SPECIAL NEEDS TRUST AGREEMENT
(Maryland Irrevocable Supplemental Needs Trust)
Effective Date: [EFFECTIVE DATE]
Settlor(s): [SETTLOR FULL LEGAL NAME(S)]
Initial Trustee: [TRUSTEE FULL LEGAL NAME]
Primary Beneficiary: [BENEFICIARY FULL LEGAL NAME]
Trust Name: “[TRUST NAME]” (the “Trust”)
[// GUIDANCE: This template is designed as a third-party supplemental needs trust. If you intend to use the disabled individual’s own assets, convert to a first-party trust and insert a Medicaid pay-back clause compliant with 42 U.S.C. § 1396p(d)(4)(A).]
TABLE OF CONTENTS
- Document Header
- Recitals
- Definitions
- Creation & Purpose of Trust
- Funding & Additional Contributions
- Distributions for Supplemental Needs
- Prohibitions & Government Benefit Protection
- Trustee Powers & Duties
- Accounting, Reports & Audits
- Representations & Warranties
- Covenants
- Events of Default; Removal & Succession of Trustee
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
1. DOCUMENT HEADER
This SPECIAL NEEDS TRUST AGREEMENT (“Agreement”) is made and entered into as of the Effective Date by and between the Settlor(s) and the Trustee for the exclusive benefit of the Beneficiary, pursuant to the Maryland Trust Act, Md. Code Ann., Est. & Tr. § 14.5-101 et seq.
2. RECITALS
A. Settlor desires to establish an irrevocable trust for the supplemental and extra needs of Beneficiary, who is a person with a disability expected to qualify or already qualifying for means-tested public assistance.
B. The Trust is intended to comply with all federal and Maryland laws, regulations, and administrative guidance governing supplemental needs trusts so that the assets held herein shall not be considered “available resources” to the Beneficiary for purposes of Supplemental Security Income (“SSI”), Medicaid, or any comparable program.
C. Trustee is willing to accept the trust estate and administer it in accordance with this Agreement.
3. DEFINITIONS
Unless the context otherwise requires, the capitalized terms below have the following meanings:
“Accountings” – The periodic written financial statements described in § 9.1.
“Beneficiary” – The individual identified in the header who meets the criteria of disability under 42 U.S.C. § 1382c(a)(3).
“Disability” – A physical or mental impairment expected to last 12 months or result in death that substantially limits one or more major life activities.
“Government Benefits” – SSI, Medicaid, SNAP, Section 8, or any other means-tested program.
“Supplemental Needs” – Goods and services other than food, shelter, or other “basic support” items that would reduce means-tested benefits, including but not limited to medical devices, therapies, education, transportation, recreation, and quality-of-life enhancements.
“Trust Estate” – All property transferred to the Trust, plus all reinvestments and accumulations.
“Trustee” – The individual or institution then serving pursuant to § 12.3.
[// GUIDANCE: Add or omit definitions to suit the complexity of the client’s plan; keep alphabetical order.]
4. CREATION & PURPOSE OF TRUST
4.1 Irrevocable Trust. The Trust is irrevocable. The Settlor expressly waives any right to alter, amend, revoke, or terminate this Trust except as expressly provided herein.
4.2 Purpose. The primary purpose of the Trust is to provide for the Beneficiary’s Supplemental Needs in a manner that preserves eligibility for Government Benefits. All provisions shall be interpreted to effectuate this purpose.
4.3 Situs & Governing Law. The Trust shall be administered in the State of Maryland, and Maryland law shall govern all questions of validity, construction, and administration unless superseded by mandatory federal law.
5. FUNDING & ADDITIONAL CONTRIBUTIONS
5.1 Initial Funding. Concurrent with execution, Settlor transfers to the Trustee the property described in Schedule A, which the Trustee hereby acknowledges.
5.2 Additions. Additional property may be added to the Trust at any time by Settlor or any third party, provided (a) such additions are acceptable to the Trustee and (b) are expressly made subject to this Agreement. The Trustee may refuse any addition in its sole discretion.
5.3 Non-Return of Contributions. No contributor shall retain or be granted any right or power, direct or indirect, that would cause the Trust Estate to be deemed a resource of such contributor or the Beneficiary.
