Universal Will/Trust Provisions
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      Clause by Clause Analysis of the UTPs/UWPs

      Definitions - Summary of Defined Terms

        • Code: Refers to the Internal Revenue Code of 1986, as amended.
        • Contribution: Cash, assets, or life insurance policies transferred to the trust, including premiums paid directly to insurers.
        • Corporate Trustee: A bank, trust company, or authorized entity serving as a fiduciary.
        • Death Taxes: Federal, state, or foreign estate/inheritance taxes, including interest, penalties, and additions.
        • Descendants: Includes children, issue, adopted individuals (under 19 at adoption), and living descendants of deceased children.
        • Estates and Trusts Laws: Applicable laws governing Wills, estates, and trusts of the Governing State.
        • Grantor or Settlor: Creator of the trust; synonymous with “Grantor,” “Settlor” and “Trustor.”
        • Governing State: The state defined in the Trust Agreement, or the Grantor’s state of residence at death if unspecified.
        • Health, Education, Maintenance, and Support: Establishes an "ascertainable standard" per the Code and expands its meaning under applicable law.
        • Heirs: Individuals entitled to inherit under intestacy laws of the Governing State.
        • Include/Including: Illustrative, not limiting.
        • Independent Trustee: Trustee without a beneficial interest or related/subordinate status per §672(c) of the Code.
        • Maximum Annual Gift Tax Exclusion: Amount defined under §2503(b) of the Code.
        • Persons: Includes individuals, partnerships, companies, corporations, trusts, estates, and recognized entities.
        • Per Stirpes: Divides property equally among living children and descendants of deceased children.
        • Qualified Charity: An organization described in §§170(c), 2055(a), and 2522(a) of the Code, including certain foreign charities.
        • Retirement Benefits: Employer-employee benefits, IRAs, pensions, deferred compensation, and similar plans.
        • Spouse: Legally married, non-separated partner; benefits cease upon divorce or legal separation proceedings.
        • Trust Agreement: Governing document of the trust, including amendments.
        • Trustee: Any serving Trustee; powers and discretions apply to all Trustees collectively or individually.
        • Will: The Last Will and Testament, including any Codicils, of the referenced testator/testatrix or Grantor.
        • Willingness and Availability to Act: Determined by death, resignation, incompetence (court order or physician certification), absence, or incapacity.

      Powers of Trustees: This section grants Trustees broad authority and flexibility to manage all types of assets and operations effectively.


        • Trustees have all common law, statutory, or court-granted powers without needing court approval.
        • Trustees have the additional specific powers to:
          • Buy, hold, sell, or manage investments, including stocks, bonds, mutual funds, partnerships, LLCs, and other property, without restriction.
          • Retain assets received in the trust, even if unconventional or disproportionate.
          • Register assets in nominee form or depositories.
          • Manage, lease, improve, or sell real or leasehold property and handle related expenses or hazards.
          • Address environmental hazards by inspecting property, hiring experts, and ensuring compliance without personal liability.
          • Manage and participate in business interests, reorganize entities, or serve in various roles within them.
          • Operate and manage mineral interests, including leasing, exploration, and pooling properties.
          • Borrow or lend money, create mortgages, or provide collateral.
          • Transact with the Grantor’s estate or beneficiaries, including secured or unsecured loans or sales for fair value.
          • Employ agents (e.g., advisors, attorneys, custodians) and delegate non-distribution powers.
          • Execute indemnification agreements and purchase insurance for transactions.
          • Create and manage a common trust fund or family trust with combined assets while maintaining separate records.
          • Allocate gains, losses, or income equitably from shared trusts.
          • Invest in margin accounts, derivatives, futures, and financial products.
          • Hold and manage collectibles, art, precious metals, and other non-income-producing property.
          • Enter underwriting agreements to facilitate asset sales.
          • Operate and manage farm or ranch properties and participate in government programs.
          • Hold assets anonymously through land trusts, nominees, or other entities.
          • Delegate powers to agents, managers, or investment advisors.
          • Divide or segregate trusts for tax purposes or other reasons.
          • Retain special investments, including real estate, closely held businesses, and digital assets (e.g., cryptocurrency).
          • Pay for insurance, storage, and maintenance costs related to trust property.
        • Independent Trustees may confer a general power of appointment on a beneficiary to reduce taxes.

      General Administrative Provisions: This section outlines comprehensive administrative powers for Trustees to efficiently manage, allocate, and adapt trust assets while addressing beneficiaries’ needs.


