DELAWARE SPECIAL NEEDS TRUST AGREEMENT

(Inter Vivos / Third-Party – Draft Template)

[// GUIDANCE: This template is designed for a Delaware-situs, third-party special needs (“supplemental needs”) trust intended to preserve a disabled Beneficiary’s eligibility for means-tested public benefits (e.g., SSI, Medicaid). Bracketed text should be customized for each matter. Counsel must confirm suitability for first-party (§ 1396p(d)(4)(A)) trusts if needed and add the mandatory Medicaid “payback” provision in Section III(7).]

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
XI. Exhibits & Schedules (optional)

I. DOCUMENT HEADER

1. Trust Name. [“The [Beneficiary Name] Supplemental Needs Trust”]

2. Parties.
   a. Grantor: [GRANTOR LEGAL NAME], of [Address].
   b. Initial Trustee: [TRUSTEE LEGAL NAME], of [Address].
   c. Primary Beneficiary: [BENEFICIARY LEGAL NAME], SSN XXX-XX-____, determined to be a “Disabled Individual” under 42 U.S.C. § 1382c(a)(3).
   d. Remainder Beneficiaries: [LIST OR “As set forth in Exhibit A”].

3. Recitals.
   WHEREAS, Grantor desires to establish an irrevocable trust for the sole benefit of Beneficiary, to supplement but not supplant governmental assistance; and
   WHEREAS, Trustee is willing to hold, administer, and distribute the Trust Estate in accordance with the terms herein;
   NOW, THEREFORE, in consideration of the mutual covenants and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows.

4. Effective Date; Situs. This Agreement is executed and effective as of [EFFECTIVE DATE] and shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict-of-law principles. The Trust’s situs and principal place of administration shall be Delaware unless changed pursuant to Section III(10).

II. DEFINITIONS

For ease of reference, defined terms appear alphabetically. Terms used in the singular include the plural and vice-versa.

“Administrative Trustee” – A Trustee whose duties are limited to maintaining the Trust’s Delaware situs in compliance with 12 Del. C. § 3312.

“Code” – The Internal Revenue Code of 1986, as amended.

“Disabled Individual” – An individual who meets the definition contained in 42 U.S.C. § 1382c(a)(3).

“Distribution Adviser” – Any person or committee appointed under Section III(8) to advise the Trustee with respect to distributions.

“Government Benefits” – Any means-tested assistance program, including Supplemental Security Income (“SSI”), Medicaid, SNAP, and state/local equivalents.

“Qualified Expenses” – Goods or services that supplement the Beneficiary’s quality of life and are not intended to supplant Government Benefits, including but not limited to: medical/dental care not covered by insurance, therapies, adaptive equipment, transportation, education, recreation, personal services, and housing modifications.

“Supplemental Needs” – Needs of the Beneficiary that are not met by Government Benefits and which maintain or enhance the Beneficiary’s comfort, dignity, and well-being.

“Trust Assets” or “Trust Estate” – All property, tangible or intangible, transferred to the Trust and all additions and accretions thereto.

[// GUIDANCE: Add or delete definitions to match the drafting attorney’s preference and the client’s facts.]

III. OPERATIVE PROVISIONS

1. Creation & Funding. Grantor hereby transfers to Trustee the property described in Schedule 1, to hold in irrevocable trust under the terms of this Agreement. Additional property may be added by any person, testamentary or inter vivos, subject to Trustee’s consent.

2. Irrevocability. This Trust is irrevocable. Grantor retains no reversionary interest and shall not have power to alter, amend, revoke, or terminate, except as expressly provided.

3. Discretionary Distributions for Supplemental Needs.
   a. Solely in Trustee’s absolute, unfettered discretion, Trustee may distribute income or principal for the Beneficiary’s Supplemental Needs.
   b. Trustee shall consider all other available resources, including Government Benefits, before making any distribution and shall, where feasible, make direct payment to providers of goods and services rather than to Beneficiary.
   c. No distribution shall be made that would:
   i. Render the Beneficiary ineligible for Government Benefits; or
   ii. Be construed as support under 20 C.F.R. §§ 416.1104–1169 unless Trustee, in its discretion, determines the benefit of such distribution outweighs any loss or reduction in Government Benefits.

