QUESTION
Whether the Charities Pooled Trust (CPT), which operates in every state in this region,
qualifies as a pooled trust under the Social Security Act (Act), 42 U.S.C. § 1396p(d)(4)(C),
and the relevant provisions of the Program Operations Manual System (POMS).
OPINION
CPT qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and the relevant
POMS provisions.
BACKGROUND
Between October 2016 and July 2018, CPT executive director, W~, executed Master Trust
Agreements (MTAs) in Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina,
South Carolina, and Tennessee. Each trust established CPT as a pooled trust in these
respective states. The MTA for each state includes identical provisions, except with
respect to the extent to which the MTA addresses directed trustees, whether the trustee
will notify the state’s Medicaid agency about a beneficiary’s death, and how the trust
will distribute the remainder funds in an individual benefit account (IBA) upon a
beneficiary’s death. The MTAs also have identical joinder agreements.
NH1, a number holder living in Kentucky, NH2, a number holder living in Tennessee,
and NH3, a number holder living in Florida, receive Supplemental Security Income (SSI).
NH1 signed a Joinder Agreement with CPT under the Kentucky MTA on February 13, 2017.
NH2’s parent and grandparent signed a Joinder Agreement with CPT under the Tennessee
MTA on July 3, 2019. NH3 signed a Joinder Agreement with CPT under the Florida MTA
on August 22, 2018. NH1, NH2, and NH3 funded the IBAs of their respective trusts through
the transfer of their own assets to the trusts.
I. Purpose and Establishment of the Trust
CPT’s MTAs identify CPT as the Trustee. See MTA, § 2.2.[4] They identify CPT as a non-profit corporation recognized as tax-exempt under section
501(c)(3) of the Internal Revenue Code. Seeid.
The MTAs indicate that the trust intends to comply with 42 U.S.C. § 1396p(d)(4)(C)
(§ 1917(d)(4)(A) of the Act). See MTA, § 1.5. They indicate that each trust shall establish a separate account for
each beneficiary, but may pool the amounts in the separate accounts for investment
and management purposes. See MTA, §§ 4.1, 9.1.
The MTAs classify a trust beneficiary as a person with a disability, as defined by
42 U.S.C. § 1382c(a)(3) (codifying § 1614(a)(3) of the Act), whom a grantor identifies
as the sole recipient of services and benefits from the individual account created
within the trust for such person with a disability. See MTA, § 13.12; Alabama, Georgia, Mississippi, North Carolina, South Carolina MTA,
§ 2.4; Florida, Kentucky, Tennessee MTA, § 2.6. A trust beneficiary, or the trust
beneficiary’s parent, grandparent, or legal guardian, or another person or entity
acting pursuant to a court order or other legal authority, can be a grantor and can
establish an account for a trust beneficiary in the Trust and contribute assets to
the trust for the sole benefit of the trust beneficiary. See MTA, § 3.1; Alabama, Georgia, Mississippi, North Carolina, South Carolina MTA, §
2.3; Florida, Kentucky, Tennessee MTA, § 2.5. The stated purpose of the trust is to
supplement, not displace, a beneficiary’s government benefits. See MTA, § 3.2.
II. Distribution and Powers of the Trustee
The Trustee is responsible for overseeing the custody, investment asset allocation
model selection, and disbursement of funds contributed to the trusts. See MTA, § 2.2. In carrying out this responsibility, the Trustee may retain an independent
investment advisor to handle the custody, investment, and management of the trust
assets. See Alabama, Georgia, Mississippi, North Carolina, South Carolina MTA, § 2.5; Florida,
Kentucky, Tennessee MTA, § 2.7. The Trustee and any investment advisor shall perform
their duties provided in the trusts to receive, hold, manage, and control all income
and principal in the IBAs comprising the Trust as may be appropriate to effectuate
the intent and purpose of the trusts. See MTA, § 10.1.
