SUPPLEMENTAL NEEDS TRUST AGREEMENT

(Commonwealth of Kentucky)

[// GUIDANCE: This document is a Kentucky-specific, irrevocable supplemental (“special”) needs trust template designed to preserve the Beneficiary’s eligibility for means-tested government benefits (e.g., SSI and Medicaid) while providing additional resources to enhance quality of life. Tailor bracketed items, confirm factual circumstances (third-party vs. first-party funding), and obtain independent tax and public-benefits counsel before execution.]

Document Header

1. Parties
   • Grantor: [NAME OF GRANTOR], of [ADDRESS] (“Grantor”)
   • Initial Trustee: [NAME OF TRUSTEE], of [ADDRESS] (“Trustee”)
   • Beneficiary: [NAME OF BENEFICIARY], born [DATE OF BIRTH] (“Beneficiary”)

2. Trust Name
   The trust created hereby shall be known as the “[NAME OF BENEFICIARY] Supplemental Needs Trust” (the “Trust”).

3. Date & Jurisdiction
   This Agreement is made and entered into as of [EFFECTIVE DATE] and shall be governed by, and construed in accordance with, the laws of the Commonwealth of Kentucky without regard to conflict-of-law principles, except where pre-empted by federal law.

4. Recitals
   A. Beneficiary is a person with a disability as defined under 42 U.S.C. § 1382c(a)(3).
   B. Grantor desires to establish an irrevocable trust for the sole benefit of the Beneficiary to supplement, and not supplant, government benefits.
   C. Grantor intends that the Trust conform to applicable federal law, including 42 U.S.C. § 1396p(d)(4)(A) [if SELF-SETTLED; delete if third-party], and corresponding Kentucky regulations.
   D. Trustee is willing to serve on the terms herein.

Table of Contents

I. Definitions
II. Establishment & Funding
III. Trust Purpose
IV. Distribution Standards
V. Trustee Provisions
VI. Administration & Accounting
VII. Trustee Compensation, Liability & Indemnification
VIII. Spendthrift & Protection From Creditors
IX. Termination & Remainder Beneficiaries
X. Risk Allocation & Force Majeure
XI. Dispute Resolution
XII. Miscellaneous
XIII. Execution & Acknowledgment

Article I – Definitions

For ease of reference, capitalized terms carry the meanings below. Terms defined elsewhere have the same meaning throughout.

1. “Applicable Law” – All controlling federal statutes (including the Social Security Act and Medicaid law), Kentucky statutes, regulations, and court rules governing trusts and benefits eligibility.
2. “Countable Resource” – Any asset or income considered by a government benefits program in determining eligibility.
3. “Discretionary Distribution” – A distribution made solely in Trustee’s discretion, not subject to any enforceable standard by the Beneficiary.
4. “Government Benefits” – Needs-based programs including, without limitation, Supplemental Security Income (“SSI”), Medicaid, SNAP, and Section 8.
5. “Qualified Expenses” – Goods and services that enhance the Beneficiary’s quality of life but are not basic support (food or shelter) unless structured to avoid reduction or termination of Government Benefits.
6. “Sole Benefit” – Use for the exclusive advantage of the Beneficiary, allowing incidental or secondary benefits to others only as permitted by Applicable Law.
7. “Trust Assets” – All property delivered to the Trustee, additions, accumulations, and investment returns, together with all substitutions thereto.
8. “Trustee” – The Initial Trustee and any duly appointed Successor Trustee.

[// GUIDANCE: Add or delete defined terms as the specific fact pattern requires.]

Article II – Establishment & Funding

2.1 Irrevocable Instrument
The Trust is irrevocable. Grantor forever relinquishes all right, title, and interest in Trust Assets upon funding.

2.2 Funding Sources
a. Initial Contribution – Grantor hereby transfers to the Trustee the property described in Schedule A attached hereto.
b. Additional Contributions – Any person may add property to the Trust with Trustee’s consent, provided that such additions do not jeopardize Government Benefits.

2.3 First-Party vs. Third-Party Status
[SELECT ONE:]

☐ First-Party (Self-Settled) – Assets used belong(ed) to the Beneficiary; Medicaid payback required at Article IX.
☐ Third-Party – Assets are contributed exclusively by persons other than the Beneficiary; no Medicaid payback required.

Article III – Trust Purpose

3.1 Primary Purpose
To provide supplemental support for the Beneficiary without causing Trust Assets to be treated as a Countable Resource.

3.2 Non-Supplantation
Trustee shall administer the Trust so that discretionary payments do not replace, reduce, or impair Government Benefits.

