SPECIAL NEEDS TRUST AGREEMENT

(Conforming to Colorado Law)

[// GUIDANCE: This template is structured for a third-party, discretionary, supplemental (a/k/a “special”) needs trust intended to preserve a Beneficiary’s eligibility for means-tested government benefits. If you require a first-party pay-back trust under 42 U.S.C. § 1396p(d)(4)(A), insert the mandatory Medicaid pay-back clause in § 3.10 and adjust defined terms accordingly.]

TABLE OF CONTENTS

1. Document Header
2. Definitions
3. Operative Provisions
4. Representations & Warranties
5. Covenants & Restrictions
6. Default & Remedies
7. Risk Allocation
8. Dispute Resolution
9. General Provisions
10. Execution Block

Schedules & Exhibits
A. Schedule of Trust Estate
B. Successor Trustee Acceptance
C. Settlor’s Letter of Intent (Optional)

1. DOCUMENT HEADER

1.1 Trust Name; Parties; Date

This [TRUST NAME] (“Trust”) is created effective [EFFECTIVE DATE] (“Effective Date”) by and among:
(a) [SETTLOR NAME], an individual residing at [ADDRESS] (“Settlor”);
(b) [TRUSTEE NAME], whose address is [ADDRESS] (“Trustee”); and
(c) [BENEFICIARY NAME], an individual with special needs residing at [ADDRESS] (“Beneficiary”).

1.2 Recitals

A. Settlor desires to set aside certain property for the supplemental and extra needs of Beneficiary, who, because of disability, is or may become eligible for means-tested public assistance.
B. It is Settlor’s intent that assets of this Trust be excluded from Beneficiary’s available resources for purposes of Medicaid, Supplemental Security Income (“SSI”), and other similar programs, consistent with 42 U.S.C. § 1396p(d) and Colo. Rev. Stat. § 15-5-101 et seq.
C. Trustee is willing to hold, administer, and distribute the Trust Estate (as defined below) in accordance with the terms and conditions herein.

2. DEFINITIONS

For ease of reference, capitalized terms have the meanings set forth below. All section references are to this Agreement unless otherwise stated.

“Accounting Period” – Each calendar year ending December 31 or such shorter period ending on termination.
“Applicable Law” – The Colorado Uniform Trust Code, Colo. Rev. Stat. § 15-5-101 et seq., all federal and Colorado statutes and regulations governing means-tested benefits, and other governing law described in § 8.1.
“Beneficiary” – The person identified in § 1.1(c) and any Alternate Beneficiary under § 3.11.
“Disability” – A condition meeting the definition of disability under 42 U.S.C. § 1382c(a)(3).
“Distribution Committee” – Any co-trustees or distribution advisers appointed under § 5.4.
“Extra Needs” – Needs that are neither inconsistent with nor duplicative of basic support and maintenance provided by means-tested programs, as further detailed in § 3.3.
“Payee” – Any third party to whom Trustee may directly pay expenses for Beneficiary’s Extra Needs.
“Special Needs” – Collectively, medical, therapeutic, educational, recreational, and other supplemental goods and services that enhance Beneficiary’s quality of life beyond subsistence.
“Trust Estate” – All property transferred to Trustee (Schedule A), together with income and accretions thereon.
“Trust Protector” – The person, if any, appointed under § 5.5.

3. OPERATIVE PROVISIONS

3.1 Creation & Funding

Settlor hereby irrevocably assigns, transfers, and delivers to Trustee the property described in Schedule A to hold IN TRUST for the uses and purposes herein.

3.2 Purpose

The primary purpose of this Trust is to provide for Beneficiary’s Special and Extra Needs without jeopardizing eligibility for government benefits. The Trust shall be administered as a discretionary, supplemental needs trust consistent with federal and Colorado law.

3.3 Distribution Standard

(a) Sole Benefit. All distributions must be for the sole benefit of Beneficiary.
(b) Discretionary Standard. Trustee shall have sole and absolute discretion (subject to § 3.4) whether to distribute income or principal for Beneficiary’s Extra Needs. Beneficiary shall have no right to compel distributions.
(c) Prohibited Distributions. Trustee shall not make any distribution that would:
(i) provide food or shelter in a manner that reduces SSI;
(ii) cause countable resources or income in excess of program limits; or
(iii) otherwise disqualify Beneficiary from means-tested benefits, unless Trustee, after consulting qualified benefits counsel, determines distribution is in Beneficiary’s best interest notwithstanding any reduction or loss of benefits.

[// GUIDANCE: Consider adding a “$20 SSI disregard” clause to permit nominal cash gifts if desired.]

