SPECIAL NEEDS TRUST AGREEMENT

(California – Third-Party Funded)

[// GUIDANCE: This template is drafted for a third-party supplemental (a/k/a “special needs”) trust intended to preserve a disabled Beneficiary’s eligibility for means-tested public benefits (e.g., SSI, Medi-Cal). It is NOT appropriate for a self-settled (d)(4)(A) trust that requires state payback. Replace every bracketed item before execution and confirm conformity with current law and agency practice.]

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

1.1 Title. Special Needs Trust Agreement (the “Agreement”).

1.2 Parties.
(a) Grantor(s): [GRANTOR NAME(S)] (“Grantor”).
(b) Initial Trustee: [TRUSTEE NAME], of [ADDRESS] (“Trustee”).
(c) Beneficiary: [BENEFICIARY NAME], Social Security No. *--[LAST 4] (“Beneficiary”).

1.3 Effective Date. This Agreement is executed and effective as of [DATE] (the “Effective Date”).

1.4 Governing Law & Jurisdiction. This Trust is created under, and shall be governed by, the trust and probate laws of the State of California without regard to conflict-of-laws principles, and is subject to the exclusive supervision of the probate division of the Superior Court of [COUNTY], California (the “Probate Court”).

1.5 Recitals.
(a) Beneficiary is a person with a disability and presently, or in the future may be, eligible for means-tested public benefits (“Government Benefits”).
(b) Grantor desires to set aside property for the Beneficiary’s supplemental needs, without disqualifying the Beneficiary from Government Benefits.
(c) Trustee is willing to hold, administer, and distribute the Trust Estate under the terms herein.

II. DEFINITIONS

For ease of reference, capitalized terms have the meanings set forth below. Defined terms apply equally to singular and plural forms.

“Accounting” – A written statement of receipts, disbursements, assets, liabilities, and investment performance prepared in accordance with applicable probate rules.

“Alternate Trustee” – A successor trustee designated under Section 6.3.

“Beneficiary’s Lifetime” – The period commencing on the Effective Date and ending upon the Beneficiary’s death.

“Distribution Guidelines” – The discretionary standards in Section 3.2 governing Trustee distributions.

“Government Benefit(s)” – Any present or future federal, state, county, or local means-tested public assistance program, including but not limited to Supplemental Security Income (“SSI”) and California’s Medi-Cal program.

“Qualified Disability Expenditure” – A good or service that enhances the Beneficiary’s quality of life beyond basic support and maintenance, consistent with program rules.

“Special Needs” – Those needs of the Beneficiary not provided by Government Benefits, including but not limited to education, recreation, medical and dental care not otherwise covered, therapies, personal care attendants, transportation, communication equipment, and other items that improve comfort or quality of life.

“Trust” – The irrevocable trust created by this Agreement; “Trust Estate” means all property held hereunder.

III. OPERATIVE PROVISIONS

3.1 Creation & Funding.
(a) Grantor hereby transfers to Trustee the property described in Schedule A attached hereto, together with any future additions (collectively, the “Trust Estate”).
(b) The Trust is irrevocable. No Grantor shall retain any beneficial interest.

3.2 Distributions During Beneficiary’s Lifetime.
(a) Pure Discretion. Trustee may, but shall never be required to, distribute so much of the net income and principal as Trustee, in sole and absolute discretion, deems advisable for the Beneficiary’s Special Needs.
(b) Supplement Not Supplant. Distributions shall be made only to supplement, and not to supplant or replace, Government Benefits. Trustee shall endeavor to structure payments to avoid income or resource treatment detrimental to the Beneficiary.
(c) Direct Payments. Whenever feasible, Trustee shall make in-kind purchases or direct payments to providers rather than to the Beneficiary.
(d) Emergency Authority. If the Beneficiary’s health, safety, or welfare is jeopardized, Trustee may make distributions notwithstanding potential impact on Government Benefits, after consulting qualified benefits counsel if reasonably practicable.

