Special Needs Trust - Virginia

SUPPLEMENTAL NEEDS TRUST AGREEMENT

(Virginia – Third-Party Funded)

TABLE OF CONTENTS

1. DOCUMENT HEADER
2. DEFINITIONS
3. CREATION, NATURE, AND IRREVOCABILITY OF TRUST
4. BENEFICIARY & SPECIAL NEEDS STATUS
5. DISTRIBUTION STANDARDS AND GOVERNMENT BENEFIT PROTECTION
6. TRUSTEE POWERS & DUTIES
7. TRUSTEE COMPENSATION, LIABILITY LIMITATIONS & INDEMNIFICATION
8. ACCOUNTINGS, REPORTS & INFORMATION RIGHTS
9. DEFAULTS & REMEDIES
10. RISK ALLOCATION
11. DISPUTE RESOLUTION
12. GENERAL PROVISIONS
13. EXECUTION BLOCK

1. DOCUMENT HEADER

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

1.2 Date of Agreement. [EFFECTIVE DATE] (“Effective Date”).

1.3 Settlor(s). [SETTLOR NAME], residing at [SETTLOR ADDRESS] (“Settlor”).

1.4 Initial Trustee(s). [TRUSTEE NAME], residing at [TRUSTEE ADDRESS] (“Trustee”).

1.5 Beneficiary. [BENEFICIARY NAME], date of birth [DOB], Social Security Number ending [LAST 4] (“Beneficiary”).

1.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, including the Virginia Uniform Trust Code, Va. Code Ann. Title 64.2, Ch. 7, and applicable federal law governing supplemental needs trusts.

1.7 Forum Selection. Virginia does not maintain a separate probate court. Exclusive venue for matters relating to the Trust shall lie in the Circuit Court of [COUNTY/CITY], Virginia (the “Court”), which has jurisdiction over trust matters pursuant to Va. Code Ann. §§ 64.2-710 and 64.2-711.

1.8 Purpose and Consideration. Settlor desires to set aside assets for the sole benefit of Beneficiary, a person with a disability, to supplement and not supplant any means-tested governmental assistance. Trustee agrees to accept and administer the Trust upon the terms herein.

2. DEFINITIONS

Unless otherwise indicated, capitalized terms have the meanings set forth below and apply equally to singular and plural forms.

“Accounting Period” – Each calendar year ending December 31 or such other period selected by Trustee consistent with Article 8.

“Applicable Law” – Collectively, (i) the Virginia Uniform Trust Code; (ii) federal statutes and regulations governing Medicaid, Supplemental Security Income (“SSI”), and other public benefits, including 42 U.S.C. § 1396p; and (iii) any mandatory administrative guidance of the Social Security Administration (“SSA”) or Virginia Department of Medical Assistance Services (“DMAS”).

“Distribution” – Any payment, disbursement, or application of Trust income or principal for the benefit of Beneficiary.

“Governmental Benefits” – Means-tested public assistance programs, including but not limited to Medicaid, SSI, housing subsidies, and SNAP benefits, for which Beneficiary is or may become eligible.

“Qualified Disability Expenses” – Expenses that enhance Beneficiary’s quality of life without disqualifying Beneficiary from Governmental Benefits, including medical, dental, therapeutic, educational, vocational, residential, recreational, transportation, technological, and personal services expenses.

“Special Needs” – Those needs of Beneficiary not fully satisfied by Governmental Benefits, including but not limited to Qualified Disability Expenses.

“Trust Assets” – The property transferred to, held by, or later added to the Trust, together with all income and proceeds therefrom.

3. CREATION, NATURE, AND IRREVOCABILITY OF TRUST

3.1 Establishment. Settlor hereby transfers the property described in Schedule A attached hereto to Trustee, to hold, manage, and distribute according to this Agreement. Additional property may be added at any time by Settlor or other permissible donors with Trustee’s consent, provided no property owned by Beneficiary shall be transferred to this Trust.

For SSI purposes, assets of the Beneficiary's spouse are not third-party assets under SSA POMS SI 01120.200. The Trustee shall not accept them into the third-party portion of this Trust; refer any proposed contribution to benefits counsel for separate planning.

3.2 Irrevocability. This Trust is irrevocable. Settlor waives all rights and powers, whether alone or in conjunction with any other person, to alter, amend, revoke, or terminate the Trust, except as expressly permitted in Section 12.3.

3.3 Spendthrift Protection. Pursuant to Va. Code Ann. §§ 64.2-742 and 64.2-743, the interests of Beneficiary are subject to a spendthrift provision and shall not be transferable or subject to voluntary or involuntary alienation, assignment, pledge, or creditor claims, except as expressly provided herein or by law. Because Distributions remain wholly within Trustee's discretion under Article 5, and Beneficiary has no right to compel any Distribution, no claim for reimbursement of public assistance may be asserted against Trust Assets under Va. Code Ann. § 64.2-745(C).

