CONNECTICUT SPECIAL NEEDS TRUST
(Discretionary Supplemental Care Trust – Third-Party Funded)
[// GUIDANCE: This template is drafted for a third-party special needs trust that protects the Beneficiary’s eligibility for means-tested government benefits (e.g., SSI, Medicaid/HUSKY C). If you require a self-settled (d)(4)(A) trust, significant modifications—especially a mandatory Medicaid payback clause—are necessary.*]
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 Trust Name. This trust shall be known as the “[TRUST NAME] Special Needs Trust” (the “Trust”).
1.2 Parties.
a. Grantor: [GRANTOR NAME], of [ADDRESS] (“Grantor”).
b. Trustee: [TRUSTEE NAME], of [ADDRESS] (“Trustee”).
c. Primary Beneficiary: [DISABLED BENEFICIARY NAME], d/o/b [DATE] (the “Beneficiary”).
1.3 Effective Date. This Trust is established and becomes irrevocable on [EFFECTIVE DATE] (the “Effective Date”).
1.4 Governing Law & Jurisdiction. This Trust shall be governed by and construed in accordance with the laws of the State of Connecticut pertaining to trusts and estates, without regard to its conflict-of-laws rules. Exclusive jurisdiction for routine trust matters shall lie with the appropriate Connecticut Probate Court having jurisdiction over the Trustee pursuant to Conn. Gen. Stat. § 45a-175 et seq.
1.5 Recitals.
a. The Beneficiary is a person with a disability as defined in 42 U.S.C. § 1382c(a)(3).
b. The Grantor desires to provide for the Beneficiary’s supplemental needs without disqualifying the Beneficiary from means-tested government benefits.
c. The Trustee is willing to hold and administer the Trust Estate subject to the terms set forth herein.
II. DEFINITIONS
Unless the context clearly requires otherwise, the following terms shall have the meanings set forth below. Capitalized terms used but not defined have the meanings assigned elsewhere in this Trust.
“Accounting” – A written statement of receipts, disbursements, assets, and liabilities of the Trust prepared in accordance with Section V.2.
“Beneficiary” – The individual identified in Section 1.2(c).
“Code” – The Internal Revenue Code of 1986, as amended.
“Discretionary Distribution” – Any distribution from the Trust made in the sole and absolute discretion of the Trustee pursuant to Section III.3.
“Government Benefits” – Any means-tested or needs-based federal, state, or local public assistance program, including but not limited to Supplemental Security Income (“SSI”), Medicaid (HUSKY C in Connecticut), Section 8 housing, SNAP, and similar programs.
“Supplemental Needs” – Expenses that enhance the Beneficiary’s quality of life but are not covered, or are inadequately covered, by Government Benefits, including but not limited to education, medical and dental care not otherwise provided, therapies, transportation, entertainment, and personal services.
“Trust Assets” – All property, real, personal, or mixed, tangible or intangible, transferred to the Trustee, including all additions, earnings, and proceeds.
III. OPERATIVE PROVISIONS
3.1 Creation & Funding. The Grantor hereby transfers the property listed on Schedule A (attached) to the Trustee, accepting no consideration other than the Trustee’s agreement to hold, manage, and distribute such property pursuant to this Trust. Additional assets may be added to the Trust at any time by the Grantor or any third party, subject to the Trustee’s written acceptance.
3.2 Purpose. The primary purpose of this Trust is to provide for the Beneficiary’s Supplemental Needs while preserving the Beneficiary’s eligibility for Government Benefits. The Trust shall be administered so as to supplement, not supplant, impair, or diminish such benefits.
3.3 Discretionary Distributions.
a. Standard. The Trustee shall have sole, absolute, and uncontrolled discretion to make or withhold Discretionary Distributions for the Beneficiary’s Supplemental Needs.
b. Prohibited Distributions. The Trustee shall not make any distribution that the Trustee knows or reasonably should know would:
1. Reduce or eliminate the Beneficiary’s eligibility for Government Benefits; or
2. Be considered “income” or a “countable resource” under 20 C.F.R. §§ 416.1102–1201, except as permitted under applicable regulations.
c. Payment Method. Whenever feasible, the Trustee shall pay third-party vendors directly to avoid in-kind support and maintenance issues.
[// GUIDANCE: Direct payments to third parties for goods/services generally do not reduce SSI, while cash distributed to the Beneficiary does. Document this practice in Trustee files.]
3.4 Spendthrift Protection. Pursuant to Conn. Gen. Stat. § 52-321a(b), no interest of the Beneficiary shall be transferable or subject to the claims of creditors or governmental entities, except as expressly provided herein or by mandatory law.