3.3 Prohibition on Beneficiary Control. Beneficiary shall have no power to assign, encumber, compel, or anticipate distributions, nor any right to demand accountings beyond those required by law.

3.4 Spendthrift Provision. To the maximum extent permitted by law, the Trust Estate shall be free from the claims of creditors and of any governmental agency except as otherwise mandated.

3.5 Additions. During Grantor’s lifetime and thereafter, any person may transfer additional property to the Trust if accepted by Trustee. All such additions shall be held under this Agreement.

3.6 Termination.
(a) Primary Termination. Upon the Beneficiary’s death, Trustee shall distribute the remaining Trust Estate in accordance with Schedule B (Remainder Beneficiaries).
(b) Early Termination. The Probate Court may terminate the Trust if continued administration no longer furthers its purpose; upon such termination, undistributed assets shall pass as in subsection (a), subject to reimbursement of any required public benefits only if mandated by then-applicable law.

3.7 Preservation of Eligibility. Trustee shall take all reasonable actions, including consulting with benefits specialists, to ensure continued eligibility.

3.8 Investments. Trustee shall invest and manage the Trust Estate consistent with the Prudent Investor Rule, with authority to retain non-income producing assets when appropriate to the Trust’s purposes.

3.9 Trustee Compensation & Expenses. Trustee is entitled to reasonable compensation and reimbursement of properly-incurred expenses, payable from the Trust Estate, subject to Probate Court review upon request of an interested party.

3.10 Accounts & Reports.
(a) Annual Accounting. Trustee shall prepare an Accounting at least annually and deliver it to the Beneficiary (if legally competent), the Beneficiary’s legal representative, and remainder beneficiaries then eligible to receive a distribution upon termination.
(b) Court Accountings. Trustee shall file accountings with the Probate Court as required by statute or court order.

3.11 Tax Matters. Unless otherwise elected, the Trust shall be a complex trust for federal income tax purposes. Trustee may employ tax professionals and may make any elections deemed prudent.

IV. REPRESENTATIONS & WARRANTIES

4.1 Grantor Representations.
(a) Capacity & Authority. Grantor has full legal capacity and unencumbered title to all property transferred.
(b) Intent. Grantor’s intention is to create an irrevocable supplemental needs trust in full compliance with applicable law.

4.2 Trustee Representations.
(a) Eligibility. Trustee is legally competent, not disqualified under California law, and willing to serve.
(b) Acceptance. By executing this Agreement, Trustee accepts the fiduciary obligations herein.

4.3 Survival. All representations and warranties survive execution and remain in effect during administration.

V. COVENANTS & RESTRICTIONS

5.1 Trustee Covenants.
(a) Fiduciary Standard. Trustee shall administer the Trust solely in the interest of the Beneficiary consistent with the purposes herein.
(b) Compliance. Trustee shall comply with all applicable laws, regulations, and benefit-program requirements.
(c) Records. Trustee shall maintain accurate books and records for not less than seven (7) years after final distribution.

5.2 Notification Obligations. Trustee shall timely notify relevant agencies of the Trust’s existence and any material changes as required.

5.3 Beneficiary Information. Beneficiary (or legal representative) shall provide Trustee with accurate information reasonably necessary for administration and benefits coordination.

VI. DEFAULT & REMEDIES

6.1 Events of Default. The following constitute defaults:
(a) Trustee’s breach of fiduciary duty, misappropriation, or willful misconduct.
(b) Failure to provide required accountings after written notice and thirty (30) days to cure.

6.2 Remedies.
(a) Removal. Upon default, an interested party or the Probate Court may remove the Trustee.
(b) Surcharge. Trustee may be surcharged for losses caused by breach.
(c) Injunctive Relief. Beneficiary or any interested party may seek equitable relief to prevent or remedy breach.

