**SPECIAL NEEDS TRUST AGREEMENT
(State of Tennessee)**
[// GUIDANCE: This template is intentionally comprehensive. Practitioners should tailor, delete, or supplement provisions to fit the facts, the funding source (first-party vs. third-party), and the client’s goals.]
TABLE OF CONTENTS
- Article I – Trust Formation, Purpose & Recitals
- Article II – Definitions
- Article III – Irrevocability; Trust Estate; Funding
- Article IV – Discretionary Supplemental Needs Distributions
- Article V – Preservation of Government Benefits
- Article VI – Trustee Powers, Duties & Standards of Care
- Article VII – Representations & Warranties
- Article VIII – Covenants & Restrictions
- Article IX – Defaults, Removal & Succession of Fiduciaries
- Article X – Risk Allocation; Indemnification & Liability Caps
- Article XI – Accounting, Records & Tax Matters
- Article XII – Dispute Resolution
- Article XIII – General Provisions
- Article XIV – Execution & Acknowledgment
**ARTICLE I
TRUST FORMATION, PURPOSE & RECITALS**
1.1 Parties
(a) Settlor/Grantor: [SETTLOR FULL LEGAL NAME], residing at [ADDRESS].
(b) Trustee: [TRUSTEE FULL LEGAL NAME], with principal address at [ADDRESS].
(c) Primary Beneficiary: [DISABLED BENEFICIARY NAME], Social Security No. [LAST-4 SSN].
1.2 Effective Date
This Special Needs Trust (“Trust”) is executed on [EFFECTIVE DATE] and shall be effective immediately upon execution and funding.
1.3 Governing Law & Situs
This Trust shall be governed by and construed in accordance with the Tennessee Uniform Trust Code, Tenn. Code Ann. § 35-15-101 et seq., and applicable federal law, including 42 U.S.C. § 1396p(d)(4)(A) where relevant. The principal place of administration shall be [COUNTY], Tennessee, unless changed pursuant to Section 6.4.
1.4 Purpose; Special Needs Intent
The purpose of this Trust is to hold, manage, and distribute the Trust Estate for the sole benefit of the Beneficiary in a manner that:
(i) enhances quality of life, comfort, and well-being; and
(ii) preserves eligibility for means-tested public benefits such as Supplemental Security Income (“SSI”) and Medicaid/TennCare.
The Trust shall be administered as a “supplemental needs trust” and not as a basic support trust.
**ARTICLE II
DEFINITIONS**
[// GUIDANCE: Definitions appear alphabetically; add or delete as needed.]
“Accounting Period” – Each calendar year ending December 31, unless the Trustee selects another fiscal year for tax purposes.
“Applicable State Medicaid Agency” – The Tennessee Bureau of TennCare or any successor agency.
“Beneficiary” – The individual identified in Section 1.1(c) who is deemed disabled under 42 U.S.C. § 1382c(a)(3).
“Co-Trustee” – Any person or institution serving concurrently with the initial Trustee pursuant to Section 9.3.
“Discretionary Distribution” – A distribution made in the Trustee’s sole, absolute, and uncontrolled discretion, subject to Article IV.
“Means-Tested Benefits” – SSI, Medicaid/TennCare, SNAP, Section 8 Housing, or any similar program requiring asset or income eligibility.
“Supplemental Needs” – Needs that are not provided for, or are only partially provided for, by Means-Tested Benefits, including but not limited to personal care services, education, recreation, transportation, and out-of-pocket medical expenses.
“Trust Estate” – All property, real or personal, tangible or intangible, and any accumulations or additions thereto, held from time to time by the Trustee under this Agreement.
**ARTICLE III
IRREVOCABILITY; TRUST ESTATE; FUNDING**
3.1 Irrevocability
This Trust is irrevocable. The Settlor expressly relinquishes all rights, title, and interest in the Trust Estate except the limited rights reserved herein.
3.2 Contributions
(a) Initial Funding: [DESCRIPTION OF INITIAL ASSETS OR “One dollar ($1.00) and other valuable consideration”].
(b) Additional Contributions: Permitted at any time by the Settlor or third parties, provided such contributions do not violate Means-Tested Benefits rules.
[// GUIDANCE: If drafting a first-party trust funded with Beneficiary’s assets, substitute Section 3.2(b) with requirement that all additions must be assets of the Beneficiary and insert Medicaid payback clause in Section 5.3.]
3.3 Spendthrift & Non-Assignment
The interests of the Beneficiary are held subject to a spendthrift trust as defined in Tenn. Code Ann. § 35-15-502. No interest shall be transferable or subject to creditor claims until actually distributed.