3.5 Irrevocability. This Trust is irrevocable. The Grantor retains no power to alter, amend, revoke, or terminate the Trust, except as provided under Section IX.1 (Amendment for Compliance).
3.6 Termination. The Trust shall terminate upon the earliest to occur of:
a. The exhaustion of Trust Assets; or
b. The Beneficiary’s death.
3.7 Distribution on Termination.
a. Upon the Beneficiary’s death, after payment of any enforceable and non-exempt expenses permitted by 42 U.S.C. § 1396p(b)(4) and Conn. Agencies Regs. § 17b-261b-1 et seq., the remaining Trust Assets shall be distributed to the following remainder beneficiaries:
1. [REMAINDER BENEFICIARY 1] – [%]
2. [REMAINDER BENEFICIARY 2] – [%]
(collectively, the “Remainder Beneficiaries”).
b. If no Remainder Beneficiary survives the Beneficiary, the remainder shall pass to the Beneficiary’s estate.
3.8 Trustee Succession.
a. Initial Trustee. [TRUSTEE NAME] shall serve as Trustee.
b. Resignation. The Trustee may resign by giving at least thirty (30) days’ written notice to the Grantor (if living), the Beneficiary’s legal representative, and the Probate Court.
c. Successor Trustee. If the Trustee resigns, is removed, or ceases to serve, the following individuals are nominated, in order, to serve as Successor Trustee:
1. [NOMINEE 1];
2. [NOMINEE 2].
d. Corporate Fiduciary. If no individual qualifies, a licensed Connecticut corporate fiduciary may serve.
e. Bond. No bond shall be required of any Trustee unless ordered by the Probate Court.
IV. REPRESENTATIONS & WARRANTIES
4.1 Grantor. The Grantor represents and warrants that:
a. The Grantor owns all property transferred to the Trust free of liens and adverse claims (except as disclosed to the Trustee);
b. The Grantor has full authority to establish this Trust; and
c. The establishment of this Trust does not constitute a fraudulent conveyance under applicable law.
4.2 Trustee. The Trustee represents and warrants that:
a. The Trustee accepts the fiduciary duties imposed by this Trust and Connecticut law;
b. The Trustee is not disqualified from serving under any law, regulation, or court order; and
c. The Trustee will administer the Trust in good faith, in the interests of the Beneficiary, and in accordance with Conn. Gen. Stat. §§ 45a-480 to 45a-496.
4.3 Survival. The representations and warranties in this Article survive execution and continue throughout the Trust administration.
V. COVENANTS & RESTRICTIONS
5.1 Affirmative Covenants of Trustee. The Trustee shall:
a. Comply with all applicable federal and Connecticut fiduciary laws, including the Connecticut Uniform Prudent Investor Act (Conn. Gen. Stat. § 45a-541 et seq.);
b. Maintain accurate books and records;
c. Obtain professional advice (legal, tax, investment) when prudent; and
d. File all tax returns required under federal or state law.
5.2 Annual Accountings. The Trustee shall deliver an Accounting annually to (i) the Beneficiary’s legal guardian/conservator, if any; (ii) the Grantor, if living; and (iii) the Probate Court, unless otherwise waived by the Court.
5.3 Negative Covenants. The Trustee shall not:
a. Engage in self-dealing or transactions prohibited by Conn. Gen. Stat. § 45a-583;
b. Loan Trust Assets to the Trustee or related parties;
c. Pledge Trust Assets as security for personal obligations; or
d. Use Trust Assets for any purpose other than as authorized in this Trust.
5.4 Notice of Benefit Changes. The Beneficiary (or legal representative) shall promptly notify the Trustee of any change in Government Benefits or disability status.
5.5 Opportunity to Cure. Before seeking removal of the Trustee for breach, the notifying party shall provide written notice specifying the alleged breach and allow thirty (30) days to cure, unless irreparable harm is imminent.
VI. DEFAULT & REMEDIES
6.1 Events of Default. Each of the following constitutes a “Default”:
a. Material breach of fiduciary duty by the Trustee;
b. Failure to provide required Accountings within sixty (60) days after written request;
c. Misappropriation or gross mismanagement of Trust Assets; or
d. Insolvency or conviction of the Trustee of a crime involving dishonesty.
6.2 Remedies. Upon Default, the following remedies are available, cumulatively and not exclusively:
a. Removal of Trustee by the Probate Court;
b. Appointment of a Successor Trustee;
c. Surcharge against the Trustee personally (limited by Article VII); and
d. Specific performance or injunctive relief to enforce Trust terms.
