SPECIAL NEEDS TRUST AGREEMENT
(New Mexico – Irrevocable Supplemental Needs Trust)
[// GUIDANCE: This template is intentionally comprehensive.
Delete bracketed placeholders, adjust section numbering if provisions are added/removed, and conform signature/notarization blocks to county-specific recording requirements before execution.]
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
1.1 Title
Special Needs Trust Agreement (the “Trust”).
1.2 Parties
(a) Settlor: [SETTLOR FULL LEGAL NAME], a resident of [COUNTY], New Mexico (“Settlor”);
(b) Initial Trustee: [TRUSTEE FULL LEGAL NAME], whose address is [ADDRESS] (the “Trustee”);
(c) Primary Beneficiary: [DISABLED BENEFICIARY FULL LEGAL NAME], SSN-ending [XXX-XX-____] (the “Beneficiary”).
1.3 Effective Date
This Trust is effective [DATE] (the “Effective Date”).
1.4 Governing Law & Jurisdiction
This Trust is governed by and construed in accordance with the laws of the State of New Mexico, including the New Mexico Uniform Trust Code, NMSA 1978, § 46A-1-101 et seq. (the “NMUTC”). Venue for all trust matters lies exclusively in the probate division of the district court of [COUNTY], New Mexico (the “Probate Court”).
1.5 Recitals
A. Settlor desires to provide for the Beneficiary, who is classified as “disabled” under 42 U.S.C. § 1382c(a)(3), without jeopardizing Beneficiary’s eligibility for means-tested government benefits, including Supplemental Security Income (“SSI”) and Medicaid (collectively, “Means-Tested Government Benefits”).
B. The Trust is established as a discretionary, irrevocable supplemental needs trust intended to conform to 42 U.S.C. § 1396p(d) and applicable New Mexico law.
C. Settlor hereby transfers and delivers to the Trustee the property described on Schedule A (the “Initial Trust Estate”) and intends to make additional transfers from time to time.
II. DEFINITIONS
For ease of reference, capitalized terms are defined alphabetically below.
“Alternate Beneficiary” – The person(s) or entity(ies) designated in § III.12 to receive any remaining Trust Estate upon termination.
“Beneficiary” – The individual identified in § 1.2(c).
“Beneficiary’s Lifetime” – The period commencing on the Effective Date and ending on the Beneficiary’s death.
“Distribution Standards” – The discretionary standards set forth in § III.5 governing distributions for Supplemental Needs.
“Government Agencies” – Any federal, state, or local agency administering Means-Tested Government Benefits.
“Means-Tested Government Benefits” – SSI, Medicaid, SNAP, housing subsidies, and any other means-tested public assistance program now or hereafter in effect.
“Protected Resources” – Assets or income excluded from resource and income calculations for Means-Tested Government Benefits under applicable law and agency policy.
“Supplemental Needs” – The Beneficiary’s special or supplemental medical, therapeutic, educational, recreational, technological, and quality-of-life needs not otherwise provided or fully covered by Means-Tested Government Benefits, as further detailed in § III.5(b).
“Trust” – This Special Needs Trust Agreement, together with any amendments permitted herein.
“Trust Estate” – All property, real or personal, tangible or intangible, including all additions and accretions, subject to the Trust.
“Trustee” – The person or institution acting as trustee of the Trust, including any Successor Trustee.
III. OPERATIVE PROVISIONS
3.1 Creation & Irrevocability
(a) The Trust is irrevocable. Settlor expressly waives all rights or powers, whether alone or in conjunction with others, to alter, revoke, or terminate the Trust except as provided in § IX.1 (Administrative Amendments).
(b) Beneficiary shall have no power to compel distributions, modify, revoke, or assign any interest in the Trust.
3.2 Funding
The Trustee acknowledges receipt of the Initial Trust Estate and shall hold, manage, invest, and distribute the Trust Estate subject to this Agreement. Additional property may be added to the Trust at any time with Trustee consent, provided such additions are compatible with Means-Tested Government Benefit rules.