6.3 Successor Trustees.
(a) Designation. If the Trustee resigns, is removed, or ceases to serve, [ALTERNATE TRUSTEE NAME] shall serve. If none is willing or able, the Probate Court shall appoint a qualified corporate fiduciary.
(b) Transfer of Assets. A resigning Trustee shall deliver all Trust property and records to the successor within thirty (30) days and provide a final Accounting.

6.4 Attorneys’ Fees & Costs. The Probate Court may award reasonable attorneys’ fees and costs from the Trust Estate or against a breaching fiduciary, as justice requires.

VII. RISK ALLOCATION

7.1 Trustee Indemnification. The Trustee and its officers, employees, and agents (collectively, the “Indemnified Parties”) shall be indemnified from the Trust Estate against any claim, liability, or expense (including reasonable attorneys' fees) arising from administration of the Trust, except to the extent resulting from the Indemnified Party’s intentional misconduct, gross negligence, or fraud.

7.2 Limitation of Liability. Liability of the Trustee, in any capacity, is limited to the value of the Trust Estate; no personal assets of the Trustee shall be exposed, except for losses attributable to intentional misconduct, gross negligence, or fraud.

7.3 Insurance. Trustee may purchase liability insurance, paid from the Trust Estate, to cover potential claims arising from administration.

7.4 Force Majeure. Trustee shall not be liable for delay or failure to perform due to events beyond reasonable control, including natural disaster, war, or governmental action, provided Trustee uses reasonable efforts to mitigate.

VIII. DISPUTE RESOLUTION

8.1 Governing Law. California trust and probate law governs all matters.

8.2 Forum Selection. Exclusive venue for any judicial proceeding is the Probate Court of [COUNTY], California.

8.3 Limited Arbitration.
(a) Scope. Non-benefit eligibility disputes solely concerning investment performance, fees, or internal administrative matters may be submitted to binding arbitration under the Commercial Rules of the American Arbitration Association upon unanimous written consent of all then-serving fiduciaries and competent beneficiaries.
(b) Preservation of Court Supervision. Issues affecting Government Benefits eligibility, requests for injunctive relief, trustee removal, or construction of this Agreement remain within the exclusive jurisdiction of the Probate Court.

8.4 Jury Waiver Inapplicable. Probate proceedings in California are tried without a jury absent statutory authority; accordingly, no jury waiver is required.

8.5 Interim Injunctive Relief. Nothing herein limits any party’s right to seek temporary or permanent injunctive relief from the Probate Court to maintain the status quo or protect the Trust.

IX. GENERAL PROVISIONS

9.1 Amendments. This Agreement may be amended only by written instrument signed by the Grantor (if living) and Trustee and approved by the Probate Court, and then solely for administrative or tax purposes that do not defeat the Trust’s supplemental needs intent.

9.2 Waiver. No waiver of any provision is effective unless in writing and signed by the waiving party. A waiver on one occasion is not a waiver on subsequent occasions.

9.3 Assignment. Beneficiary’s interest is non-assignable. Trustee may not delegate fiduciary duties except as expressly permitted by statute.

9.4 Severability. If any provision is held invalid or unenforceable, it shall be reformed to the minimum extent necessary, and the remaining provisions shall remain in full force.

9.5 Entire Agreement. This document, together with Schedules A and B, constitutes the entire agreement and supersedes any prior statements or writings.

9.6 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, each of which is deemed an original, and by electronic signature or notarized digital acknowledgment to the extent permitted by law.

X. EXECUTION BLOCK

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

Grantor:

[GRANTOR NAME]

Trustee:

[TRUSTEE NAME], Trustee

[NOTARIZATION BLOCK – CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT]

Schedule A – Initial Trust Property

[// GUIDANCE: List cash amounts, accounts, securities, life insurance proceeds, etc.]

Schedule B – Remainder Beneficiaries

[// GUIDANCE: Identify persons or charitable organizations to receive the residue upon the Beneficiary’s death.]

[// GUIDANCE: Additional schedules (e.g., Letter of Wishes, Care Plan) may be appended to assist future Trustees and should be updated periodically.]