SPECIAL NEEDS TRUST AGREEMENT
(Iowa – Third-Party Supplemental Needs Trust)
[// GUIDANCE: This template is designed as a third-party, discretionary special needs trust governed by Iowa law (IA Code Ch. 633A) and compliant with federal benefit-eligibility rules (e.g., 42 U.S.C. § 1396p). Practitioners should tailor all bracketed placeholders, confirm funding sources, and verify the Beneficiary’s public-benefit profile before execution.]
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
This Special Needs Trust Agreement (“Agreement”) is executed as of [EFFECTIVE DATE] (the “Effective Date”).
1.2 Parties
(a) Settlor: [SETTLOR FULL LEGAL NAME], residing at [ADDRESS] (“Settlor”).
(b) Trustee: [TRUSTEE FULL LEGAL NAME], with a mailing address at [ADDRESS] (“Trustee”).
(c) Primary Beneficiary: [BENEFICIARY FULL LEGAL NAME], Social Security No. [XXX-XX-XXXX], date of birth [DOB] (“Beneficiary”).
1.3 Governing Law
This Agreement shall be interpreted and enforced in accordance with the Iowa Trust Code, Iowa Code Ch. 633A, and other applicable Iowa law (“Governing Law”).
1.4 Forum Selection
Exclusive venue for any court proceeding arising under this Agreement lies in the Probate Division of the Iowa District Court in [COUNTY], Iowa (“Designated Court”).
1.5 Recitals
A. Settlor desires to establish an irrevocable trust to hold and administer assets for the sole benefit of Beneficiary, who has a disability expected to continue indefinitely.
B. The purpose of this Trust is to supplement, and not to supplant, any government benefits Beneficiary now receives or may hereafter receive.
C. Trustee is willing to accept the trust and to administer Trust Assets in accordance with this Agreement.
D. In consideration of the mutual covenants herein, the parties agree as follows:
II. DEFINITIONS
Unless the context requires otherwise, capitalized terms have the meanings set forth below:
“Act” means the Social Security Act, 42 U.S.C. § 1381 et seq. and § 1396 et seq., as amended.
“Affiliate” means any person or entity directly or indirectly controlling, controlled by, or under common control with another.
“Agreement” has the meaning set forth in Section 1.1.
“Beneficiary” has the meaning set forth in Section 1.2(c).
“Benefits” means Supplemental Security Income (“SSI”), Medicaid, and any similar income- or resource-tested public benefit programs.
“Distribution Request” means a written request by or on behalf of Beneficiary for a distribution under Article III.
“Government Agency” means the Social Security Administration (“SSA”), Iowa Department of Health and Human Services, or any other agency administering Benefits.
“Qualified Disability Expenses” means expenses that enhance Beneficiary’s quality of life, including but not limited to medical care not covered by Benefits, education, transportation, adaptive equipment, therapies, recreation, and legal services.
“Trust” means the trust created by this Agreement.
“Trust Assets” means all property, tangible or intangible, contributed to the Trust and all additions and accretions thereto.
“Trustee” has the meaning set forth in Section 1.2(b).
[// GUIDANCE: Add additional defined terms as necessary for bespoke provisions.]
III. OPERATIVE PROVISIONS
3.1 Creation and Funding
(a) Irrevocable Trust. Settlor hereby irrevocably transfers to Trustee the property described in Schedule A attached hereto, to be held, administered, and distributed as provided herein.
(b) Additional Contributions. Additional assets may be added to the Trust at any time by Settlor or any third party, subject to Trustee’s written acceptance.
3.2 Purpose
The primary purpose of this Trust is to provide Beneficiary with goods and services in addition to those provided by Benefits, without disqualifying or reducing such Benefits.
3.3 Discretionary Distributions
(a) Sole and Absolute Discretion. Trustee may, but is not required to, make distributions of income or principal for Beneficiary’s Qualified Disability Expenses. Beneficiary shall have no enforceable right to compel a distribution.
(b) Standards. In exercising discretion, Trustee shall consider:
(i) the effect of any distribution on Beneficiary’s eligibility for Benefits;
(ii) other resources available to Beneficiary; and
(iii) the purposes set forth in Section 3.2.
(c) Prohibited Distributions. Trustee shall not make any distribution that the Trustee reasonably believes would be considered “support” or “maintenance” under the Act if such distribution would reduce or eliminate Benefits, unless Trustee, after consultation with counsel, determines the benefit to Beneficiary outweighs the loss.
3.4 Spendthrift Protection
To the maximum extent permitted by Governing Law, neither the principal nor income of the Trust shall be subject to the claims of Beneficiary’s creditors, nor shall Beneficiary have any power to anticipate, assign, or encumber any interest in the Trust.
