In this opinion, the RCC examines the Oregon Pooled Trust of Life Enrichment Trust, Inc, to determine if it qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. The RCC finds that the trust meets all the pooled trust requirements and therefore must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

QUESTION PRESENTED

Does the Oregon Pooled Trust of Life Enrichment Trust, Inc., qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D, such that trust assets must be evaluated under POMS SI 01120.200 to determine if they are countable resources for Supplemental Security Income (SSI) purposes?

BRIEF ANSWER

Yes, the Trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. Accordingly, it must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

SUMMARY OF FACTS

In June 2014, Life Enrichment Trust, Inc. (LET), settled a pooled trust in Oregon (2014 Trust). Master Trust Agreement, “Pooled Trust.” After consultation with OGC, the Regional Office concluded that the 2014 Trust was not a qualifying pooled trust. On March 15, 2017, LET amended and restated the Master Trust Agreement and Joinder Agreement for its Oregon pooled trust (2017 Trust). Master Trust Agreement, “Pooled Trust.” On July 8, 2020, B.S., who is disabled, executed a 2017 Trust Joinder Agreement. The Regional Office has asked whether the 2017 Trust now satisfies the requirements of 42 U.S.C. § 1396p(d)(4)(C).

ANALYSIS

A. To be a pooled trust, a trust must meet six requirements.

To be eligible for SSI, the dollar value of a claimant’s countable resources cannot exceed certain statutory limits. 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. ^[1]

First, to be a qualifying pooled trust, the trust must contain “the assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); accord POMS SI 01120.203.D.2. Second, the trust must be “established and managed by a nonprofit association.” 42 U.S.C. § 1396p(d)(4)(C)(i); accord POMS SI 01120.203.D.3. Third, the association must maintain “[a] separate account . . . for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.” 42 U.S.C. § 1396p(d)(4)(C)(ii); accord POMS SI 01120.203.D.4. Fourth, the accounts must be “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. Fifth, the trust account 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); accord POMS SI 01120.203.D.6. Sixth, and finally, “[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.

A trust that qualifies as a pooled trust must still be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

 

B. The 2017 Trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C).

The 2017 Trust meets all six requirements for a pooled trust. The 2017 Trust contains provisions that remedy the deficiencies in the 2014 Trust.

1. Disabled Individual

To begin, the trust must contain “the assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); see also POMS SI 01120.203.D.2 (“[T]he individual whose assets were used to establish the trust account must be disabled for SSI purposes . . . .”).

The 2017 Trust complies with this requirement. It requires that a beneficiary be disabled under 42 U.S.C. § 1382c(a)(3). Master Trust Agreement, “Who Can Be a Beneficiary?”

The 2017 Trust further provides that the assets that are to be placed in the trust are those that “would otherwise disqualify an individual from receiving . . . Supplemental Security Income.” Master Trust Agreement, “Pooled Trust.” While ambiguous, Oregon law requires unclear provisions in a trust to be constructed in a manner “which is most consistent with the overall intention discerned from the other provisions of the trust instrument.” U. S. Nat. Bank of Oregon v. Duling, 39 Or. App. 329, 336, 592 P.2d 257, 261 (1979). Here, the goal of 2017 Trust is to contain assets that would otherwise disqualify disabled individuals from receiving supplemental security income and to comply with 42 U.S.C. § 1396p(d)(4)(C). Master Trust Agreement, “Pooled Trust.” Accordingly, under Oregon law, the 2017 Trust must be construed to require that it is “the assets of the individual who is disabled” which are placed into the trust.

2. Established and Managed by a Nonprofit Association

Second, the trust must be “established and managed by a nonprofit association.” 42 U.S.C. § 1396p(d)(4)(C)(i); see also POMS SI 01120.203.D.3 (trust is “established and maintained by the actions of a nonprofit association”). A nonprofit corporation may employ a for-profit entity as investment manager if the nonprofit corporation maintains ultimate managerial control over the Trust. POMS SI 01120.225.D. The nonprofit must be responsible for determining the amount of the trust corpus to invest, removing or replacing the trustee, and making the day-to-day decisions regarding the health and well-being of the trust beneficiaries. Id.

This requirement is satisfied. LET is a Pennsylvania non-profit organization. https://www.corporations.pa.gov/search/corpsearch (providing search window to verify active Pennsylvania non-profit organizations) (last accessed February 4, 2021). The 2017 Trust provides that LET established and manages the Trust. Master Trust Agreement, “About the Pooled Trust.” Further, the 2017 Trust provides that should LET employ the services of a for-profit entity, LET will maintain “ultimate managerial control” and the for-profit entity “will always be subordinate” to LET’s managers. Master Trust Agreement, “Potential Conflict of Interest.”

3. Separate Accounts, Pooled for Investing

Third, to be a pooled trust, the trust must maintain “a separate account . . . for each beneficiary of the trust.” 42 U.S.C. § 1396p(d)(4)(C)(ii). “[F]or purposes of investment and management of funds, the trust pools these accounts.” Id. However, “[t]he trust must be able to provide an individual accounting for each individual.” POMS SI 01120.203.D.4.

The 2017 Trust maintains a separate account for each beneficiary, but pools the accounts for investment and management purposes. Master Trust Agreement, “About the Pooled Trust.” The 2017 Trust further explains that each account will share in the income or loss of the entire fund based on the amount of money in the account and the length of time the funds were deposited. Id. Finally, the 2017 Trust provides that statements for each account will be issued quarterly. Id.

Accordingly, this requirement is satisfied.

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); see also 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.” See 42 U.S.C. § 1396p(h) (setting forth definitions, but not defining this term). But 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, as well as 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 2017 Trust explicitly states the trust is for the sole benefit of the beneficiary, and all distributions must be for the beneficiary’s benefit. Master Trust Agreement, “What is the Trustee’s Role;” Joinder agreement, “Distributions.”

The 2017 Trust contains an early termination provision that does not violate the sole benefit criteria. The early termination provision has two parts. Master Trust Agreement, “Amendment or Termination of the Trust.” First, if it becomes impossible or impractical to carry out the purpose of the trust, then the trustee may, in its discretion, choose to terminate the trust. Id. The trustee will first try to transfer the funds to another qualifying 42 U.S.C. § 1396p(d)(4)(C) trust. Id. This decanting provision satisfies the requirements of POMS SI 01120.199.E.2, which states that a decanting clause must contain specific language that precludes disbursement of funds to anything other than a qualifying 42 U.S.C. § 1396p(d)(4)(C) trust or to pay allowable expenses. Here, the decanting provision provides that the funds of the trust, without qualification or limitation, will be transferred to a qualifying trust. Master Trust Agreement, “Amendment or Termination of the Trust.”

The 2017 Trust provides that, if the funds cannot be decanted to another qualifying trust, then the trustee will reimburse the states for their Medicaid expenses and disburse the remaining funds to the trust beneficiary. Master Trust Agreement, “Amendment or Termination of the Trust.”

Early termination 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.E.1 (bold in original). The trust may pay taxes, reasonable fees, and administrative expenses before reimbursing any state(s) for medical assistance. POMS SI 01120.199.E.3.

The 2017 Trust satisfies all three of these requirements. Upon early termination of the trust, the trustee first repays the states for their Medicaid expenses. Master Trust Agreement, “Amendment or Termination of the Trust.” And, other than state Medicaid payback and payment for allowable expenses, all funds must be given to the beneficiary. Id. Finally, the power to terminate resides exclusively within the power of the Trustee. Id.

Accordingly, the 2017 Trust satisfies the fourth requirement for pooled trusts.

5. Established Through the Actions of the Individual, Parent, Grandparent, Legal Guardian, or Court

Fifth, to qualify as a pooled trust, the trust account 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); accord POMS SI 01120.203.D.6.

The 2017 Trust only permits parents, grandparents, legal guardians, beneficiaries themselves, and courts to complete and sign a Joinder Agreement. Master Trust Agreement, “Who Can Set Up an Account.” In the instant case, the disabled beneficiary established the trust account. Joinder Agreement. Thus, the fifth condition is satisfied.

6. Remaining Amounts Paid to the State

The sixth requirement is that, “[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. Taxes and reasonable fees and costs may be paid before paying the state for medical assistance. See POMS SI 01120.203.E.1.

The 2017 Trust satisfies this requirement. It provides that, upon the death of the beneficiary, the trust will repay the State of Oregon and any other State the amount they spent on behalf of the beneficiary. Master Trust Agreement, “Residual Amounts at the Beneficiary’s Death.” The Life Enrichment Trust provides that the “State of Oregon (and any other state in its proportionate share as set forth below) shall be the first payee.” Id. Though the 2017 Trust occasionally employs unclear language regarding whether Oregon will receive preferential Medicaid repayments, it clarifies that “[if] the Beneficiary has received Medicaid benefits in more than one state, each state that has provided benefits shall be repaid,” and that if there is insufficient money to repay each state, each state will be paid a proportionate share. Id. Under Dunling, 39 Or. App. at 336, 592 P.2d at 261, any ambiguous language in the trust regarding state Medicaid payback must be construed consistently with the clear intent of the 2017 Trust to provide proportional Medicaid repayments to the states. Accordingly, the 2017 Trust must be read not to preference Oregon, but rather to provide proportional Medicaid repayments consistent with the requirements of POMS SI 01120.203.D.8. In addition, the 2017 Trust specifies that payment to the States will have priority over all other debts and administrative expenses, except those expenses permitted under Program Operations Manual System (POMS) SI 01120.203.B.3.a.^[2] Id.

