====================================================================
SPECIAL NEEDS TRUST AGREEMENT
====================================================================

This Special Needs Trust Agreement (“Agreement”) is made effective as of [EFFECTIVE DATE] (the “Effective Date”), by and among:

1. [GRANTOR FULL LEGAL NAME], of [ADDRESS] (“Grantor”);
2. [INITIAL TRUSTEE FULL LEGAL NAME], of [ADDRESS] (“Trustee”); and
3. [PRIMARY BENEFICIARY FULL LEGAL NAME], a person with a disability as defined herein (“Beneficiary”).

Collectively, Grantor, Trustee, and Beneficiary may be referred to as the “Parties.”

RECITALS

A. Grantor desires to establish an irrevocable trust governed by the laws of the State of Alabama (the “Trust”) for the sole benefit of Beneficiary in order to protect Beneficiary’s eligibility for means-tested public benefits, including but not limited to Supplemental Security Income (“SSI”) and Medicaid.

B. The Trust is intended to qualify as a “special needs trust” within the meaning of 42 U.S.C. § 1396p(d)(4)(A) (2023) and applicable Alabama trust law so that the assets of the Trust shall be disregarded for purposes of determining Beneficiary’s continued eligibility for such benefits.

C. Trustee is willing to accept the duties and obligations set forth in this Agreement, subject to the terms, conditions, and protections contained herein.

NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

TABLE OF CONTENTS

I. DEFINITIONS
II. OPERATIVE PROVISIONS
III. REPRESENTATIONS & WARRANTIES
IV. COVENANTS & RESTRICTIONS
V. DEFAULT & REMEDIES
VI. RISK ALLOCATION
VII. DISPUTE RESOLUTION
VIII. GENERAL PROVISIONS
IX. EXECUTION BLOCK

// GUIDANCE: Update page numbers or hyperlink cross-references as needed once finalized.

====================================================================
I. DEFINITIONS
====================================================================

For purposes of this Agreement, the following terms shall have the meanings set forth below. Terms defined in the singular include the plural and vice-versa; references to gender include all genders.

“Accountant” means a certified public accountant engaged pursuant to Section IV.C.

“Act” means 42 U.S.C. § 1396p(d)(4)(A) and its implementing regulations, as amended.

“Alabama Probate Court” means any court of competent jurisdiction in the State of Alabama exercising probate jurisdiction over the Trust pursuant to Section VII.

“Beneficiary” has the meaning assigned in the preamble and, where the context requires, includes any Successor Beneficiary designated under Section II.I.

“Disability” means a condition meeting the definition set forth in 42 U.S.C. § 1382c(a)(3).

“Distribution Committee” means the advisory body described in Section II.F, if appointed.

“Government Benefits” means any present or future means-tested or entitlement program, including without limitation SSI, Medicaid, Social Security Disability Insurance (“SSDI”), Medicare, Section 8 housing, Supplemental Nutrition Assistance Program (“SNAP”), and comparable programs.

“Income” and “Principal” have the meanings assigned in the Alabama Uniform Principal and Income Act as adopted in Alabama.

“Qualified Expenses” means goods and services that supplement, and do not supplant, public assistance, consistent with Section II.D.

“Remainder Beneficiary” means the person(s) or entity(ies) entitled to receive Trust assets upon termination pursuant to Section II.I.

“Special Needs” means Beneficiary’s supplemental, non-support needs that are not provided by Government Benefits, including but not limited to education, therapies, travel, recreation, and adaptive equipment.

“State” means the State of Alabama.

// GUIDANCE: Add any additional defined terms unique to client circumstances, e.g., “Corporate Trustee,” “Investment Advisor,” etc.

====================================================================
II. OPERATIVE PROVISIONS
====================================================================

A. Creation and Funding
1. Grantor hereby irrevocably transfers, assigns, and delivers to Trustee the property described in Schedule A, together with any additional property hereafter transferred to Trustee by any person (collectively, the “Trust Estate”), to hold IN TRUST under the terms of this Agreement.
2. This Trust shall be irrevocable. No part of the Trust Estate shall be returned to Grantor except as expressly permitted by applicable law.

B. Purpose
The primary purpose of this Trust is to provide for Beneficiary’s Special Needs while preserving eligibility for Government Benefits. The Trust shall be administered so as to:

a. Supplement, and not replace, any Government Benefits;
b. Maximize Beneficiary’s quality of life; and
c. Comply with the Act and Alabama trust law.

C. Trustee’s Discretionary Authority
1. Sole and Absolute Discretion. Trustee shall have sole and absolute discretion regarding all distributions. Beneficiary shall have no right to demand or compel distributions.
2. Standard. Trustee may make distributions only for Qualified Expenses. No distribution shall be made for food, shelter, or other basic support if such distribution would reduce or eliminate Beneficiary’s Government Benefits.
3. Direct Payment to Providers. Wherever practicable, distributions shall be made directly to third-party providers of goods or services.

D. Spendthrift Protection
All interests of Beneficiary in this Trust shall be held subject to a valid spendthrift provision. Beneficiary’s interest shall not be subject to voluntary or involuntary transfer, assignment, pledge, or seizure by creditors.

