Question Presented
You asked:
(1) Whether the Planned Lifetime Assistance Network of California (PLAN) Master Pooled
Trust (Trust), as amended on October 12, 2012, met the resource exclusion requirements
of section 1917(d)(4)(C) of the Social Security Act (Act), 42 U.S.C. § 1396p(d)(4)(C);
(2) Whether a joinder agreement, providing for the Trust’s retention of 100% of a
sub-account’s assets at the death of the account’s beneficiary, precluded resource
exclusion under section 1917(d)(4)(C); and
Whether the Trust’s October 12, 2012 amendment modified the terms of the H~ [61] Joinder Agreement?
Short Answer
(1) As amended, the Trust meets the resource exclusion requirements for pooled trusts
under section 1917(d)(4)(C) of the Act.
(2) A term providing for the trust’s retention of 100% of a sub-account’s assets upon
the death of the account’s beneficiary would not conflict with section 1917(d)(4)(C).
(3) A California Court would likely find that the Trust’s amended terms effectively
modified the H~’ Joinder Agreement, making the sub-account’s early termination provision
compliant with the requirements of section 1917(d)(4)(C). Nevertheless, H~’s sub-account
would not be an excludable resource because the account was not established through
her actions, or through the actions of her parent, grandparent, legal guardian, or
a court
BACKGROUND
On December 23, 2004, the Superior Court of the State of California, County of Riverside,
ordered that settlement funds H~ received through a lawsuit against Anheuser be placed in a special needs trust, the terms of which the Court approved.
On October 24, 2005, the Inland Counties Regional Center petitioned the Court to authorize
its execution of joinder agreement on H~’s behalf to the Inland Counties Master Pooled
Trust. The petition indicated that the Court relieved D~, H~’s guardian ad litem,
as trustee and appointed Inland Regional Center as her successor trustee on September
14, 2005.
On November 30, 2006, Proxy Parent Foundation dba Planned Lifetime Assistance Network
of California (PLAN), executed the PLAN of California Master Pooled Trust (Trust).
PLAN established the Trust with the intention that it qualify as a pooled trust under
section 1917(d)(4)(C) of the Act. Beneficiaries join the Trust by executing a Joinder
Agreement, thereby creating a sub-account from which the trustee pays the beneficiary’s
special needs. The purpose of the Trust was to supplement public benefits available
to disabled beneficiaries.
The case docket of the Superior Court of the State of California, County of Riverside,
shows that it considered and ruled on petitions relating to some aspects of H~’s special
needs trust (SNT). See Case No. RIP087605. The docket indicates that, on January 3, 2008, Inlands Regional
Center petitioned to add PLAN as a successor trustee. However, we are only able to
access the docket listings and do not have access to the case documents themselves.
[62] Therefore, we cannot confirm when PLAN began serving as the SNT’s trustee; however,
a June 4, 2008 order suggested that the Court previously approved PLAN as the successor
trustee. [63] Nor do we have information regarding the Inland Counties Master Pooled Trust, and
that entity’s authority to transfer H~’s sub-account to PLAN.
On March 6, 2008, G~, board member and Director of Legal Affairs for PLAN, signed
a Joinder Agreement as grantor, [64] establishing a sub-account for the benefit of H~. The Joinder Agreement listed PLAN
as H~’s legal representative, indicating that it served as her “Trust Protector.”
On October 12, 2012, PLAN amended Article 12 of the Trust.
Relevant Trust and Joinder Provisions
Original Trust Provision - Article 12
Trust Article 12, as originally drafted, set forth provisions under which the trustee
may terminate a sub-account. This article provided that the trustee had the power
to terminate a beneficiary’s sub-account prior to the beneficiary’s death (early termination)
if the trustee reasonably believed that the assets in the sub-account would be liable
for support payments that would otherwise be available through public benefits. In
the event of early termination, the trustee would distribute the sub-account’s assets
as if the beneficiary were deceased.
Additionally, Trust Article 12 provided for the distribution of a beneficiary’s sub-account
upon his or her death. From the assets remaining in the beneficiary’s account at the
time of his or her death, the Trust shall first retain the remainder portion (Trust’s
Remainder Share) authorized in the beneficiary’s joinder agreement. [65] Second, the trustee will pay for state or federal taxes and administrative expenses
accrued due to the account’s termination. Third, the trustee will reimburse the State(s)
for the medical assistance paid to the beneficiary under State Medicaid Plan(s). Fourth,
the trustee will distribute all remaining funds to the final remainder beneficiary
as listed in the beneficiary’s joinder agreement.