4. BENEFICIARY & SPECIAL NEEDS STATUS

4.1 Disability Determination. Beneficiary is presently recognized or expected to be recognized as disabled under 42 U.S.C. § 1382c(a)(3) or similar criterion. Trustee may require updated medical or governmental determinations of disability as reasonably necessary.

4.2 Sole Lifetime Beneficiary. During Beneficiary’s lifetime, no person other than Beneficiary shall have any beneficial interest in the Trust.

4.3 Notification Obligation. Settlor and Beneficiary (or Beneficiary’s legal representative) shall promptly notify Trustee of any change affecting Beneficiary’s disability status or eligibility for Governmental Benefits.

5. DISTRIBUTION STANDARDS & GOVERNMENT BENEFIT PROTECTION

5.1 Supplemental Purpose. Trustee shall distribute such amounts of income and/or principal as Trustee, in Trustee’s sole and absolute discretion, deems advisable to meet Beneficiary’s Special Needs so as to supplement, and not supplant, reduce, or replace Governmental Benefits.

5.2 No Mandated Support. Beneficiary has no right to compel any Distribution. The terms “shall,” “may,” or similar language in this Article 5 confer discretion upon Trustee and do not create an enforceable support obligation.

5.3 Consideration of Benefits Impact.
(a) Trustee shall consider the effect of any proposed Distribution on Beneficiary’s continued eligibility for Governmental Benefits.
(b) Trustee may elect to make a Distribution even if it may reduce or eliminate certain benefits, provided Trustee reasonably determines that the overall benefit to Beneficiary outweighs the loss.

5.4 Manner of Distribution. To avoid counting as income or resources to Beneficiary, Trustee may:
(i) pay vendors directly for goods or services;
(ii) purchase assets titled in Trustee’s name for Beneficiary’s use; or
(iii) reimburse third parties who paid Qualified Disability Expenses on Beneficiary’s behalf.

5.5 Prohibited Payments. Trustee shall not (except under Section 5.3(b)) distribute cash or cash-equivalents directly to Beneficiary, nor pay for shelter items countable as in-kind support and maintenance (“ISM”) under SSI rules, unless Trustee first confirms the permissible adverse impact and elects to proceed. Pursuant to the Social Security Administration's final rule omitting food from ISM calculations, 89 Fed. Reg. 21,209 (Mar. 27, 2024), effective September 30, 2024, food is no longer counted as ISM; accordingly, Trustee may pay for or reimburse Beneficiary's food expenses without regard to this Section 5.5, subject always to Section 5.3.

5.6 Remainder Interest. Upon Beneficiary’s death, Trust Assets shall be distributed in accordance with Section 5.7, free of any Medicaid “payback” because this is a third-party trust.

5.7 Remainder Beneficiaries. After Beneficiary’s death and payment of any properly payable expenses, Trustee shall distribute the remaining Trust Assets to [DESIGNATED REMAINDER BENEFICIARIES] per stirpes; if none survive, then to Settlor’s heirs at law.

6. TRUSTEE POWERS & DUTIES

6.1 Fiduciary Standard. Trustee shall administer the Trust solely in the interests of Beneficiary, exercising the judgment and care of a prudent person familiar with special needs trusts.

6.2 Incorporation of Statutory Powers. Trustee shall have all powers granted to trustees under Applicable Law, including, without limitation, to:
(a) retain, purchase, sell, exchange, pledge, or lease Trust Assets;
(b) invest pursuant to the prudent investor rule;
(c) employ professionals and delegate authority as reasonably necessary;
(d) compromise or arbitrate claims; and
(e) execute documents and perform all acts useful to Trust administration.

6.3 Bond. [SELECT ONE]
(i) ☐ Bond Required in the amount of $[AMOUNT].
(ii) ☐ Bond Waived, as directed in this Agreement pursuant to Va. Code Ann. § 64.2-1400 (clerk shall not require security from a trustee if the trust instrument directs that no security be required, absent cause shown) or successor statute.

6.4 Successor Trustee. If the office of Trustee becomes vacant, the following persons, in listed order, shall serve: [FIRST SUCCESSOR TRUSTEE], then [SECOND SUCCESSOR TRUSTEE]. A majority of the adult remainder beneficiaries may appoint an institutional trustee if no individual successor is willing or able to serve.

6.5 Trustee Removal. The Court may, upon petition by Settlor (if living), Beneficiary, or a majority of remainder beneficiaries, remove a Trustee for cause defined by Applicable Law.

7. TRUSTEE COMPENSATION, LIABILITY LIMITATIONS & INDEMNIFICATION

7.1 Compensation. Trustee shall be entitled to reasonable compensation consistent with Virginia fiduciary fee standards or, if a corporate trustee, its published fee schedule, as amended from time to time.