4. Prohibitions on Compelled Distributions. The Beneficiary shall have no right to compel distributions and no power of anticipation or assignment. This Trust shall be construed as a fully discretionary, spendthrift trust under 12 Del. C. § 3536.

5. Standard of Care; Fiduciary Duties. Trustee shall administer the Trust with the care, skill, and diligence a prudent person would use, consistent with 12 Del. C. § 3302 and the best interests of the Beneficiary.

6. Trustee Powers. Trustee shall have all powers granted under the Delaware Trust Act, 12 Del. C. §§ 3301-3595, including specifically the powers to: invest and reinvest; hold assets in nominee form; employ agents; lease, mortgage, or sell property; commence or defend litigation; and do all acts deemed advisable for the protection of the Trust Estate.

7. [OPTIONAL] Medicaid Payback Provision (Self-Settled Trust). [IF APPLICABLE] Upon the death of the Beneficiary, and after payment of allowable administrative expenses, Trustee shall reimburse the Delaware Division of Medicaid & Medical Assistance, and any other state(s) that provided Medicaid benefits, up to the amount of medical assistance paid on behalf of Beneficiary, consistent with 42 U.S.C. § 1396p(d)(4)(A). Any residue shall pass to the Remainder Beneficiaries per Section III(9).

8. Distribution Adviser; Co-Trustees. Grantor (or, if unavailable, a majority of Adult Remainder Beneficiaries) may appoint a Distribution Adviser whose unanimous written direction shall bind Trustee on distribution questions. Any Adviser is a fiduciary only with respect to matters within its scope.

9. Remainder Distribution. Upon the earlier of (a) the Beneficiary’s death or (b) complete termination per Section III(11), Trustee shall distribute the remaining Trust Assets, free of trust, to the Remainder Beneficiaries, per stirpes, or if none, to Grantor’s heirs-at-law under Delaware intestacy.

10. Change in Situs & Governing Law. Trustee may change the Trust’s situs to any jurisdiction with equal or greater asset-protection statutes if advisable for tax or benefit preservation, provided that the Trust shall remain governed by Delaware law unless judicial approval is obtained.

11. Termination. Trustee may terminate the Trust if Trust Assets fall below $[THRESHOLD] and are insufficient to justify administrative costs, provided all assets are then applied for the Beneficiary’s Supplemental Needs or as a transfer to an ABLE account under 26 U.S.C. § 529A. Trustee shall first obtain written confirmation from counsel that termination will not adversely affect Government Benefits.

IV. REPRESENTATIONS & WARRANTIES

1. Grantor. Grantor represents that:
   a. Grantor has full right, power, and authority to transfer the Trust Assets;
   b. Property transferred is unencumbered, or encumbrances have been disclosed to Trustee;
   c. This Agreement does not violate any court order or creditors’ rights.

2. Trustee. Trustee represents that:
   a. Trustee is qualified to serve under Delaware law;
   b. Trustee has reviewed and understands the purpose of a special needs trust and will administer accordingly;
   c. Trustee shall obtain and maintain all licenses or bonding required by law.

3. Survival. The representations and warranties contained in this Article shall survive execution and remain in effect throughout the Trust’s administration.

V. COVENANTS & RESTRICTIONS

1. Trustee Covenants.
   a. Timely Accountings: Provide annual trust accountings to Beneficiary (if legally competent), the Distribution Adviser, and any state agency as required.
   b. Benefit Preservation: Promptly notify the Beneficiary and Adviser of any event that may jeopardize Government Benefits.
   c. Tax Compliance: File all federal, state, and local tax returns for the Trust.

2. Grantor Restrictions. Grantor shall not retain any power that would cause assets to be considered a resource to the Beneficiary under 20 C.F.R. § 416.1201.

3. Beneficiary Covenants. Beneficiary shall promptly notify Trustee of changes in residence, marital status, employment, or resource levels that could impact Government Benefit eligibility.

4. Notice & Cure. A party alleging breach shall give written notice specifying the breach and allowing thirty (30) calendar days to cure before initiating remedies.