Joinder Agreement:
In relevant part, the Joinder Agreement provided that, in the event of H~’s death,
the Trust’s Remainder Share would be 100%, effectively leaving no remaining funds
to be used for reimbursement to State(s) for medical assistance paid on H~’s behalf
during her lifetime. The Joinder Agreement also provided that, in the event of the
sub-account’s termination prior to H~’s death, the trustee would either (A) distribute
the sub-accounts’ funds to H~, or (B) if the trustee, in his sole discretion, deems
such a distribution not in H~’s best interest, then he may distribute any remaining
funds to PLAN, the final remainder beneficiary. The Joinder Agreement provides that
the Grantor and Trustee may jointly agree to amend the terms of the Joinder Agreement,
so long as the amendment is consistent with the Trust, and does not modify the beneficiary
or the final remainder beneficiary.
Amended Trust Provision – Article 12
As amended on October 12, 2012, Article 12 provides that, in the event of early termination,
the trustee will distribute a beneficiary’s sub-account as follows: [66]
(A) If distributed directly to the beneficiary: First, the trustee will pay for state
or federal taxes and administrative expenses accrued due to the account’s termination.
Second, the trustee will reimburse the State(s) for the medical assistance paid to
the beneficiary under State Medicaid Plan(s). Third, the trustee will distribute any
remaining funds in the sub-account directly to the beneficiary; or
(B) If transferred to a different (secondary) section 1917(d)(4)(C) trust: First,
the trustee shall obtain acceptance by another section 1917(d)(4)(C) trust. Second,
the trustee will pay for state or federal taxes and administrative expenses accrued
due to the account’s termination. Then, the trustee will pay any remaining balance
of the sub-account to a secondary trust for establishment of the beneficiary’s sub-account
with that trust.
RELEVANT LAW A trust established with the assets of an individual and for his or her benefit is
considered a resource in determining his or her eligibility for SSI. Act §§ 1613(e),
1917(d)(4); 42 U.S.C. §§ 1382b(e), 1396p. However, a trust established with the assets
of a disabled individual that is part of a pooled trust may be exempted as a resource.
Act §§ 1613(e)(5), 1917(d)(4)(C), 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(C). To meet
this exception,
(i) The trust must be managed by a non-profit association;
(ii) A separate account must be maintained for each beneficiary of the trust;
(iii) Accounts in the trust must be established for the sole benefit of the disabled
beneficiaries, and the account must be established by the actions of the individual,
or his or her parent, grandparent, legal guardian, or by a court; and
To the extent that amounts remaining in the beneficiary’s account upon the death of
the beneficiary are not retained by the trust, upon the beneficiary’s death, the trust
must pay the State(s), from such remaining amounts, the total amount of medical assistance
paid on behalf of the deceased beneficiary during the beneficiary’s lifetime. [67]
Act §§ 1613(e)(5), 1917(d)(4)(C), 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(C); POMS SI 01120.203(B)(2)).
If a pooled trust contains a provision for the early termination of a sub-account
(i.e., termination of the sub-account prior to the beneficiary’s death), the following
criteria must also apply, in order for the trust to be an excludable resource under
section 1917(d)(4)(C):
(1) Upon early termination, the State(s) would receive all amounts remaining in the
account up to an amount equal to the total amount of medical assitance pain on behalf
of the individual under the State(s) Medicaid Plan(s);
(2) Other than state and federal taxes, as well as administrative fees, accuing from
the termination of the account, all remaining funds must be disbursed to the trust beneficiary; and
(3) The early termination clause must give the power for early termination to someone
other than the beneficiary.
See POMS SI 01120.199(F)(1).
A pooled trust with an early termination clause will still be excluded as a countable
resource if it allows for transfer of the beneficiary’s assets from one special needs
pooled trust to another special needs pooled trust, so long as the early termination
clause contains limiting language precluding disbursements other than to the new trust
or for administrative expenses. POMS SI 01120.199(F)(2).
ANALYSIS
(1) Does the PLAN Trust, as amended on October 12, 2012, meet the resource
exclusion requirements?
As originally drafted, the Trust provided that, in the event of early termination,
the trustee would distribute a beneficiary’s sub-account as if he or she were deceased.
