SOUTH DAKOTA DISCRETIONARY SUPPLEMENTAL (SPECIAL) NEEDS TRUST AGREEMENT

[Clean Template for Attorney Customization]

[// GUIDANCE: This template is designed for either a “first-party” (self-settled) special needs trust compliant with 42 U.S.C. § 1396p(d)(4)(A) OR a “third-party” supplemental needs trust. Select the appropriate bracketed options and delete inapplicable language before execution.]

TABLE OF CONTENTS

1. Document Header
2. Definitions
3. Establishment of Trust & Funding
4. Purpose; Supplemental Needs Standard
5. Trust Administration
6. Distributions
7. Public Benefits Compliance
8. Trustee Provisions
9. Indemnification; Limitation of Liability
10. Records; Accounting; Inspection Rights
11. Default; Remedies
12. Governing Law; Forum; Dispute Resolution
13. General Provisions
14. Execution Block

1. DOCUMENT HEADER

1.1 Title and Parties

THIS SOUTH DAKOTA DISCRETIONARY SUPPLEMENTAL (SPECIAL) NEEDS TRUST AGREEMENT (this “Trust Agreement”) is made and entered into as of [EFFECTIVE DATE] (the “Effective Date”) by and among:

• [SETTLOR NAME(S)], an individual having an address at [ADDRESS] (“Settlor”);
• [PRIMARY TRUSTEE NAME], having an address at [ADDRESS] (“Trustee”); and
• [BENEFICIARY NAME], the individual beneficiary for whose exclusive benefit this Trust is established (the “Beneficiary”).

1.2 Recitals

A. Settlor desires to establish an irrevocable trust for the sole benefit of Beneficiary, who has a medically verified permanent disability as defined under applicable federal and South Dakota law.
B. The intent of Settlor is to preserve Beneficiary’s eligibility for means-tested public assistance programs, including Supplemental Security Income (“SSI”), Medicaid, and similar benefits, while providing for Beneficiary’s supplemental and special needs.
C. Trustee is willing to accept the trusteeship of this Trust in accordance with the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Settlor hereby irrevocably establishes the following Trust on the terms and conditions below.

2. DEFINITIONS

Unless the context clearly requires otherwise, the following capitalized terms shall have the meanings set forth below:

“Accountant” – The independent certified public accountant engaged under Section 10.1.
“Applicable Law” – All federal, state, and local statutes, regulations, judicial decisions, and other legal requirements, including the South Dakota Uniform Trust Code, S.D. Codified Laws ch. 55-1A, and 42 U.S.C. § 1396p.
“Beneficiary” – The person identified in Section 1.1 who meets the disability criteria under 42 U.S.C. § 1382c(a)(3).
“Disability Certification” – Written confirmation from a qualified physician that Beneficiary’s condition satisfies Applicable Law disability standards.
“Dispositive Provisions” – Articles relating to distributions, remainder interests, and termination.
“Expenses” – All costs, fees, taxes, assessments, penalties, and other charges reasonably incurred in administering the Trust.
“Protected Benefits” – Means-tested governmental assistance programs, including but not limited to SSI, Medicaid, SNAP, Section 8 housing, and any successor programs.
“Special Needs” – Needs not otherwise provided by public assistance, including but not limited to education, habilitation, transportation, recreation, adaptive equipment, therapies, and other items enhancing quality of life.
“Trust” – The irrevocable trust created by this Trust Agreement.
“Trust Assets” – All property, tangible or intangible, transferred to or acquired by the Trust, together with all reinvestments, proceeds, and accretions.
“Trust Estate” – Same meaning as Trust Assets.
“Trustee” – Each person or entity serving as trustee under this Trust Agreement, including any successor.

[// GUIDANCE: Add additional defined terms as needed (e.g., “Investment Advisor,” “Distribution Advisor”). Ensure cross-references remain accurate.]

3. ESTABLISHMENT OF TRUST & FUNDING

3.1 Irrevocable Trust. The Trust is irrevocable. Except as expressly provided herein or by non-waivable law, Settlor retains no right or power, whether alone or in conjunction with another, to alter, amend, revoke, or terminate the Trust, or to direct the disposition of Trust Assets.