This distribution scheme comports with the statute. Accordingly, the 2017 Trust satisfies the last requirement.

CONCLUSION

In sum, the 2017 Trust is a qualifying pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. Accordingly, the 2017 Trust must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI eligibility.

 

In this opinion, the Regional Chief counsel (RCC) examines the Oregon Special Needs Trust to determine if it qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. The RCC finds the Oregon Special Needs Trust contains a sub-trust – The First-Party Oregon Special Needs Trust – that qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C).

QUESTION PRESENTED

Does the Oregon Special Needs Trust qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D, such that trust assets must be evaluated under POMS SI 01120.200 to determine if they are countable resources for Supplemental Security Income (SSI) purposes?

BRIEF ANSWER

Yes, the Oregon Special Needs Trust contains a sub-trust – The First-Party Oregon Special Needs Trust – that qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C). The First-Party Oregon Special Needs Trust contains none of the faults that we found prevented the Oregon Special Needs Trust from qualifying as a pooled trust in our 2019 opinion.

SUMMARY OF FACTS

In June 2019, we opined that the Oregon Special Needs Trust (OSNT) was not a qualifying pooled trust under 42 U.S.C. § 1396p(d)(4)(C) because it was not managed by a non-profit and was not established solely for the benefit of individuals who are disabled. After we issued our opinion, the OSNT submitted draft master trust and joinder agreements that had been amended to address our concerns. In November 2019, we issued an opinion stating that the amended agreements, if adopted, would resolve the deficiencies we noted in our June 2019 opinion, and the OSNT would qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C). In April 2020, the OSNT was amended to (a) adopt the draft amendments we reviewed in our November 2019 opinion, and (b) create two sub-trusts of OSNT. Amendment to Master Trust Agreement, Oregon Special Needs Trust, April 24, 2020. Though the sub-trusts each have their own governing documents, they operate using a single federal trust identification number. Id.

One sub-trust, the First-Party Oregon Special Needs Trust (First-Party OSNT), was created with the intent of being a qualifying pooled trust under 42 U.S.C. § 1396p(d)(4)(C). Id.; see First-Party OSNT Agreement, §§ 1.2, 2.3, 2.4(b); First-Party Joinder Agreement, ¶ B. The other sub-trust, the Third-Party Oregon Special Needs Trust (Third-Party OSNT), consists of sub-accounts containing assets of parents and family members of persons with disabilities. Third-Party OSNT Agreement, Recitals ¶ B.

The RO has asked if these sub-trusts satisfy the requirements of 42 U.S.C. § 1396p(d)(4)(C).

ANALYSIS

Only the First-Party OSNT appears designed to qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C). The Third-Party OSNT is designed to contain the assets of individuals other than the disabled. Third-Party OSNT Agreement, Recital ⁋ B, §§ 1.2, 2.4. A qualifying pooled trust under 42 U.S.C. § 1396pd(d)(4)(C) is, by definition, one “containing the assets of an individual who is disabled” that meets additional criteria. The Third-Party OSNT is accordingly not a qualifying pooled trust under 42 U.S.C. § 1396p(d)(4)(C).

The existence of a non-qualifying sub-trust within the OSNT, however, does not prevent another sub-trust – here the First-Party OSNT – from being a qualifying pooled trust. Accordingly, we analyze whether the First-Party OSNT is a qualifying pooled trust below.

A. To be a pooled trust, a trust must meet six requirements.

To be eligible for SSI, the dollar value of a claimant’s countable resources cannot exceed certain statutory limits. 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.^[3]

First, to be a qualifying pooled trust, the trust must contain “the assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); accord POMS SI 01120.203.D.2. Second, the trust must be “established and managed by a nonprofit association.” 42 U.S.C. § 1396p(d)(4)(C)(i); accord POMS SI 01120.203.D.3. Third, the association must maintain “[a] separate account . . . for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.” 42 U.S.C. § 1396p(d)(4)(C)(ii); accord POMS SI 01120.203.D.4. Fourth, the accounts must be “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. Fifth, the trust account 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); accord POMS SI 01120.203.D.6. Sixth, and finally, “[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.

A trust that qualifies as a pooled trust must still be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

B. The First-Party OSNT qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C).

The First-Party OSNT meets all six requirements for a pooled trust. The First-Party OSNT Agreement and the First-Party Joinder Agreement contain amendments that address the issues we identified in our June 2019 opinion.

1. Disabled Individual

To begin, the trust must contain “the assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); see also POMS SI 01120.203.D.2 (“[T]he individual whose assets were used to establish the trust account must be disabled for SSI purposes . . . .”). The First-Party OSNT complies with this requirement. Each Joinder Agreement creating a sub-account of the First-Party OSNT must designate a person with disabilities as the Beneficiary. First-Party OSNT Agreement, § 1.1. Only assets belonging to that Beneficiary may be accepted by the Trustee as trust assets. Id., § 1.2; First-Party Joinder Agreement, ¶¶ A, F.

2. Established and Managed by a Nonprofit Association

Second, the trust must be “established and managed by a nonprofit association.” 42 U.S.C. § 1396p(d)(4)(C)(i); see also POMS SI 01120.203.D.3 (trust is “established and maintained by the actions of a nonprofit association”). A nonprofit corporation may employ a for-profit entity as investment manager if the nonprofit corporation maintains ultimate managerial control over the Trust. POMS SI 01120.225.D. The nonprofit must be responsible for determining the amount of the trust corpus to invest, removing or replacing the trustee, and making the day-to-day decisions regarding the health and well-being of the trust beneficiaries. Id.

This requirement is satisfied. The First-Party OSNT Agreement is between The Arc of Oregon, Trustor, and Key Bank National Association, Trustee (KeyBank). First-Party OSNT Agreement, at 1. According to this trust agreement, “The Arc is an Oregon nonprofit corporation providing advocacy and other services to residents of Oregon with disabilities.” Id.See also Search Oregon Charities, Oregon Department of Justice Charitable Activities, https://justice.oregon.gov/charities (search “The Arc of Oregon”) (last visited July 28, 2020).

KeyBank, the Trustee, is a for-profit entity.^[4] The non-profit Trustor has the discretion to remove KeyBank as Trustee. First-Party OSNT Agreement, § 4.4. The non-profit Trustor also has “absolute discretion” to direct trust fund distributions to the beneficiary. Id., §§ 2.2, 3.1; see also First-Party Joinder Agreement ¶ G.3. Additionally, the non-profit Trustor has “sole authority to determine what portion of the Trust Corpus the Trustee may invest.” First-Party OSNT Agreement, § 4.1.

The First-Party OSNT Agreement provides that, “[s]ubject to any restrictions contained in this agreement, Trustee shall have all the powers conferred upon a Trustee by the laws of the State of Oregon.” Id., § 4.2. While the laws of the State of Oregon grant a trustee powers of “management” of trust property (Or. Rev. Stat. § 130.720), this provision is not an excess delegation of power to a for-profit entity. Oregon law explains that, ultimately, a trustee’s powers are “limited by the terms of the trust.” Or. Rev. Stat. § 130.720. Here, the terms of the trust limit the trustee’s management of trust property and vest the day-to-day decisions regarding the health and well-being of the beneficiaries in the non-profit Trustor. For instance:

• •

  The non-profit Trustor “shall be solely responsible for determining the Special Needs of the Beneficiary,” which are the goods, services, and benefits that are paid for by the Trust. First-Party OSNT Agreement, §§ 2.1-2.2. The Trustor shall then use the income and principal of each sub-account for the Special Needs of the Beneficiary. Id., § 2.1

• •

  Distributions from the trust by the Trustee are only to be made “in accordance with directions from the Trustor, in its sole discretion.” First-Party Joinder Agreement, ¶ G.3.

• •

  If the trust receives a request for a distribution, it is the non-profit Trustor who reviews the request. Id.

• •

  The non-profit Trustor determines whether spending trust assets is in Beneficiary’s best interest. Id., ¶ H.1.

Because the non-profit Trustor makes day-to-day decisions regarding the health and well-being of the beneficiaries, has the power to remove or replace the Trustee, and determines the amount of the trust corpus to invest, the second requirement is met.

3. Separate Accounts, Pooled for Investing

Third, to be a pooled trust, the trust must maintain “a separate account . . . for each beneficiary of the trust.” 42 U.S.C. § 1396p(d)(4)(C)(ii). “[F]or purposes of investment and management of funds, the trust pools these accounts.” Id. However, “[t]he trust must be able to provide an individual accounting for each individual.” POMS SI 01120.203.D.4.

The First-Party OSNT contains these requirements. According to its terms, “[e]ach sub-trust established for a Beneficiary shall be held and administered by Trustee as a separate account or “sub-trust”, but all such trust assets may be commingled by Trustee for investment and other purposes” First-Party OSNT Agreement, § 1.4. The Trustee must maintain accounting records for each sub-trust, and send them at least annually to each Beneficiary. Id., § 1.5.

Given these provisions, the First-Party OSNT meets the third requirement.

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); see also 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.” See 42 U.S.C. § 1396p(h) (setting forth definitions, but not defining this term). But 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, as well as 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 First-Party OSNT meets this requirement. Distributions from the trust “shall be made for the sole benefit of the Beneficiary.” First-Party Joinder Agreement, ¶ G.1, see also First Party OSNT Agreement, § 2.1. The First-Party OSNT also allows for “reasonable compensation” for the services of the Trustor and Trustee. Id., § 4.8.