The priority of distribution, therefore, would result in the trust receiving its Remainder
Share prior to reimbursement to State(s) for medical assistance paid on the beneficiary’s
behalf. The early termination provision also provided that any remaining balance be
paid to a remainder beneficiary.
The Trust’s retainment of a Remainder Share and distributions to a remainder beneficiary
violated the requirements of section 1917(d)(4)(C). A special needs trust must be
established for and used for the sole benefit of the disabled individual, and any
provision of the trust that “allow(s) for termination of the trust prior to the individual’s
death and payment of the corpus to an individual or entity (other than the State(s)
. . . ) will result in disqualification for the special needs trust exception.” POMS
SI 01120.203(B)(1)(e). In the event of early termination, after reimbursement of State(s) Medicaid
Plan(s) and payment of taxes and administrative fees, all remaining funds must be
disbursed to the beneficiary. POMS SI 01120.199(F). On October 12, 2012, the Trust amended its early termination language to bring
the Trust into compliance with section 1917(d)(4)(C). [68] The Trust now provides that, in the event of early termination, after reimbursement
to the State(s) Medicaid Plan(s) and payment of taxes and administrative fees, any
remaining assets in the sub-account shall either (1) be distributed directly to the
beneficiary, or (2) be transferred to another qualified master pooled trust.
As amended, the Trust’s early termination provisions comply with section 1917(d)(4)(C).
Specifically, only the beneficiary will benefit from the early termination, either
through direct receipt of the account’s assets, or through the transfer of his or
her account to a different master pooled trust. See POMS SI 01120.199(F).
(2) Does the joinder agreement providing for the Trust’s retention of 100%
of a sub-account’s assets on the death of the account’s beneficiary, preclude
resource exclusion?
Upon the death of a beneficiary, a master pooled trust may retain a percentage of
the assets in the beneficiary’s account prior to any other disbursements, including
reimbursement to State(s) for medical assitance paid the beneficiary during his or
her lifetime. See Act § 1917(d)(4)(C), 42 U.S.C. § 1396p(d)(4)(C) (“To the extent that amounts remaining
in the beneficiary’s account upon the death of the beneficiary are not retained by
the trust…”) (emphasis added); POMS SI 01120.199(F) (“it is permissible for the trust to retain amounts remaining in the individual’s
account upon the death of the individual”).
H~’s Joinder Agreement provides that, in the event of her death, the Trust will retain
100% of the assets in her sub-account. This provision effectively precludes reimbursement
to any state for medical assistance paid on H~’s behalf during her lifetime. Nevertheless,
the Act does not limit the amount or extent to which a master pooled trust may retain
assets from a deceased beneficiary’s sub-account. See Act § 1917(d)(4)(C), 42 U.S.C. § 1396p(d)(4)(C). Indeed, the Third Circuit held that
“Congress intended to permit special needs trust – at the discretion of the trust
– to retain up to 100% of the residual after the death of the disabled beneficiary.”
Lewis v. Alexander, 685 F.3d 325, 348 (3d Cir. 2012).
Accordingly, the Trust complied with section 1917(d)(4)(C), despite the Joinder Agreement’s
provision that the Trust will retain up to 100% of H~’s sub-account’s assets upon
her death.
(3) Whether the Trust’s October 12, 2012 amendment modified the terms of the
H~ Joinder Agreement?
In 2008, G~, executed a Joinder Agreement as grantor, establishing a PLAN sub-account
for H~’s benefit. Although the Joinder Agreement listed PLAN as H~’s legal representative,
and indicated that it served as her “Trust Protector,” the agency has not been provided
with evidence showing that G~ or PLAN had any legal authority to establish a Trust
sub-account on her behalf. Indeed, the Joinder Agreement itself has blank spaces in
the place where the beneficiary is asked to provide the name of the court appointed
conservator.
Section 1917(d)(4)(C) requires that the a pooled trust account be established through
the actions of the beneficiary, a parent, grandparent, legal guardian or court. G~
is not H~’s parent or grandparent, but an employee of PLAN. We have no evidence indicating
that he acted as H~’s conservator or through power of atto rney, or that the Court
ordered the execution of the H~’ Joinder Agreement. [69] See POMS 01120.203(B)(2)(g) (“In the case of a trust established through the actions
of a court, the creation of the trust must be required by a court order. Approval
of a trust by a court order is not sufficient.”). In the absence of this type of documentation,
it appears that G~’s execution of H~’s Joinder Agreement and the establishment of
her Trust sub-account did not comply with the requirements of section 1917(d)(4)(C).