3.3 Spendthrift Protection
To the maximum extent permitted under applicable law, all interests in the Trust shall be held subject to a spendthrift provision. No beneficiary may anticipate, assign, pledge, or encumber any interest in the Trust, nor shall such interests be subject to attachment, levy, or other legal process.
3.4 Sole Benefit Requirement
All distributions must be for the sole benefit of the Beneficiary during Beneficiary’s Lifetime and in strict accordance with the Distribution Standards.
3.5 Distribution Standards
(a) Pure Discretion. The Trustee shall have sole and absolute discretion to distribute so much of the net income and principal as the Trustee deems advisable for the Beneficiary’s Supplemental Needs.
(b) Supplemental Needs Defined. Supplemental Needs include, without limitation:
• Medical, dental, vision, psychiatric, and psychological services not covered by insurance or public benefits;
• Assistive devices, rehabilitation, and habilitation services;
• Education, tutoring, vocational training, and employment supports;
• Modifications to vehicles and residences;
• Computers, internet access, and adaptive technology;
• Travel, recreation, cultural experiences, and companion services;
• Legal, advocacy, and fiduciary expenses.
(c) Prohibition on Support Distributions. The Trustee shall avoid any distribution that would be considered “support or maintenance” under SSI/Medicaid regulations (e.g., food or shelter) unless the Trustee, after consultation with qualified counsel, determines that the benefit of such distribution outweighs any resulting reduction in benefits.
(d) Cash Policy. Cash distributions directly to the Beneficiary are strongly discouraged and should be made only after evaluating the potential impact on benefits eligibility.
(e) Trustee Documentation. The Trustee shall maintain contemporaneous records of the purpose and amount of every distribution.
3.6 Right to Refuse Distribution
The Trustee may refuse any request for distribution that the Trustee reasonably believes may (i) jeopardize Means-Tested Government Benefits, (ii) violate the Distribution Standards, or (iii) contravene applicable law.
3.7 Trustee Powers
In addition to all powers granted by law, the Trustee may, without court order:
(a) Invest and reinvest in any property the Trustee deems prudent, without regard to diversification rules that might otherwise apply;
(b) Employ professionals, including investment advisers, attorneys, and accountants, and pay their fees from the Trust Estate;
(c) Buy, sell, lease, exchange, or encumber Trust property;
(d) Make distributions in cash or in kind;
(e) Allocate receipts and expenses between income and principal as the Trustee deems equitable;
(f) Prosecute or defend claims at the expense and risk of the Trust Estate; and
(g) Execute and deliver any instrument necessary or desirable to carry out the Trust purposes.
3.8 Trustee Succession
(a) Successor Trustees. If the Trustee resigns, is removed, or ceases to serve, the next person named in Schedule B shall become Trustee.
(b) Resignation. The Trustee may resign upon at least 30 days’ written notice to the Settlor (if living), the Beneficiary, and any co-trustee or successor trustee.
(c) Removal. The Probate Court may remove any Trustee for cause upon petition of the Beneficiary, Settlor, co-trustee, or Government Agency with standing.
3.9 Trustee Bond
No bond shall be required of any Trustee unless ordered by the Probate Court.
3.10 Accountings & Reporting
(a) Annual Accounting. Within 90 days after each calendar year-end, the Trustee shall provide an accounting to the Beneficiary (or court-appointed guardian) and any other party entitled to receive an accounting under applicable law.
(b) Agency Reporting. The Trustee shall timely respond to any information request or audit by Government Agencies and shall furnish such reports as those agencies require to determine or maintain the Beneficiary’s eligibility.
3.11 Taxes
The Trust is intended to be a “grantor trust” for federal income tax purposes. The Trustee shall sign and file all required tax returns. Any income tax attributable to Trust income shall, to the extent permitted by law, be paid from the Trust Estate.
