SPECIAL NEEDS TRUST AGREEMENT
(Montana – Third-Party, Discretionary, Supplemental Needs Trust)
[// GUIDANCE: This template is designed for a third-party funded special needs trust governed by Montana law. For a self-settled “(d)(4)(A)” trust, additional federal pay-back language is required. Practitioners should tailor bracketed placeholders and optional text to the client’s facts.]
TABLE OF CONTENTS
- Document Header
- Definitions
- Creation of Trust & Funding
- Beneficial Interest & Distribution Standards
- Trustee Provisions
- Representations & Warranties
- Covenants & Restrictions
- Default, Removal & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
1. DOCUMENT HEADER
THIS SPECIAL NEEDS TRUST AGREEMENT (“Agreement” or “Trust”) is made as of [EFFECTIVE DATE] (“Effective Date”) by and between:
• Settlor: [SETTLOR NAME], of [SETTLOR ADDRESS]; and
• Trustee: [TRUSTEE NAME], of [TRUSTEE ADDRESS] (together with any Successor Trustee, “Trustee”),
for the benefit of Beneficiary: [BENEFICIARY NAME], born [DOB], Social Security Number ending in [XXX-XX-____], who is a person with a disability as defined under 42 U.S.C. § 1382c(a)(3) and applicable Montana law.
RECITALS
A. Settlor desires to establish an irrevocable special needs trust to provide supplemental benefits for Beneficiary without disqualifying Beneficiary from means-tested government benefits.
B. Trustee is willing to administer the Trust on the terms herein.
C. This Trust shall be governed by the Montana Uniform Trust Code, Mont. Code Ann. tit. 72, ch. 38 (“MUTC”), and other applicable law.
NOW, THEREFORE, Settlor hereby transfers the Trust Property described in Schedule A and declares that Trustee shall hold, manage, and distribute such property under the following terms:
2. DEFINITIONS
For ease of reference, capitalized terms are defined alphabetically below. Any term used in the singular includes the plural and vice versa unless the context requires otherwise.
“Administrative Expenses” – Costs incurred in administration, including Trustee compensation, professional fees, taxes, and expenses reasonably related to Trust management.
“Beneficiary” – The individual identified in Section 1 and any Alternate Beneficiary under Section 4.12.
“Distribution Purposes” – Supplemental, non-support goods and services that enhance the Beneficiary’s quality of life and are not countable as income or resources for purposes of Medicaid, SSI, or other means-tested benefits. Examples include but are not limited to education, medical equipment not covered by insurance, therapies, transportation, vocational training, recreation, and companion services.
“Government Benefits” – Medicaid, Supplemental Security Income (“SSI”), Social Security Disability Insurance (“SSDI”), Section 8 housing, SNAP, or any similar federal, state, or local needs-based assistance program.
“Mediation Period” – Thirty (30) calendar days after written notice of a dispute under Section 10.3.
“Qualified Spendthrift Provision” – The spendthrift protection under Section 4.7 consistent with MUTC § 72-38-502.
“Trust Assets” or “Trust Property” – All property, tangible or intangible, transferred to and held under this Agreement, together with all income, products, and proceeds thereof.
3. CREATION OF TRUST & FUNDING
3.1 Irrevocable Trust. This Trust is irrevocable. Except as expressly provided, Settlor retains no right, title, or interest in Trust Assets.
3.2 Initial Funding. Contemporaneously with execution, Settlor delivers the property listed on Schedule A, receipt of which Trustee acknowledges. Additional contributions may be accepted at Trustee’s discretion if consistent with Government Benefit eligibility and this Agreement.
3.3 Separate Property. Trust Assets shall at all times be separate from Trustee’s personal assets and shall not be liable for Trustee’s debts.
3.4 Tax Status. This Trust is intended to be a grantor trust for federal income tax purposes unless Trustee elects otherwise.
[// GUIDANCE: Insert tax ID assignment and EIN procurement provisions as needed.]
4. BENEFICIAL INTEREST & DISTRIBUTION STANDARDS
4.1 Primary Beneficiary. Beneficiary shall be the sole lifetime beneficiary. No other person shall have a right to compel distributions.
4.2 Sole Discretion Standard. Distributions are strictly within the Trustee’s sole and absolute discretion. Beneficiary’s access is limited to the extent that any enforceable support obligation would render Trust Assets a countable resource. Beneficiary shall have no power to alienate or assign any interest herein.
4.3 Supplemental Needs Objective. Trustee may expend Trust Assets only for Distribution Purposes that supplement, but do not supplant, Government Benefits. Trustee shall, before any distribution, consider the effect on eligibility and consult relevant regulations or qualified counsel.