**ARTICLE IV
DISCRETIONARY SUPPLEMENTAL NEEDS DISTRIBUTIONS**
4.1 Sole Benefit Standard
All distributions must be for the sole benefit of the Beneficiary.
4.2 Trustee’s Absolute Discretion
Notwithstanding any other provision, the Trustee may (but is never required to) make Discretionary Distributions for Supplemental Needs. The Beneficiary shall have no right to compel distributions.
4.3 Prohibited Distributions
The Trustee shall not:
(a) Make direct cash distributions to the Beneficiary;
(b) Pay for food or shelter to the extent that such payment would reduce SSI benefits without first considering alternate strategies;
(c) Act in any manner inconsistent with the POMS or successor agency guidance.
4.4 Consideration of Alternative Resources
The Trustee may require the Beneficiary to apply for or maintain Means-Tested Benefits before making Discretionary Distributions.
**ARTICLE V
PRESERVATION OF GOVERNMENT BENEFITS**
5.1 Compliance with Federal & State Law
The Trust shall be administered in conformity with 42 U.S.C. § 1396p and relevant Social Security Administration policies. The Trustee shall consult competent benefits counsel as necessary.
5.2 Reporting Requirements
The Trustee shall provide accountings, statements, or certifications to the Social Security Administration, TennCare, or other agencies as required.
5.3 Medicaid Reimbursement (First-Party Funding ONLY)
[OPTION 1 – INCLUDE if first-party trust]
Upon the death of the Beneficiary, the Trustee shall reimburse the Applicable State Medicaid Agency, up to the remaining Trust balance, for medical assistance paid on behalf of the Beneficiary after the Trust’s creation, before paying any remainder beneficiaries.
[OPTION 2 – OMIT if purely third-party trust]
**ARTICLE VI
TRUSTEE POWERS, DUTIES & STANDARDS OF CARE**
6.1 Fiduciary Standard
The Trustee shall administer the Trust as a prudent person would, consistent with Tenn. Code Ann. § 35-15-804, except as otherwise specifically provided.
6.2 Enumerated Powers
Subject to Article V, the Trustee may:
(a) Invest and reinvest in any prudent asset;
(b) Employ professionals and delegate investment functions pursuant to Tenn. Code Ann. § 35-15-807;
(c) Purchase real or personal property for Beneficiary’s use;
(d) Establish or contribute to an ABLE account under 26 U.S.C. § 529A;
(e) Execute any documents necessary to carry out Trust purposes.
6.3 Bond & Compensation
Bond is [WAIVED/REQUIRED] unless ordered by a court. Trustee compensation shall be [PERCENTAGE] % of Trust income/principal or as otherwise agreed in writing.
6.4 Change of Situs
The Trustee may transfer the situs to another jurisdiction if necessary to protect benefits eligibility or for more favorable trust administration law, after 30 days’ written notice to the Protector (if any) and the Beneficiary’s legal representative.
**ARTICLE VII
REPRESENTATIONS & WARRANTIES**
7.1 Settlor Representations
(a) Settlor has full right, title, and authority to transfer the assets described in Section 3.2.
(b) No creditor claims, liens, or encumbrances exist that would defeat the transfer.
7.2 Trustee Representations
(a) Trustee has reviewed this Agreement and accepts the fiduciary obligations herein.
(b) Trustee has no conflict of interest that would materially impair administration.
7.3 Survival
The representations and warranties in this Article survive the transfer of assets and the resignation or removal of any fiduciary.
**ARTICLE VIII
COVENANTS & RESTRICTIONS**
8.1 Trustee Covenants
(a) Maintain adequate liability insurance covering Trust administration.
(b) Provide annual accountings within 90 days after the close of each Accounting Period to the Beneficiary’s legal representative and, upon request, to the Protector or court.
8.2 Negative Covenants
The Trustee shall not (i) lend Trust assets to the Settlor or Beneficiary, (ii) use Trust assets as security for debts of third parties, or (iii) commingle Trust assets with non-trust property.
8.3 Notice & Cure
In the event of an alleged breach, written notice must be delivered specifying the breach. The Trustee shall have 30 days to cure before any remedy in Article IX is invoked.
**ARTICLE IX
DEFAULTS, REMOVAL & SUCCESSION OF FIDUCIARIES**
9.1 Events of Default
(a) Failure to administer for the Beneficiary’s sole benefit;
(b) Failure to render required accountings;
(c) Self-dealing or gross negligence.