3.4 Distribution Guidance

In exercising discretion, Trustee may but is not required to consider Settlor’s non-binding recommendations in the Letter of Intent (Schedule C).

3.5 Spendthrift Protection

To the maximum extent permitted by Colo. Rev. Stat. § 15-5-502, the interest of Beneficiary shall be involuntary and non-assignable; no creditor may attach or compel distributions.

3.6 Trustee Powers

Trustee shall have all powers enumerated under Colo. Rev. Stat. § 15-1-804 and § 15-5-816, including but not limited to:
(a) retain, sell, or exchange assets;
(b) invest pursuant to the Colorado Prudent Investor Act;
(c) employ professionals;
(d) make direct payments to Payees;
(e) execute documents; and
(f) compromise claims.

3.7 Accounting & Reporting

(a) Annual Reports. Within 90 days after each Accounting Period, Trustee shall furnish a written accounting to Beneficiary (if legally competent), any court-appointed guardian, and the Trust Protector.
(b) Court Supervision. This Trust is intended to be administered informally; however, the Colorado probate court retains jurisdiction for any necessary proceedings.

3.8 Tax Provisions

[// GUIDANCE: Elect grantor or complex trust status here.]
(a) Identification Number. Trustee shall obtain a separate EIN unless the Trust is treated as a grantor trust.
(b) Income Taxes. Taxes shall be paid from the Trust Estate; Trustee may make tax-motivated allocations between income and principal.

3.9 Termination

The Trust shall terminate upon the earliest of:
(a) Beneficiary’s death;
(b) exhaustion of Trust Estate; or
(c) court order under § 6.2(b). Upon termination, Trustee shall distribute remaining assets as provided in § 3.11.

3.10 Medicaid Pay-Back (First-Party Trust ONLY – DELETE if third-party)

Upon Beneficiary’s death, Trustee shall first reimburse the State of Colorado, and any other state that provided Medicaid, up to the total amount of medical assistance paid on Beneficiary’s behalf, consistent with 42 U.S.C. § 1396p(d)(4)(A).

3.11 Remainder Beneficiaries

After satisfaction of § 3.10 (if applicable), Trustee shall distribute the remaining Trust Estate outright to [ALTERNATE BENEFICIARY DESIGNATION]. If any such beneficiary is a minor or disabled, Trustee may distribute to a custodial account or supplementary trust.

4. REPRESENTATIONS & WARRANTIES

4.1 Settlor

(a) Authority. Settlor warrants lawful ownership of assets transferred and authority to create this Trust.
(b) Intent. Settlor affirms intent that the Trust be administered to preserve Beneficiary’s eligibility for public benefits.

4.2 Trustee

(a) Acceptance. Trustee accepts the office and agrees to administer the Trust in accordance with its terms and Applicable Law.
(b) Fiduciary Capacity. Trustee represents the requisite competence, experience, and bonding (if any) for a fiduciary in Colorado.

5. COVENANTS & RESTRICTIONS

5.1 Duty of Loyalty & Care

Trustee shall administer the Trust solely in Beneficiary’s best interest, exercising reasonable care, skill, and caution.

5.2 Investment Compliance

Trustee shall invest and manage assets in compliance with the Colorado Prudent Investor Act, diversifying unless imprudent to do so.

5.3 Recordkeeping & Inspection

Trustee shall maintain accurate books and records. Beneficiary, Guardian, Trust Protector, and the Colorado Department of Health Care Policy & Financing (“HCPF”) may inspect during normal business hours.

5.4 Co-Trustees & Distribution Committee

Settlor (or Trust Protector) may appoint additional or successor trustees. Unless otherwise stated, any two acting co-trustees may act.

5.5 Trust Protector

Settlor hereby appoints [TRUST PROTECTOR NAME] with powers limited to:
(a) remove and replace Trustee;
(b) resolve ambiguity by written direction;
(c) approve Trustee compensation schedules.

[// GUIDANCE: A Trust Protector is advisable to provide flexibility without court intervention.]

6. DEFAULT & REMEDIES

6.1 Events of Default

An “Event of Default” occurs if Trustee:
(a) commits a material breach of fiduciary duty;
(b) becomes incapacitated, insolvent, or convicted of a crime involving dishonesty; or
(c) fails to account or distribute as required after 30 days’ written notice.

6.2 Remedies

(a) Interim Relief. Any interested party may petition the probate court for injunctive relief to protect the Trust Estate.
(b) Removal. Upon proof of an Event of Default, the court (or Trust Protector) may remove Trustee and appoint a Successor Trustee pursuant to Schedule B.
(c) Surcharge. Trustee shall be liable for damages caused by breach, capped as provided in § 7.2.