      • Trustees have the power to:
        • Hold Assets Without Bond: Serve without providing surety or bond.
        • Make Regular Income Payments: Distribute net income quarter-annually or more often if required.
        • Make Discretionary Distributions:
          • Distribute income or principal without impartiality between current and successive beneficiaries.
          • Consider beneficiaries' other financial resources and others' support obligations.
        • Facilitate Payments to Beneficiaries:
          • Pay distributions to beneficiaries under 25 or those unable to manage affairs by:
            • Paying directly to the beneficiary or depositing funds in their name.
            • Delivering funds to a relative, caregiver, or institution acting in the beneficiary’s interest.
            • Creating a custodial account under applicable laws.
            • Holding distributions in a separate trust for the beneficiary’s support until age 30 or until deemed capable.
          • Enforce spendthrift provisions to protect distributions from creditors.
          • Prohibit payments that would replace public/private assistance programs.
        • Allocate Debts: Charge any beneficiary debts or obligations to their trust share.
        • Allocate Insurance Proceeds: Pay insurance proceeds to the spouse or marital trust as certified, ensuring compliance with tax laws.
        • Administer Principal and Income:
          • Decide income allocation upon termination of an income interest.
          • Avoid establishing depreciation reserves.
          • Determine how to classify partnership distributions and tax-related payments.
          • Allocate IRA or retirement plan distributions between income and principal.
        • Divide Trusts into Separate Shares:
          • Partition the trust into multiple shares, holding assets separately or as undivided interests.
          • Reallocate shares among descendants if no beneficiaries remain.
          • Maintain the same provisions as the original trust in any divided trusts.
        • Combine Trusts:
          • Consolidate trusts with substantially similar terms for efficiency.
          • Preserve fairness when combining assets and ensure compliance with tax laws (e.g., GST tax).
        • Terminate Small or Impractical Trusts:
          • Distribute assets to current beneficiaries in proportions deemed beneficial if continuation is no longer practical due to size or changed circumstances.
        • Amend Trust Provisions:
          • Allow Independent Trustees to amend trust terms for tax efficiency, practical administration, or to align with the Grantor’s intent.
          • Prohibit amendments that alter dispositive provisions or GST inclusion ratios.
        • Accept Additions to the Trust: Receive contributions to the trust from any source.
        • Settle Claims:
          • Pay, collect, settle, or arbitrate claims for or against the trust.
        • Make Tax Elections:
          • Exercise tax options under federal or state laws (e.g., QTIP, S Corporation status, alternate valuation date, or installment payments).
          • Allocate expenses and receipts between income and principal to maximize tax efficiency.
        • Administer Retirement Plans:
          • Make elections regarding retirement plans, including treatment of employer securities and plan amendments.
        • Render Accounts:
          • Provide annual or intermediate accounts to beneficiaries upon request but avoid formal court filings.
        • Limit Liability:
          • Avoid personal liability for actions or omissions of co-Trustees or agents unless requested by beneficiaries to act.
        • Change Situs of the Trust: Relocate the trust’s jurisdiction for administrative or tax purposes.
        • Hold S Corporation Stock: Ensure trusts holding S Corp stock remain eligible shareholders.
        • Enter Non-Judicial Settlement Agreements (NJSA): Resolve trust matters without court approval where permitted by law.
        • Manage Closely-Held Businesses:
          • Operate, control, or retain business interests, including reorganizing or liquidating businesses.
          • Invest additional funds into businesses or secure loans using trust assets.
        • Grant a Right of Occupancy:
          • Allow the Grantor’s spouse to occupy the trust-owned home rent-free.
          • Maintain or reinvest in a replacement home for the spouse under similar terms.

      The Office of Fiduciary/Executor/PR: These provisions provide flexibility, oversight, and mechanisms for seamless trustee and trust protector management.


        • Ability to Remove/ Replace Fiduciaries
        • Ability to add an Independent Fiduciary
        • Sole Fiduciary may appoint successors via written instrument or Will.
        • If no successor is named, the Protector or majority of income beneficiaries (weighted per stirpes) elect one.
        • Most recent, unrevoked appointment governs.
        • Fiduciaries resign via written notice; effective once a successor accepts.
        • Trust property and records must be promptly transferred.
        • A Fiduciary can renounce the role before acting or receiving assets.
        • Fiduciaries may delegate duties to a Co-Fiduciary.
        • Fiduciary changes must be documented in writing and kept in trust records.
        • No court proceedings needed for Fiduciary appointments, resignations, or removals.
        • New Fiduciaries can accept records without audit and are not liable for prior actions.
        • Fiduciaries manage trusts individually; no uniform actions required.
        • Decisions require a majority vote.
        • If a Corporate Fiduciary disagrees with a sole individual Fiduciary, the individual Fiduciary’s decision controls.
        • Protectors, if named in the trust document, can remove Fiduciaries with or without cause and appoint successors if none are available.
        • Protectors are not fiduciaries unless state law requires it.