6.3 Attorney’s Fees. In any action to enforce this Trust, the prevailing party may recover reasonable attorney’s fees and costs, payable from (i) the breaching Trustee personally if breach is established, or (ii) the Trust Assets otherwise.
VII. RISK ALLOCATION
7.1 Indemnification of Trustee. The Trustee, and each Successor Trustee, shall be indemnified and held harmless out of the Trust Assets from and against any and all claims, liabilities, and expenses (including reasonable attorney’s fees) arising out of or in connection with the proper administration of the Trust, except for liabilities arising from the Trustee’s willful misconduct or gross negligence.
7.2 Limitation of Liability. Any liability of the Trustee under this Trust is limited exclusively to the Trust Assets; the Trustee shall have no personal liability except to the extent liability arises from willful misconduct or gross negligence.
7.3 Insurance. The Trustee may purchase fiduciary liability insurance payable from Trust Assets if deemed prudent.
7.4 Force Majeure. The Trustee shall not be liable for failure to perform duties when prevented by events beyond the Trustee’s reasonable control (e.g., natural disasters, war, or changes in governing laws/regulations), provided the Trustee acts diligently to resume performance.
VIII. DISPUTE RESOLUTION
8.1 Governing Law. Connecticut law governs all disputes.
8.2 Forum Selection. Exclusive venue for trust administration disputes lies in the Connecticut Probate Court of [COUNTY] County.
8.3 Limited Arbitration. Notwithstanding Section 8.2, purely financial accountings-related disputes exceeding $[AMOUNT] may, upon mutual written agreement, be resolved by binding arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules. The arbitrator shall apply Connecticut law. The award may be confirmed in any court of competent jurisdiction.
8.4 No Jury Trial. Because probate matters are tried without a jury under Connecticut law, the parties acknowledge and agree that no jury trial right exists.
8.5 Injunctive Relief. Nothing in this Article restricts the Probate Court’s ability to issue temporary, preliminary, or permanent injunctive relief to preserve Trust Assets or enforce fiduciary duties.
IX. GENERAL PROVISIONS
9.1 Amendment & Reformation for Compliance. If any governmental agency asserts that any provision of this Trust affects the Beneficiary’s eligibility for Government Benefits, the Trustee may petition the Probate Court to amend or reform this Trust retroactively to the extent necessary to maintain such eligibility, provided the amendment furthers the Trust’s primary purpose.
9.2 Assignment. No party may assign, delegate, or transfer any right or obligation hereunder except as expressly permitted.
9.3 Severability. If any provision is held invalid or unenforceable, the remaining provisions shall remain in full force and effect, and the invalid provision shall be construed, to the maximum extent possible, in a manner consistent with the original intent.
9.4 Entire Agreement. This Trust constitutes the entire understanding among the parties and supersedes all prior oral or written agreements concerning its subject matter.
9.5 Counterparts. This Trust may be executed in one or more counterparts, each of which is deemed an original, and all of which together constitute one instrument. Signatures delivered by electronic means shall be deemed effective to the fullest extent permitted by law and the Connecticut Uniform Electronic Transactions Act, Conn. Gen. Stat. § 1-266 et seq.
X. EXECUTION BLOCK
IN WITNESS WHEREOF, the parties execute this Trust as of the Effective Date.
GRANTOR:
[GRANTOR NAME]
Date: _______
TRUSTEE:
[TRUSTEE NAME]
Date: _______
WITNESS 1:
Name: ____
Date: ____
WITNESS 2:
Name: ____
Date: ____
State of Connecticut )
) ss: [COUNTY], on this ___ day of _, 20
County of __ )
On this date, before me, the undersigned, a Notary Public in and for said State, personally appeared [GRANTOR NAME] and [TRUSTEE NAME], each personally known to me or proved by satisfactory evidence to be the persons whose names are subscribed to the within instrument, and acknowledged that they executed the same for the purposes therein contained.
Notary Public
My Commission Expires: _______
Schedule A – Initial Trust Corpus
[// List cash amounts, securities, real property descriptions, or other assets being transferred into the Trust at formation.]
[// GUIDANCE:
1. Obtain a Tax ID (EIN) for the Trust immediately after execution to avoid attribution of income to the Grantor.
2. File IRS Form 1041 annually; attach a Grantor Statement if applicable.
3. Advise the Beneficiary’s representative to provide the Social Security Administration with a copy of this Trust upon request.
4. Regularly review Connecticut Medicaid statutes/regulations for changes affecting special needs trusts.
]