Additionally, the First-Party OSNT contains an early termination provision and a decanting provision, both of which satisfy the requirement that the trust be for the sole benefit of the individuals who are disabled.

The early termination provision allows the Trustor to terminate the trust before the beneficiary’s death and then (1) pay taxes and reasonable expenses, and reimburse the states for Medicaid before (2) disbursing all remaining funds to the beneficiary or the beneficiary’s account in another qualifying pooled trust under 42 U.S.C. § 1396p(d)(4)(C). First-Party OSNT Agreement, § 2.4(a)-(b).

Early termination 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. POMS SI 01120.199.F.3.

The trust’s early termination clause satisfies these criteria. First, the early termination clause gives the power to terminate the trust to the Trustor, not the beneficiary. First-Party OSNT Agreement, § 2.4. Second, it requires that “claims for reimbursement for services by the State of Oregon or other state that has provided Medicaid benefits to the Beneficiary shall be satisfied in full if possible.” Id., § 2.4(a). Third, it provides that, other than for the payment of taxes, reasonable fees, and administrative expense, no entity other than the trust beneficiary may benefit from the early termination. Id., § 2.4(a)-(b).

The First-Party OSNT also contains a decanting provision. First-Party Joinder Agreement, ¶ G.4. It provides that, if the beneficiary moves to another state, the Trustor may cease making any distributions from the trust until “appropriate arrangements can be made, within the sole discretion of the Trustor, including, but not limited to” transfer of assets to another comparable pooled trust.^[5] Id. This decanting provision satisfies the requirements of POMS SI 01120.199.F.2. POMS SI 01120.199.F.2 requires that a decanting clause contain specific language that precludes disbursement of funds to anything other than a qualifying Section 1917(d)(4)(C) trust or to pay allowable expenses. Here, the First-Party Joinder agreement states sub-account property will be transferred “directly” to a qualifying pooled trust. Id., ¶ G.4(a). Moreover, the trust will only decant its assets to another qualifying pooled trust under 42 U.S.C. § 1396p(d)(4)(C). Id., ¶ L.2(d).

Accordingly, the First-Party OSNT satisfies the fourth requirement for pooled trusts.

5. Established Through the Actions of the Individual, Parent, Grandparent, Legal Guardian, or Court

Fifth, to qualify as a pooled trust, the trust account 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); accord POMS SI 01120.203.D.6.

Here, the Joinder Agreement specifies that a sub-account “may only be established by a competent Beneficiary or by his or her parent, grandparent, guardian, or the court.” First-Party Joinder Agreement, ¶ C. While this requirement will need to be evaluated on a sub-account by sub-account basis, the First-Party Joinder Agreement correctly articulates the legal requirement.

The First-Party OSNT contains no provision that violates this requirement.

6. Remaining Amounts Paid to the State

The sixth requirement is that, “[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. Taxes and reasonable fees and costs may be paid before paying the state for medical assistance. See POMS SI 01120.203.E.1.The First-Party OSNT satisfies this requirement. Specifically, the trust states that on the beneficiary’s death, a percentage of funds will be retained by the Trust.^[6] First-Party OSNT Agreement, § 2.3(a); First-Party Joinder Agreement, ¶ J.1. Then, surplus funds will be subject to recovery by the State of Oregon, and if applicable, any other state, up to the amount of medical benefits paid on behalf of the Beneficiary. First-Party OSNT Agreement, § 2.3(b). To the extent funds “are insufficient to repay all such states, distributions will be made in proportion to each state’s share of the total amount of medical assistance paid on behalf of the Beneficiary.” Id.; see First-Party Joinder Agreement, ¶ J.2. If there are any funds remaining after the states have been reimbursed for medical assistance, those funds are distributed to the remainder beneficiaries or are retained by the trust. First-Party Joinder Agreement, ¶ J.3.

This distribution scheme comports with the statute. Accordingly, the First-Party OSNT satisfies the last requirement.

CONCLUSION

In sum, the First-Party OSNT is a qualifying pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D even though the Third-Party OSNT is not. As long a sub-account of the First-Party OSNT is established through the actions of a court, the beneficiary, or the beneficiary’s parent, grandparent, or legal guardian, the sub-account must be evaluated under POMS SI 01120.200.

 

This Regional Chief Counsel (RCC) opinion examines whether amendments made to a trust that previously did not qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D now enable the trust to qualify. The RCC concludes that the amendments resolve all of the problems and the amended trust now meets the necessary requirements. Therefore, the trust must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for Supplemental Security Income (SSI) purposes.

QUESTION PRESENTED

Does the Oregon Special Needs Trust, as amended, qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D, such that the trust must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for Supplemental Security Income (SSI) purposes?

BRIEF ANSWER

Yes. The Oregon Special Needs Trust, as amended, qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. if the proposed amendments are enacted. Accordingly, it must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

SUMMARY OF FACTS

A~ (NH) is a disabled individual receiving SSI. See Joinder Agreement ¶ K.1. In March 2018, NH executed the Joinder Agreement with The Arc Oregon. Id. at 12-13. The Joinder Agreement defined NH as the “Beneficiary” and “Primary Representative.” Id. at ¶ D.3, E.1. By executing the agreement, NH enrolled in the Oregon Special Needs Trust. Id. at ¶ B. This established an individual trust account for NH. Id. at ¶ B. The Joinder Agreement states that the sub-trust account established is a pooled trust “created pursuant to 42 U.S.C. § 1396p(d)(4)(C).” Id. at ¶ B. The trust was funded by an inheritance payable to NH. Id. at ¶ F.1.

In June 2019, OGC Seattle issued an opinion concluding that the Oregon Special Needs Trust did not qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C). In August 2019, the ARC of Oregon sent SSA proposed amendments to the trust documents. Below we address the proposed amendments and whether they would cure the deficiencies noted in our earlier opinion.

ANALYSIS

A. To be a pooled trust, a trust must meet six requirements.

To be eligible for SSI, the dollar value of a claimant’s countable resources cannot exceed certain statutory limits. 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). A trust that meets the requirements of 42 U.S.C. § 1396p(d)(4)(C) is considered to be a pooled trust, which must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

First, to be a pooled trust, the trust must contain “the assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); accord POMS SI 01120.203.D.2. Second, the trust must be “established and managed by a nonprofit association.” 42 U.S.C. § 1396p(d)(4)(C)(i); accord POMS SI 01120.203.D.3. Third, the association must maintain “[a] separate account . . . for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.” 42 U.S.C. § 1396p(d)(4)(C)(ii); accord POMS SI 01120.203.D.4. Fourth, the accounts must be “established solely for the benefit of the individuals who are disabled.” 42 U.S.C. § 1396p(d)(4)(C)(iii); accord POMS SI 01120.203.D.5. Fifth, the trust account 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); accord POMS SI 01120.203.D.6. Sixth, and finally, “[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.

B. The Oregon Special Needs Trust qualifies as a pooled trust.

The Oregon Special Needs Trust, if amended as proposed, meets all six requirements for a pooled trust. Our analysis of the Oregon Special Needs Trust is based on the Master Trust Agreement, Oregon Special Needs Trust, with proposed amendments (“Master Trust Agreement 2019”); the Joinder Agreement – 1st Party for the claimant NH, dated March 2018 (“Joinder Agreement”); and the proposed Joinder Agreement Amendments. Also referenced below is the original Master Trust Agreement, dated November 25, 2015 (“Master Trust Agreement (2015)”).

1. Disabled Individual

To begin, the trust must contain “the assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); see also POMS SI 01120.203.D.2 (“[T]he individual whose assets were used to establish the trust account must be disabled for SSI purposes . . . .”).

That requirement is satisfied here. NH is a disabled individual receiving SSI payments when enrolled in the trust. Joinder Agreement ¶ K.1. According to the Joinder Agreement, the sub-account may only be funded with the assets and/or income of the Beneficiary, NH. Id. at ¶ F.1. The Joinder Agreement indicates that the source of NH’s assets was an inheritance payable to her. Id.

Notably, the Master Trust Agreement contemplates both first and third party trusts, and requires separate joinder agreements for each. Master Trust Agreement ¶¶ 1.1, 1.6. Specifically, the Master Trust Agreement indicates that the contributions involving funds of persons other than the beneficiary shall be made to a third-party trust. Master Trust Agreement ¶ 1.2. As the Joinder Agreement clearly states that it is a first party trust and only NH’s funds were used, the provision is not violated. Joinder Agreement ¶ A (defining first party trust), ¶ F.1 (stating source of trust assets is an inheritance payable to NH).

Therefore, the Oregon Special Needs Trust, as amended, satisfies the first requirement.

2. Established and Managed by a Nonprofit Association

Second, the trust must be “established and managed by a nonprofit association.” 42 U.S.C. § 1396p(d)(4)(C)(i); see also POMS SI 01120.203.D.3 (trust is “established and maintained by the actions of a nonprofit association”). A nonprofit corporation may employ a for-profit entity as investment manager if the nonprofit corporation maintains ultimate managerial control over the Trust. POMS SI 01120.225.D. For example, the nonprofit must be responsible for determining the amount of the trust corpus to invest, removing or replacing the trustee, and making the day-to-day decisions regarding the health and well-being of the trust beneficiaries. Id.

