WASHINGTON IRREVOCABLE SUPPLEMENTAL NEEDS TRUST AGREEMENT
(Comprehensive Draft Template – For Attorney Customization)
[// GUIDANCE: This form is drafted as a third-party supplemental (special) needs trust. If the Settlor intends to place the Beneficiary’s own assets in trust, convert to a “(d)(4)(A) Payback Trust” and insert a mandatory Medicaid reimbursement clause.]*
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; Parties; Date
This Washington Irrevocable Supplemental Needs Trust Agreement (the “Agreement” or “Trust”) is made effective as of [EFFECTIVE DATE] (the “Effective Date”) by and among:
a. [SETTLOR NAME], an individual residing at [ADDRESS] (“Settlor”);
b. [TRUSTEE NAME], whose principal address is [ADDRESS] (“Trustee”); and
c. [PRIMARY BENEFICIARY NAME] (“Primary Beneficiary”), an individual with a qualifying disability within the meaning of applicable federal and Washington State law.
1.2 Recitals
A. Settlor desires to set aside certain assets for the sole benefit of the Primary Beneficiary, who has special needs requiring lifetime support.
B. The intent of this Trust is to supplement, and not supplant, any governmental assistance the Primary Beneficiary may receive.
C. Trustee is willing to hold, manage, and distribute the Trust Assets in accordance with the terms hereof.
D. This Trust is established under, and shall be governed by, the laws of the State of Washington applicable to trusts (the “Washington Trust Law”).
II. DEFINITIONS
Unless the context clearly requires otherwise, capitalized terms have the meanings set forth below and apply equally to singular and plural forms.
- “Accountant” – The certified public accountant appointed by Trustee to prepare all required returns and statements.
- “Applicable State Law” – The Washington Trust Law and all related Washington statutes and regulations governing trusts and fiduciaries.
- “Beneficiary” – Collectively, the Primary Beneficiary and any Remainder Beneficiaries.
- “Code” – The Internal Revenue Code of 1986, as amended.
- “Disabling Condition” – A medically determinable physical or mental impairment resulting in marked and severe functional limitation that is expected to last not less than twelve (12) months or result in death.
- “Distribution” – Any payment, transfer, or benefit provided from the Trust Assets.
- “Governmental Assistance” – Needs-based public benefits, including but not limited to Supplemental Security Income (“SSI”), Medicaid, and state-funded equivalents.
- “Primary Beneficiary” – The individual identified in Section 1.1(c) for whose sole benefit the Trust is established during his or her lifetime.
- “Remainder Beneficiaries” – Those persons or entities entitled to receive any remaining Trust Assets upon termination of the Trust, described in Section 3.5.
- “Supplemental Needs” – Expenditures that enhance the quality of life of the Primary Beneficiary but are not otherwise provided by Governmental Assistance, including (without limitation) housing modifications, therapies, education, recreation, vacations, companionship, personal property, transportation, and insurance.
- “Trust” – The separate legal entity created by this Agreement.
- “Trust Assets” – All property transferred to the Trust, together with all accretions and replacements.
- “Trustee” – The fiduciary (and any successor fiduciary) acting under this Agreement.
- “Washington Probate Court” – The Superior Court of the State of Washington, [COUNTY] County, sitting in probate and trust jurisdiction.
III. OPERATIVE PROVISIONS
3.1 Creation; Irrevocability
Settlor hereby irrevocably transfers to Trustee the property described in Schedule A (“Initial Trust Corpus”). No portion of the Trust shall be revoked, amended, or terminated except as expressly provided herein or as mandated by law.
3.2 Purpose
The primary purpose of this Trust is to provide for the Supplemental Needs of the Primary Beneficiary while preserving his or her continuing eligibility for Governmental Assistance. Distributions are strictly limited to further that purpose.
3.3 Additional Contributions
Third parties may, but are not obligated to, add assets to the Trust at any time with Trustee’s consent, provided such assets are acceptable under Applicable State Law and consistent with the Trust’s purpose.