4.4 Prohibited Distributions. Except upon written opinion of specialized benefits counsel, Trustee shall not make distributions:
a. Directly to Beneficiary for food or shelter;
b. Toward obligations that would be treated as in-kind support and maintenance reducing SSI; or
c. In any manner that would convert Trust Assets into a countable resource.
4.5 Emergency Exception. If Trustee reasonably determines that withholding a distribution would pose a serious threat to Beneficiary’s health or safety, Trustee may distribute notwithstanding Section 4.4, provided Trustee first exhausts alternative funding sources and documents the basis for the decision.
4.6 Reimbursement of Government Agencies. Because this is a third-party trust, no Medicaid pay-back is required. Trustee shall not reimburse any governmental entity except to correct overpayments caused by Trustee error.
4.7 Spendthrift; Non-Assignment. Pursuant to MUTC § 72-38-502, the Qualified Spendthrift Provision prohibits voluntary or involuntary transfer, alienation, or attachment of Beneficiary’s interest before actual receipt.
4.8 Remainder Beneficiaries. Upon Beneficiary’s death, or earlier termination per Section 4.10, Trust Assets shall be distributed to [ALTERNATE BENEFICIARY SCHEME—e.g., “Settlor’s issue per stirpes,” or charities], subject to Government Benefit lien priorities, if any.
4.9 Early Termination for De Minimis Value. If Trust Assets fall below [THRESHOLD DOLLAR AMOUNT] and Trustee determines continued administration impracticable, Trustee may terminate and distribute per Section 4.8, provided no adverse effect on Government Benefits results.
4.10 Term and Termination. The Trust shall terminate on the earliest of: (a) Beneficiary’s death; (b) exhaustion of Trust Assets; or (c) lawful court order.
4.11 Accounting to Beneficiary. Trustee shall provide annual written accountings in accordance with MUTC § 72-38-813, unless waived by a guardian ad litem or court.
4.12 Alternate Beneficiary. If Beneficiary is definitively and permanently disqualified from all Government Benefits, Trustee may, after consulting counsel, distribute income or principal for Beneficiary’s support or designate an alternate beneficiary with court approval.
5. TRUSTEE PROVISIONS
5.1 Acceptance & Authority. By signing, Trustee accepts the office and all fiduciary duties under Montana law, including the prudent investor rule, MUTC § 72-38-901.
5.2 General Powers. In addition to powers under MUTC § 72-38-815, Trustee may:
a. Hold assets unproductive of income if advisable for benefits preservation;
b. Employ agents and delegate investment functions per MUTC § 72-38-807;
c. Compromise or litigate claims;
d. Invest in life insurance on Beneficiary; and
e. Execute documents to carry out Trust purposes.
5.3 Investment Philosophy. Trustee shall primarily preserve capital and liquidity to meet Beneficiary’s anticipated supplemental needs, balancing growth and risk consistent with benefits eligibility.
5.4 Compensation & Reimbursement. Trustee is entitled to reasonable compensation and reimbursement of Administrative Expenses from Trust Assets.
5.5 Successor Trustee. If the initial Trustee resigns, dies, or is removed, [SUCCESSOR TRUSTEE NAME] shall serve. Subsequent vacancies shall be filled by (in order): (i) [CORPORATE TRUSTEE DESIGNATION], (ii) majority of adult remainder beneficiaries, or (iii) court appointment.
5.6 Bond. No bond shall be required unless demanded by a court of competent jurisdiction.
5.7 Resignation. Trustee may resign on sixty (60) days’ notice to Settlor (if living), Beneficiary’s legal representative, and remainder beneficiaries, subject to court approval if required.
5.8 Co-Trustees. If co-trustees serve, actions require unanimous consent unless emergency distribution is needed, in which event any one co-trustee may act.
5.9 Trustee Indemnity. See Section 9.1.
6. REPRESENTATIONS & WARRANTIES
6.1 Settlor Representations. Settlor represents that:
a. Settlor owns all property transferred free of encumbrances;
b. The transfer will not render Settlor insolvent;
c. Settlor understands this Trust is irrevocable; and
d. All information regarding Beneficiary’s disability and Government Benefits is complete and accurate to Settlor’s knowledge.
6.2 Trustee Warranties. Trustee warrants that it is legally competent to serve and will administer the Trust in accordance with this Agreement and applicable law.
6.3 Survival. The representations and warranties survive the Effective Date and rely upon no external statement not contained herein.
7. COVENANTS & RESTRICTIONS
7.1 Settlor Covenant of Non-Revocation. Settlor covenants not to seek court modification that would undermine the supplemental needs purpose.
7.2 Trustee Covenants. Trustee shall:
a. Maintain records sufficient to verify compliance with Government Benefit rules;
b. Provide notices to relevant agencies if required under benefits regulations; and
c. Seek professional advice before any complex distribution.