E. Reimbursement to State(s)
Upon termination of the Trust during Beneficiary’s lifetime, and after payment of allowable expenses, Trustee shall reimburse each State that has provided Medicaid benefits to Beneficiary in an amount equal to the total medical assistance paid on behalf of Beneficiary, to the extent required by the Act.

F. Distribution Committee (Optional)
Grantor may appoint a Distribution Committee of up to three persons to advise Trustee. Decisions of the Distribution Committee shall be non-binding recommendations.

// GUIDANCE: Delete or modify this subsection if no Distribution Committee will be used.

G. Trustee Succession
1. Resignation. Trustee may resign upon 30 days’ written notice to Grantor (if living), Beneficiary, and the Alabama Probate Court.
2. Removal. Grantor (if living) or a court of competent jurisdiction may remove any Trustee for cause.
3. Successor Trustee. If the office of Trustee becomes vacant, [SUCCESSOR TRUSTEE NAME] shall serve. If no named successor is able or willing, the Alabama Probate Court shall appoint a corporate fiduciary authorized to administer special needs trusts in Alabama.

H. Trustee Powers
Trustee shall have all powers conferred by Alabama law upon trustees, including those enumerated under the Alabama Uniform Trust Code, and in addition:

1. To retain, invest, and reinvest the Trust Estate in accordance with the prudent investor rule;
2. To employ and compensate agents, attorneys, accountants, and investment advisors;
3. To compromise or settle claims;
4. To execute documents and delegate authority as permitted by law; and
5. To make elections and take any steps advisable to minimize taxes or preserve Government Benefits.

I. Termination; Remainder Beneficiaries
1. Mandatory Termination. The Trust shall terminate upon the earliest of:
a. Beneficiary’s death;
b. Exhaustion of the Trust Estate; or
c. Court order.
2. Distribution Upon Termination.
a. First, Trustee shall pay all unpaid Qualified Expenses and administrative costs.
b. Second, Trustee shall satisfy the Medicaid payback required under Section E.
c. Third, any remaining balance shall be distributed to the following Remainder Beneficiaries in the percentages indicated:

• [NAME] – []%
• [NAME] – []%

d. If no Remainder Beneficiaries survive Beneficiary, residue shall pass to Grantor’s heirs at law per stirpes.

// GUIDANCE: Confirm whether Trust is first-party (self-settled) or third-party. Medicaid payback is mandatory only for first-party trusts.

====================================================================
III. REPRESENTATIONS & WARRANTIES
====================================================================

A. Grantor
1. Authority. Grantor has full legal capacity and authority to execute this Agreement and to transfer the property comprising the Trust Estate.
2. Non-Contravention. Execution and performance of this Agreement do not violate any other agreement or legal obligation binding on Grantor.

B. Trustee
1. Qualification. Trustee is qualified and, if a corporate fiduciary, duly authorized to act as a trustee in the State.
2. Duty of Loyalty. Trustee acknowledges fiduciary duties of loyalty and care owed to Beneficiary.
3. No Conflict. Trustee’s acceptance of this trusteeship does not create a prohibited conflict of interest.

C. Survival
The representations and warranties herein shall survive execution and continue during the term of this Trust.

====================================================================
IV. COVENANTS & RESTRICTIONS
====================================================================

A. Accounting and Reporting
1. Annual Accounts. Trustee shall prepare an annual accounting and provide copies to Beneficiary (or Beneficiary’s legal guardian), the Alabama Probate Court, and any other person entitled under applicable law.
2. Court Audit. Trustee shall submit to court audit as required by the Alabama Probate Court.

B. Compliance with Government Benefit Rules
Trustee shall timely file all reports required by governmental agencies and shall take no action that would knowingly disqualify Beneficiary from Government Benefits.

C. Tax Matters
Trustee shall cause an income tax return (IRS Form 1041) to be filed annually for the Trust and shall provide any tax information statements to Beneficiary. Trustee is authorized to engage an Accountant and may pay reasonable fees from the Trust Estate.

D. Investment Policy
Trustee shall adopt a written investment policy consistent with Beneficiary’s anticipated needs, the projected duration of the Trust, and preservation of capital.

E. Notice of Material Events
Trustee shall notify Beneficiary and, if applicable, Beneficiary’s legal guardian within 30 days of (i) change in Trustee, (ii) litigation affecting the Trust, or (iii) any Government Benefit eligibility issue.

====================================================================
V. DEFAULT & REMEDIES
====================================================================

A. Events of Default
The following constitute Events of Default:
1. Trustee’s willful misconduct, gross negligence, or material breach of fiduciary duty;
2. Failure to account within the time required by Section IV.A;
3. Unauthorized self-dealing;
4. Failure to maintain Beneficiary’s eligibility for Government Benefits through negligence or malfeasance.

B. Cure Period
Trustee shall have 30 days after written notice to cure any Event of Default, except no cure period shall apply to willful misconduct or fraud.