This requirement is satisfied with the proposed amendments. The Master Trust Agreement is between The Arc of Oregon, Trustor, and Key Bank National Association, Trustee (KeyBank). Master Trust Agreement at 1. According to the Master Trust Agreement, “The Arc is an Oregon nonprofit corporation providing advocacy and other services to residents of Oregon with disabilities.” Id.^[7]

KeyBank is a for-profit entity.^[8] The Master Trust Agreement notes that the Arc of Oregon has discretion to remove KeyBank as trustee. Id. at ¶ 4.4. The Arc of Oregon also has “absolute discretion” to direct trust fund distributions to the beneficiary. Id. at ¶¶ 2.2, 3.1; see also Joinder Agreement ¶ G.3. But, without the proposed amendments, the original Master Trust Agreement provides KeyBank with authority exceeding the limits set forth in POMS SI 01120.225.D. Specifically, the original Master Trust Agreement does not specify that the Arc of Oregon will retain responsibility for determining the amount of the trust corpus to invest. Master Trust Agreement (2015) ¶ 4.1; see POMS SI 01120.225.D.

Furthermore, the original Master Trust Agreement outlines the powers of KeyBank and provides that KeyBank “shall have all the powers conferred upon a trustee” pursuant to the Oregon Uniform Trust Code. Master Trust Agreement (2015) ¶ 4.1 (citing Or. Rev. Stat. §§ 130.720, 130.725). This provision is problematic because the statute specifically grants a trustee powers of “management” of trust property. Or. Rev. Stat. § 130.720. The original Master Trust Agreement delegates all investment decisions to the Trustee. Master Trust Agreement (2015) ¶ 4.1(a). As noted above, to satisfy the pooled trust exception, the nonprofit corporation cannot delegate certain tasks that would amount to a relinquishment of managerial control.

The amendment resolves our concern because it retains ultimate managerial control in the nonprofit. Under the amended agreement, the nonprofit determines how much of the trust corpus to invest. Master Trust Agreement ¶ 4.1. This brings the trust into alignment with POMS SI 01120.225.D. Further, the language about Oregon law has been revised. The new language states that KeyBank shall have all the powers conferred by the laws of Oregon, “subject to any restrictions contained in this agreement.” Id. ¶ 4.2. This language allows the nonprofit to retain sufficient managerial control.

Therefore, the Oregon Special Needs Trust, as amended, satisfies the second requirement.

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 also 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); see also POMS 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 further reflected in POMS, which notes that “the trust must be able to provide an individual accounting for each individual.” POMS SI 01120.203.D.4.

The Oregon Special Needs Trust contains these requirements. According to its terms, “[e]ach trust established by one or more Donors for a particular Beneficiary shall be held and administered by Trustee as a separate account or ‘sub-trust’, but all such trust assets may be commingled by Trustee for investment and other purposes.” Master Trust Agreement ¶ 1.5. The Trustee must maintain accounting records for each sub-trust, and send them at least annually to each Beneficiary. Id. at ¶ 1.6.

Given these provisions, the Oregon Special Needs Trust, as amended, meets the third requirement.

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); see also 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.” See 42 U.S.C. § 1396p(h) (setting forth definitions, but not defining this term). But 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 Oregon Special Needs Trust partially meets this requirement. The Joinder Agreement states that “[d]istributions shall be made for the sole benefit of the Beneficiary.” Joinder Agreement ¶ G.1. The Master Trust Agreement states that the trust assets “shall apply for the benefit of each Beneficiary.” Master Trust Agreement ¶ 2.1. The Oregon Special Needs Trust also allows for “reasonable compensation” for the services of the Trustor and Trustee. Id. at¶ 4.8. This portion of the Oregon Special Needs Trust meets the requirement.

Early termination 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. POMS SI 01120.199.F.3.

The original Oregon Special Needs Trust does not satisfy these criteria. The Master Trust Agreement (2015) gives the Trustor discretion to terminate the sub-trust in certain circumstances. Master Trust Agreement (2015) ¶ 2.4. Upon termination, in the original Trust Agreement, any remaining assets shall be distributed the same as they would be distributed upon the death of the beneficiary. Id. at¶ 2.3, 2.4. Specifically, the trust states that, upon the death of a beneficiary, any remaining funds from the individual trust account be distributed in a particular order:

1. 1. 

   A percentage of any funds will be retained by the Trust pursuant to the current contractual agreement with the State of Oregon.^[9]

2. 2. 

   Any surplus funds will be paid to the State of Oregon, and if applicable, any other state, up to the amount of medical benefits paid on behalf of the Beneficiary. If funds are insufficient to repay all such states, distributions will be made in proportion to each state’s share of the total amount of medical assistance paid on behalf of the Beneficiary.^[10]

3. 3. 

   Any remaining funds go to the remainder beneficiaries, as designated in the Joinder Agreement.

Id. at ¶ 2.3; Joinder Agreement ¶ J.

Although it is permissible for the Trust to retain the assets in the beneficiary’s sub-account when the trust terminates due to death, 42 U.S.C. § 1396p(d)(4)(C)(iv), the Trust may not retain such assets during the beneficiary’s lifetime because doing so would constitute a benefit to someone other than the beneficiary, namely the Trust. POMS SI 01120.199.F.1, H.1. Further, this provision is invalid because, after each State Medicaid plan is reimbursed, any remaining funds go to third-party beneficiaries designated by the Beneficiary. Master Trust Agreement (2015) ¶ 2.3; Joinder Agreement ¶ J. Accordingly, the original Oregon Special Needs Trust contains an early termination provision that allows entities other than the beneficiary to benefit from the trust, and does not satisfy the criteria of 42 U.S.C. § 1396p(d)(4)(C)(iii) and POMS SI 01120.199.F.1.

The amendments resolve the deficiencies in the original. The early termination provision now allocates assets first to taxes, reasonably expenses associated with termination of the trust, and towards Medicaid reimbursement. Master Trust Agreement ¶ 2.4(a). After Medicaid payback, the assets are distributed to the trust beneficiary, or to another 42 U.S.C. § 1396p(d)(4)(C) trust belonging to the beneficiary. Master Trust Agreement ¶ 2.4(b).

The original Joinder Agreement contains another problematic clause that comes into effect if the beneficiary moves to another state. Joinder Agreement ¶ G.4. The Joinder Agreement states distributions may cease until “appropriate arrangements can be made, within the sole discretion of the Trustor, including, but not limited to” transfer of assets to another comparable pooled trust. Id. (emphasis added). Because this clause contemplates total decanting, it is construed as an early termination provision. An early termination provision is allowed “if the clause solely allows for a transfer of the beneficiary’s assets from one Section 1917(d)(4)(C) trust to another Section 1917(d)(4)(C) trust.” POMS SI 01120.199.F.2. Here, however, the phrase “including, but not limited to” clause grants the Trustor sole discretion to act beyond transferring the assets to another pooled trust. In addition, the language in the Joinder Agreement contemplates transferring the trust assets “to a comparable 501(c)(3) tax-exempt pooled trust.” Joinder Agreement ¶ G.4(1). Without more, this description of the secondary trust does not meet the requirement that the secondary trust be a qualifying Section 1917(d)(4)(C) trust. See POMS SI 01120.199.F.2.

The Joinder Agreement Amendments contain language that satisfies the statute. It specifically states that the “Trustee and Trustor will not transfer or permit the transfer of assets held in a Grantor’s sub-trust to another trust unless the receiving trust qualifies as pooled trust under U.S.C. § 1396p(d)(4)(C).” Joinder Agreement Amendments ¶ L.2(d). This revision eliminates the problematic language.

Accordingly, the Oregon Special Needs Trust, as amended, satisfies the fourth requirement for pooled trusts.

5. Established Through the Actions of the Individual, Parent, Grandparent, Legal Guardian, or Court

Fifth, to qualify as a pooled trust, the trust account 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); accord POMS SI 01120.203.D.6. NH executed the Joinder Agreement to establish an individual trust account for herself. See Joinder Agreement at 12. Therefore, because NH herself established the individual trust account, Oregon Special Needs Trust, as amended, meets the fifth requirement.

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. Taxes and reasonable fees and costs may be paid before paying the state for medical assistance. See POMS SI 01120.203.E.1.

The Oregon Special Needs Trust reflects this concept. Specifically, the trust states that on the beneficiary’s death, a percentage of funds will be retained by the Trust. Master Trust Agreement ¶ 2.3(a)(i); Joinder Agreement ¶ J.1. Then, surplus funds will be subject to recovery by the State of Oregon, and if applicable, any other state, up to the amount of medical benefits paid on behalf of the Beneficiary. Master Trust Agreement ¶ 2.3(a)(ii). To the extent funds “are insufficient to repay all such states, distributions will be made in proportion to each state’s share of the total amount of medical assistance paid on behalf of the Beneficiary.” Master Trust Agreement ¶ 2.3(a)(ii); see generally Joinder Agreement ¶ J.2.

This revised distribution scheme comports with the statute. Essentially, to the extent the Oregon Special Needs Trust does not retain funds, it distributes them to the states for medical assistance and then to any remaining beneficiaries. See id. Accordingly, the Oregon Special Needs Trust, as amended, satisfies the last requirement.

CONCLUSION

In sum, the Oregon Special Needs Trust, as amended, qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. Accordingly, the Oregon Special Needs Trust must be evaluated under POMS SI 01120.200.

In this opinion, the Regional Chief Counsel (RCC) examines whether the trust established pursuant to the Indian Gaming Regulatory Act (IGRA) benefitting minors and legally incompetent adults of the Confederated Tribes of Siletz Indians of Oregon (the Tribe) meets the requirements described in POMS SI 01120.195.E. The opinion concludes that the requirements are met. The Tribe is treated as the grantor of the trust, and POMS SI 01120.200 should be used to determine whether the trust is a resource for SSI purposes.