3.2 Initial Funding. Concurrently with the execution of this Trust Agreement, Settlor hereby transfers and delivers to Trustee the property described on Schedule A (the “Initial Contribution”).

3.3 Additional Contributions. Trustee may accept additional property from any person, including Settlor, at any time, provided such contributions are irrevocably transferred to the Trust and clearly identified as subject to this Trust Agreement.

3.4 Characterization. [SELECT ONE]
☐ Third-Party Trust – No assets of Beneficiary are contributed; therefore no Medicaid “payback” provision is required.
☐ First-Party Trust – The Trust is funded with Beneficiary’s own assets and must therefore comply with 42 U.S.C. § 1396p(d)(4)(A), including the mandatory payback provision of Section 7.6.

[// GUIDANCE: Delete the inapplicable option.]

4. PURPOSE; SUPPLEMENTAL NEEDS STANDARD

4.1 Primary Purpose. The paramount purpose of this Trust is to supplement, and not to supplant or replace, any Protected Benefits to which Beneficiary may be, or may become, entitled. Distributions shall be made solely in a manner and to an extent that does not disqualify or reduce Beneficiary’s Protected Benefits, unless Trustee determines that such distribution is in Beneficiary’s best interests notwithstanding any consequential reduction or loss of benefits.

4.2 No Support Obligation. Settlor expressly disclaims any intent to satisfy any legal support obligation through this Trust. No language herein shall be construed to create enforceable support rights in Beneficiary.

4.3 Spendthrift Protection. To the maximum extent permitted by Applicable Law, all interests of Beneficiary are held subject to a spendthrift trust. Beneficiary shall have no power to anticipate, assign, pledge, encumber, or transfer any interest in the Trust, nor shall such interests be subject to the claims of creditors.

5. TRUST ADMINISTRATION

5.1 General Powers. Subject to the terms hereof, Trustee shall have all powers granted to a trustee under S.D. Codified Laws § 55-2-1 et seq. and any successor provisions, including the power to retain, invest, reinvest, sell, lease, or otherwise manage Trust Assets.

5.2 Investment Standard. Trustee shall invest and manage the Trust Assets as a prudent investor in accordance with S.D. Codified Laws § 55-5-6 et seq., taking into account Beneficiary’s supplemental needs, tax considerations, liquidity requirements, and anticipated duration of the Trust.

5.3 Delegation. Trustee may delegate investment functions to qualified professionals consistent with S.D. Codified Laws § 55-5-9.

5.4 Bond. [OPTIONAL] Trustee shall post a fiduciary bond in the amount of [$___] unless waived by all adult remainder beneficiaries and the appropriate court.

5.5 Compensation. Trustee is entitled to reasonable compensation for services rendered and to reimbursement of properly incurred Expenses, all payable from the Trust Assets.

6. DISTRIBUTIONS

6.1 Sole and Absolute Discretion. Subject to Article 7, Trustee shall have sole and absolute discretion regarding distributions of income and principal for Beneficiary’s Special Needs. Beneficiary shall have no enforceable right to compel distributions.

6.2 Non-support Uses. Distributions may include, but are not limited to, the purchase of medical equipment, home modifications, educational expenses, companion services, travel, recreation, and any other expenditures enhancing Beneficiary’s well-being. Trustee shall endeavor to pay vendors directly whenever practicable.

6.3 Prohibited Distributions. Unless specifically approved after consultation with benefits counsel, Trustee shall not make distributions in cash or for shelter or food if such distribution would reduce or terminate Beneficiary’s SSI or comparable benefits.

6.4 Emergency Distributions. In the event of an emergency threatening Beneficiary’s health or safety, Trustee may distribute Trust Assets even if such distribution adversely affects Protected Benefits, provided Trustee documents the rationale for such action.

6.5 Remainder Beneficiaries. Upon the death of Beneficiary, remaining Trust Assets shall be distributed in accordance with Article 7 (first-party) or Article 13 (third-party).

7. PUBLIC BENEFITS COMPLIANCE

7.1 Federal Statutory Compliance. This Trust is intended to qualify as a “special needs trust” under 42 U.S.C. § 1396p(d)(4). Trustee shall administer the Trust consistently with all requirements of that statute and related regulations.

