.
4
trust (hereinafter “the term of the QPRT”). During the term of the QPRT, the Transferor
shall have the exclusive rent-free use, possession, and enjoyment of the Residence.
(2) Payment of Expenses
. The Transferor shall be responsible for the payment
of all costs associated with the Residence, including but not limited to mortgage
payments, property taxes, utilities, repairs, maintenance, and insurance. The Trustee’s
responsibility for the maintenance of the Residence and for other costs associated with
the Residence is limited to the extent of any trust income and additions of cash for that
purpose received by the Trustee in accordance with this Article II. If the Trustee has
insufficient funds to pay these costs and expenses, the Trustee shall notify the
Transferor, who shall be responsible for the unpaid balance of these costs and
expenses. In addition, the Trustee from time to time may make improvements to the
Residence, but the Trustee’s authority and responsibility to do so is limited to the extent
of any trust income, insurance proceeds, and additions of cash for that purpose
received by the Trustee in accordance with this Article II.
(3) Distributions of Cash to Transferor
. Any net income of the QPRT shall be
distributed to the Transferor, not less frequently than annually. In addition, the Trustee
shall determine, not less frequently than quarterly, whether the cash held by the QPRT
exceeds the amount permitted to be held by the Trustee and shall immediately
distribute the excess, if any, to the Transferor. Within 30 days of the date of the
termination of the QPRT, the Trustee shall distribute outright to the Transferor (or to the
estate of the Transferor, as the case may be), any amounts held by the QPRT pursuant
to Paragraph A(3) of this Article II that are not used to pay QPRT expenses due and
payable on the date of termination (including expenses directly related to the
termination of the QPRT).
(4) Reinvestment of Trust Assets
. Except as provided in Paragraph B(5) of this
Article II, the Trustee may sell the Residence from time to time upon terms and
conditions the Trustee deems appropriate. The Trustee may disburse from time to time
any part or all of the amounts described in Paragraph A(1) and A(3) above and
Paragraph B(6) below, including all income and capital gains thereon, as the Trustee
deems appropriate for the purchase or construction of a replacement Residence to be
owned by the trust or for the reconstruction or repair of the Residence. These
disbursements shall be made, and any reconstruction and repairs shall be completed,
within the time periods necessary to allow this trust to continue to qualify as a QPRT,
but the Trustee shall not be held liable for any failure in this regard unless the Trustee
has acted (or failed to act) through willful default or gross negligence.
(5) Prohibition on Sale of Residence to Transferor or Related Parties
. The
Trustee is prohibited from selling or transferring (as defined in § 25.2702-5(c)(9) of the