Special Needs Trust - North Dakota

NORTH DAKOTA SUPPLEMENTAL NEEDS TRUST AGREEMENT

(Irrevocable Discretionary “Special Needs” Trust)

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. Title. North Dakota Supplemental Needs Trust Agreement (this “Agreement” or “Trust”).

2. Parties.
   a. Settlor(s): [SETTLOR NAME(S)] (“Settlor”).
   b. Initial Trustee: [TRUSTEE NAME] (“Trustee”).
   c. Beneficiary: [BENEFICIARY NAME], born [DOB], a person with a “Disability” (as defined below).

3. Recitals.
   A. Settlor desires to establish an irrevocable trust for the sole benefit of Beneficiary to supplement, not supplant, Beneficiary’s Government Benefits.
   B. This Trust is intended to qualify as a "third-party special needs trust" under N.D.C.C. § 59-08-01(3) and § 59-08-02, and (if and to the extent funded with Beneficiary's own assets under § III(8)(b)(ii)) as a "self-settled special needs trust" under N.D.C.C. § 59-08-01(2) meeting the requirements of 42 U.S.C. § 1396p(d)(4)(A).
   C. Trustee is willing to serve under the terms set forth herein.

4. Effective Date. This Trust is executed and effective as of [DATE] (“Effective Date”).

5. Governing Law. This Agreement and the administration of the Trust shall be governed by the laws of the State of North Dakota (“Governing Law”).
6. Forum Court. “Forum Court” means a North Dakota district court having jurisdiction under N.D.C.C. § 30.1-02-02 and proper venue under applicable law.

II. DEFINITIONS

For ease of reference, capitalized terms are listed alphabetically.

“Act” – 42 U.S.C. § 1396p(d) and related federal statutes protecting Government Benefits.
“Agreement” – This North Dakota Supplemental Needs Trust Agreement.
“Arbitration Provision” – The limited arbitration mechanism in § VIII(3), conducted under the North Dakota Uniform Arbitration Act, N.D.C.C. ch. 32-29.3.
“Beneficiary” – The individual identified in § I(2)(c).
“Disability” – A disability as defined in 42 U.S.C. § 1382c(a)(3).
“Distribution Standard” – The discretionary, supplemental-needs standard in § III(4).
“Government Benefits” – Means-tested public benefits, including but not limited to Medicaid and Supplemental Security Income (“SSI”).
“Self-Settled Special Needs Trust” – A special needs trust funded with assets belonging to Beneficiary, as defined in N.D.C.C. § 59-08-01(2), which must be authorized by the Forum Court under N.D.C.C. § 59-08-03 and which qualifies under 42 U.S.C. § 1396p(d)(4)(A).
“Settlor” – The person(s) identified in § I(2)(a).
“Special Needs” – Needs that enhance Beneficiary’s quality of life but are not basic support (food, shelter) provided by Government Benefits.
“Third-Party Special Needs Trust” – A special needs trust funded by a person other than Beneficiary, Beneficiary's spouse, a parent of a minor Beneficiary, or a person obligated to pay sums to or for Beneficiary under a settlement or judgment, as defined in N.D.C.C. § 59-08-01(3), and subject to N.D.C.C. § 59-08-02.
“Trust” / “Trust Estate” – All property, tangible or intangible, held under this Agreement, including additions and accretions.
“Trustee” – The individual or corporate trustee acting from time to time under this Agreement.
“Trustee Indemnified Parties” – Trustee, its affiliates, officers, directors, employees, and agents.

III. OPERATIVE PROVISIONS

1. Establishment & Irrevocability.
   a. Settlor hereby irrevocably transfers the property described in Schedule A (attached) to Trustee, to be held, managed, and distributed under this Agreement.
   b. Except as expressly allowed herein, this Trust is irrevocable; Settlor reserves no reversionary interest.
   c. Third-Party Funding (Default). As described in Schedule A, this Trust is funded solely with assets of Settlor (or another third party), and is intended as a Third-Party Special Needs Trust under N.D.C.C. §§ 59-08-01(3) and 59-08-02. No provision of this Agreement shall be construed to make this a Self-Settled Special Needs Trust unless Schedule A or an amendment expressly identifies Trust property as belonging to Beneficiary.
   d. Self-Settled Funding (If Applicable). If any property listed on Schedule A belongs to Beneficiary (e.g., a personal-injury settlement, inheritance, or accrued benefits), this Trust is, to that extent, a Self-Settled Special Needs Trust under N.D.C.C. § 59-08-01(2), and its creation and funding with such property must be authorized by the Forum Court under N.D.C.C. § 59-08-03.

2. Additional Contributions. Settlor or any third party may make additional, irrevocable contributions, subject to Trustee’s acceptance and § III(8). Any contribution of assets belonging to Beneficiary converts this Trust, to the extent of that contribution, into a Self-Settled Special Needs Trust subject to § III(1)(d) and the payback requirement of § III(8)(b)(ii).