The Trustee shall hold, administer, and distribute all property and income from an
individual trust beneficiary’s IBA for the sole benefit of the beneficiary. See MTA, §§ 6.1, 6.2. Distributions are solely within the Trustee’s discretion, but the
Trustee must make them for the sole benefit of a beneficiary and should make them
if the distribution has the effect of supplanting or replacing any government assistance
or disqualifying a beneficiary from receiving government assistance. See MTA, § 6.1.
The Trustee assesses enrollment fees for the fees and expenses associated with a beneficiary
enrolling in one of the trusts and establishing an IBA and annual administration fees
for the administration and maintenance of an IBA at the time a beneficiary enrolls
in the trust. See MTA, § 9.2. The Trustee may adjust the enrollment fees schedule and annual administration
fees schedule from time to time. See id.
III. Irrevocability and Spendthrift
The trusts established under each state’s MTA are irrevocable upon the Trustee’s acceptance
of a beneficiary’s joinder agreement and related required documents, and the grantor’s
contributed amount, and upon the grantor and beneficiary completing the enrollment
requirements to join the trust. See MTA, § 1.3. The MTA treats the amount contributed to a beneficiary’s IBA as irrevocably
assigned, transferred, conveyed and delivered to the Trustee to be used for the sole
benefit of the beneficiary. MTA, § 4.2. Once the Trustee accepts the contributed amount,
it is not refundable to the beneficiary. Seeid. A beneficiary has no right to demand a distribution from the trust for his or her
own support or maintenance. See MTA, § 9.8.
Each trust is a spendthrift trust. See MTA, § 9.9. No beneficiary can subject any part of either trust to an assignment;
attachment; levy; a creditor’s control; a creditor’s legal or equitable action, proceeding,
suit, or procedure to take from the Trust; or a compelled distribution to any beneficiary’s
creditor. Seeid.
IV. Termination
Upon a beneficiary’s death, the Trustee will use remaining funds in the beneficiary’s
IBA to pay back to a state’s Medicaid agency or agencies an amount equal to the total
amount of medical assistance paid on behalf of the beneficiary under a state Medicaid
plan. See MTA § 7.2B, D. If the payback amount is equal or greater than the amount remaining
in the IBA, the MTAs for Alabama, Georgia, and North Carolina indicate that the trust
will retain ten percent of the remaining amount and use the remaining ninety percent
to pay back the Medicaid agency or agencies. Alabama, Georgia, North Carolina MTA,
§ 7.2D.1. The MTAs for the rest of the states in the Atlanta region indicate that
under the same circumstances, the Trust will retain fifty percent of the remaining
amount and use the remaining fifty percent to pay back the Medicaid agency or agencies.
See Kentucky, Mississippi, South Carolina, Tennessee MTA, § 7.2D.1. If the payback amount
is less than the amount remaining in the IBA, the MTAs for every state in the Atlanta
region indicate that the Trust will retain five percent of the amount remaining in
the IBA and pay back the full amount to the Medicaid agency or agencies. See MTA, § 7.2D.2. The Trustee will distribute any remaining amount left after the Trust
retains five percent and pays back the Medicaid agency or agencies to any remainder
beneficiaries of the deceased beneficiary identified in the IBA joinder agreement.
See MTA, § 7.2C, D.2.
A beneficiary cannot terminate the Trust or any part of the beneficiary’s IBA at any
time, under any circumstances. See MTA, § 8.1. If the Trust terminates during the lifetime of a beneficiary, the Trustee
will use any funds remaining in an IBA to pay back a state’s Medicaid agency or agencies
an amount equal to the total amount of medical assistance paid on behalf of the beneficiary
under a state Medicaid plan, with the remaining amounts distributed to the beneficiary.
See MTA, § 8.1.
DISCUSSION
A. To qualify as a pooled trust, a trust must meet six
requirements.