3.5 No Right to Direct Trustee
Beneficiary shall have no authority to direct the Trustee in the exercise of any powers granted hereunder, except as expressly provided.
3.6 Termination
(a) Termination Events. The Trust shall terminate upon the earliest of:
(i) Beneficiary’s death;
(ii) exhaustion of Trust Assets; or
(iii) [OPTIONAL] a date certain: [DATE].
(b) Disposition upon Termination. Upon termination, Trustee shall:
(i) pay all properly incurred Trust expenses, taxes, and fees;
(ii) reimburse any state Medicaid plan for medical assistance paid on behalf of Beneficiary to the extent required by 42 U.S.C. § 1396p(d)(4)(A); and
(iii) distribute the balance, if any, to the contingent beneficiaries identified in Schedule B.
3.7 Trustee Succession
(a) Resignation. Trustee may resign upon not less than [30] days’ written notice to Settlor (if living), Beneficiary, and the Designated Court.
(b) Removal. Settlor (if living) or, after Settlor’s death, the Designated Court may remove Trustee for cause, including breach of fiduciary duty or incapacity.
(c) Successor Trustee. If the office of Trustee becomes vacant, the person(s) named in Schedule C shall serve. Failing such person(s), the Designated Court shall appoint a successor.
IV. REPRESENTATIONS & WARRANTIES
4.1 Settlor
(a) Authority. Settlor has full legal capacity to execute and deliver this Agreement.
(b) Ownership. The assets listed in Schedule A are owned by Settlor free of liens, claims, or encumbrances (other than as disclosed).
(c) Intent. Settlor’s intent is to create a valid, irrevocable, third-party discretionary trust for the sole benefit of Beneficiary.
4.2 Trustee
(a) Acceptance. Trustee accepts the trust and agrees to administer it in accordance with this Agreement and Governing Law.
(b) Qualification. Trustee is eligible to serve under Iowa Code § 633A.4402 and has not been convicted of a felony or any offense involving dishonesty.
(c) Fiduciary Duty. Trustee acknowledges fiduciary duties of loyalty and prudent administration.
4.3 Survival
All representations and warranties shall survive execution and remain in full force for the duration of the Trust.
V. COVENANTS & RESTRICTIONS
5.1 Trustee’s Affirmative Covenants
(a) Compliance. Administer the Trust in conformity with:
(i) Governing Law;
(ii) SSA’s Program Operations Manual System (“POMS”); and
(iii) any other applicable Benefit regulations.
(b) Accounting. Provide annual written accountings to Beneficiary (or Beneficiary’s legal representative) and, upon request, to the Designated Court.
(c) Notice. Promptly notify Beneficiary and, if required, the relevant Government Agencies of any significant Trust events (e.g., large distributions).
5.2 Trustee’s Negative Covenants
(a) Self-Dealing. Refrain from entering any transaction that benefits Trustee or an Affiliate, unless permitted by Governing Law and approved in writing by the Designated Court.
(b) Pledge of Trust Assets. Not pledge or encumber Trust Assets except as necessary for investment purposes consistent with prudent-investor standards.
5.3 Beneficiary Covenants
Beneficiary shall timely provide Trustee with all information reasonably necessary to determine eligibility for Benefits and shall execute any documents needed for Trustee’s administration.
5.4 Cure Periods
If any party becomes aware of a breach of covenant, that party shall provide written notice describing the breach. The breaching party shall have [30] days to cure before further remedies may be pursued.
VI. DEFAULT & REMEDIES
6.1 Events of Default
(a) Trustee Default. Material breach of fiduciary duty, willful misconduct, or failure to provide required accountings.
(b) Beneficiary Default. Material misrepresentation affecting Benefit eligibility or misuse of distributed assets.
6.2 Remedies
(a) Removal or Suspension of Trustee by the Designated Court.
(b) Surcharge against Trustee personally (limited as set forth in Article VII).
(c) Injunctive relief to prevent actions jeopardizing Trust compliance.
(d) Attorneys’ Fees. The prevailing party in any action shall recover reasonable attorneys’ fees and costs, payable from the Trust unless the court directs otherwise.
VII. RISK ALLOCATION
7.1 Indemnification of Trustee
To the fullest extent permitted by Governing Law, Trustee shall be indemnified and held harmless from and against all claims, liabilities, and expenses (including attorneys’ fees) arising out of Trustee’s administration of the Trust, except for acts or omissions constituting willful misconduct or gross negligence (“Excluded Conduct”).