QUESTION PRESENTED

Whether the trust established pursuant to the Indian Gaming Regulatory Act (IGRA) benefitting minors and legally incompetent adults of the Confederated Tribes of Siletz Indians of Oregon (the Tribe) meets the requirements described in POMS SI 01120.195.E for evaluating whether IGRA trusts are resources for Supplemental Security Income (SSI) purposes.

BRIEF ANSWER

Yes. The requirements of POMS SI 01120.195.E are satisfied. Accordingly, the Tribe is treated as the grantor of the trust, and POMS SI 01120.200 should be used to determine whether the trust is a resource for SSI purposes.

SUMMARY OF FACTS

The Tribe operates a gaming facility. A portion of the Tribe’s share of the net revenues of the gaming enterprise is distributed on a per capita basis to tribal members. Distributions to certain tribal members, including minors and adults under a legal disability, are deposited into trust accounts.

ANALYSIS

A. Relevant Authority

Indian tribes may distribute gaming revenues to tribal members if they comply with IGRA. IGRA requires tribes to prepare a revenue allocation plan. 25 U.S.C. § 2710(b)(3)(A). The revenue allocation plan must provide that gaming revenues will be used only for certain purposes, including providing “for the general welfare of the Indian tribe and its members.” 25 U.S.C. § 2710(b)(2)(B)(ii). As part of providing for its members, tribes are required to ensure that “the interests of minors and other legally incompetent persons who are entitled to receive any of the per capita payments are protected and preserved” and funds are available “in such amounts as may be necessary for the health, education, or welfare of the minor or other legally incompetent person.” 25 U.S.C. § 2710(b)(3)(C). To comply with this provision of IGRA, some Indian tribes create a trust that holds distributions to minors and legally incompetent adults (referred to herein as an IGRA trust).

The Internal Revenue Service’s Revenue Procedure 2011-56 provides a safe harbor under which beneficiaries of an IGRA trust are not required to include amounts in gross income when transferred to, or earned by, the IGRA trust, but must include trust distributions in income when actually or constructively received by the beneficiary. Revenue Procedure 2011-56 establishes nine requirements that, when met, permit a beneficiary to exclude IGRA trust assets from gross income until it is actually or constructively received.

SSA previously treated beneficiaries of an IGRA trust as the grantor of the trust. Following the issuance of and in partial reliance on Revenue Procedure 2011-56, SSA issued POMS SI 01120.195, changing its position for evaluation of IGRA trusts effective November 14, 2014. Under the current POMS, a tribe will be treated as the grantor of an IGRA trust if the trust meets nine specific requirements. If the tribe is found to be the grantor, SSA uses the policy in POMS SI 01120.200 to determine if the IGRA trust is a resource. If the tribe is not the grantor of the IGRA trust, the policy in POMS SI 01120.201 is used to determine if the IGRA trust is a resource.

B. Tribal Documents

The Tribe’s revenue allocation plan is explained in the Tribe’s Distribution of Net Revenues Ordinance, Siletz Tribal Code (STC) § 4.200 (the Plan). The Plan states it has been approved by the Bureau of Indian Affairs. STC § 4.200(a). The Plan provides that per capita distributions shall be made to enrolled members of the Tribe pursuant to the Tribal Member Distribution Ordinance. STC § 4.208.

The Tribal Member Distribution Ordinance (TMDO), STC § 4.100, most recently revised by Resolution No. 2019-155, dated April 19, 2019^[11] , governs the distribution of monies to enrolled members of the Tribe. The TMDO provides that distributions to minors and adults under a legal disability will generally be deposited into trust accounts by a Trust Officer. STC § 4.103(b), (c).

Finally, the Trust Officer has developed regulations, approved by the Tribal Council (the Regulations), pursuant to STC § 4.103(e) and § 4.208, setting out the process by which and purposes for which funds may be disbursed to minors.

C. Application of Authority to Tribal Documents

Under POMS SI 01120.195, an analysis of whether an IGRA trust is a resource begins with a determination of whether the IGRA trust meets the nine requirements of Section E of the provision. Here, according to the Tribe’s documentation, the IGRA trust meets all nine requirements. Each of the nine requirements is recited and discussed below:

1. 1. 

   The Indian tribe establishes the trust for the benefit of tribal members who are minors and/or legally incompetent adults and it funds the trust using only per capita payments from gaming revenues.

   The tribal documentation satisfies this requirement. The Tribe establishes trust accounts for the benefit of tribal members who are minors or adults under a legal disability. STC § 4.103(b)(2). The Tribe funds the trust accounts with per capita payments. STC §§ 4.103(b)(2), (c)(1).

2. 2. 

   The trust beneficiary is a minor or legally incompetent adult at the time the trust (or trust account) is established.

   The tribal documentation satisfies this requirement. The Trust Officer is responsible for setting up and managing trust accounts to maintain distribution funds for minors and adults with a legal disability. STC § 4.103(b)(2)(B).

3. 3. 

   The trust only allows contributions while the beneficiary is still a minor or legally incompetent.

   The tribal documentation satisfies this requirement. Tribal documentation provides that contribution to a trust account may only be made while the beneficiary is still a minor or under a legal disability. STC § 4.103(b)(2)(B).

4. 4. 

   The trust instrument states that it is a grantor trust and the Indian tribe is the grantor of the trust, and grants to the Indian tribe a power or interest in the trust assets, such as the ability to vote any shares held in trust.

   The tribal documentation satisfies this requirement. The tribal documentation provides that the Tribe is the grantor of the trust, is the owner of the trust, and retains sole power to manage or revoke the trust. STC § 4.103(b)(5).

5. 5. 

   The Indian tribe is the owner of the trust for tax purposes and all the trust assets and the trust principal and income are subject to claims of general creditors of the Indian tribe under applicable federal, state, local, and tribal law.

   The tribal documentation satisfies this requirement. The tribal documentation provides that the Tribe is the owner of the trust for tax purposes. STC § 4.103(b)(5). The tribal documentation further provides that the trust principal and income are subject to claims of general creditors of the Indian tribe under applicable law. STC § 4.103(b)(7).

6. 6. 

   At all times while the trust is in effect, the principal and income of the trust must be subject to claims of general creditors under applicable law. In addition, the trust documents must require the trustee to cease payments to or for the benefit of the beneficiary, and must require that the trustee hold trust assets for the benefit of the Indian tribe’s general creditors throughout any period during which the trustee believes or has reason to believe that the Indian tribe is unable to pay its debts as they become due, or is subject to a pending insolvency or bankruptcy proceeding.

   The tribal documentation satisfies this requirement. As noted, the tribal documentation provides that, at all times while the trust is in effect, the principal and income of the trust shall be subject to the claims of the general creditors of the Tribe under applicable law. STC § 4.103(b)(7). In addition, the tribal documentation provides that the Trust Officer shall cease payments to or for the benefit of beneficiaries and shall hold the assets of the trust for the benefit of the Tribe’s general creditors throughout any period during which the Trust Officer believes or has reason to believe that the Tribe is unable to pay its debts as they become due, or is subject to a pending insolvency or bankruptcy proceeding. STC § 4.103(b)(7).

7. 7. 

   The trust beneficiary does not have any preferred claim or beneficial ownership interest in any assets of the trust, and any rights created under the trust documents must be unsecured rights. In addition, amounts payable to, or for his or her benefit, cannot be anticipated, assigned (either at law or at equity), alienated, pledged, encumbered or subjected to garnishment, levy, or other legal or equitable process.

   The tribal documentation satisfies this requirement. The tribal documents state that trust beneficiaries have no preferred claim on, or any beneficial ownership interest in, any assets of the tribe, and that any rights created under the trust should be unsecured rights. STC § 4.103(b)(6). In addition, the documents state that amounts payable to or for the benefit of beneficiaries may not be anticipated, assigned (either at law or at equity), alienated, pledged, encumbered, or subjected to attachment, garnishment, levy, execution, or other legal or equitable process. STC § 4.103(b)(8). Although the tribal documentation governing per capita distributions generally does permit attachment of distribution monies under certain circumstances, this provision does not apply to trust accounts established for minors or adults under a legal disability. STC § 4.104.

8. 8. 

   Trust assets are not available to or for the benefit of the beneficiary until the beneficiary ceases to be a minor or legal incompetent, except for the distributions for the beneficiary’s health, education, or welfare made at the discretion of the trustee and pursuant to the trust instrument.

   This requirement is met. Regulations § II and STC § 4.103(b)(1), (c)(1), and (e) provide for distributions in accordance with this requirement.

9. 9. 

   Upon the beneficiary’s death, the beneficiary’s share must be paid to the Indian tribe, unless the trust document provides for payment either: to persons who may inherit from the beneficiary under applicable state or tribal inheritance laws; or based on the terms of a valid will or trust of the beneficiary. The tribal documentation satisfies this requirement.

   The tribal documentation provides that, upon the beneficiary’s death, the beneficiary’s share of the trust assets shall be paid to the beneficiary’s legal heirs according to applicable tribal or state probate laws, or to the tribe if the beneficiary has no legal heirs. STC § 4.103(d)(2).

CONCLUSION

The Tribe should be treated as the trust grantor under POMS SI 01120.195.E because the tribal documentation satisfies all nine requirements of that section. Accordingly, POMS SI 01120.200 should be used to determine whether the IGRA trust is a resource for SSI purposes.