6. DISTRIBUTIONS FOR SUPPLEMENTAL NEEDS
6.1 Discretionary Standard. The Trustee may, in its sole, absolute, and uncontrolled discretion, make distributions from income or principal for the Beneficiary’s Supplemental Needs. The Beneficiary shall have no right to compel any distribution.
6.2 Prohibited Distributions. The Trustee shall not make any distribution (a) that would constitute payment for the Beneficiary’s legal obligation of support, (b) for food or shelter unless the Trustee first obtains written confirmation from a benefits counselor that such payment will not jeopardize benefits, or (c) directly to the Beneficiary, except for nominal amounts constituting “in-kind support and maintenance” permitted under SSI rules.
6.3 Distribution Methods. Permissible methods include (a) direct payment to providers, (b) purchase and delivery of goods or services, or (c) reimbursement to third parties who have paid for approved Supplemental Needs.
6.4 No Support Obligation. The Trust is intended to supplement, not supplant, any support otherwise available to the Beneficiary from public or private sources.
6.5 Emergency Provision. If Government Benefits are suspended or terminated, Trustee may, after consulting a qualified benefits planner, use Trust assets for basic support until benefits are reinstated, provided all reasonable efforts are made to restore eligibility promptly.
7. PROHIBITIONS & GOVERNMENT BENEFIT PROTECTION
7.1 Spend-down Protection. No part of the Trust Estate shall be deemed available to the Beneficiary. Trustee shall invoke all statutory and regulatory exceptions to asset attribution.
7.2 Anti-Alienation. To the maximum extent permitted by law, the interest of the Beneficiary shall not be subject to voluntary or involuntary alienation, assignment, pledge, attachment, or seizure by legal process.
7.3 Notice to Agencies. Trustee shall provide notice or copies of this Agreement to the Social Security Administration, Maryland Department of Health, or any other agency upon lawful request.
7.4 Benefit Review. Trustee shall annually consult with a qualified benefits specialist to ensure ongoing compliance with applicable rules.
8. TRUSTEE POWERS & DUTIES
8.1 In General. Subject to the limitations herein, Trustee shall have all powers under Md. Code Ann., Est. & Tr. § 14.5-801 et seq. and similar successor statutes, including but not limited to:
a. Investment under the Maryland prudent investor rule;
b. Retention or sale of Trust assets;
c. Execution of documents;
d. Hiring professionals and paying their fees;
e. Compromise or submit to arbitration any claims;
f. Establishing bank, brokerage, or ABLE accounts.
8.2 Duty of Loyalty; No Self-Dealing. Trustee shall administer the Trust solely in the interest of the Beneficiary and not engage in self-dealing or transactions prohibited by law.
8.3 Delegation. Trustee may delegate investment functions consistent with § 14.5-807, provided any delegation is in writing and monitored.
9. ACCOUNTING, REPORTS & AUDITS
9.1 Periodic Accountings. Within [ACCOUNTING CYCLE, e.g., 60 days after each calendar year-end], Trustee shall deliver Accountings to:
i. The Beneficiary (if legally competent);
ii. [GUARDIAN/REPRESENTATIVE PAYEE]; and
iii. Any other person entitled under Maryland law.
9.2 Judicial Review. Any interested person may petition the [COUNTY] Orphans’ Court for review of an Accounting pursuant to Maryland Rules 10-701 et seq.
9.3 Audit Cooperation. Trustee shall fully cooperate with any governmental audit or review.
10. REPRESENTATIONS & WARRANTIES
10.1 Settlor. Settlor represents that (a) all assets transferred are free of liens and encumbrances, (b) Settlor has full authority to make the transfer, and (c) the transfer will not render Settlor insolvent.
10.2 Trustee. Trustee warrants that (a) Trustee is qualified and not disqualified under Maryland law, (b) Trustee will devote the time and attention reasonably necessary to administer the Trust, and (c) Trustee has reviewed and understands the requirements of a supplemental needs trust.
10.3 Survival. All representations and warranties survive execution and funding of the Trust.
11. COVENANTS
11.1 Settlor Covenants. Settlor will not take any action that would result in inclusion of Trust assets in the Beneficiary’s resources for means-tested benefit purposes.
11.2 Trustee Covenants.
a. Comply with all federal and state reporting obligations;
b. Maintain adequate insurance to cover fiduciary liability;
c. Provide prompt written notice of any material change affecting eligibility.