      Self-Dealing: This section prevents Trustees from favoring themselves as beneficiaries but allows them and affiliated entities to provide services, manage investments, and receive reasonable compensation, ensuring proper oversight and flexibility in trust administration.

        • Trustees cannot vote on or make discretionary distributions of income or principal to themselves, except as limited by an ascertainable standard.
        • Trustees cannot make discretionary payments that relieve them of any legal obligation or exercise powers involving life insurance on their own life held by an irrevocable trust.
        • Trustees may provide services to the trust, directly or through affiliated entities, including managing investments, acting as broker/dealer, and providing legal, accounting, or professional services.
        • Trustees can invest in mutual funds or commingled funds managed by affiliates.
        • Trustees may receive compensation or exchange services with affiliated entities, and such expenses can be charged to the trust.

      Marital Deduction - QTIP Election Flexibility: This section ensures marital deductions are maximized, tax efficiency is achieved, and the Grantor's spouse is prioritized.


        • Powers of Trustees must not prevent marital bequests from qualifying for the marital deduction under the Code.
        • Marital Bequest: Defined as a bequest qualifying for the marital deduction; terms like “gross estate” align with the Code.
        • Trustees cannot use non-qualifying assets to satisfy a marital bequest.
        • Marital Trust Powers: Trustees resolve doubts (legal or factual) in favor of the Grantor’s spouse as the preferred beneficiary.
        • Discretionary Distributions: Trustees aim to minimize future estate tax by prioritizing distributions from the Federal Marital Trust.
        • Trustees must convert unproductive property to income-producing assets upon written request by the spouse.
        • Trustees can divide the trust to reflect partial QTIP elections and allocate tax burdens accordingly.
        • Distributions from retirement plans/IRAs: Income exceeding minimum distributions can be compelled by the spouse, with adjustments to ensure the spouse's benefit.
        • QTIP Elections:
          • Only an Independent Trustee can decide federal/state QTIP elections.
          • Property for which no QTIP election is made is reallocated to the Family Trust.
        • Spouse Disclaimer: Disclaimed property forms a Disclaimer Trust, prioritized for the spouse's health, support, and welfare:
          • Upon the spouse's death, the Disclaimer Trust is distributed to residuary beneficiaries.
          • No powers retained by the spouse if it would invalidate the disclaimer.

      GST Tax: These provisions ensure GST tax efficiency through trust division and prioritization of distributions.

      • Automatic Division of Trusts:
        • If property is added to a trust resulting in a non-zero inclusion ratio (per §2642 of the Code), the trust automatically divides into:
          1. Exempt Trust (inclusion ratio = 0).
          2. Non-Exempt Trust (inclusion ratio = 1).
        • Both trusts maintain identical terms to the original trust.
      • Distributions:
        • Distributions to non-skip beneficiaries (for GST tax purposes) come first from the Non-Exempt Trust.
        • Exempt Trust is used only if the Non-Exempt Trust is insufficient or a compelling reason exists.
      • Funding Exempt Trusts:
        • Trustees must fund Exempt Trusts to maintain an inclusion ratio of zero, in compliance with the Code.

      Supplemental Needs Trusts: These provisions serve as a safeguard, “turning on” an SNT automatically when a beneficiary becomes eligible for or receives Government Benefits. By holding assets in a separate SNT, the trust ensures the beneficiary maintains access to essential Government Benefits while providing supplemental care and quality-of-life enhancements.

      • The Supplemental Needs Trust (SNT) automatically “turns on” if a beneficiary becomes eligible for or receives Government Benefits.
      • Assets for a qualifying beneficiary are held in a separate SNT to protect eligibility.
      • Trustees may distribute income and principal as needed for the beneficiary; unused income is added to the principal.
      • The trust supplements, not replaces, Government Benefits, and Trustees maximize access to such benefits.
      • Funds may be used for supplemental needs like private care, recreation, education, health insurance premiums, and family contact, but not for basic support (food, shelter, or primary health care).
      • Trustees can purchase, maintain, or improve a residence for the beneficiary’s use.
      • Trustees may distribute funds even if it affects eligibility but cannot do so if their authority alone disqualifies benefits.
      • Trustees can amend the trust to comply with laws or preserve the beneficiary’s eligibility for benefits.
      • Beneficiaries cannot revoke, direct, or assign trust distributions.
      • Upon the beneficiary’s death, the trust property is distributed under the original terms.
      • “Government Benefits” include programs like Medicaid and SSI, but not Social Security or Medicare.