To be eligible for Supplemental Security Income (SSI), the dollar value of a claimant’s
countable resources cannot exceed certain statutory limits. See 42 U.S.C. § 1382(a)(1)(B), (3)(B); 20 C.F.R. §§ 416.202(d), 416.1201, 416.1205; POMS
SI 01110.003(A). Under 42 U.S.C. § 1382b(e), a trust is a resource unless it meets certain requirements,
including those articulated in § 1396p(d)(4)(C). Trusts that meet the requirements
of 42 U.S.C. § 1396p(d)(4)(C) are considered to be qualifying pooled trusts.
B. The MTAs for every state in the Atlanta Region qualifies as a pooled
trust.
The MTAs for every state in this region qualify as pooled trusts. As further explained
below, the MTAs meet each of the six criteria articulated in 42 U.S.C. § 1396p(d)(4)(C)
as follows:
1. Disabled Individual
To qualify as a pooled trust, the trust must contain “the assets of an individual
who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); see POMS SI 01120.203.D.2 (stating that “the individual whose assets were used to establish the trust account
must be disabled for SSI purposes . . . .”). That requirement is satisfied here.
The MTAs require that a trust beneficiary be a person with a disability. See MTA, § 13.12; Alabama, Georgia, Mississippi, North Carolina, South Carolina MTA,
§ 2.4; Florida, Kentucky, Tennessee MTA, § 2.6. Although a grantor besides the trust
beneficiary may contribute assets to the trust, the grantor makes those contributions
for the sole benefit of the trust beneficiary. See MTA, § 3.1; Alabama, Georgia, Mississippi, North Carolina, South Carolina MTA, §
2.3; Florida, Kentucky, Tennessee MTA, § 2.5. Additionally, the individuals who established
IBAs under the MTAs for Florida, Kentucky, and Tennessee are disabled and used their
own assets to fund their IBAs.
2. Established and Managed by a Nonprofit
Association
Second, the trust must be “established and managed by a non-profit association.” 42
U.S.C. § 1396p(d)(4)(C)(i); see POMS SI 01120.203.D.3 (trust is “established and maintained by the actions of a nonprofit association”).
This requirement is satisfied as well.
According to the MTAs, CPT is the settlor and trustee of the MTAs and is a non-profit
corporation under section 501(c)(3) of the Internal Revenue Code. MTA, § 2.2. CPT
is a fictitious name for the Institute for Health Care Advocacy, Inc. See sunbiz.org – Florida Department of State, http://dos.sunbiz.org/scripts/ficidet.exe?action=DETREG&docnum=G09000149562&rdocnum=G09000149562 (last accessed Feb. 24, 2020). The Institute for Health Care Advocacy, Inc. is an
active not-for-profit Florida corporation. See sunbiz.org – Florida Department of State, http://search.sunbiz.org/Inquiry/CorporationSearch/SearchResultDetail?inquirytype=EntityName&directionType=Initial&searchNameOrder=INSTITUTEFORHEALTHCAREADVOCACY%20N930000037871&aggregateId=domnp-n93000003787-3d08880b-9b2a-400f-bc4b-4f26864703fb&searchTerm=Institute%20for%20Health%20Care%20Advocacy&listNameOrder=INSTITUTEFORHEALTHCAREADVOCACY%20N930000037871 (last accessed Feb. 24, 2020). The fictitious name registration for CPT expired on
December 31, 2019. See sunbiz.org – Florida Department of State, http://dos.sunbiz.org/scripts/ficidet.exe?action=DETREG&docnum=G09000149562&rdocnum=G09000149562 (last accessed Feb. 24, 2020). However, under Florida law, the failure of a business
to register a fictitious name “does not impair the validity of any contract, deed,
mortgage, security interest, lien, or act of such business . . . .” Fla. Stat. Ann.
§ 865.09(9)(b). Accordingly, this requirement is still satisfied in spite of the failure
of the Institute for Health Care Advocacy, Inc., to maintain its registration of CPT
as a fictitious name.
3. Separate Accounts, Pooled for Investing
Third, to be a pooled trust, the trust must maintain a separate account for each beneficiary.