9.2 Remedies
Upon an uncured Event of Default, any interested party may petition the [COUNTY] Probate Court for:
(i) removal of the Trustee,
(ii) surcharge for damages, and/or
(iii) injunctive relief compelling proper administration.
9.3 Successor Trustees
[PRIMARY SUCCESSOR TRUSTEE NAME] is nominated as first successor. Further successor order: [SECOND SUCCESSOR] → [THIRD SUCCESSOR]. Each successor must accept in writing and shall have all the powers of the original Trustee.
**ARTICLE X
RISK ALLOCATION; INDEMNIFICATION & LIABILITY CAPS**
10.1 Trustee Indemnification
Except in cases of willful misconduct or gross negligence, the Trust Estate shall indemnify and hold the Trustee harmless from any claim or liability arising from proper administration.
10.2 Liability Cap
Any Trustee’s personal liability shall not exceed the value of the Trust Estate under its control at the time the cause of action arises.
10.3 Exculpation
No Trustee shall be liable for any loss to the Trust Estate so long as the Trustee acts in good faith and with reasonable care.
**ARTICLE XI
ACCOUNTING, RECORDS & TAX MATTERS**
11.1 Tax Identification
The Trust shall obtain a separate EIN and file federal and state fiduciary returns as required.
11.2 Accounting Method
The Trustee shall maintain records on an accrual [or cash] basis consistent with generally accepted accounting principles for trusts.
11.3 Audit Rights
The Beneficiary (or legal representative) may, upon 30 days’ written notice, inspect the Trust’s books and records during normal business hours.
**ARTICLE XII
DISPUTE RESOLUTION**
12.1 Governing Law
This Agreement is governed by the laws of the State of Tennessee.
12.2 Required Forum
Exclusive venue for any proceeding concerning this Trust shall be the Probate Court of [COUNTY], Tennessee.
12.3 Limited Arbitration
(a) Internal administrative disputes between co-trustees or between Trustee and Protector only shall be resolved by binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”).
(b) Matters affecting government benefits eligibility, or requiring court approval, are expressly excluded from arbitration.
(c) Any arbitration award may be confirmed in the Probate Court.
12.4 Injunctive Relief
Nothing herein limits the right of any interested party to seek injunctive or equitable relief in Probate Court to preserve the Trust Estate or enforce fiduciary duties.
12.5 Jury Trial Waiver
To the extent permitted in probate matters, the parties knowingly waive the right to a jury trial for any controversy relating to this Trust.
**ARTICLE XIII
GENERAL PROVISIONS**
13.1 Amendment & Reformation
This Trust may not be amended except (i) by court order to maintain federal or state benefits compliance, or (ii) by nonjudicial settlement in strict accordance with Tenn. Code Ann. § 35-15-111, provided the amendment does not impair the Beneficiary’s eligibility.
13.2 Severability
If any provision is held invalid, the remainder shall be interpreted to best fulfill the Trust’s intent and the Beneficiary’s continued benefits eligibility.
13.3 Entire Agreement
This document constitutes the entire agreement between the parties with respect to the Trust and supersedes all prior understandings.
13.4 Counterparts; Electronic Signatures
This Trust may be executed in counterparts, each deemed an original. Signatures delivered via electronic means shall be deemed effective to the fullest extent permitted by law.
**ARTICLE XIV
EXECUTION & ACKNOWLEDGMENT**
IN WITNESS WHEREOF, the Settlor and Trustee have executed this Special Needs Trust Agreement on the date first written above.
| _______ | _______ |
| [SETTLOR NAME], Settlor | Date |
| _______ | _______ |
| [TRUSTEE NAME], Trustee | Date |
[// GUIDANCE: Add additional signature blocks for Co-Trustees, Trust Protector, or Guardians as needed.]
NOTARY ACKNOWLEDGMENT
State of Tennessee )
County of ____)
On this ___ day of _, 20_, before me, the undersigned authority, personally appeared ________, known to me (or satisfactorily proven) to be the person(s) whose name(s) are subscribed to the within 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: ____
[// GUIDANCE:
1. File a Notice of Trust, if desired, in the appropriate county pursuant to Tenn. Code Ann. § 35-15-1011 to protect confidentiality while evidencing the Trust’s existence.
2. For real property funding, prepare and record a deed titling property to “[Trustee Name], Trustee of the [Beneficiary] Special Needs Trust dated [Date].”
3. Confirm federal gift-tax implications of third-party contributions, and prepare IRS Form 709 as needed.]