3.3 Sole Benefit Standard
All distributions must be for the Sole Benefit of the Beneficiary in compliance with Applicable Law.

Article IV – Distribution Standards

4.1 Discretionary Distributions
Trustee may distribute Trust Assets for Qualified Expenses at any time, in any amount, and in any manner, entirely within Trustee’s sole and absolute discretion.

4.2 Prohibited Distributions
a. Cash directly to the Beneficiary, unless within SSI exclusion limits.
b. Payments for food or shelter unless Trustee first confirms availability of in-kind support and maintenance disregards.
c. Any transfer that constitutes a Countable Resource or gift disqualifying the Beneficiary from Government Benefits.

4.3 Permitted Distributions (Illustrative)
Educational expenses; medical devices not covered by Medicaid; personal attendants; transportation; recreational activities; electronic equipment; legal or advocacy services; burial arrangements (subject to Applicable Law).

4.4 Conditional Distributions
Trustee may condition payments on payees’ acknowledgment that funds are for Benefit of Beneficiary and shall not be considered Beneficiary’s assets.

4.5 Excess Resources Protocol
If Trust Assets or income risk classification as Countable Resources, Trustee shall, in the following order:
1. Purchase exempt assets for Beneficiary’s sole use;
2. Transfer funds to an ABLE account (if Beneficiary is eligible);
3. Seek court instruction.

[// GUIDANCE: The list above reflects current federal resource rules; verify at execution.]

Article V – Trustee Provisions

5.1 Acceptance; Standard of Care
Trustee accepts the office and shall administer the Trust with the care, skill, and prudence of a prudent person familiar with special needs trust administration.

5.2 Powers
Trustee shall have all powers granted under Kentucky’s Uniform Trust Code and general fiduciary law, including but not limited to:
a. Invest and reinvest Trust Assets;
b. Employ professionals;
c. Compromise, arbitrate, or litigate claims;
d. Execute and deliver instruments;
e. Establish investment reserves.

5.3 Successor Trustees
a. Designation – Grantor appoints as first Successor Trustee: [NAME].
b. Additional Successors – If no nominated Trustee serves, a Successor shall be appointed by [DESIGNATING PARTY or COURT].
c. Qualification – A corporate fiduciary must have trust powers under Kentucky law; an individual must be bonded unless waived in writing by the Grantor or a court of competent jurisdiction.

5.4 Removal & Resignation
a. Beneficiary (or legal guardian) may petition the state probate court for removal for cause.
b. Trustee may resign on 60 days’ written notice to Beneficiary and Successor Trustee, conditioned upon acceptance by a qualified successor and, if required, court approval.

Article VI – Administration & Accounting

6.1 Books & Records
Trustee shall maintain complete and accurate records.

6.2 Annual Accounting
Within 90 days of each calendar year-end, Trustee shall provide an accounting to:
• Beneficiary (or legal representative)
• Any court or agency requiring same

6.3 Court Supervision
Unless otherwise ordered, the Trust is not subject to routine court supervision; however, Trustee shall comply with any mandatory Kentucky probate reporting requirements.

Article VII – Trustee Compensation, Liability & Indemnification

7.1 Compensation
Trustee is entitled to reasonable compensation consistent with Kentucky law or, if a corporate fiduciary, its published fee schedule.

7.2 Reimbursement of Expenses
Trustee may reimburse itself from Trust Assets for reasonable costs incurred in administration.

7.3 Exculpation
Except for acts of willful misconduct, gross negligence, or bad faith, no Trustee shall be liable for any loss sustained by the Trust.

7.4 Indemnification
The Trust shall indemnify the Trustee (and agents) against all claims, liabilities, and expenses arising from proper administration, limited in all cases to the extent of the Trust Assets. No personal liability shall attach to Grantor or Beneficiary.

Article VIII – Spendthrift & Protection From Creditors

8.1 Spendthrift Clause
Beneficiary shall have no transferable interest in the Trust, voluntary or involuntary. Trust Assets are not subject to assignment, pledge, seizure, or legal process, except as provided under federal Medicaid law for first-party trusts.

8.2 No Support Obligation
Trust distributions are discretionary only and may not be compelled under any support theory.

Article IX – Termination & Remainder Beneficiaries

9.1 Termination Events
This Trust shall terminate upon the earliest of:
a. The Beneficiary’s death;
b. Exhaustion of Trust Assets; or
c. Judicial termination pursuant to Applicable Law.