3. Purpose. To provide for Beneficiary’s Special Needs while preserving eligibility for Government Benefits.

4. Distribution Standard.
   a. Sole Discretion. Trustee may distribute so much of the Trust Estate as Trustee, in sole and absolute discretion, deems advisable for Beneficiary’s Special Needs.
   b. Prohibited Distributions. Absent prior written confirmation from qualified benefits counsel:
   i. No distributions for Beneficiary’s basic shelter (food is no longer counted as in-kind support and maintenance under the Social Security Administration's final rule, 89 Fed. Reg. 21,199 (Mar. 27, 2024), eff. Sept. 30, 2024; see 20 C.F.R. § 416.1130);
   ii. No distributions paid directly to Beneficiary;
   iii. No distributions that would reduce or eliminate Government Benefits.
   c. Permitted Distributions (non-exhaustive): therapy, education, adaptive equipment, transportation, home modifications, recreation, vacations with caregiver, and insurance premiums.

5. Spendthrift Protection. All interests under this Trust are subject to a valid spendthrift provision under N.D.C.C. § 59-13-02; neither Beneficiary nor any remainder beneficiary may voluntarily or involuntarily transfer, assign, or encumber any interest herein. The child/spousal-support and governmental-claim exceptions to spendthrift protection that would otherwise apply under N.D.C.C. § 59-13-03(2) do not apply to this Trust, because N.D.C.C. § 59-13-03(3) expressly excludes self-settled and third-party special needs trusts under chapter 59-08, and trusts meeting 42 U.S.C. § 1396p(d), from those exceptions.

6. Trustee Powers. Subject to § III(4) and Governing Law, Trustee shall have all powers granted under N.D.C.C. § 59-16-15 (general powers) and § 59-16-16 (specific powers), including but not limited to:
   a. Invest and reinvest;
   b. Employ professionals and delegate authority;
   c. Compromise claims;
   d. Lend or borrow;
   e. Lease, sell, or exchange Trust assets;
   f. Determine income and principal allocations.

7. Trustee Succession.
   a. Resignation. Trustee may resign on at least 30 days’ written notice to Settlor (if living), any co-trustee, and Beneficiary’s legal representative, or with the Forum Court's approval, consistent with N.D.C.C. § 59-15-05.
   b. Removal. Settlor (if living), a co-trustee, or Beneficiary (through Beneficiary's legal representative) may request the Forum Court to remove Trustee for the grounds recognized under N.D.C.C. § 59-15-06 (including serious breach of trust, unfitness, or unwillingness or persistent failure to administer the Trust effectively); the Forum Court may also remove Trustee on its own initiative.
   c. Successor Appointment. [NAME ORDER OF SUCCESSOR TRUSTEES]; if none, the Forum Court shall appoint a licensed professional or corporate trustee experienced in managing special needs trusts, consistent with N.D.C.C. § 59-15-04.

8. Termination; Remainder.
   a. Standard Termination. This Trust terminates on Beneficiary’s death.
   b. Distribution of Remainder. Upon termination:
   i. Third-Party Funded Trust (Default). Trustee shall distribute remaining assets to [NAME OF REMAINDER BENEFICIARIES] or their estates, per stirpes.
   ii. Optional Payback Clause – First-Party Funding Only. Notwithstanding § III(8)(b)(i), if any Trust corpus consists of assets belonging to Beneficiary, Trustee shall first repay the North Dakota Department of Health & Human Services (and any other state Medicaid agency) up to the total amount of medical assistance paid on Beneficiary’s behalf, as required by 42 U.S.C. § 1396p(d)(4)(A).
   c. Early Termination. Trustee may petition the Forum Court for early termination only if continued administration is impossible or contrary to Beneficiary’s interests and Government Benefits can be preserved.

9. Administrative Matters.
   a. Accountings. At least annually, Trustee shall deliver a written accounting to Beneficiary’s legal representative and any co-trustee, consistent with the duty to inform and report under N.D.C.C. § 59-16-13.
   b. Compensation. Trustee’s compensation shall be the lesser of (i) Trustee’s published fee schedule, or (ii) [PERCENTAGE]% of Trust assets per annum.
   c. Bond. [REQUIRED / WAIVED] unless ordered by the Forum Court.

IV. REPRESENTATIONS & WARRANTIES

1. Settlor.
   a. Settlor has full legal capacity and title to transfer the assets listed in Schedule A;
   b. Transfer of such assets does not violate any agreement or law;
   c. The Trust’s establishment is not a fraudulent conveyance.

2. Trustee.
   a. Trustee is duly qualified and, if an entity, in good standing under applicable law;
   b. Trustee has reviewed this Agreement and understands fiduciary duties under North Dakota law;
   c. Trustee is not under any conflict of interest that would impair independent judgment.

3. Survival. The foregoing representations and warranties survive execution and remain in effect for the duration of the Trust.