7.3 Notice & Cure. A party alleging breach must provide written notice specifying the breach. The accused party has thirty (30) days to cure, unless the breach is incapable of cure.
8. DEFAULT, REMOVAL & REMEDIES
8.1 Events of Default. The following constitute Trustee default:
a. Willful misconduct or gross negligence;
b. Misappropriation or commingling of Trust Assets;
c. Persistent failure to render accountings.
8.2 Removal Procedure. Remainder beneficiaries or Beneficiary’s guardian may petition the state probate court for removal pursuant to MUTC § 72-38-706.
8.3 Remedies. Upon default, the court may order: (i) surcharge, (ii) removal, (iii) injunctive relief to protect assets, (iv) appointment of a special fiduciary, and (v) recovery of attorney fees from Trustee personally if misconduct is proven.
9. RISK ALLOCATION
9.1 Trustee Indemnification. Trustee and its agents shall be indemnified out of Trust Assets against any liability, loss, or expense arising from administration, except to the extent caused by Trustee’s willful misconduct or bad faith.
9.2 Limitation of Liability. Liability of Trustee, in any action relating to Trust administration, shall be limited to Trust Assets under Trustee’s control at the time of judgment. No personal or joint liability attaches to Trustee in its individual capacity except as provided in Section 9.1.
9.3 Insurance. Trustee may purchase fiduciary liability insurance payable from Trust Assets.
9.4 Force Majeure. Trustee is excused from performance for delays or failures caused by events beyond reasonable control, including natural disasters, war, or changes in applicable law affecting benefits eligibility.
10. DISPUTE RESOLUTION
10.1 Governing Law. This Agreement and all disputes hereunder shall be governed by the laws of the State of Montana, without regard to conflict-of-law principles.
10.2 Forum Selection. Exclusive jurisdiction and venue reside in the [NAME OF COUNTY] District Court, Probate Division, State of Montana.
10.3 Mediation. Prior to litigation, parties shall submit disputes to non-binding mediation in [COUNTY], Montana, during the Mediation Period. Costs shall be paid from Trust Assets unless otherwise allocated by the mediator.
10.4 Limited Arbitration. If mediation fails, parties may agree in writing to binding arbitration under the Montana Uniform Arbitration Act, but only for matters not requiring court approval under MUTC (e.g., accounting objections).
10.5 Jury Waiver. Given probate court jurisdiction, no jury trial right attaches.
10.6 Injunctive Relief. Nothing herein limits the right of any interested party to seek temporary or permanent injunctive relief for Trust enforcement.
11. GENERAL PROVISIONS
11.1 Amendment & Reformation. This Trust may not be amended except (a) to the extent permitted by MUTC §§ 72-38-411 to 416, and (b) only if the supplemental needs purpose and Government Benefits eligibility are preserved.
11.2 Severability. If any provision is invalid or unenforceable, the remaining provisions remain in full force, and a court may reform the Trust to effectuate Settlor’s intent.
11.3 Assignment. No party may assign rights or delegate duties hereunder except as expressly allowed.
11.4 Successors & Assigns. This Agreement binds and benefits all permitted successors, assigns, and fiduciaries.
11.5 Integration. This document constitutes the entire agreement regarding the Trust and supersedes all prior understandings.
11.6 Counterparts; Electronic Signatures. This Agreement may be executed in multiple counterparts, including facsimile or electronic PDF signatures, each deemed an original.
11.7 Headings. Section headings are for convenience only and do not affect interpretation.
12. EXECUTION BLOCK
IN WITNESS WHEREOF, the parties have executed this Special Needs Trust Agreement as of the Effective Date.
Settlor
[SETTLOR NAME]
Trustee
[TRUSTEE NAME], Trustee
[// GUIDANCE: To enhance enforceability, include a notary acknowledgment for each signatory per Mont. Code Ann. § 1-5-610 and obtain two disinterested witnesses if local practice so dictates.]
NOTARIZATION
STATE OF MONTANA )
: ss.
COUNTY OF _____ )
On this ___ day of ____, 20__, before me, the undersigned Notary Public, personally appeared [SETTLOR NAME] and [TRUSTEE NAME], known to me or proved to me on the basis of satisfactory evidence to be the individuals whose names are subscribed to this instrument, and acknowledged that they executed the same for the purposes therein contained.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
Notary Public for the State of Montana
Residing at: ___
My commission expires: ______
SCHEDULE A – INITIAL TRUST PROPERTY
[// GUIDANCE: Provide detailed description of cash, securities, or other assets delivered to Trustee, including account numbers and approximate values.]
[END OF DOCUMENT]