3.4 Distributions During Lifetime of the Primary Beneficiary
a. Sole Benefit Standard. All Distributions shall be for the sole benefit of the Primary Beneficiary.
b. Discretionary Standard. Trustee shall have sole and absolute discretion to make or withhold Distributions for Supplemental Needs. The Primary Beneficiary shall have no right to compel Distributions.
c. Governmental Benefits Preservation. Trustee shall not make any Distribution that would (i) reduce or eliminate Governmental Assistance unless Trustee determines, in good faith and after consultation with competent benefits counsel, that the benefit of the Distribution outweighs the consequent loss or reduction; or (ii) be considered “income” or “available resources” under applicable benefits rules, except as permitted under those rules.
d. Prohibited Distributions. Trustee shall not pay cash directly to the Primary Beneficiary except for nominal amounts permissible without affecting eligibility.
3.5 Termination; Remainder
Upon the death of the Primary Beneficiary or earlier exhaustion of the Trust Assets, the Trust shall terminate. After payment of (i) any proper expenses of administration and (ii) [OPTIONAL, INSERT IF FIRST-PARTY TRUST: any mandatory Medicaid payback amount], the remaining balance shall be distributed outright, per stirpes, to the following Remainder Beneficiaries: [NAME 1] %, NAME 2 %, charitable entity __%].
3.6 Spendthrift Protection
All interests in the Trust are held subject to a spendthrift provision. No Beneficiary shall voluntarily or involuntarily anticipate, assign, alienate, pledge, or encumber his or her interest, nor shall such interest be subject to the claims of creditors.
3.7 Trustee Powers
To accomplish the purposes of this Trust, Trustee shall have all powers permitted to trustees under Applicable State Law, including, without limitation, the power to:
1. invest and reinvest;
2. retain assets without diversification;
3. lease, sell, or exchange property;
4. participate in partnerships or LLCs;
5. employ professionals;
6. compromise claims; and
7. exercise all powers as though absolute owner, subject to fiduciary duties.
3.8 Bond; Compensation; Accounting
a. Bond. [SELECT ONE] (i) Trustee shall serve without bond, or (ii) Trustee shall furnish bond in the amount of $[AMOUNT].
b. Compensation. Trustee is entitled to reasonable compensation consistent with market rates for professional fiduciaries in Washington.
c. Accounting. Trustee shall provide annual written accounts to the Primary Beneficiary (or legal representative) and, upon request, to Settlor (if living) and any Protector.
3.9 Trust Protector (Optional)
Settlor may appoint a Trust Protector with authority to (i) remove and replace the Trustee, (ii) resolve ambiguities, and (iii) approve amendments required to preserve the Trust’s purpose.
IV. REPRESENTATIONS & WARRANTIES
4.1 Settlor represents and warrants that:
a. Settlor has full legal capacity and unencumbered title to the property transferred;
b. Settlor’s execution of this Agreement does not violate any contract, court order, or law.
4.2 Trustee represents and warrants that:
a. Trustee is qualified and willing to serve;
b. Trustee shall discharge fiduciary duties with prudence, loyalty, and impartiality;
c. Trustee will comply with Applicable State Law and this Agreement.
4.3 Survival
The representations and warranties in this Article IV survive execution and are continuous in nature.
V. COVENANTS & RESTRICTIONS
5.1 Affirmative Covenants of Trustee
a. Maintain records sufficient to demonstrate compliance with Governmental Assistance rules;
b. Timely file tax returns and pay taxes attributable to the Trust;
c. Notify the Primary Beneficiary or legal representative of any material administrative action affecting benefits.
5.2 Negative Covenants
Trustee shall not (i) loan Trust Assets to the Settlor or any Beneficiary, (ii) self-deal except as expressly authorized, or (iii) commingle Trust Assets with personal assets.
5.3 Notice & Cure
Before any action for breach of trust is initiated, the complaining party shall give Trustee written notice of the alleged breach and a thirty-(30)-day opportunity to cure.
VI. DEFAULT & REMEDIES
6.1 Events of Default
a. Failure to account as required;
b. Breach of fiduciary duty causing material loss;
c. Incapacity, resignation, or death of Trustee without a successor.
6.2 Remedies
a. Removal and replacement of Trustee by the Trust Protector or the Washington Probate Court;
b. Surcharge of Trustee to the extent of losses, limited by Section VII;
c. Injunctive relief to protect Trust Assets or enforce fiduciary duties;
d. Recovery of reasonable attorneys’ fees and costs by the prevailing party.