7.2 Liability Limited to Trust Assets. All obligations, liabilities, and expenses incurred by Trustee in good-faith administration of the Trust shall be satisfied solely from the Trust Assets; Trustee shall not be personally liable except for acts or omissions constituting willful misconduct or gross negligence.

7.3 Indemnification. The Trust shall indemnify and hold harmless Trustee, to the fullest extent permitted by Applicable Law, from and against any loss, liability, or expense (including attorneys’ fees) arising out of or in connection with the administration of the Trust, except to the extent resulting from Trustee’s willful misconduct or gross negligence.

8. ACCOUNTINGS, REPORTS & INFORMATION RIGHTS

8.1 Annual Accounting. Within ninety (90) days after the close of each Accounting Period, Trustee shall provide Beneficiary (or Beneficiary’s legal representative) and, upon written request, the Settlor (if living) with an accounting of Trust receipts, disbursements, and assets.

8.2 Court Review. Trustee may, at its discretion or upon Beneficiary’s written demand, submit any accounting to the Court for judicial settlement.

8.3 Inspection. Beneficiary and Settlor shall have reasonable access to Trust records during normal business hours upon ten (10) days’ written notice.

9. DEFAULTS & REMEDIES

9.1 Trustee Breach. A material breach of fiduciary duty constitutes an Event of Default.

9.2 Cure Period. Prior to petitioning the Court, the complaining party shall give Trustee written notice specifying the default and a thirty (30) day opportunity to cure, unless irreparable harm would result.

9.3 Remedies. Upon continuing default, the Court (or, where permitted, the arbitral tribunal under Article 11) may:
(i) compel specific performance;
(ii) surcharge Trustee;
(iii) remove Trustee and appoint a successor; and/or
(iv) award costs and reasonable attorneys’ fees to the prevailing party, all payable from Trust Assets except where otherwise ordered for Trustee misconduct.

10. RISK ALLOCATION

10.1 Insurance. Trustee may maintain fiduciary liability insurance, the premiums of which shall be a Trust expense.

10.2 Force Majeure. Trustee shall not be liable for failure to perform due to acts of God, terrorism, pandemics, governmental restrictions, or other events beyond Trustee’s reasonable control that materially impair administration.

11. DISPUTE RESOLUTION

11.1 Governing Law. This Agreement and all disputes arising hereunder shall be governed by the laws of the Commonwealth of Virginia, without regard to conflict-of-law rules.

11.2 Forum. Matters relating to the Trust shall be brought in the Circuit Court of [COUNTY/CITY], Virginia, and the parties hereby consent to such jurisdiction and venue.

11.3 Limited Arbitration. Any dispute (i) between or among co-trustees, or (ii) relating solely to accounting objections under $250,000 in dispute value, shall be resolved by binding arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules then in effect.
(a) Seat of arbitration: Richmond, Virginia.
(b) Injunctive Relief Carve-Out. Notwithstanding the foregoing, any party may seek temporary, preliminary, or permanent injunctive relief in the Circuit Court to preserve the Trust Assets or enforce fiduciary obligations.

11.4 Jury Waiver. Trust administration matters in Virginia are equitable in nature and are generally tried by the court without a jury; any jury trial right is knowingly and voluntarily waived to the fullest extent permitted by law.

12. GENERAL PROVISIONS

12.1 Amendment for Compliance. Trustee may, without court approval, amend administrative provisions of this Agreement if (a) necessary to comply with changes in Applicable Law affecting the Trust’s qualification as a supplemental needs trust, and (b) such amendment does not alter the beneficial interests of any party. Trustee shall provide thirty (30) days’ advance written notice to Beneficiary and remainder beneficiaries.

12.2 Severability & Reformation. If any provision is determined invalid or unenforceable, such provision shall be reformed to the minimum extent necessary to fulfill the Trust’s purpose and remain enforceable, and the remaining provisions shall continue in full force.

12.3 Entire Agreement. This instrument constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements.

12.4 Assignment. No interest hereunder may be assigned or delegated except as expressly permitted by this Agreement or Applicable Law.

12.5 Successors & Assigns. This Agreement shall bind and inure to the benefit of the parties and their respective heirs, personal representatives, successors, and permitted assigns.

12.6 Counterparts; Electronic Signatures. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original. Signatures delivered by electronic transmission shall be deemed valid and binding to the fullest extent permitted by law.

13. EXECUTION BLOCK

IN WITNESS WHEREOF, the Settlor and Trustee have executed this Supplemental Needs Trust Agreement as of the Effective Date.

SETTLOR:
_________________________________
[SETTLOR NAME]

Date: ____________________________

TRUSTEE:
_________________________________
[TRUSTEE NAME]

Date: ____________________________

Schedule A – Initial Trust Property

Schedule B – Trustee Fee Schedule (if corporate trustee)

END OF DOCUMENT