Invalidating an irrevocable trust

Rated 4.54/5 based on 999 customer reviews

Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust.

Any rights created under the Plan(s) and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against Company.

Of course, provisions may be renumbered if appropriate, language in brackets may be omitted, and blanks may be completed.

In addition, the taxpayer may add sections to the model language provided that such additions are not inconsistent with the model language. The model trust language in this section contains all provisions necessary for operation of the trust except for provisions describing the trustee's investment powers.

Thus, no inference may be drawn by reason of adoption of the model trust concerning constructive receipt or economic benefit issues that may be present in the underlying nonqualified deferred compensation plan.

In addition, the use of the model trust does not change the rules generally applicable under section 6321 of the Code with respect to the attachment of a federal tax lien to a taxpayer's property and rights to property.

(b) The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan(s) shall be determined by Company or such party as it shall designate under the Plan(s), and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan(s).

Taxpayers that adopt the model trust and wish to obtain a ruling on the underlying nonqualified deferred compensation plan, must include a representation that the plan, as amended, is not inconsistent with the terms of the trust and must follow the guidelines outlined in Section 4 of this Revenue Procedure and Revenue Procedure 92-65.

Rulings issued on such deferred compensation arrangements will continue to provide that the Service expresses no opinion as to the consequences of the arrangement under Title I of the Employee Retirement Income Security Act of 1974 ("ERISA").

The model trust language contains a number of optional provisions, which are printed in italics and marked as "OPTIONAL." [Editor's note: THESE ARE IN CAPITAL LETTERS, NOT ITALICS.] The taxpayer may substitute language of its choice for any optional provision, provided that the substituted language is not inconsistent with the language of the model trust. OPTIONAL (c) WHEREAS, COMPANY HAS INCURRED OR EXPECTS TO INCUR LIABILITY UNDER THE TERMS OF SUCH PLAN(S) WITH RESPECT TO THE INDIVIDUALS PARTICIPATING IN SUCH PLAN(S); (d) WHEREAS, Company wishes to establish a trust (hereinafter called "Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of Company's creditors in the event of Company's Insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan(s); (e) WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan(s) as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; (f) WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan(s); NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: Section 1.

The model trust language also contains several alternative provisions, which are printed in italics and marked as "ALTERNATIVE." [Editor's note: THESE ARE IN CAPITAL LETTERS, NOT ITALICS.] The taxpayer must choose one of these alternatives. ESTABLISHMENT OF TRUST (a) Company hereby deposits with Trustee in trust _____ [INSERT AMOUNT DEPOSITED], which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement. (b) THE TRUST HEREBY ESTABLISHED SHALL BE REVOCABLE BY COMPANY.

Leave a Reply