VII. RISK ALLOCATION
7.1 Indemnification of Trustee
Trustee and affiliates are indemnified from and against any and all claims, liabilities, and expenses, solely to the extent payable from the Trust Assets, except for losses arising from willful misconduct or gross negligence.
7.2 Limitation of Liability
No Trustee (including successor or co-trustee) shall be personally liable for any action taken or omitted in good faith and in accordance with this Agreement. The maximum aggregate liability of Trustee shall not exceed the value of the Trust Assets under Trustee’s control at the time the liability is determined.
7.3 Insurance
Trustee may purchase fiduciary liability insurance, the premiums of which may be paid from the Trust Assets and treated as a Trust expense.
7.4 Force Majeure
Trustee shall not be liable for delays or failures resulting from acts of God, governmental action, or other events beyond reasonable control, provided Trustee acts diligently to mitigate effects.
VIII. DISPUTE RESOLUTION
8.1 Governing Law
This Agreement and all disputes or claims arising out of or relating to it are governed by the laws of the State of Washington, without regard to conflict-of-law principles.
8.2 Forum Selection
Exclusive jurisdiction and venue lie in the Washington Probate Court.
8.3 Limited Arbitration
a. Scope. Non-dispositive accounting disputes may, upon mutual written consent, be submitted to binding arbitration administered by [ARBITRATION SERVICE] in [CITY], Washington.
b. Preservation of Judicial Remedies. Nothing herein limits the right of any party to seek injunctive relief or to petition the Washington Probate Court for interpretation, modification, or enforcement of this Trust.
8.4 Jury Waiver
To the extent a right to trial by jury exists in any proceeding related to this Trust, the parties do not waive such right; however, probate matters in Washington are typically heard without a jury.
IX. GENERAL PROVISIONS
9.1 Amendment and Reformation
This Trust is irrevocable. Notwithstanding the foregoing, Trustee (or Trust Protector) may amend purely administrative provisions if (i) necessary to maintain Governmental Assistance eligibility, (ii) tax-neutral, and (iii) approved by the Washington Probate Court if required.
9.2 Assignment
No party may assign rights or delegate duties under this Agreement except as expressly permitted herein or by court order.
9.3 Successors & Assigns
All provisions bind and inure to the benefit of the parties and their lawful successors.
9.4 Severability
If any provision is held unenforceable, the remaining provisions shall remain in full force, and the unenforceable provision shall be reformed to the minimum extent necessary.
9.5 Integration
This Agreement constitutes the entire understanding among the parties regarding the subject matter and supersedes all prior agreements, whether oral or written.
9.6 Counterparts; Electronic Signatures
This Agreement may be executed in multiple counterparts, each deemed an original, together constituting one instrument. Signatures delivered via electronic means have the same effect as original signatures.
X. EXECUTION BLOCK
IN WITNESS WHEREOF, the parties execute this Washington Irrevocable Supplemental Needs Trust Agreement as of the Effective Date.
| SETTLOR | TRUSTEE |
| _________ | _________ |
| [SETTLOR NAME] | [TRUSTEE NAME] |
ACKNOWLEDGMENTS
State of Washington )
County of [COUNTY] )
On this ___ day of ____, 20__, before me, the undersigned Notary Public, personally appeared [SETTLOR NAME] and [TRUSTEE NAME], known to me (or proved to me on the basis of satisfactory evidence) to be the individuals whose names are subscribed to the within instrument and acknowledged executing the same.
Notary Public in and for the State of Washington
My Commission Expires: ____
SCHEDULE A – INITIAL TRUST CORPUS
[List cash amounts, securities, policies, real estate, or other assets transferred to the Trust on the Effective Date.]
[// GUIDANCE:
- Customize All Bracketed Placeholders.
- Confirm Third-Party vs. First-Party Trust Type and insert or remove Medicaid payback language accordingly.
- Attach Physician’s Letter verifying the Beneficiary’s Disabling Condition for Medicaid/SSI files.
- File Certification of Trust (short-form affidavit) if any Washington financial institution requests documentation.
- Coordinate With Benefits Counsel before making distributions that might implicate SSI resource or income limits.
]