[70] Accordingly, H~’s trust account does not qualify as an excludable resource.
However, we recognize that PLAN may seek to re-execute H~’s Joinder Agreement in compliance
with section 1917(d)(4)(C). Therefore, we offer further analysis regarding the effect
of the Trust’s October 12, 2012 amendment on the terms of H~’s Joinder Agreement.
H~’s Joinder Agreement provides that, in the event of early termination, the trustee
has discretion to either (A) distribute the remaining sub-accounts’ funds to H~, or
(B) distribute those funds to PLAN, the entity listed as the final remainder beneficiary.
The Joinder Agreement’s early termination clause does not meet the requirements of
section 1917(d)(4)(C). In the event of early termination, first, the State(s) must
be reimbursed for medical assistance paid on H~’s behalf, then, all remaining funds
must be disbursed to the beneficiary or to another qualifying pooled trust. POMS SI 01120.199(F); SI 01120.203(B)(1)(e). Here, the Joinder Agreement’s early termination clause
does not provide for State(s) Medicaid Reimbursement, and does not ensure that only
H~ will benefit from the early termination. Indeed, the provision leaves it entirely
within the trustee’s discretion to terminate H~’s account early and distribute all
of the account’s funds to PLAN. [71]
The Joinder Agreement permits modification of its provisions so long as the Grantor
and Trustee jointly agreed. However, the Joinder Agreement is silent as to whether
an amendment to the Trust would control, or whether a separate document, amending
the Joinder Agreement, was necessary.
Based on California rules of contract interpretation, we believe that a California
court would find that the amendment to the master trust served to modify the terms
of the Joinder Agreement. [72] One such rule, as codified in California Civil Code § 1642, provides that “[s]everal
contracts relating to the same matters, between the same parties, and made as parts
of substantially one transaction, are to be taken together.” Cal. Civ. Code § 1642;
see also Cal. Civ. Code § 1641 (“The whole of a contract is to be taken together, so as to
give effect to every part. . . each clause helping to interpret the other.”), § 1650
(“Particular clauses of a contract are subordinate to its general intent.”). H~’s
Joinder Agreement incorporated the Trust by reference, thus making the Trust and the
Joinder two contracts relating to the same matter between the same parties. Accordingly,
as the Trust pertains to H~’s sub-account, it should be interpreted together with
the Joinder Agreement. It follows that any amendment to the Trust subsequent to the
execution of the Joinder Agreement would modify like-terms in the Joinder Agreement.
Another California rule of contract interpretation, codified as California Civil Code
§ 1643, provides that “[a] contract must receive such an interpretation as will make
it lawful, operative, definite, reasonable, and capable of being carried into effect,
if it can be done without violating the intention of the parties.” Cal. Civ. Code
§ 1643. The purpose of the Trust and Joinder Agreement was to supplement, rather than
replace, public benefits available to H~ as a disabled individual. Accordingly, it
was the intent of the parties for H~’s Trust account to qualify under section 1917(d)(4)(C)
as an excludable resource. Accordingly, interpreting the October 12, 2012 Trust amendment
as modifying the Joinder Agreement’s early termination clause will have the most favorable
effect in carrying out the parties’ intent and having the account meet the terms of
section 1917(d)(4)(C).
As discussed, the Trust’s October 12, 2012 amendment modifies the provisions for early
termination, bringing the terms into compliance with section 1917(d)(4)(C). With the
revision, in the event of early termination, after reimbursement to the State(s) Medicaid
Plan(s) and payment of taxes and administrative fees, any remaining assets in H~’s
sub-account shall either (1) be distributed directly to H~, or (2) be transferred
to another qualified master pooled trust. Only H~ will benefit from the early termination,
either through direct receipt of the account’s assets, or through the transfer of
her account to a different master pooled trust.
In sum, we do not currently have evidence showing that G~ or any PLAN employee had
legal authority to sign the Joinder Agreement on H~’s behalf. However, separating
out the two issues, the terms of the Joinder Agreement, as modified through the October
12, 2012 Trust amendment, appear to comply with section 1917(d)(4)(C).