3.12 Termination & Remainder
(a) Mandatory Termination. The Trust shall terminate upon the earliest of:
(1) the death of the Beneficiary;
(2) exhaustion of the Trust Estate; or
(3) a final judicial determination that continuation of the Trust is unlawful or impossible.
(b) Disposition of Remainder. Upon termination:
(1) First-Party Payback (if Trust funded with Beneficiary’s assets): The Trustee shall reimburse the New Mexico Human Services Department and any other state(s) that provided Medicaid benefits to the Beneficiary, up to the total medical assistance paid on behalf of the Beneficiary.
(2) Remaining Balance. After satisfying any Medicaid payback obligation, the Trustee shall distribute the remaining Trust Estate to the Alternate Beneficiary(ies) designated in Schedule C, per-stirpes unless otherwise indicated.
(c) Hold-back for Expenses. Prior to final distribution, the Trustee may hold a reasonable reserve for unpaid expenses, taxes, or liabilities.
IV. REPRESENTATIONS & WARRANTIES
4.1 Settlor
(a) Authority. Settlor has full legal right, power, and authority to establish this Trust and to transfer the property listed in Schedule A.
(b) No Conflicts. The execution and delivery of this Trust does not conflict with any other agreement or court order binding on the Settlor.
4.2 Trustee
(a) Acceptance. The Trustee accepts the trusteeship and agrees to administer the Trust in good faith, in a manner consistent with the purposes herein, and in accordance with the NMUTC and other applicable law.
(b) Fiduciary Duty. The Trustee acknowledges fiduciary duties of loyalty and prudent administration to the extent not specifically modified by this Agreement.
4.3 Survival
All representations and warranties survive the execution of this Trust and remain in effect during the lifetime of the Trust.
V. COVENANTS & RESTRICTIONS
5.1 Compliance with Benefit Rules
The Trustee shall administer the Trust to preserve the Beneficiary’s eligibility for Means-Tested Government Benefits.
5.2 Consultation
The Trustee shall consult with professionals knowledgeable in special needs planning before making any distribution with uncertain benefit impact.
5.3 Notice of Changes
The Trustee shall notify the Beneficiary (or guardian) and Government Agencies of any material change to the Trust that may affect eligibility.
5.4 No Commingling
Trust assets shall be maintained separate from the Trustee’s personal assets and from any other trust or account except as permitted under pooled-trust rules (if applicable).
VI. DEFAULT & REMEDIES
6.1 Events of Default
An “Event of Default” occurs if a Trustee:
(a) commits a material breach of trust;
(b) fails to provide required accountings within 60 days after written notice;
(c) is adjudicated bankrupt or insolvent; or
(d) is convicted of a felony or crime involving dishonesty or breach of fiduciary duty.
6.2 Notice & Cure
Before seeking removal, any interested party shall give the Trustee written notice of the default and a 30-day opportunity to cure, unless cure is impossible or further delay would cause irreparable harm.
6.3 Remedies
Upon an uncured Event of Default, the Probate Court may:
(a) remove the Trustee and appoint a Successor Trustee;
(b) surcharge the Trustee’s fiduciary bond or Trust compensation;
(c) issue injunctive relief to protect the Trust Estate; and/or
(d) award reasonable attorney fees and costs to the prevailing party.
VII. RISK ALLOCATION
7.1 Trustee Indemnification
The Trust Estate shall indemnify and hold the Trustee harmless from and against any loss, liability, or expense (including reasonable attorney fees) incurred by reason of any act or omission within the scope of the Trustee’s authority, except such as result from the Trustee’s willful misconduct or gross negligence.
7.2 Limitation of Liability
The Trustee’s liability is limited to the Trust Estate; the Trustee shall not be personally liable for obligations arising under this Trust, except to the extent of willful misconduct or gross negligence.