12. EVENTS OF DEFAULT; REMOVAL & SUCCESSION OF TRUSTEE
12.1 Events of Default. The following constitute defaults: (i) willful misconduct, (ii) gross negligence, (iii) breach of fiduciary duty, or (iv) failure to provide required Accountings within 30 days after written notice.
12.2 Remedies. Upon default, any interested person may seek injunctive relief, removal of Trustee, surcharge, or any remedy available under law.
12.3 Resignation & Successor Trustee.
a. Resignation requires 30 days’ written notice and court approval unless waived.
b. [ALTERNATE TRUSTEE] is nominated as first successor; thereafter the Maryland probate court shall appoint a qualified successor.
c. Title to Trust Estate vests in each successor without further act.
12.4 Bond. Trustee shall furnish a fiduciary bond unless expressly waived in writing by Settlor or the court.
13. RISK ALLOCATION
13.1 Indemnification. The Trustee and its agents are indemnified out of the Trust Estate against all claims, liabilities, and expenses, except those arising from willful misconduct or bad faith.
13.2 Limitation of Liability. Any liability of the Trustee to any person shall be limited to the value of the Trust Estate; no personal liability shall attach.
13.3 Insurance. Trustee may purchase fiduciary liability insurance with premiums paid from the Trust Estate.
13.4 Force Majeure. Trustee shall not be liable for delays or failures caused by events beyond Trustee’s reasonable control, including natural disasters, governmental actions, or public health emergencies.
14. DISPUTE RESOLUTION
14.1 Governing Law. Maryland law governs all matters arising under this Agreement.
14.2 Forum Selection. Exclusive jurisdiction lies in the [COUNTY] Orphans’ Court or other Maryland probate court having proper venue.
14.3 Limited Arbitration. Upon unanimous written consent of all interested persons, any dispute other than trust accountings or requests for injunctive relief may be submitted to binding arbitration administered by the American Arbitration Association under its Commercial Rules. Arbitration shall occur in [COUNTY], Maryland.
14.4 Injunctive Relief Preservation. Nothing herein shall limit any party’s right to seek provisional or injunctive relief from a court of competent jurisdiction to enforce the terms of this Trust.
14.5 No Jury Trial in Probate. The parties acknowledge that jury trials are not available in Maryland probate proceedings concerning trusts.
15. GENERAL PROVISIONS
15.1 Amendment. This Agreement may be amended only (a) to maintain eligibility for Government Benefits, and (b) by written instrument executed by the Trustee and approved by the court.
15.2 Severability. Any invalid provision shall be severed, and the remainder enforced to the fullest extent permissible.
15.3 Entire Agreement. This instrument constitutes the complete agreement of the parties concerning the Trust.
15.4 Headings. Section headings are for convenience only and shall not affect interpretation.
15.5 Counterparts & Electronic Signatures. This Agreement may be executed in counterparts and by electronic signature, each of which shall be deemed an original.
15.6 Successors & Assigns. All provisions bind and benefit the parties and their respective successors and permitted assigns.
16. EXECUTION BLOCK
IN WITNESS WHEREOF, the parties execute this SPECIAL NEEDS TRUST AGREEMENT as of the Effective Date.
| _______ | _______ |
| [SETTLOR NAME] | Date |
| _______ | _______ |
| [CO-SETTLOR NAME, if any] | Date |
| _______ | _______ |
| [TRUSTEE NAME], Trustee | Date |
Witnesses (optional but recommended)
- ____ Date __
- ____ Date __
Notary Acknowledgment
State of Maryland )
County of [COUNTY] ) ss:
On this _ day of _, 20__, before me, the undersigned Notary Public, personally appeared ______, known to me or satisfactorily proven to be the persons whose names are subscribed to the foregoing instrument, and acknowledged that they executed the same for the purposes therein contained.
Notary Public
My Commission Expires: ____
SCHEDULE A
Initial Property Transferred to Trust
[// GUIDANCE: Insert detailed list of cash amounts, securities, life insurance proceeds, etc.]
[// GUIDANCE: Before implementation, counsel should (1) confirm compliance with the latest SSA POMS provisions, (2) obtain a benefits analysis letter, and (3) file or register the trust if required under local court rules.]