This Regional Chief Counsel (RCC) opinion examines whether the Revised Cow Creek Band of Umpqua Tribe of Indians trust accounts, established pursuant to the Indian Gaming Regulatory Act, meet the requirements described in POMS SI 01120.195.E. This RCC replaces the previous 10/23/2018 opinion and concludes that the trust documentation satisfies all nine requirements of section POMS SI 01120.195.E. Under the proposed Restated Tribal Code and Revised Trust Agreement, the Tribe should be treated as the trust grantor. Accordingly, POMS SI 01120.200 should be used to determine whether trusts established pursuant to the trust documentation are a resource for SSI purposes.

QUESTION PRESENTED

Whether trusts established pursuant to the Indian Gaming Regulatory Act benefitting minors and legally incompetent adults of the Cow Creek Band of Umpqua Tribe of Indians (the Tribe) meet the requirements described in POMS SI 01120.195.E for evaluating whether the trusts are resources for Supplemental Security Income (SSI) purposes.

BRIEF ANSWER

Yes. The Restated Tribal Code and the Revised Trust Agreement resolve the issues identified in our October 2018 opinion. Accordingly, the Tribe should be treated as the grantor of the trusts, and POMS SI 01120.200 should be used to determine whether the trusts are a resource for SSI purposes.

SUMMARY OF FACTS

The Tribe operates a gaming facility. A portion of the Tribe’s share of the net revenues of the gaming enterprise is distributed on a per capita basis to tribal members. Distributions to certain tribal members, including minors and legally incompetent members, are deposited into trusts.

ANALYSIS

This Regional Chief Counsel (RCC) opinion examines whether Klamath Tribes trust accounts established pursuant to the Indian Gaming Regulatory Act meet the requirements described in POMS SI 01120.195.F. The RCC concludes that the trust accounts do not meet all the requirements. Accordingly, the Tribe is not treated as the grantor of the trust accounts, and POMS SI 01120.201 should be used to determine whether the trust accounts are resources for Supplemental Security Income purposes.

QUESTION PRESENTED

Whether trust accounts established pursuant to the Indian Gaming Regulatory Act benefiting minors and legally incompetent adults of the Klamath Tribes (the Tribe) meet the requirements described in POMS SI 01120.195.F for evaluating whether the accounts are resources for Supplemental Security Income (SSI) purposes.

BRIEF ANSWER

No. Requirements one, six, seven, eight, and nine of POMS SI 01120.195.F are not met. Accordingly, the Tribe is not treated as the grantor of the trusts, and POMS SI 01120.201 should be used to determine whether the trust accounts are a resource for SSI purposes.

SUMMARY OF FACTS

The Tribe operates a gaming facility. A portion of the Tribe’s share of the net revenues of the gaming enterprise is distributed on a per capita basis to tribal members. Distributions to tribal minors and legally incompetent tribal members are deposited into a trust.

ANALYSIS

This Regional Chief Counsel (RCC) opinion examines whether the assignment of a Number Holder’s (NH’s) private disability insurance benefits to his special needs trust is valid under Oregon law; and if so, whether the assignment is irrevocable. (If the assignment is both legally valid and irrevocable, the agency does not count the benefits as income to the NH, per POMS SI 01120.200G.1.d.) The RCC concludes that the assignment is valid under Oregon law, and if the NH can show that the assignment instrument was delivered to the insurance company, then the assignment will also be irrevocable.

Question Presented

M~ (NH) assigned the benefits of his private disability insurance policy to his special needs trust. Is the assignment valid under Oregon law, and, if so, is the assignment irrevocable?

Brief Answer

The assignment here is valid. If the NH can show delivery of the assignment instrument to the insurance company, then the assignment will also be irrevocable. Under these circumstances, we understand that the agency would not count the benefits as income under POMS SI 01120.200G.1.d.

Summary of Facts

The NH receives private disability insurance benefits. He is also the beneficiary of a valid special needs trust.^[13] The NH has provided a document purporting to assign the benefits from his disability insurance policy to the trust to be added to the principal. The assignment instrument provides the following:

The undersigned hereby transfers and assigns to S~, Trustee, M~ Special Needs Trust dated May XX, 2016, all rights, title and interest in the following long term care and disability insurance policy:

Life Insurance Company of North America

Group Policy No. LK-96xxxx

Plan No. xxx

Plan Administrator: Western Michigan University School of Medicine

(WMed)

1000 Oakland Drive

Kalamazoo, MI 49008

The NH signed this assignment instrument on June 23, 2016.

The NH also provided a copy of the insurance policy. The policy provides for the payment of benefits to classes of eligible individuals who, due to sickness or injury, are no longer capable of performing the material duties of their regular occupation. See generally, Policy, pp. 4–15. On June 15, 2016, the insurance company approved the NH’s claim for long-term disability benefits as of November 5, 2015, and deemed him entitled to benefits as of May 3, 2016. See Award Letter, p. 1.

Analysis

Benefits from a disability insurance policy constitute unearned income that can affect eligibility for Supplemental Security Income (SSI). 42 U.S.C. § 1382a(a)(2)(B); 20 C.F.R. § 416.1121(a). Under contract law, however, a party receiving benefits under an insurance policy may assign these benefits to a third party, thus divesting himself of any right to this income. Restatement (Second) of Contracts, § 317(1). If a claimant assigns these benefits to a “special needs trust,” which the Social Security Act excludes from countable resources affecting SSI eligibility, 42 U.S.C. § 1382b(e)(5), we understand that the agency would not count the benefits as income if the assignment is both valid and irrevocable. See POMS SI 01120.200G.1.d.

In this case, the NH provided an assignment of his disability insurance benefits to the M~ Special Needs Trust (the trust), of which he is the beneficiary. Because the NH lives in Oregon, we look to Oregon law to determine the validity and revocability of his assignment.^[14]

Oregon allows assignment of insurance benefits if the insurance policy does not have an anti-assignment clause. Or. Rev. Stat. §§ 743.043, 743.345.^[15] This is consistent with common-law principles recognizing assignment of the rights under an insurance policy. 29 Williston on Contracts § 74:66 (4th ed. May 2017 update). In this case, the insurance policy provides that the insurance company will honor a beneficiary’s assignment of rights under the policy. See Policy, p. 26. The only limitation of the assignment is that it may not be “levied on, attached, garnished, or otherwise taken for a person’s debts.” Policy, p. 26. The assignment clearly manifests the intent of the NH to assign his rights under the insurance policy to the trust. Since Oregon law and the insurance policy both allow this, the assignment appears to be valid.

Turning to revocability, the assignment here is a gratuitous assignment—that is, it was made for nothing in return. Oregon’s statutory law is silent as to whether such an assignment is irrevocable, and case law itself does not directly address the point. Common-law principles of contracts provide that, unless a contrary intention is manifested, a gratuitous assignment is irrevocable if “the assignment is in a writing signed or under seal that is delivered by the assignor” or “the assignment is accompanied by delivery of a writing of a type customarily accepted as a symbol or as evidence of the right assigned.” Restatement (Second) of Contracts, § 332(1). Irrevocability can be established by evidence of the assignee’s assent, or by delivery of the writing to a third person. Restatement (Second) of Contracts, § 327(1).

Both Oregon law and the policy reflect the need to deliver to a third party, here the insurer. Under Or. Rev. Stat. § 743.043, an insurance policy “may be assigned . . . by an assignment executed by the insured or owner alone and delivered to the insurer.” The policy notes that “the original assignment or a certified copy of the assignment” must be “filed with the Insurance Company” in order to effect assignment. See Policy, p. 26. If these conditions are not satisfied, the assignment will remain effective, though revocable under three contingencies: (a) the death of the assignor; (b) a subsequent assignment by the assignor; or (c) notification of revocation received by either the assignee or the obligor. Restatement (Second) of Contracts, § 332(2); see also 29 Williston on Contracts § 74:63 (4th ed. May 2017 update).^[16] In this case, the assignment instrument manifests an intention to transfer “all rights, title and interest” in the insurance policy and does not indicate that the NH would retain the power to revoke the assignment. Moreover, the instrument is in writing and signed by the NH. But we cannot determine from the evidence provided whether the NH has delivered the assignment instrument to the insurance company. If the NH has delivered the instrument to the insurance company, the assignment is irrevocable. If, however, the NH has not delivered the assignment instrument, the assignment remains revocable.

Conclusion

The assignment is valid. If the NH can show delivery of the assignment instrument to the insurance company, then the assignment will also be irrevocable. Under these circumstances, we understand that the agency would not count the benefits as income under POMS SI 01120.200G.1.d.

This Regional Chief Counsel (RCC) opinion examines whether the trust accounts of the Confederate Tribes of Siletz Indians of Oregon (the Tribe), established pursuant to the Indian Gaming Regulatory Act (IGRA), meet the requirements described in POMS SI 01120.195F for evaluating whether the trust accounts are resources for Supplemental Security Income (SSI) purposes. The RCC concludes that the trust documentation does not meet all nine requirements of that section. Therefore, the Tribe should not be treated as the grantor of the trust accounts, and POMS SI 01120.201 should be used to determine whether the trust accounts are resources for SSI purposes.

QUESTION PRESENTED

Whether trust accounts established pursuant to the Indian Gaming Regulatory Act benefitting minors and legally incompetent adults of the Confederated Tribes of Siletz Indians of Oregon (the Tribe) meet the requirements described in POMS SI 01120.195.F for evaluating whether the trust accounts are resources for Supplemental Security Income (SSI) purposes.