7.3 Insurance
The Trustee is authorized, but not required, to purchase fiduciary liability insurance payable from the Trust Estate.
7.4 Force Majeure
The Trustee shall not be liable for failure to perform caused by acts of God, governmental restrictions, pandemics, war, or other causes beyond reasonable control, provided the Trustee acts diligently to resume performance.
VIII. DISPUTE RESOLUTION
8.1 Governing Law
New Mexico substantive and procedural law governs all disputes.
8.2 Forum Selection
Exclusive venue lies in the Probate Court, which retains continuing jurisdiction over the Trust.
8.3 Limited Arbitration
Notwithstanding § 8.2, upon mutual written agreement of all then-serving fiduciaries and all beneficiaries with legal capacity, discrete investment-related disputes not involving Trust administration or beneficiary distributions may be submitted to binding arbitration under the New Mexico Uniform Arbitration Act. Any arbitral award shall not limit the Probate Court’s supervisory authority.
8.4 Jury Waiver
Proceedings in the Probate Court are bench proceedings; no party shall demand a jury trial.
8.5 Injunctive Relief
Nothing herein limits the Probate Court’s power to grant temporary restraining orders, preliminary injunctions, or other equitable relief to protect the Trust Estate or enforce fiduciary duties.
IX. GENERAL PROVISIONS
9.1 Administrative Amendments
The Trustee, with written consent of the Beneficiary (or guardian) and approval of the Probate Court, may amend this Trust solely to:
(a) comply with changes in federal or state law affecting Means-Tested Government Benefits;
(b) maintain tax status or clarify administrative provisions; or
(c) correct scrivener’s errors.
No amendment may expand the Beneficiary’s right to compel distributions or revoke the Trust.
9.2 Waiver
Failure to enforce any provision shall not constitute a waiver of that or any other provision.
9.3 Assignment
Except as expressly permitted, no party may assign rights or delegate duties under this Trust without Probate Court approval.
9.4 Successors & Assigns
This Trust is binding upon and inures to the benefit of the parties’ respective heirs, personal representatives, successors, and permitted assigns.
9.5 Severability
If any provision is held invalid or unenforceable, that provision shall be reformed to the minimum extent necessary, and the remaining provisions shall remain in full force.
9.6 Entire Agreement
This document constitutes the entire agreement of the parties concerning the subject matter herein and supersedes all prior agreements or understandings.
9.7 Counterparts & Electronic Signatures
This Trust may be executed in counterparts, each of which is deemed an original. Signatures transmitted electronically or by facsimile have the same effect as originals.
X. EXECUTION BLOCK
IN WITNESS WHEREOF, the Settlor and Trustee have executed this Special Needs Trust Agreement as of the Effective Date.
Settlor
[SETTLOR NAME]
Date: _______
Trustee
[TRUSTEE NAME], Trustee
Date: _______
[// GUIDANCE: If the Trustee is an institution, add officer title and attestation lines.]
NOTARY ACKNOWLEDGMENT
State of New Mexico
County of [__]
This instrument was acknowledged before me on ____, 20_, by [SETTLOR NAME] as Settlor and by [TRUSTEE NAME] as Trustee.
Notary Public
My Commission Expires: ___
SCHEDULE A – INITIAL TRUST ESTATE
[Detailed list of cash, securities, real property, insurance proceeds, or other assets being transferred.]
SCHEDULE B – SUCCESSOR TRUSTEE DESIGNATION
- [NAME, ADDRESS, PHONE]
- [NAME, ADDRESS, PHONE]
[// GUIDANCE: Include procedures for institutional trustee acceptance if desired.]
SCHEDULE C – ALTERNATE BENEFICIARIES
[List names, relationships, and shares or percentages.]
[// GUIDANCE: Review all cross-references after any modification. Confirm Medicaid payback clause (§ III.12) aligns with funding source (first-party vs. third-party). Remove payback language if the Trust will never receive the Beneficiary’s assets.]