VI. DEFAULT & REMEDIES

1. Events of Default.
   a. Trustee’s failure to adhere to distribution standards;
   b. Breach of fiduciary duty or self-dealing;
   c. Material misrepresentation in Article IV;
   d. Insolvency or appointment of a receiver for Trustee.

2. Remedies.
   a. Removal and replacement of Trustee per Section VIII(3);
   b. Accounting surcharge;
   c. Equitable or injunctive relief (see Article VIII);
   d. Recovery of attorneys’ fees and costs by prevailing party.

3. Graduated Consequences. Minor breaches may be addressed with written warnings or temporary suspension of powers before full removal.

VII. RISK ALLOCATION

1. Trustee Indemnification. The Trust Estate shall indemnify Trustee, its agents, and employees against all claims, liabilities, and expenses, except to the extent arising from Trustee’s willful misconduct or gross negligence.

2. Limitation of Liability. Trustee’s liability to any person is limited to the value of the Trust Assets under its control at the time the liability is determined.

3. Insurance. Trustee may purchase fiduciary liability insurance payable from the Trust Estate.

4. Force Majeure. Trustee is excused for delay or failure to act due to events beyond its reasonable control, including but not limited to changes in law, natural disasters, or acts of governmental authorities.

VIII. DISPUTE RESOLUTION

1. Governing Law. This Agreement shall be governed by Delaware trust law and applicable federal statutes.

2. Forum Selection. The Court of Chancery of the State of Delaware (or such other state probate court of competent jurisdiction) shall have exclusive jurisdiction over all matters relating to the Trust, except as provided in Section VIII(4).

3. Mediation Requirement. Prior to filing any petition (other than for emergency injunctive relief), the parties shall submit the dispute to non-binding mediation administered in Delaware for at least eight (8) hours.

4. Limited Arbitration. Disputes solely among Remainder Beneficiaries that do not involve interpretation of trust provisions or affect Government Benefits shall be resolved by binding arbitration under the Delaware Rapid Arbitration Act, 10 Del. C. § 5801 et seq.

5. Jury Waiver. To the fullest extent permitted, the parties waive the right to trial by jury in any proceeding, recognizing that trust matters are ordinarily equitable.

6. Injunctive Relief. Nothing herein shall limit a party’s right to seek temporary, preliminary, or permanent injunctive relief from a court of competent jurisdiction for trust enforcement.

IX. GENERAL PROVISIONS

1. Amendment & Reformation. Except as needed to comply with changes in federal or state law affecting Government Benefits, this Agreement may be amended only by written instrument executed by Grantor (if alive and competent), Trustee, and with court approval. Any amendment shall maintain the Trust’s status as a special needs trust.

2. Severability. If any provision is held invalid, the remainder shall be interpreted to effectuate the Trust’s primary purpose.

3. Assignment. Rights and interests hereunder are personal and may not be voluntarily or involuntarily assigned, alienated, or encumbered by any Beneficiary.

4. Successors & Assigns. This Agreement binds and benefits the parties and their lawful successors.

5. Entire Agreement. This instrument constitutes the entire understanding and supersedes all prior agreements concerning the Trust.

6. Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, each deemed an original, and by electronic signature under the Delaware Uniform Electronic Transactions Act, 6 Del. C. § 12A-101 et seq.

X. EXECUTION BLOCK

IN WITNESS WHEREOF, the parties have executed this Delaware Special Needs Trust Agreement effective as of the date first written above.

Grantor:

[GRANTOR NAME]

Trustee:

[TRUSTEE NAME], Trustee

[// GUIDANCE: Insert notarial acknowledgment per 29 Del. C. § 4323 and witness signature lines if required by local practice or funding assets. Many Delaware practitioners obtain self-proving affidavits for probate clarity.]

XI. EXHIBITS & SCHEDULES

• Schedule 1 – Initial Trust Funding Assets
• Exhibit A – Remainder Beneficiaries
• Exhibit B – Sample Letter of Wishes (optional)

[// GUIDANCE: 1) Verify all dollar thresholds, tax elections, and bond requirements with current law and client instructions. 2) Consider appointing a Delaware administrative trustee to ensure continuous Delaware situs. 3) For Medicaid payback trusts, file state notification forms promptly after funding. 4) Review investment policy statements to satisfy modern prudent investor standards and any ESG or delegation preferences.]