      Charitable Split Interest Trusts: This section ensures charitable split-interest trusts comply with the Code:

      • Trustees’ powers over charitable remainder trusts, charitable lead trusts, or pooled income funds are limited by the Code (§§664, 170(f)(2)(B), and 642(c)(5)).
      • If a trust has both charitable and non-charitable interests, Trustees may release any power that risks disqualifying the trust as a charitable split-interest trust.
      • Trustees may divide the trust into separate trusts for charitable and non-charitable interests, allocating principal based on the present value of each interest.
      • Trustees are authorized to refuse additions to pooled income funds.

      Life Insurance: This section ensures Trustees can manage life insurance policies flexibly while avoiding estate tax issues in irrevocable trusts.


        • Trustees may acquire, retain, and exercise full ownership rights over life insurance policies on the lives of any beneficiaries, Grantor, or other individuals.
        • Trustees may exercise options on policies, including borrowing against cash value, paying premiums, designating beneficiaries, or converting policies (e.g., to paid-up insurance).
        • Prohibited Powers (for irrevocable trusts):
          • Trustees cannot allow the Grantor to buy, borrow, or deal with trust assets for less than adequate consideration.
          • Trustees must avoid any actions causing trust assets to be included in the Grantor’s gross estate unless acting in good faith.
        • Trustees are not obligated to pay premiums during the Grantor’s lifetime.
        • Premium payment dates are considered the date of contribution to the trust.
        • If a group term policy is transferred, future replacement policies are automatically included in the trust.

      Contributions and Withdrawal Provisions: This provision ensures clear rules for withdrawal rights, notices, lapses, and handling of life estates.


        • No withdrawal rights attach to property or funds lent to the Trustees by the Grantor or others.
        • Trustees must notify beneficiaries (or their guardians) of contributions within 30 days, unless periodic contributions are scheduled.
        • Withdrawal rights must be exercised in writing by the beneficiary or their guardian, excluding the donor, for the beneficiary’s sole benefit.
        • Trustees may satisfy withdrawals with cash or other trust assets, and their selection of assets for distribution is binding.
        • Withdrawal rights lapse on the later of 30 days after notice or the end of the calendar year, limited to the greater of $5,000 or 5% of aggregate trust value.
        • Lapses are charged first to trusts not distributed upon the Grantor’s (or spouse’s) death, starting with the oldest trust.
        • Upon trust termination (e.g., Grantor’s death), withdrawal rights continue in any new trust created for the beneficiary and their descendants.

      Rules of Construction: This section ensures clarity, flexibility, and consistency in trust interpretation, administration, and application.


        • The Trust Agreement controls if it conflicts with the Universal Trust Provisions, except where required for marital or charitable deductions.
        • Invalid provisions do not affect the validity of the remaining trust terms.
        • Powers of Appointment:
          • Grantor’s powers are adjusted to comply with any limitations.
          • Testamentary powers must reference the trust and may not appoint property in a way that disqualifies an S election.
        • Beneficiaries or Trustees may release powers in whole or part by written instrument.

        Rule Against Perpetuities:
          • If applicable, trust terms are reformed to maximize duration while avoiding violations.
          • If reformation isn’t possible, remaining trust property is divided among beneficiaries.
        • If a recipient trust no longer exists, its terms are incorporated into a new trust under the Trust Agreement.
        • Captions and headings are for reference only.
        • Gender and number references are inclusive and interchangeable.
        • Courts may assume jurisdiction only to resolve specific disputes, not ongoing trust administration.
        • The trust is governed by the laws of the Governing State.
        • Trustees may amend Universal Trust Provisions with notice to the Grantor and beneficiaries.
        • Trustees’ decisions are final and binding.
        • Trustees have full discretion to allocate income and principal, even if contrary to state law.
        • Virtual Representation allows living beneficiaries to act on behalf of future or unborn beneficiaries unless there’s a conflict of interest.
        • Beneficiaries waive Trustees’ statutory duties to provide notices, information, or reports.
        • All references to the Code include future revisions of the Internal Revenue Code.

      Retirement Benefits: This ensures that Retirement Benefits are managed in compliance with tax laws while meeting trust-specific distribution requirements.


        • Retirement Benefits as Separate Trust Share:
          • If a trust holds Retirement Benefits, the Trustees must hold them as a separate share and treat it as a conduit trust or “see-through trust” for distribution purposes.
        • Marital Trust Administration:
          • Trustees must annually withdraw and distribute the required minimum distribution (RMD), or any greater amount required to avoid penalties, to the spouse.
          • The spouse can compel the withdrawal of all income generated by the Retirement Benefits each year.
        • Non-Marital Trust Administration:
          • Trustees must annually withdraw and distribute the RMD or any greater amount needed to avoid penalties to the primary beneficiary.
          • If there is no sole primary beneficiary, the amount is divided pro rata among all living and available beneficiaries.