SPECIAL NEEDS TRUST AGREEMENT

(Massachusetts Irrevocable Third-Party Supplemental Needs Trust)

[// GUIDANCE: This template is drafted for a third-party special needs trust (i.e., funded with assets that never belonged to the Beneficiary) governed by Massachusetts law. If you require a first-party trust with Medicaid payback under 42 U.S.C. § 1396p(d)(4)(A), material modifications will be necessary—particularly Articles III, IV, and XIII.]*

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

(Internal page numbering to be inserted during final formatting)

I. DOCUMENT HEADER

1.1 Trust Name. This Special Needs Trust Agreement (the “Agreement”) shall be known as the “[TRUST NAME]” (the “Trust”).

1.2 Parties.
(a) Settlor: [SETTLOR LEGAL NAME], of [ADDRESS].
(b) Trustee: [INITIAL TRUSTEE LEGAL NAME], of [ADDRESS].
(c) Primary Beneficiary: [BENEFICIARY LEGAL NAME], a person with a disability as defined in 42 U.S.C. § 1382c and eligible (or potentially eligible) for means-tested government benefits.
(d) Remainder Beneficiaries: [LIST OR “as provided in Schedule A”].

1.3 Date & Jurisdiction. This Agreement is entered into and effective as of [EFFECTIVE DATE] (the “Effective Date”) and shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, including but not limited to M.G.L. c. 190B, art. VII (the “Massachusetts Uniform Trust Code”).

1.4 Recitals.
(a) Settlor desires to create an irrevocable trust to provide for the supplemental needs of the Beneficiary without interfering with the Beneficiary’s eligibility for means-tested public benefits, including but not limited to MassHealth (Medicaid) and Supplemental Security Income (“SSI”).
(b) Trustee is willing to accept the trusteeship and to administer the Trust in accordance with this Agreement.
(c) Consideration for this Agreement is provided by Settlor’s conveyance of property described in Section 3.1 to the Trustee, acceptance by the Trustee, and the mutual promises herein.

II. DEFINITIONS

For purposes of this Agreement, capitalized terms have the following meanings. Definitions appear alphabetically; cross-references indicate first substantive use.

“Accounting” – Section 5.3
“Additional Contributions” – Section 3.2
“Agreement” – Preamble
“Beneficiary” – Section 1.2(c)
“Disabled” – As defined in 42 U.S.C. § 1382c(a)(3).
“Distribution Guidelines” – Section 4.1
“Government Benefits” – Section 4.1(a)
“MassHealth” – The Massachusetts Medicaid program administered under M.G.L. c. 118E.
“Person” – An individual or entity of any nature.
“Protective Action” – Section 6.2(b)
“Remainder Beneficiaries” – Section 1.2(d)
“Settlor” – Section 1.2(a)
“Supplemental Needs” – Section 4.1(b)
“Trust” – Section 1.1
“Trustee” – Section 1.2(b)
“Trust Estate” – Section 3.3

[// GUIDANCE: Add or delete defined terms to match final drafting choices. Ensure every capitalized term is actually used.]

III. OPERATIVE PROVISIONS

3.1 Initial Funding. Simultaneously with execution, Settlor hereby irrevocably transfers to Trustee the property described on Schedule B, receipt of which Trustee hereby acknowledges.

3.2 Additional Contributions. Subject to Trustee’s written acceptance, any Person may make irrevocable, unconditional transfers to the Trust (“Additional Contributions”), provided such transfers are not assets of the Beneficiary.

3.3 Trust Estate. The “Trust Estate” shall consist of the property described in Section 3.1, all Additional Contributions, and all income and proceeds therefrom, less lawful disbursements.

3.4 Purpose. The Trust is established exclusively for the benefit of the Beneficiary’s Supplemental Needs, as more fully described in Article IV, and for no other purpose. The Trust shall be administered so as not to be considered an available resource to the Beneficiary for any means-tested Government Benefits.

3.5 Irrevocability. Except as expressly provided herein, Settlor waives all power to revoke, amend, or alter this Agreement.

3.6 Spendthrift. To the maximum extent permitted by law, the interests of the Beneficiary and any Remainder Beneficiary are not subject to voluntary or involuntary transfer, assignment, or legal process.