7.2 Limitation of Liability
Trustee’s liability for any claim arising under this Agreement shall be limited to the lesser of (a) the value of the Trust Assets under Trustee’s control at the time of the claim, or (b) the amount recoverable from available insurance. Trustee shall not be liable for consequential, punitive, or exemplary damages.
7.3 Insurance
Trustee shall maintain, at Trust expense, fiduciary liability insurance in commercially reasonable amounts, naming the Trust as an additional insured.
7.4 Force Majeure
Trustee shall not be liable for delays or failures in performance caused by events beyond Trustee’s reasonable control, including natural disasters, acts of war, or changes in applicable law.
VIII. DISPUTE RESOLUTION
8.1 Governing Law
This Agreement and all disputes or claims relating hereto shall be governed by and construed under Iowa law without regard to its conflict-of-law rules.
8.2 Exclusive Jurisdiction; Probate
Subject to Section 8.3, the Designated Court shall have exclusive jurisdiction over all proceedings concerning the Trust.
8.3 Limited Arbitration
(a) Scope. Any dispute solely concerning:
(i) the reasonableness of Trustee’s fees; or
(ii) investment performance
may, at Trustee’s election, be submitted to binding arbitration administered by the American Arbitration Association (“AAA”) under its Commercial Arbitration Rules.
(b) Seat and Law. Seat of arbitration shall be Des Moines, Iowa; Iowa law shall govern.
(c) Court Relief. This clause shall not preclude any party from seeking injunctive relief in the Designated Court to preserve the status quo pending arbitration.
8.4 No Jury Trial
Because probate matters in Iowa are tried to the court, the parties acknowledge and agree that no jury trial right exists for any dispute arising out of this Agreement.
IX. GENERAL PROVISIONS
9.1 Amendment and Waiver
This Agreement may be amended only by written instrument executed by Settlor (if living) and Trustee, and, after Settlor’s death, with approval of the Designated Court, provided that no amendment shall:
(a) grant Beneficiary any right to compel distributions, or
(b) jeopardize Benefit eligibility.
9.2 Assignment
Except as expressly permitted herein, no party may assign or delegate rights or obligations under this Agreement without prior written consent of the Designated Court.
9.3 Successors and Assigns
This Agreement binds and inures to the benefit of the parties hereto and their respective heirs, personal representatives, successors, and permitted assigns.
9.4 Severability
If any provision is held invalid or unenforceable, the remaining provisions shall remain in full force, and the invalid portion shall be deemed modified to the minimum extent necessary to render it valid.
9.5 Entire Agreement
This Agreement, together with all Schedules, constitutes the entire understanding of the parties and supersedes all prior agreements relating to its subject matter.
9.6 Counterparts; Electronic Signatures
This Agreement may be executed in multiple counterparts, each of which shall be deemed an original. Signatures transmitted electronically (e.g., PDF, DocuSign) shall be deemed original signatures for all purposes.
X. EXECUTION BLOCK
IN WITNESS WHEREOF, the Settlor and Trustee have executed this Special Needs Trust Agreement effective as of the date first above written.
10.1 Settlor
[SETTLOR NAME]
Date: _______
10.2 Trustee
[TRUSTEE NAME], Trustee
Date: _______
10.3 Acknowledgment (Notary)
State of Iowa )
County of ____ ) SS.
On this _ day of _, 20__, before me, the undersigned, a Notary Public in and for said State, personally appeared [SETTLOR NAME] and [TRUSTEE NAME], to me known to be the identical person(s) named in and who executed the foregoing instrument, and acknowledged that (s)he/they executed the same as (his/her/their) voluntary act and deed.
Notary Public in and for the State of Iowa
My Commission Expires: _____
[// GUIDANCE: Iowa generally does not require witnesses for trust instruments, but practitioners may add witness attestations if desired.]
SCHEDULE A – INITIAL TRUST PROPERTY
[LIST OF PROPERTY, CASH ACCOUNTS, SECURITIES, ETC.]
SCHEDULE B – CONTINGENT BENEFICIARIES
- [NAME] – Relationship: [RELATIONSHIP] – Share: [PERCENTAGE]
- [NAME] – Relationship: [RELATIONSHIP] – Share: [PERCENTAGE]
SCHEDULE C – SUCCESSOR TRUSTEE DESIGNATION
Primary Successor Trustee: [NAME & CONTACT]
Secondary Successor Trustee: [NAME & CONTACT]
[// GUIDANCE:
1. Review Iowa Code §§ 633A.6101–633A.6302 for investment and accounting duties.
2. For first-party (self-settled) trusts, substitute Section 3.1(b) language to reference 42 U.S.C. § 1396p(d)(4)(A) payback requirements and restrict additional contributors.
3. Confirm county-specific probate procedures for trustee appointment and annual reporting.]