7.2 Notifications. Trustee shall provide any notices required by Medicaid, Social Security Administration, or other agencies regarding the establishment or funding of the Trust.

7.3 Distribution Reporting. Trustee shall maintain detailed records of all distributions and make timely reports as required by Applicable Law or agency regulation.

7.4 Payback Provision (First-Party). [Include only if Section 3.4 designates a first-party trust.]
Upon Beneficiary’s death, and after payment of allowable administrative expenses pursuant to 42 U.S.C. § 1396p(d)(4)(A), Trustee shall repay to the State of South Dakota (and any other state that provided Medicaid benefits) an amount equal to the total medical assistance paid on behalf of Beneficiary that has not been previously repaid.

7.5 Residual Distribution. After full satisfaction of Section 7.4, any remaining Trust Assets shall be distributed to [REMAINDER BENEFICIARIES] in accordance with Article 13.

7.6 Audit Cooperation. Trustee shall cooperate fully with any governmental audit or review of Trust administration relating to Beneficiary’s Protected Benefits.

8. TRUSTEE PROVISIONS

8.1 Acceptance. By executing this Trust Agreement, Trustee accepts the fiduciary obligations herein.

8.2 Successor Trustees. [NAME OR MECHANISM FOR APPOINTMENT] shall serve as successor trustee upon the resignation, incapacity, or removal of Trustee. Any successor trustee shall have all rights, powers, and duties of the original Trustee.

8.3 Removal and Resignation. Settlor (if living) or, after Settlor’s death, a court of competent jurisdiction, may remove a Trustee for cause, including breach of fiduciary duty. A Trustee may resign upon 30 days’ written notice to Settlor (if living), Beneficiary (or Beneficiary’s legal representative), and any co-trustees.

8.4 Trustee Indemnity. See Section 9.1.

8.5 Co-Trustees. If multiple trustees serve concurrently, they shall act by majority decision unless otherwise provided herein or by court order.

9. INDEMNIFICATION; LIMITATION OF LIABILITY

9.1 Trustee Indemnification. To the fullest extent permitted by Applicable Law, the Trust shall indemnify and hold harmless Trustee from any loss, liability, or expense (including reasonable attorneys’ fees) incurred in connection with the administration of the Trust, except for losses resulting from Trustee’s willful misconduct or gross negligence.

9.2 Liability Cap. Trustee’s personal liability, if any, arising out of or related to this Trust shall in all events be limited to the Trust Assets. Under no circumstances shall Trustee be personally liable beyond the value of the Trust Estate, except to the extent of willful misconduct or gross negligence.

9.3 Insurance. Trustee may purchase fiduciary liability insurance, the premiums of which shall be payable from Trust Assets.

10. RECORDS; ACCOUNTING; INSPECTION RIGHTS

10.1 Annual Accounting. Trustee shall prepare, or cause to be prepared by the Accountant, an annual statement of receipts, disbursements, and assets on hand, and shall deliver such statement to (i) Beneficiary (or Beneficiary’s legal representative); and (ii) any remainder beneficiary entitled to such accounting under Applicable Law.

10.2 Interim Statements. Upon reasonable request, Trustee shall provide additional accountings, not more than quarterly, to government agencies whose rules require such reporting.

10.3 Inspection of Records. Beneficiary (or Beneficiary’s legal representative) may, upon reasonable notice, inspect the books and records of the Trust during normal business hours.

10.4 Judicial Accounting. Trustee may petition the [STATE PROBATE COURT] for settlement of accounts at any time.

11. DEFAULT; REMEDIES

11.1 Events of Default. The following constitute Events of Default:
(a) Trustee’s willful refusal or failure to administer the Trust in accordance with this Trust Agreement;
(b) Material breach of fiduciary duty causing demonstrable harm to Beneficiary;
(c) Misappropriation of Trust Assets; or
(d) Bankruptcy or insolvency of Trustee.

11.2 Notice and Cure. Any interested party may provide written notice describing the Event of Default. Trustee shall have 30 days from receipt of such notice to cure, unless the default is incapable of cure.

11.3 Remedies. If an Event of Default is not timely cured:
(a) An interested party may petition the [STATE PROBATE COURT] to suspend or remove Trustee and to appoint a successor;
(b) The court may order an accounting, surcharge, recovery of misappropriated assets, injunctive relief, or any other equitable remedy;
(c) Reasonable attorneys’ fees and costs incurred in enforcing Trustee obligations shall be payable from Trust Assets, or personally by the removed Trustee in the event of willful misconduct or gross negligence.