3.7 Termination. The Trust shall terminate upon the earliest of:
(a) the Beneficiary’s death (subject to Article III§3.8);
(b) exhaustion of the Trust Estate; or
(c) court order or written determination by Trustee that continuation no longer serves the Trust’s purpose.

3.8 Distribution on Termination. Upon termination under § 3.7(a):
(a) Trustee shall pay all properly incurred expenses, including Taxes and, if applicable, reimbursement to MassHealth to the limited extent (if any) required by then-applicable law for third-party trusts; and
(b) The remaining Trust Estate shall be distributed to the Remainder Beneficiaries in the shares set forth in Schedule A.

IV. REPRESENTATIONS & WARRANTIES

4.1 Settlor. Settlor represents and warrants that:
(a) Settlor has full legal capacity to execute and fund this Trust;
(b) The assets transferred hereunder are not assets of the Beneficiary; and
(c) Establishment of this Trust will not place Settlor in violation of any contractual, court-ordered, or statutory obligation.

4.2 Trustee. Trustee represents and warrants that:
(a) Trustee is qualified and willing to serve, has secured any bond required under Massachusetts law or waived by the court, and will administer the Trust in accordance with this Agreement and applicable law;
(b) Trustee understands the fiduciary duty of loyalty and competence owed to the Beneficiary; and
(c) Trustee will take reasonable measures to maintain the Beneficiary’s eligibility for Government Benefits.

4.3 Survival. All representations and warranties survive execution and continue in force until final Trust termination.

V. COVENANTS & RESTRICTIONS

5.1 Distribution Standards (“Distribution Guidelines”).
(a) Government Benefit Preservation. Trustee shall consider the effect of any distribution on the Beneficiary’s eligibility for MassHealth, SSI, SSDI, Section 8, SNAP, or any analogous state or federal program (collectively, “Government Benefits”).
(b) Supplemental Needs. Trustee may make distributions—in Trustee’s sole and absolute discretion—only for goods and services not otherwise provided by Government Benefits and that enhance the Beneficiary’s quality of life (“Supplemental Needs”), including, by way of example: medical equipment, personal care attendants beyond approved hours, education, transportation, recreation, vacations, legal expenses, and companion services.
(c) Prohibited Distributions. Trustee shall not distribute cash directly to the Beneficiary nor pay for food or shelter expenses unless Trustee determines, after consultation with qualified benefits counsel, that such distribution will not reduce Government Benefits or that any reduction is in the Beneficiary’s best interests.

5.2 Trustee Obligations.
(a) Standard of Care. Trustee shall exercise the judgment and care under the circumstances then prevailing that a prudent person would use in the management of property of another, consistent with M.G.L. c. 190B, § 7-302.
(b) Recordkeeping & Accounting. Trustee shall maintain accurate books and records and provide an annual “Accounting” to the Beneficiary (or legal representative) and, upon written request, to Settlor or any Remainder Beneficiary.
(c) Investment Management. Trustee may retain investment professionals and shall diversify trust assets unless, under the circumstances, it is prudent not to do so.

5.3 Notice & Cure. Trustee shall notify the Beneficiary’s legal representative within thirty (30) days of discovering any violation of Government Benefit rules and shall take corrective action within sixty (60) days thereafter.

VI. DEFAULT & REMEDIES

6.1 Events of Default. The following constitute “Events of Default”:
(a) Trustee’s material breach of fiduciary duty;
(b) Trustee’s failure to provide the Accounting within sixty (60) days of a written request by the Beneficiary’s legal representative;
(c) Trustee’s insolvency, resignation without qualified successor, or incapacity as determined under applicable law.

6.2 Remedies.
(a) Removal & Replacement. Upon an Event of Default, a majority of the persons listed in Schedule C (“Removal Committee”) may, by written notice, remove the Trustee and appoint a Successor Trustee, effective upon acceptance and qualification of such successor.
(b) Protective Action. Any interested person may petition the Massachusetts Probate and Family Court for orders necessary to protect the Trust Estate and the Beneficiary’s interests, including injunctions, accountings, or surcharge.
(c) Attorneys’ Fees. In any action arising from an Event of Default, the court may award reasonable attorneys’ fees and costs to the prevailing party from the non-prevailing party’s share of the Trust Estate or personal assets, as the court deems just.