42 U.S.C. § 1396p(d)(4)(C)(ii); see POMS SI 01120.203.D.4. However, “for purposes of investment and management of funds, the trust pools
these accounts.” 42 U.S.C. § 1396p(d)(4)(C)(ii); seePOMS SI 01120.203.D.4 (the “trust may pool the funds in the individual accounts . . . for purposes
of investment and management of funds”). This requirement is reflected in POMS, which
notes that “[t]he trust must be able to provide an individual accounting for each
individual.” POMS SI 01120.203.D.4. The MTAs for every state in this region meet these requirements.
The MTAs indicate that each trust shall establish a separate account for each beneficiary,
but trust may pool the amounts in the separate accounts for investment and management
purposes. MTA, §§ 4.1, 9.1. The MTAs also indicate that the trustee, or its agent,
must “maintain records for each Trust IBA in the name of each Trust Beneficiary and
showing the Contributed Amount plus any income earned from the Contributed Amount.”
MTA, § 4.1. The trust must provide periodic reports, at least annually, about receipts
and disbursements to and from the individual’s account. See MTA, § 9.4.
4. Established for the Sole Benefit of the Disabled
Individual
The fourth requirement for a pooled trust is that the trust account is “established
solely for the benefit of individuals who are disabled.” 42 U.S.C. § 1396p(d)(4)(C)(iii);
accord POMS SI 01120.203.D.5 (trust “must be established for the sole benefit of the disabled individual”).
The statute does not provide guidance on “sole benefit,” but the POMS explains that
a trust is “established for the sole benefit of an individual” when it “benefits no
one but that individual, whether at the time the trust is established or at any time
for the remainder of the individual’s life.” POMS SI 01120.201.F.1.
The trust may pay third parties for goods or services for the beneficiary and still
be for the “sole benefit” of the beneficiary. POMS SI 01120.201.F.3. The trust also may “provide for reasonable compensation for (a) trustee(s) to
manage the trust and reasonable costs associated with investment, legal, or other
services rendered on behalf of the individual with regard to the trust.” POMS SI 01120.201.F.4.
The MTAs for every state in this region meet this requirement. The MTAs indicate that
the trustee must “hold, administer, and distribute all property, and all income therefrom
from an Individual Trust Beneficiary’s IBA, for the sole
benefit of the Trust Beneficiary during the Trust Beneficiary’s lifetime and after Trust
termination.” MTA, § 6.2 (emphasis in original); MTA, § 6.3 (“Trust Beneficiary’s
IBA is for the sole benefit of the Trust Beneficiary.”) (emphasis in original).
The MTAs also allow for fees in accordance with a written fee schedule and expenses
for administering the trust. MTA, §§ 9.2, 10.5. The MTAs further state that the trust
will compensate a trustee for “services rendered and reimbursed reasonable expenses
incurred on behalf of the Trust or a Trust Beneficiary.” MTA, § 10.5. Additionally,
the MTAs allow for charges of pro rata legal fees to all individual trust accounts,
or to accounts of affected beneficiaries, and the trustee will determine “if defense
costs affect a substantial number of Trust beneficiaries” and warrant allocation.
MTA, § 10.6. These provisions pass muster under the statute because they constitute
“reasonable costs associated with investment, legal, or other services rendered on
behalf of the individual with regard to the trust.” POMS SI 01120.201.F.4.
The MTAs contain an early termination provision that accounts for a scenario where
the trust terminates prior to the death of the beneficiary. MTA, Art. 8. An early
termination provision is allowable under the pooled-trust exception so long as three
criteria are met: (1) “[u]pon early termination (i.e., termination prior to the death
of the beneficiary), the State(s), as primary assignee, would receive all amounts
remaining in the trust at the time of termination up to an amount equal to the total
amount of medical assistance paid on behalf of the individual under the State Medicaid
plan(s);” (2) “[o]ther than payment for those expenses [for taxes, reasonable fees,
and administrative expenses], no entity other than the trust beneficiary may benefit
from the early termination (i.e., after reimbursement to the State(s), all remaining funds are disbursed to the trust beneficiary);” and (3) “[t]he early termination
clause gives the power to terminate to someone other than the trust beneficiary.”
