SPECIAL NEEDS TRUST AGREEMENT

(Arkansas – Third-Party, Discretionary, Irrevocable)

TABLE OF CONTENTS

I. Document Header
II. Definitions
III. Operative Provisions
IV. Representations & Warranties
V. Covenants & Restrictions
VI. Default & Remedies
VII. Risk Allocation
VIII. Dispute Resolution
IX. General Provisions
X. Execution Block

I. DOCUMENT HEADER

1. Title & Parties

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

1. [SETTLOR NAME], an individual with a principal residence at [ADDRESS] (“Settlor”);
2. [TRUSTEE NAME], whose address for notice is [ADDRESS] (“Trustee”); and
3. [BENEFICIARY NAME], a person with a disability within the meaning of 42 U.S.C. § 1382c(a)(3) (“Beneficiary”).

2. Recitals

A. Settlor desires to establish an irrevocable trust for the sole benefit of Beneficiary to supplement, and not supplant, means-tested government assistance programs.
B. Trustee is willing to accept the fiduciary obligations herein.
C. The parties intend that the Trust be administered under Arkansas law, specifically Ark. Code Ann. § 28-73-101 et seq. (Arkansas Trust Code), and remain a non-countable resource for public-benefit eligibility purposes.

3. Governing Law & Forum

This Agreement shall be governed by the substantive and procedural laws of the State of Arkansas (“State Trust Law”). Exclusive jurisdiction over matters concerning the construction, administration, or termination of this Trust lies with the Probate Division of the [COUNTY] Circuit Court (“State Probate Court”), subject to the limited arbitration provisions set forth herein.

II. DEFINITIONS

For purposes of this Agreement, capitalized terms have the meanings set forth below. Terms defined in a Section are cross-referenced parenthetically.

“Accounting” – A written report of Trust financial activity prepared in compliance with Section V.

“Applicable Law” – Collectively, State Trust Law, 42 U.S.C. § 1396p, 42 U.S.C. § 1382 et seq., and all successor or implementing regulations.

“Arbitrable Matter” – Any dispute solely regarding the amount, form, or timing of an Accounting (VIII.3).

“Beneficiary” – The individual identified in Section I.1 who is the sole lifetime beneficiary of the Trust.

“Distribution Standard” – The discretionary standard in Section III.2 limiting distributions to Supplemental Needs.

“Qualified Disability Expenses” – Expenses that enhance Beneficiary’s quality of life without disqualifying Beneficiary from public assistance, including but not limited to medical care not covered by insurance, therapies, education, housing modifications, transportation, recreation, and personal services.

“Supplemental Needs” – Needs that go beyond basic support—food, clothing, and shelter—provided by public benefits, and which are not inconsistent with government benefit regulations.

“Trust” – The trust created under this Agreement, including all amendments, additions, and restatements.

III. OPERATIVE PROVISIONS

1. Creation & Funding

1.1 Irrevocable Trust. Settlor hereby irrevocably transfers to Trustee the property described on Schedule A attached hereto, together with any future additions from Settlor or other third parties.
1.2 Non-Self-Settled. No assets of Beneficiary may be added to the Trust. Should Beneficiary, directly or indirectly, contribute assets, Trustee shall either (a) return such assets, or (b) hold them in a segregated sub-trust that complies with 42 U.S.C. § 1396p(d)(4)(A).

2. Distribution Standard

2.1 Sole Discretion. Trustee may, but is not required to, distribute income and/or principal for Beneficiary’s Supplemental Needs.
2.2 Government Benefits Preservation. Trustee shall administer the Trust so that the corpus and any undistributed income are not considered available resources under Applicable Law.
2.3 Prohibited Distributions. Trustee shall not make distributions that would:
a. Provide cash directly to Beneficiary;
b. Cover the same items provided by means-tested benefits if such payment would reduce or eliminate those benefits; or
c. Violate any condition of Beneficiary’s eligibility for Medicaid, SSI, or other public benefits.

[// GUIDANCE: Consider inserting a detailed “safe harbor” list based on current SSI POMS.]

3. Term & Termination

3.1 Lifetime Trust. The Trust shall continue until the death of Beneficiary unless sooner terminated as provided herein.
3.2 Remainder Beneficiaries. Upon Beneficiary’s death, Trustee shall:
a. Pay all properly payable Trust expenses, including final taxes; then
b. Distribute the remaining assets to [REMAINDER BENEFICIARIES / CHARITABLE ORGANIZATION] in the proportions indicated in Schedule B.

4. Spendthrift Protection

All interests under the Trust are subject to a spendthrift provision as contemplated by Ark. Code Ann. § 28-73-502; no interest may be assigned, attached, or reached by creditors prior to actual receipt.

5. Trustee Powers

Trustee shall have all powers granted under Ark. Code Ann. § 28-73-815, including—but not limited to—the power to invest, reinvest, lease, sell, exchange, and otherwise manage Trust assets, subject always to the prudent investor standard (Ark. Code Ann. § 28-73-804).

IV. REPRESENTATIONS & WARRANTIES

4.1 Settlor represents that:
a. Settlor owns the assets described in Schedule A free of adverse claims;
b. Settlor has legal capacity to create this Trust;
c. The contributions will not render Settlor insolvent.