BRIEF ANSWER

No. Accordingly, the Tribe is not treated as the grantor of the trust accounts, and POMS SI 01120.201 should be used to determine whether the trust accounts are a resource for SSI purposes.

SUMMARY OF FACTS

The Tribe operates a gaming facility. A portion of the Tribe’s share of the net revenues of the gaming enterprise is distributed on a per capita basis to tribal members. Distributions to certain tribal members, including minors and adults under a legal disability, are deposited into a trust account.

ANALYSIS

Relevant Authority

Indian tribes may distribute gaming revenues to tribal members if they comply with the Indian Gaming Regulatory Act (IGRA). IGRA requires tribes to prepare a revenue allocation plan. 25 U.S.C. § 2710(b)(3)(A). The revenue allocation plan must provide that gaming revenues will be used only for certain purposes, including providing “for the general welfare of the Indian tribe and its members.” 25 U.S.C. § 2710(b)(2)(B)(ii). As part of providing for its members, tribes are required to ensure that “the interests of minors and other legally incompetent persons who are entitled to receive any of the per capita payments are protected and preserved” and funds are available “in such amounts as may be necessary for the health, education, or welfare of the minor or other legally incompetent person.” 25 U.S.C. § 2710(b)(3)(C). To comply with this provision of IGRA, some Indian tribes create a trust that holds distributions to minors and legally incompetent adults (referred to herein as an IGRA trust).

The Internal Revenue Service’s Revenue Procedure 2011-56 provides a safe harbor under which beneficiaries of an IGRA trust are not required to include amounts in gross income when transferred to, or earned by, the IGRA trust, but must include trust distributions in income when actually or constructively received by the beneficiary. Revenue Procedure 2011-56 establishes nine requirements that, when met, permit a beneficiary to exclude IGRA trust assets from gross income until it is actually or constructively received.

SSA previously treated beneficiaries of IGRA trusts as the grantor of the trust. Following the issuance of and in partial reliance on Revenue Procedure 2011-56, SSA issued POMS SI 01120.195, changing its position for evaluation of IGRA trusts effective November 14, 2014. Under the new POMS, a tribe will be treated as the grantor of an IGRA trust if the trust meets nine specific requirements. If the tribe is found to be the grantor, SSA uses the policy in POMS SI 01120.200 to determine if the IGRA trust is a resource. If the tribe is not the grantor of the IGRA trust, the policy in POMS SI 01120.201 is used to determine if the IGRA trust is a resource.

Tribal Documents

The Tribe’s revenue allocation plan is explained in the Tribe’s Distribution of Net Revenues Ordinance, Siletz Tribal Code (STC) § 4.200 (the Plan). The Plan states it has been approved by the Bureau of Indian Affairs. STC 4.200(a). The Plan provides that per capita distributions shall be made to enrolled members of the Tribe pursuant to the Tribal Member Distribution Ordinance. STC § 4.208.

The Tribal Member Distribution Ordinance (TMDO), STC § 4.100, governs the distribution of monies to enrolled members of the Tribe. The TMDO provides that distributions to minors and adults under a legal disability will generally be deposited into a trust account by a Trust Officer. STC § 4.103(b), (c), (e).

Finally, the Trust Officer has developed regulations, approved by the Tribal Council (the Regulations), pursuant to STC § 4.103(b)(3) & (e) and § 4.208, setting out the process by which and purposes for which funds may be disbursed to minors.^[17]

Application of Authority to Tribal Documents

Under POMS SI 01120.195, an analysis of whether an IGRA trust is a resource begins with a determination of whether the IGRA trust meets the nine requirements of Section F of the provision. Here, the Tribe’s documentation of the trust accounts do not meet all nine requirements. Each of the nine requirements is recited and discussed below:

1. The Indian tribe establishes the trust for the benefit of tribal members who are minors and legally incompetent adults and it funds the trust using only per capita payments from gaming revenues.

The Tribe establishes trust accounts for the benefit of tribal members who are minors or adults under a legal disability. STC § 4.103(b)(2), 4.103(c). However, the TMDO anticipates that money other than per capita payments from gaming revenues will fund the trust. In fact, the TMDO specifically acknowledges that money distributed to members “may derive from a variety of sources of funds,” including the sale of timber harvested from reservation trust lands. STC §§ 4.100, 4.105. Accordingly, the trust accounts do not satisfy this requirement.

2. The trust beneficiary is a minor or legally incompetent adult at the time the trust (or trust account) is established.

Trust accounts established pursuant to the Plan and TMDO satisfy this requirement. The Trust Officer is responsible for setting up and managing trusts accounts to maintain distribution funds for minors and adults with a legal disability. STC § 4.103(b)(2).

3. The trust only allows contributions while the beneficiary is still a minor or legally incompetent.

Trust accounts established pursuant to the Plan and TMDO satisfy this requirement. In the event a court determines that an adult is no longer subject to a legal disability and releases the adult from the custody of a guardian, conservator, or institution, the Trust Officer must disburse all distribution funds held in trust for the benefit of that member. STC § 4.103(g)(2). Likewise, when a minor reaches the age of majority, the newly adult tribal member may request distribution of any and all amounts. STC § 4.103(g)(1). The Plan and TMDO do not provide for contributions into the trust beyond the age of majority for a minor not subject to a legal disability or beyond determination that an adult is no longer subject to a legal disability.

4. The trust instrument states that it is a grantor trust and the Indian tribe is the grantor of the trust, and grants to the Indian tribe a power or interest in the trust assets, such as the ability to vote any shares held in trust.

The tribal documentation does not satisfy this requirement as it does not state that trust accounts are grantor trusts or that the Indian tribe is the grantor of such trust accounts.

5. The Indian tribe is the owner of the trust for tax purposes and all the trust assets and the trust principal and income are subject to claims of general creditors of the Indian tribe under applicable federal, state, local, and tribal law.

The tribal documentation does not satisfy this requirement as it does not state that the Tribe is the owner of the trust or that trust assets, principal, and income are subject to the claims of general creditors of the Indian tribe.

6. At all times while the trust is in effect, the principal and income of the trust must be subject to claims of general creditors under applicable law.

In addition, the trust documents must require the trustee to cease payments to or for the benefit of the beneficiary, and must require that the trustee hold trust assets for the benefit of the Indian tribe’s general creditors throughout any period during which the trustee believes or has reason to believe that the Indian tribe is unable to pay its debts as they become due, or is subject to a pending insolvency or bankruptcy proceeding.

The tribal documentation does not satisfy this requirement. The Plan and TMDO do not state that trust principal and income are subject to the claims of general creditors nor identify any circumstance under which the trustee must cease distribution and hold trust assets for the benefit of general creditors.

7. The trust beneficiary does not have any preferred claim or beneficial ownership interest in any assets of the trust, and any rights created under the trust documents must be unsecured rights. In addition, amounts payable to, or for his or her benefit, cannot be anticipated, assigned (either at law or at equity), alienated, pledged, encumbered or subjected to garnishment, levy, or other legal or equitable process.

The tribal documentation does not satisfy this requirement. Attachment of distribution monies is permitted under certain circumstances. STC § 4.104.

8. Trust assets are not available to or for the benefit of the beneficiary until the beneficiary ceases to be a minor or legal incompetent, except for the distributions for the beneficiary’s health, education, or welfare made at the discretion of the trustee and pursuant to the trust instrument.

The tribal documentation, including Regulations § II(b) and STC § 4.103(b)(1) and (e), satisfies this requirement.

9. Upon the beneficiary’s death, the beneficiary’s share must be paid to the Indian tribe, unless the trust document provides for payment either:

• •

  to persons who may inherit from the beneficiary under applicable state or tribal inheritance laws; or

• •

  based on the terms of a valid will or trust of the beneficiary.

The tribal documentation does not anticipate what will be done with the beneficiary’s share upon his or her death. Instead, the tribal documentation only addresses distribution when an eligible enrolled tribal member dies between the distribution cut-off date (the date by which an individual must be an enrolled Tribal member to be entitled to a distribution) and the date the distribution funds are to be disbursed. STC § 4.103(d). Accordingly, this section is not satisfied.

CONCLUSION

The Tribe should not be treated as the trust grantor under POMS SI 01120.195.F because the tribal documentation does not satisfy all nine requirements of that section. Accordingly, POMS SI 01120.201 should be used to determine whether trust accounts established pursuant to the trust documentation are a resource for SSI purposes.

This Regional Chief Counsel (RCC) Opinion examines whether the trust accounts established, pursuant to the Indian Gaming Regulatory Act, benefitting minors and incompetent adults of the Confederated Tribes of the Grand Ronde Community of Oregon (the Tribe), as amended by the First Amendment to the Trust Agreement, dated February 22, 2017, meet the requirements described in POMS SI 01120.195 for evaluating whether the trust accounts are resources for Supplemental Security Income (SSI) purposes. The RCC determined that the answer depends on whom the trust account benefits; if the relevant trust account benefits a minor or legally incompetent adult, the trust meets the requirements described in POMS SI 01120.195. In such cases, the Tribe is treated as the grantor of the trust, and POMS SI 01120.200 should be used to determine whether the trust is a resource for SSI purposes. The RRC concluded that if the relevant trust account benefits a person between the ages of 18 and 21 who does not meet the education requirements set by Tribal Council Resolution and who is not a legally incompetent adult, per capita distributions into the trust account between the ages of 18 and 21 would not satisfy the requirements described in POMS SI 01120.195. The RCC also concluded that the Tribe is not treated as the grantor of the portion of the trust account attributable to such distributions, and POMS SI 01120.201 should be used to determine whether that portion of the trust is a resource for SSI purposes.

