allocates the following items of property to the various trusts established under the Trust:
a. To Wife, as Trustee of Wife's Survivors Trust, the property described in Schedule A attached to this Agreement and incorporated by reference, having a total value of $xxxxxx on the date of distribution.
b. To Wife, as Trustee of the Last Name Family Bypass Trust, (Tax Identification No.: xx-xxxxxxx) the property described in Schedule B attached to this Agreement and incorporated by reference, having a total value of $3,500,000.00 on the date of distribution.
c. To Wife, as Trustee of the Last Name Marital QTIP Trust, (Tax Identification No.: xx-xxxxxxx), the property described in Schedule C attached to this Agreement and incorporated by reference, having a total value of $____________ on the date of distribution.
8. Interest on Pecuniary Gifts. Under California law, a pecuniary gift bears interest if it is paid after one (1) year from the date of death of the Decedent unless such interest is waived. Interest on such gift has been waived.
9. Reserve for Contingent Liabilities. Notwithstanding the provisions of paragraph 7 above, the Trustee may (but shall not be required to) retain as part of the Trust Estate of the Family Bypass Trust a reasonable reserve for unpaid and contingent administration expenses and liabilities chargeable to the Family Bypass Trust hereunder for such period of time and in such amount as the Trustee, in the Trustee’s sole discretion, determines. The balance of such reserve remaining after payment of all such charges shall be distributed to the Family Bypass Trust.
10. Further Documents. The Trustee agrees to make, execute, and acknowledge such deeds, assignments, bills of sale, stock powers, letters of instruction, and other documents of transfer or conveyance as reasonably required to carry out the distributions set forth in paragraph 7 above and otherwise to carry out the terms of this Agreement.
11. Adjustments to Shares on Audit. The Trustee has determined the pecuniary marital formula gift using the values reported on the Decedent’s federal estate tax return. The Trustee recognizes that the values reported on the federal estate tax return are tentative and that it may take months or years before the values or the estate assets are finally determined for federal estate tax purposes. Nevertheless, for the purpose of efficient trust administration, the Trustee desires to allocate and distribute the Trust Estate of the Family Bypass Trust, subject to whatever adjustments may be required by reason of any adjustments made with respect to the asset values or the amount of deductions, including the marital deduction, as reported on Decedent’s federal estate tax return.
If any such adjustments lead to a conclusion that any trust referred to herein has been overfunded or underfunded, the Trustee agrees to make whatever transfers or cash payments as may be necessary between or among the various trusts in order to give effect to the Decedent’s directions in the Declaration of Trust concerning qualification for the marital deduction. The amount of any overfunding shall bear interest at a rate per annum equal to the short-term applicable federal rate (compounded annually) in effect under Internal Revenue Code §1274(d), from the date of distribution to the date of payment, such rate to be recalculated thereafter on each anniversary date of the date of distribution. Unpaid interest shall be accumulated and added to principal as of each such anniversary date. The entire unpaid principal balance of such overfunding, together with all current and accumulated interest, shall be due and payable on demand by any underfunded trust, and it may be prepaid, in whole or in part, at any time without premium or penalty. Unless otherwise agreed by the parties, all payments shall be applied first to current interest, then to accumulated interest, and finally to the remaining principal.
12. Indemnification. The Trustee of each separate trust represented hereby agrees to indemnify, defend, and hold each and every other Trustee free and harmless from and against any and all liability, damages, losses, or expenses, including reasonable attorneys’ and accountants’ fees howsoever arising by reason of the distribution of the Trust Estate under this Agreement, including payment of taxes, interest, and penalties, if any.
13. Binding on Successors. This Agreement shall be binding on the heirs, successors, and assigns of the parties hereto, including any successor trustees of any of the trusts referred to herein.
14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Executed at Redwood City, California, on January ___, 2013.