V. COVENANTS & RESTRICTIONS

1. Trustee Covenants.
   a. Administer the Trust exclusively for Beneficiary’s sole benefit;
   b. Maintain records adequate to satisfy federal and state reporting requirements;
   c. File all required tax returns (EIN-based) and obtain professional tax advice;
   d. Notify Beneficiary’s benefits caseworker in writing within 30 days of any change that could affect eligibility.

2. Settlor Covenants.
   a. Deliver any additional contributions free and clear of liens;
   b. Execute all documents reasonably requested by Trustee.

3. Restrictions. No amendment or action shall:
   a. Divest Beneficiary of beneficial enjoyment during lifetime;
   b. Authorize distributions contrary to § III(4);
   c. Eliminate the Spendthrift Protection in § III(5).

VI. DEFAULT & REMEDIES

1. Breach of Trust. A violation by the Trustee of a duty owed to a Beneficiary is a breach of trust under N.D.C.C. § 59-18-01.

2. No Private Delay. No notice-and-cure period in this Agreement delays a remedy authorized by applicable law.

3. Remedies. A person with standing may request relief authorized by N.D.C.C. § 59-18-01, including performance, an accounting, redress by payment or restoration, injunction, suspension, removal, appointment of a special fiduciary, or other appropriate relief. Costs and attorney fees are available only when authorized by applicable law or court order.

VII. RISK ALLOCATION

1. Exculpation and Indemnification. No term relieves the Trustee of liability beyond the limits permitted by N.D.C.C. § 59-18-08. Reimbursement or indemnification from Trust property is available only as authorized by this Agreement and applicable law.

2. Personal Liability. N.D.C.C. § 59-18-10 governs the Trustee's personal liability on fiduciary contracts, torts, and obligations arising from ownership or control of Trust property. This Agreement does not impose a blanket Trust-Estate liability cap.

3. Insurance. Under N.D.C.C. § 59-16-16(11), the Trustee may insure the Trustee against liability at Trust expense.

4. No Contractual Excuse. No force-majeure provision excuses a duty imposed by applicable trust law.

VIII. DISPUTE RESOLUTION

1. Governing Law. This Agreement is governed by North Dakota law without regard to conflict-of-laws principles.

2. Court. Judicial proceedings concerning the Trust shall be brought in a North Dakota district court with jurisdiction under N.D.C.C. § 30.1-02-02, with venue governed by applicable law.

3. Alternative Dispute Resolution. N.D.C.C. § 59-16-16(23) permits the Trustee to resolve a dispute concerning interpretation or administration by mediation, arbitration, or another alternative-dispute-resolution procedure. This Agreement does not require ADR or remove any matter from a court that has exclusive jurisdiction.

4. Trial Rights. This Agreement does not waive any trial right supplied by applicable law.

5. Injunctive Relief. Under N.D.C.C. § 59-18-01, the court may enjoin a breach of trust that has occurred or may occur.

IX. GENERAL PROVISIONS

1. Amendment & Reformation. Only the Forum Court may amend or reform this Agreement, and then solely to:
   a. Conform to changes in federal or state law governing Special Needs Trusts; or
   b. Correct scrivener’s errors;
   provided that Beneficiary’s eligibility for Government Benefits is not impaired. Trustee or Settlor may seek such court reformation under N.D.C.C. § 59-08-04(3) to accomplish the purpose of a third-party or self-settled special needs trust under chapter 59-08.

2. Waiver. No waiver of any provision shall be effective unless in writing and signed by the waiving party.

3. Assignment. Rights hereunder are personal and may not be assigned except as expressly provided.

4. Successors & Assigns. This Agreement binds and benefits the parties and their respective successors and permitted assigns.

5. Severability. If any provision is invalid or unenforceable, remaining provisions shall remain in full force; the invalid provision shall be reformed to the minimum extent necessary.

6. Integration. This Agreement (including Schedule A) is the entire agreement of the parties regarding the Trust and supersedes all prior writings.

7. Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, each of which is an original; electronic signatures shall be deemed originals for all purposes.

X. EXECUTION BLOCK

IN WITNESS WHEREOF, the parties have executed this North Dakota Supplemental Needs Trust Agreement as of the Effective Date.

Settlor

______________________________
[SETTLOR NAME] – Settlor
Date: ________________________

Trustee

______________________________
[TRUSTEE NAME] – Trustee
Date: ________________________

Notarization (Recommended)

State of North Dakota )
County of [COUNTY] ) ss.

On this ___ day of __________, 20__, before me, a Notary Public, personally appeared [SETTLOR NAME and/or TRUSTEE NAME], known to me or satisfactorily proven to be the person(s) whose name(s) are subscribed to this instrument, and acknowledged that they executed the same for the purposes therein contained.

______________________________
Notary Public
My Commission Expires: __________

SCHEDULE A – INITIAL TRUST PROPERTY

[Detailed description of cash, securities, real property, or other assets transferred to the Trust.]