VII. RISK ALLOCATION

7.1 Indemnification of Trustee. To the extent permitted by law, Trustee is indemnified from the Trust Estate against any liability, claim, or expense (including reasonable attorneys’ fees) arising from administration of the Trust, except for losses resulting from Trustee’s intentional misconduct, gross negligence, or self-dealing.

7.2 Limitation of Liability. The Trustee’s liability is limited to the assets constituting the Trust Estate; no Trustee shall be personally liable for obligations incurred on behalf of the Trust, absent intentional misconduct or gross negligence.

7.3 Insurance. Trustee may procure, at Trust expense, fiduciary liability insurance and bonds deemed advisable to protect the Trust and Trustee.

7.4 Force Majeure. Trustee shall not be liable for delays or failures in performance caused by events beyond reasonable control, including natural disaster, war, or governmental action, provided Trustee acts with reasonable dispatch following cessation of the event.

VIII. DISPUTE RESOLUTION

8.1 Governing Law. This Agreement and all disputes hereunder shall be governed by the internal laws of the Commonwealth of Massachusetts, without regard to conflict-of-law principles.

8.2 Exclusive Probate Forum. Any matter concerning construction, administration, or enforcement of this Trust shall be brought exclusively in the Probate and Family Court Department of the Trial Court of Massachusetts (“state_probate_court”).

8.3 Limited Arbitration. Disputes solely between the Trustee and a third-party vendor or investment advisor, which do not involve interpretation of this Agreement or the rights of the Beneficiary, may, at Trustee’s election, be submitted to binding arbitration in Boston, Massachusetts, under the Commercial Rules of the American Arbitration Association then in effect.

8.4 Injunctive Relief. Nothing herein shall impair any party’s right to seek temporary, preliminary, or permanent injunctive relief from the Probate and Family Court to prevent waste of the Trust Estate or loss of Government Benefits (“trust_enforcement”).

8.5 Jury Trial. No clause is included because jury trials are not available in Massachusetts probate proceedings (“no_jury_probate”).

IX. GENERAL PROVISIONS

9.1 Amendment & Reformation.
(a) No party may amend this Agreement except by court order to correct scrivener’s errors or to conform the Trust to changes in applicable law so long as such amendment does not defeat the primary purpose of preserving Government Benefits.
(b) The court may reform or construe provisions to comply with 42 U.S.C. § 1396p, M.G.L. c. 118E, or successor statutes.

9.2 Assignment. No Trustee may delegate discretionary distribution authority except to a co-trustee; ministerial functions may be delegated in writing.

9.3 Successors & Assigns. This Agreement binds and inures to the benefit of all successors, assigns, and legal representatives of the parties, subject to its terms.

9.4 Severability. If any provision is held invalid or unenforceable, the remaining provisions shall remain in full force, and the invalid provision shall be construed to effect its intent to the maximum extent permitted by law.

9.5 Entire Agreement. This instrument, together with Schedules A–C, constitutes the entire understanding of the parties concerning the Trust and supersedes all prior agreements (oral or written) relating thereto.

9.6 Counterparts & Electronic Signatures. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together constitute one instrument. Signatures delivered by electronic means (e.g., PDF, DocuSign) shall be deemed original for all purposes, subject to Massachusetts law on electronic transactions.

X. EXECUTION BLOCK

IN WITNESS WHEREOF, the Settlor and Trustee have executed this Agreement under seal as of the Effective Date first above written.

SETTLOR

[SETTLOR LEGAL NAME]

TRUSTEE

[TRUSTEE LEGAL NAME], Trustee

[// GUIDANCE: Insert notary acknowledgment per M.G.L. c. 183, § 30; Massachusetts does not require witnesses for trusts, but some practitioners still use two witnesses for evidentiary support.]

SCHEDULE A

Remainder Beneficiaries & Shares

SCHEDULE B

Initial Trust Corpus

SCHEDULE C

Removal Committee

[// GUIDANCE:
1. Review federal and Massachusetts statutes/regulations in effect on the funding date.
2. Confirm no payback language is required; if assets trace to the Beneficiary, convert to first-party trust.
3. Verify insurance/bond requirements with the Probate & Family Court or waive via court order.
4. Coordinate with benefits counsel before large distributions for housing, food, or cash.]