7. RISK ALLOCATION

7.1 Indemnification of Trustee

To the extent of the Trust Estate and except for willful misconduct or gross negligence, Trustee shall be indemnified and held harmless from any claim, liability, or expense arising out of proper administration of the Trust.

7.2 Limitation of Liability

Trustee’s personal liability is limited to the assets constituting the Trust Estate; no personal assets of Trustee shall be subject to attachment for Trust obligations except in cases of fraud or intentional wrongdoing.

7.3 Insurance

Trustee may obtain fiduciary liability insurance, premiums payable from the Trust Estate.

7.4 Force Majeure

Trustee shall not be liable for delay or failure to act due to events beyond reasonable control, including natural disasters, governmental actions, or pandemic conditions.

8. DISPUTE RESOLUTION

8.1 Governing Law

This Agreement and Trust administration shall be governed by Colorado law, without regard to conflict-of-law principles.

8.2 Exclusive Forum; Probate Jurisdiction

All judicial proceedings concerning the Trust shall be brought in the [COUNTY] District Court, Probate Division, State of Colorado.

8.3 Limited Arbitration

(a) Scope. Non-core fiduciary disputes (e.g., accountings, fee objections) may be submitted to binding arbitration under the Colorado Uniform Arbitration Act upon unanimous written consent of all interested parties.
(b) Preservation of Court Jurisdiction. Arbitration shall not limit the probate court’s inherent oversight of trusts.

8.4 Jury Trial Waiver

Not applicable; probate matters in Colorado are adjudicated without a jury.

8.5 Injunctive Relief

Nothing herein limits any party’s right to seek emergency or injunctive relief from the probate court to enforce Trust provisions.

9. GENERAL PROVISIONS

9.1 Amendment & Reformation

This Trust is irrevocable. However, Trustee (with consent of Trust Protector and probate court, if required) may amend administrative provisions to:
(a) maintain or obtain favorable tax status;
(b) ensure continued benefits eligibility; or
(c) comply with changes in Applicable Law.

9.2 Severability

If any provision is held invalid or unenforceable, the remaining provisions shall be given full effect consistent with Settlor’s intent.

9.3 Merger & Integration

This instrument constitutes the entire agreement regarding the Trust.

9.4 Assignment

No party may assign rights or delegate duties except as expressly provided.

9.5 Notices

Written notices shall be sent by certified U.S. mail, return receipt requested, or by nationally recognized courier to the addresses in § 1.1, unless updated by written notice.

9.6 Counterparts; Electronic Signatures

This Agreement may be executed in counterparts and by electronic signatures, each deemed an original.

10. EXECUTION BLOCK

IN WITNESS WHEREOF, the undersigned have executed this Trust Agreement effective as of the date first written above.

10.1 Settlor

[SETTLOR NAME], Settlor
Date: _______

10.2 Trustee

[TRUSTEE NAME], Trustee
Date: _______

10.3 Trust Protector (if any)

[TRUST PROTECTOR NAME], Trust Protector
Date: _______

10.4 Notary Acknowledgment

State of Colorado )
County of __ ) ss.

Subscribed and sworn before me on ___, 20 by _____.

Notary Public
My commission expires: _____

[// GUIDANCE: Check county-specific witnessing requirements. Colorado generally does not require witnesses for trusts, but financial institutions sometimes request them.]

SCHEDULE A

Schedule of Trust Estate
(Attach list of cash, securities, life insurance policies, or other property transferred.)

SCHEDULE B

Successor Trustee Acceptance

I, [SUCCESSOR TRUSTEE NAME], hereby accept appointment as Successor Trustee under the [TRUST NAME] effective upon the occurrence of a vacancy in trusteeship.

[SUCCESSOR TRUSTEE NAME]
Date: ______

SCHEDULE C (Optional)

Settlor’s Letter of Intent Concerning Beneficiary’s Needs

[Insert narrative guidance for Trustee regarding Beneficiary’s routines, preferences, medical providers, therapies, religious practices, and social supports.]

[// GUIDANCE:
1. Medicaid & SSI Compliance Review – Prior to funding, counsel should confirm that no prohibited “support or maintenance” language remains.
2. Bonding & Registration – Colorado does not automatically require Trustee bonding; consider court approval and registration under Colo. Rev. Stat. § 15-5-108.
3. Tax Identification – If grantor trust status is intended, complete the IRS Form SS-4 accordingly.]