C. Remedies
Upon an uncured Event of Default, any interested party may petition the Alabama Probate Court for:
1. Removal and surcharge of Trustee;
2. Injunctive relief to prevent further harm;
3. Recovery of damages limited as provided in Section VI.B; and
4. Attorneys’ fees and costs, in the court’s discretion.

====================================================================
VI. RISK ALLOCATION
====================================================================

A. Indemnification of Trustee
1. Scope. The Trust Estate shall indemnify and hold Trustee harmless from and against any liability, loss, or expense (including reasonable attorneys’ fees) incurred in the administration of the Trust, except to the extent arising from Trustee’s willful misconduct or gross negligence.
2. Advancement. Trustee may advance costs from the Trust Estate, subject to refund if later determined not indemnifiable.

B. Liability Cap
Trustee’s liability to all parties for claims arising out of this Agreement shall not exceed the lesser of (i) the then-existing Trust Estate or (ii) the actual loss proven, unless a court finds willful misconduct or fraud.

C. Insurance
Trustee may, but is not required to, purchase fiduciary liability insurance payable from the Trust Estate.

D. Force Majeure
Trustee shall not be liable for delays or failures in performance caused by events beyond reasonable control, including changes in law, court closure, natural disasters, or systemic failure of financial institutions.

====================================================================
VII. DISPUTE RESOLUTION
====================================================================

A. Governing Law
This Agreement and the Trust shall be governed by and construed in accordance with the substantive laws of the State of Alabama relating to trusts, without regard to conflict-of-laws principles.

B. Forum Selection
Exclusive jurisdiction for matters involving the internal affairs or administration of the Trust shall lie with the [NAME OF COUNTY] Probate Court, State of Alabama.

C. Limited Arbitration
1. Scope. Any dispute that (a) does not involve interpretation of the Trust’s dispositive provisions, and (b) could be finally resolved without impinging upon the Probate Court’s exclusive jurisdiction, shall, at the election of any party, be submitted first to mediation and, if unresolved within 60 days, to binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”).
2. Carve-Outs. Petitions for instructions, account approval, or trustee removal shall be brought exclusively in Probate Court.
3. Injunctive Relief. The Probate Court shall retain authority to issue temporary, preliminary, and permanent injunctive relief as necessary for Trust enforcement.

D. Jury Trial Waiver
To the fullest extent permitted by applicable law, the Parties waive any right to trial by jury in any proceeding arising out of or relating to this Trust; provided, however, that such waiver shall not apply in proceedings where jury trial is unavailable under probate practice.

====================================================================
VIII. GENERAL PROVISIONS
====================================================================

A. Amendment and Reformation
1. No Amendment by Grantor. Grantor lacks power to revoke or amend this Trust.
2. Judicial Reformation. The Probate Court may modify or reform the Trust to ensure continued qualification as a special needs trust or to address unanticipated circumstances, consistent with Grantor’s intent.

B. Severability
If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall remain in full force, and the Probate Court may reform such provision to the minimum extent necessary to effectuate Grantor’s intent.

C. Assignment
No party may assign rights or obligations under this Agreement except as expressly provided herein or with Probate Court approval.

D. Entire Agreement
This Agreement constitutes the entire understanding among the Parties with respect to the Trust and supersedes all prior negotiations or agreements.

E. Counterparts; Electronic Signatures
This Agreement may be executed in multiple counterparts, each deemed an original, and by electronic signature to the extent permitted by applicable law.

====================================================================
IX. EXECUTION BLOCK
====================================================================

IN WITNESS WHEREOF, the Parties have executed this Special Needs Trust Agreement as of the Effective Date.

GRANTOR

[GRANTOR NAME]
Date: _______

TRUSTEE

[TRUSTEE NAME], Trustee
Date: _______

BENEFICIARY (acknowledgment only)

[BENEFICIARY NAME]
Date: _______

WITNESSES

1. ______ Date: _______
2. ______ Date: _______

NOTARY PUBLIC

State of Alabama )
County of [_] )

On this _ day of _, 20__, before me, the undersigned Notary Public, personally appeared [NAME(S)], known to me (or satisfactorily proven) to be the person(s) whose name(s) is/are subscribed to the foregoing instrument, and acknowledged that he/she/they executed the same for the purposes therein contained.

Notary Public
My Commission Expires: __

====================================================================
SCHEDULE A – INITIAL TRUST PROPERTY
====================================================================
(Attach detailed list of cash, securities, or other assets contributed.)

====================================================================
// GUIDANCE:

1. Confirm with local counsel any additional execution formalities (e.g., self-proving affidavit) required under Alabama law.
2. For first-party (self-settled) trusts funded with Beneficiary’s own assets, ensure the Medicaid payback clause in Section II.E aligns with current state Medicaid agency expectations.
3. For third-party trusts (funded solely with assets of someone other than Beneficiary), delete Section II.E and revise termination provisions accordingly.
4. Review investment policy language with the selected trustee to ensure compliance with its internal fiduciary standards.
5. Consider adding a trust protector provision for additional oversight if complexity or asset size warrants.

====================================================================
END OF DOCUMENT
====================================================================