9.2 Medicaid Payback [APPLICABLE ONLY IF FIRST-PARTY]
Upon Beneficiary’s death, after payment of all allowable administrative expenses, the Trustee shall reimburse the Commonwealth of Kentucky (and any other state that provided Medicaid benefits) from remaining Trust Assets up to the total amount of Medicaid paid on Beneficiary’s behalf.

9.3 Distribution of Remainder
After satisfaction of any Medicaid payback obligation, Trustee shall distribute the residue per the following order of priority:
1. Primary Remainder Beneficiaries: [NAME(S)] in equal shares, per stirpes.
2. Secondary Remainder Beneficiaries: [NAME(S)] if none of the foregoing survives.
3. Default: Beneficiary’s heirs-at-law as determined under Kentucky intestacy statutes.

9.4 Early Termination for De-Minimis Assets
If Trust Assets fall below $[THRESHOLD] and Trustee determines continued administration is uneconomical, Trustee may terminate the Trust with court approval, disbursing assets consistent with Sections 9.2 and 9.3.

Article X – Risk Allocation & Force Majeure

10.1 Force Majeure
Trustee is not liable for any failure or delay caused by events beyond reasonable control, including acts of God, war, pandemic, or changes in Applicable Law.

10.2 Tax Matters
Trust is intended to be a grantor trust under Subchapter J of the Internal Revenue Code unless otherwise indicated in Schedule B. Grantor (or Beneficiary if self-settled) shall be treated as owner for income-tax reporting.

[// GUIDANCE: Adjust tax status per funding source and estate-planning objectives.]

Article XI – Dispute Resolution

11.1 Governing Law
This Agreement and all disputes hereunder shall be governed by Kentucky trust law and Applicable Law.

11.2 Exclusive Forum
The probate division of the Circuit Court of [COUNTY], Kentucky shall have exclusive jurisdiction over all matters concerning the Trust (“Designated Probate Court”).

11.3 Limited Arbitration
a. Any controversy not requiring Designated Probate Court oversight (e.g., fee disputes, investment-performance disputes) shall be submitted to binding arbitration administered by the American Arbitration Association (AAA) under its Commercial Arbitration Rules.
b. Seat of arbitration: [COUNTY], Kentucky.
c. The arbitrator shall have no authority to override Trustee discretion regarding distributions.

11.4 Injunctive Relief
Nothing herein limits the right of any party to seek temporary, preliminary, or permanent injunctive relief from the Designated Probate Court to enforce trust provisions or prevent dissipation of Trust Assets.

11.5 Jury Waiver
To the extent any matter becomes triable in a court of law other than probate, the parties reserve all rights to a jury trial unless prohibited by Applicable Law.

Article XII – Miscellaneous

12.1 Amendment
This Trust may be amended only (a) by written instrument executed by the Trustee and, if living, the Grantor, and (b) with approval of the Designated Probate Court, solely to maintain or enhance Government Benefits eligibility. No amendment may increase the Beneficiary’s access to principal or income beyond what is permitted herein.

12.2 Severability
Any invalid provision shall be severed and the remainder construed to effectuate intent.

12.3 Merger & Integration
This Agreement represents the entire understanding among the parties and supersedes all prior agreements on the subject.

12.4 Assignment
No party may assign rights or delegate duties except as expressly permitted.

12.5 Notices
Written notices shall be delivered by certified mail, return receipt requested, or nationally recognized courier to the last known address of the party.

12.6 Headings
Headings are for convenience only and do not affect interpretation.

12.7 Counterparts; Electronic Signatures
The parties may execute this Agreement in counterparts, each of which is deemed an original. Signatures transmitted electronically (e.g., via PDF or DocuSign) shall be deemed originals for all purposes.

Article XIII – Execution & Acknowledgment

IN WITNESS WHEREOF, the Grantor and Trustee have executed this Supplemental Needs Trust Agreement on the date first written above.

Notarization

Commonwealth of Kentucky
County of ____

On this _ day of _, 20__, before me, the undersigned Notary Public, personally appeared [NAME OF GRANTOR] ☐ and/or [NAME OF TRUSTEE] ☐, known to me or satisfactorily proven to be the person(s) whose name(s) 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 Property

[// GUIDANCE: Attach list of assets retitled to the Trust (e.g., brokerage account, life-insurance proceeds, etc.).]

Schedule B – Tax Status & Elections (Optional)

[// GUIDANCE: Insert grantor-trust elections, EIN information, or alternative provisions if the Trust will be treated as a separate taxpayer.]

[END OF DOCUMENT]