12. GOVERNING LAW; FORUM; DISPUTE RESOLUTION

12.1 Governing Law. This Trust Agreement and all rights, duties, and obligations arising hereunder shall be governed by and construed in accordance with the internal laws of the State of South Dakota (“State Trust Law”), without regard to its conflict-of-laws principles.

12.2 Exclusive Forum. The [INSERT COUNTY] County, South Dakota state probate court (the “Probate Court”) shall have exclusive jurisdiction over any proceeding involving the Trust, except as provided in Section 12.3.

12.3 Limited Arbitration. Any claim (other than (i) requests for instructions, (ii) trust enforcement actions, or (iii) applications for injunctive relief) with an amount in controversy not exceeding [$___] shall be submitted to binding arbitration administered by the American Arbitration Association in [CITY], South Dakota, under its Commercial Arbitration Rules. The arbitral award may be entered as a judgment in the Probate Court.

12.4 Injunctive Relief. Nothing herein shall limit the Probate Court’s power to grant temporary, preliminary, or permanent injunctive relief to protect the Trust Estate or enforce fiduciary obligations.

12.5 Jury Trial Waiver. Because probate matters in South Dakota are tried without a jury, the parties acknowledge that no jury rights attach to disputes under this Trust Agreement.

13. GENERAL PROVISIONS

13.1 Amendment. Except as specifically permitted under Section 3.4 with respect to first-party trusts, and only to the extent necessary to comply with changes in Applicable Law or to preserve Beneficiary’s eligibility for Protected Benefits, no amendment to this Trust may be made. Any permissible amendment must be (a) set forth in a written instrument executed by Trustee and, if living, Settlor, and (b) approved by the Probate Court.

13.2 Merger. This Trust Agreement supersedes all prior understandings relating to the subject matter hereof and constitutes the entire agreement among the parties. There are no representations or warranties other than those expressly set forth herein.

13.3 Severability. If any provision of this Trust Agreement is determined to be invalid or unenforceable, the remaining provisions shall remain in full force and effect, and the invalid provision shall be construed so as to effectuate its original intent to the greatest extent lawful.

13.4 No Waiver. No failure or delay by any party in exercising any right or remedy shall operate as a waiver thereof; nor shall any single or partial exercise of any right preclude any other or further exercise thereof.

13.5 Headings; Construction. Headings are for convenience only and shall not affect interpretation. Pronouns and nouns shall be deemed to include the masculine, feminine, neuter, singular, and plural, as context requires.

13.6 Counterparts; Electronic Signatures. This Trust Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one instrument. Signatures may be affixed by electronic means compliant with applicable e-signature laws and shall be deemed originals for all purposes.

13.7 Successors and Assigns. This Trust Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.

14. EXECUTION BLOCK

IN WITNESS WHEREOF, Settlor and Trustee have executed this South Dakota Discretionary Supplemental Needs Trust Agreement as of the Effective Date first written above.

14.1 Settlor

[SETTLOR NAME]
Date: _______

14.2 Trustee

[TRUSTEE NAME]
Date: _______

[// GUIDANCE: Insert additional signature lines for co-trustees or corporate trustee officers as needed.]

14.3 Acknowledgment

State of South Dakota )
County of ______ ) ss.

On this _ day of ___, 20_, before me, the undersigned Notary Public, personally appeared _______, known to me or satisfactorily proven to be the person(s) whose names are subscribed to the foregoing 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
My Commission Expires: _____

Schedule A – Initial Contribution

[LIST OF ASSETS TRANSFERRED TO TRUST]

[// GUIDANCE:
1. Review South Dakota-specific trustee qualification and bonding requirements.
2. For first-party trusts, confirm inclusion of beneficiary age restrictions (< 65), payback language, and court approval requirements.
3. Coordinate with public benefits counsel to ensure current SSI POMS compliance.
4. File any required notices with the appropriate state Medicaid agency within the statutory timeframe after funding.
5. Customize arbitration threshold, successor trustee provisions, and remainder distributions to client objectives.]