4.2 Trustee warrants that:
a. Trustee is qualified to act and is not under any fiduciary disability;
b. Trustee shall administer the Trust in good faith and in accordance with its provisions and Applicable Law.

Survival. The foregoing representations and warranties survive execution of this Agreement.

V. COVENANTS & RESTRICTIONS

5.1 Trustee Accounting. Trustee shall provide an annual Accounting, and such interim reports as required by Applicable Law or upon written request of any qualified remainder beneficiary.
5.2 Notice & Cure. If any party alleges a breach of trust, such party shall give Trustee written notice and a 30-day opportunity to cure before initiating remedies.
5.3 Compliance Review. Trustee shall review Applicable Law at least annually and adjust administration as reasonably necessary to maintain benefit protection.

VI. DEFAULT & REMEDIES

6.1 Events of Default. The following constitute defaults:
a. Failure by Trustee to comply with the Distribution Standard;
b. Failure to provide an Accounting within 60 days of written request;
c. Gross negligence, willful misconduct, or breach of fiduciary duty.

6.2 Remedies. Upon default:
a. Interested parties may petition the State Probate Court for removal of Trustee, surcharge, or other equitable relief;
b. For Arbitrable Matters, parties shall follow Section VIII.3;
c. Reasonable attorneys’ fees and costs shall be chargeable against the Trust as the court may order.

VII. RISK ALLOCATION

1. Trustee Indemnification

Except for loss arising from Trustee’s gross negligence or willful misconduct, Trustee and its agents shall be indemnified from, and have a lien against, the Trust assets for liabilities and expenses incurred in good-faith administration.

2. Limitation of Liability

All liabilities of Trustee in connection with this Trust shall be limited to Trust assets; no personal liability shall be imposed.

3. Force Majeure

Trustee shall not be liable for delays or failures in performance caused by events beyond Trustee’s reasonable control—including acts of God, war, governmental restrictions, pandemic, or natural disasters—provided Trustee acts diligently to resume performance.

VIII. DISPUTE RESOLUTION

1. Governing Law
Arkansas law governs all validity, construction, and administration issues.

2. Forum Selection
Exclusive venue lies in the Probate Division of the [COUNTY] Circuit Court, State of Arkansas.

3. Limited Arbitration

3.1 Scope. Only Arbitrable Matters (defined in Section II) are subject to binding arbitration.
3.2 Procedure. Arbitration shall be administered by the American Arbitration Association under its Commercial Rules, conducted in [CITY, AR].
3.3 Mediation First. Parties must attempt mediation before filing for arbitration.
3.4 Injunctive Relief. Pending arbitration, any party may seek temporary or preliminary injunctive relief from the State Probate Court to protect Trust assets.

[// GUIDANCE: Arkansas law generally recognizes arbitration of trust matters if expressly provided. Confirm client’s appetite before activating.]

4. Jury Trial
No jury trial demand is required or available in the Probate Division; accordingly, no waiver clause is necessary.

IX. GENERAL PROVISIONS

9.1 Amendment. This Trust is irrevocable; however, Trustee and [TRUST PROTECTOR, if any] may execute non-judicial settlement agreements under Ark. Code Ann. § 28-73-111 to correct ambiguities or comply with changes in Applicable Law, provided Beneficiary’s interests and benefit eligibility are preserved.

9.2 Assignment. No party may assign rights or delegate duties except as expressly permitted.

9.3 Successors & Assigns. This Agreement binds and inures to the benefit of the parties and their lawful successors.

9.4 Severability. If any provision is held invalid, the remainder of the Agreement shall be enforced to the fullest extent permitted.

9.5 Entire Agreement. This instrument constitutes the entire agreement regarding the Trust and supersedes all prior understandings.

9.6 Counterparts & Electronic Signatures. This Agreement may be executed in counterparts, each of which is deemed an original, and signatures transmitted electronically (including via DocuSign or PDF) shall be deemed valid and binding.

X. EXECUTION BLOCK

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

NOTARY ACKNOWLEDGMENT

State of Arkansas )
County of [COUNTY] )

On this _ day of _, 20__, before me, the undersigned notary, personally appeared [SETTLOR NAME] and [TRUSTEE NAME], known to me or satisfactorily proven to be the persons whose names are subscribed to the foregoing instrument, and acknowledged that they executed the same for the purposes therein contained.

__________
Notary Public

My Commission Expires: _______

SCHEDULE A – Initial Trust Corpus

[Detailed list of assets being transferred]

SCHEDULE B – Remainder Beneficiary Designations

[List of beneficiaries and percentages]

[// GUIDANCE:
1. Verify Beneficiary’s disability status and age to ensure SSI/Medicaid compliance.
2. Review distribution language in light of current SSI POMS before final execution.
3. If a Trust Protector is desired, insert corresponding provisions (powers to remove/replace Trustee, amend for law changes, etc.).
4. Confirm with Arkansas counsel whether local court approval is advisable or required in your county.
5. Attach IRS Form SS-4 application for EIN post-execution.]