POMS SI 01120.199.F.1 (bold in original). The trust may pay taxes, reasonable fees, and administrative
expenses before reimbursing any state(s) for medical assistance. See POMS SI 01120.199.F.3.
The MTAs for this region satisfy these criteria. Specifically, the MTAs indicate that,
if the trust terminates during the beneficiary’s life, all remaining funds in that
account will be paid to reimburse each state for medical assistance paid on behalf
of the beneficiary. MTA, § 8.1. The MTAs also indicate that, after paying the states,
“if there are any assets remaining, the Trustee shall distribute all of the remaining
assets to the Trust Beneficiary.” MTA, § 8.1. Additionally, the beneficiary does not
have the power to terminate his or her trust account. See MTA, § 8.1.[5]
5. Established Through the Actions of the Individual, Parent,
Grandparent, Legal Guardian, or Court
To qualify as a pooled trust, the trust account also must be “established... by the
parent, grandparent, or legal guardian of such individuals, by such individuals, or
by a court.” 42 U.S.C. § 1396p(d)(4)(C)(iii); see POMS SI 01120.203.D.6. The MTAs here meet this requirement, as they require that a beneficiary or a
grantor, who must be a parent, grandparent, legal guardian, or other person acting
pursuant to a court order, execute the joinder agreement to establish an IBA under
the MTA. MTA, §§ 3.1, 13.2; Alabama, Georgia, Mississippi, North Carolina, South Carolina
MTA, § 2.3; Florida, Kentucky, Tennessee MTA, § 2.5. The joinder agreements submitted
for NH1, NH2, and NH3 for the Florida, Kentucky, and Tennessee MTAs, respectively,
also show that each of these individuals have established their IBAs either through
their own actions or through the actions of their parents.
6. Remaining Amounts Paid to the State
Sixth, “[t]o the extent that amounts remaining in the beneficiary’s account upon the
death of the beneficiary are not retained by the trust, the trust pays to the State
from such remaining amounts in the account an amount equal to the total amount of
medical assistance paid on behalf of the beneficiary under the State plan.” 42 U.S.C.
§ 1396p(d)(4)(C)(iv); accord POMS SI 01120.203.D.8. The trustee may pay taxes and reasonable fees and costs before paying the state
for medical assistance. SeePOMS SI 01120.203.E.1.
The MTAs meet this requirement, as well. Specifically, the MTAs allocate remaining
assets between the trust, the state(s), and the remainder beneficiaries. MTA, § 7.2.
If the state medical assistance amount is equal to or greater than the total amount
left in the beneficiary’s IBA, the MTAs for Alabama, Georgia, and North Carolina state
that the trust will retain ten percent of the remaining amount and use the remaining
ninety percent to pay back the Medicaid agency or agencies. See Alabama, Georgia, North Carolina MTA, § 7.2D.1. The MTAs for the rest of the states
in the Atlanta region state that under the same circumstances, the trust will retain
fifty percent of the remaining amount and use the remaining fifty percent to pay back
the Medicaid agency or agencies. See Kentucky, Mississippi, South Carolina, Tennessee MTA § 7.2D.1. If the state medical
assistance amount is less than the amount left in the beneficiary’s IBA, the trust
in every state in the Atlanta region will retain the first five percent of the amount;
the trustee will pay the full amount owed to the state; and the trustee will pay any
remaining amount to the beneficiary’s heirs. See MTA, § 7.2D.2. This distribution scheme comports with the statute.
In addition, the MTAs allow the trustee to pay certain administrative expenses, such
as taxes and reasonable fees and costs, before paying the state for medical assistance.
MTA, § 7.4A. The MTAs incorporate by reference the allowable and prohibited expenses
in SSA’s POMS, by stating the Trustee will not pay any administrative expenses not
allowed by the SSA’s POMS. MTA, § 7.4B.
CONCLUSION
The Trust complies with all the requirements for a pooled trust under section 1917(d)(4)(C)
of the Act and the implementing POMS provisions.