QUESTION PRESENTED

Whether trust accounts established pursuant to the Indian Gaming Regulatory Act benefitting minors and incompetent adults of the Confederated Tribes of the Grand Ronde Community of Oregon (the Tribe), as amended by the First Amendment to the Trust Agreement, dated February 22, 2017, meet the requirements described in POMS SI 01120.195 for evaluating whether the trust accounts are resources for Supplemental Security Income (SSI) purposes.

BRIEF ANSWER

The answer depends on whom the trust account benefits. If the relevant trust account benefits a minor or legally incompetent adult, the trust meets the requirements described in POMS SI 01120.195. In such cases, the Tribe is treated as the grantor of the trust, and POMS SI 01120.200 should be used to determine whether the trust is a resource for SSI purposes.

However, if the relevant trust account benefits a person between the ages of 18 and 21 who does not meet the education requirements set by Tribal Council Resolution and who is not a legally incompetent adult, per capita distributions into the trust account between the ages of 18 and 21 would not satisfy the requirements described in POMS SI 01120.195. In such cases, the Tribe is not treated as the grantor of the portion of the trust account attributable to such distributions, and POMS SI 01120.201 should be used to determine whether that portion of the trust is a resource for SSI purposes.

SUMMARY OF FACTS

The Tribe operates a gaming facility. The Tribe distributes a portion of the net revenues of the gaming enterprise on a per capita basis to tribal members. Distributions to certain tribal members, including minors and legally incompetent adults, are deposited into trust accounts.

ANALYSIS

A. Relevant Authority

Indian tribes may distribute gaming revenues to tribal members if they comply with the Indian Gaming Regulatory Act (IGRA). IGRA requires tribes to prepare a revenue allocation plan. 25 U.S.C. § 2710(b)(3)(A). The revenue allocation plan must provide that gaming revenues will be used only for certain purposes, including providing “for the general welfare of the Indian tribe and its members.” 25 U.S.C. § 2710(b)(2)(B)(ii). As part of providing for its members, tribes are required to ensure that “the interests of minors and other legally incompetent persons who are entitled to receive any of the per capita payments are protected and preserved” and funds are available “in such amounts as may be necessary for the health, education, or welfare of the minor or other legally incompetent person.” 25 U.S.C. § 2710(b)(3)(C). To comply with this provision of IGRA, some Indian tribes create a trust that holds distributions to minors and legally incompetent adults (referred to herein as an IGRA trust).

The Internal Revenue Service’s Revenue Procedure 2011-56 provides a safe harbor under which beneficiaries of an IGRA trust are not required to include amounts in gross income when transferred to, or earned by, the IGRA trust, but must include trust distributions in income when actually or constructively received by the beneficiary. Revenue Procedure 2011-56 establishes nine requirements that, when met, permit a beneficiary to exclude IGRA trust assets from gross income until it is actually or constructively received.^[18]

SSA previously treated beneficiaries of IGRA trusts as the grantor of the trust. Following the issuance of and in partial reliance on Revenue Procedure 2011-56, SSA issued POMS SI 01120.195, changing its position for evaluation of IGRA trusts effective November 14, 2014. Under the new POMS, a tribe will be treated as the grantor of an IGRA trust if the trust meets nine specific requirements that track those of Revenue Procedure 2011-56. If the tribe is found to be the grantor, SSA uses the policy in POMS SI 01120.200 to determine if the IGRA trust is a resource. If the tribe is not the grantor of the IGRA trust, the policy in POMS SI 01120.201 is used to determine if the IGRA trust is a resource.

B. Trust Documents

The Gaming Revenue Allocation Plan (the Plan), as amended through Tribal Council Resolution No. 199-06, establishes the plan by which the Tribe will distribute per capita payments.^[19] Pursuant to § D.6.d of the Plan, Per Capita Payments for minors and legally incompetent adults will be deposited into trust accounts. The Plan also provides for deposit of Per Capita Payments into trust accounts for tribal members who are between the ages of 18 and 21, who are not legally incompetent, and who have not completed the education requirement set by Tribal Council Resolution. Plan § D.6.c.

The Trust, comprised of the individual trust accounts, was established effective December 14, 1999, pursuant to an agreement entitled Trust for the Benefit of Minors Pursuant to 1999 Gaming Revenue Allocation Plan (Trust Agreement).

The Trust Agreement was amended on February 22, 2017, by a First Amendment to the Trust Agreement for the Trust for the Benefit of Minors Pursuant to 1999 Gaming Revenue Allocation Plan (Amendment).

C. Application of Authority to Trust Documents

Under POMS SI 01120.195, an analysis of whether an IGRA trust is a resource begins with a determination of whether the IGRA trust meets the nine requirements of Section F of the provision. Here, trust accounts benefitting certain beneficiaries meet all nine requirements of Section F of POMS SI 01120.195. Each requirement is discussed below:

1. The Indian tribe establishes the trust for the benefit of tribal members who are minors and legally incompetent adults and it funds the trust using only per capita payments from gaming revenues.

This requirement is met for trust accounts that are established for the benefit of tribal members who are minors and legally incompetent adults. As Plan § D.6.d states, per capita payments for Minors^[20] and Incompetents^[21] are made by deposit into the beneficiary’s separate trust account. Plan § D.6.d, Trust Agreement § 1(a). The recitals to the Trust Agreement also explain that the Trust will be funded with contributions of per capita payments.

Trust accounts are also established for the benefit of members between the ages of 18 and 21, who are not incompetent and who have not met the education requirements set by Tribal Council Resolution. Plan § D.6.c. This category of person is not considered a minor or legally incompetent adult within the meaning of POMS SI 01120.195.C.2-3.

2. The trust beneficiary is a minor or legally incompetent adult at the time the trust (or trust account) is established.

The Plan states that the Trust is for minor tribal members, tribal members between the ages of 18 and 21 who do not meet education requirements set by Tribal Council Resolution, and adult tribal members deemed incompetent by a court of competent jurisdiction. Plan § B.1. Accordingly, the trust documents anticipate that some but not all beneficiaries will be minors or legally incompetent adults at the time the trust is established. Satisfaction of this requirement will need to be confirmed on a claimant-by-claimant basis.

3. The trust only allows contributions while the beneficiary is still a minor or legally incompetent adult.

The Plan provides that Per Capita Payments for Minors and Incompetents are made to the respective trust accounts. Plan § D.6.d. When an Incompetent person is deemed legally competent, the trust terminates and thus no further Per Capita Payments are made into the trust. Plan § B.1.e. Although a trust established for the benefit of a Minor does not terminate until that person’s 21st birthday (or death),^[22] Per Capita Payments are made directly to tribal members over the age of 18 who are competent and who have completed the educational requirement set by Tribal Council Resolution. Plan §§ B.1.e, D.6.b. Thus, Per Capita Payments will not be made into the trust after a competent Minor ceases to be a Minor, provided she meets the educational requirements.

However, Per Capita Payments for individuals between the ages of 18 and 21 who are competent but have not completed the educational requirement set by Tribal Council Resolution are deposited into the person’s trust account. Plan § D.6.c. These contributions would not satisfy POMS SI 01120.195.

The trust instrument states that it is a grantor trust and the Indian tribe is the grantor of the trust, and grants to the Indian tribe a power or interest in the trust assets, such as the ability to vote any shares held in trust.

The Trust Agreement expressly states that the Trust is intended to be a grantor trust, with the Tribe as the grantor. Trust Agreement § 1(c). The Trust Agreement further provides that beneficiaries have no preferred claim on or any beneficial ownership interest in any assets of the Trust. Trust Agreement § 1(d). The Trust Agreement provides that the Tribe may remove the Trustee on 30 days’ notice (or shorter notice, if accepted by the Trustee). Trust Agreement § 10(b). The Tribe may appoint successor Trustees. Trust Agreement § 11(a). This section of POMS SI 01120.195 is satisfied.

4. The Indian tribe is the owner of the trust for tax purposes and all the trust assets and the trust principal and income are subject to claims of general creditors of the Indian tribe under applicable federal, state, local, and tribal law.

The Trust Agreement expressly states that the Trust is intended to be a grantor trust, of which the Tribe is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code, which subpart regards trust grantors treated as owners. Trust Agreement § 1(c). See, e.g., 26 U.S.C. § 671.

5. The Trust Agreement provides that the principal of the Trust, and any earnings thereon, will be used exclusively for the uses and purposes of beneficiaries and general creditors. Trust Agreement § 1(d).

Trust assets are subject to the claims of the Tribe’s general creditors under federal, tribal, and, to the extent that the tribe has agreed to be liable, state law. Trust Agreement §§ 1(d), 3(b). This requirement under POMS SI 01120.195 is satisfied.

6. At all times while the trust is in effect, the principal and income of the trust must be subject to claims of general creditors under applicable law.

In addition, the trust documents must require the trustee to cease payments to or for the benefit of the beneficiary, and must require that the trustee hold trust assets for the benefit of the Indian tribe’s general creditors throughout any period during which the trustee believes or has reason to believe that the Indian tribe is unable to pay its debts as they become due, or is subject to a pending insolvency or bankruptcy proceeding.

Trust Agreement § 3 provides that the Trustee cease payments to or for the benefit of the beneficiary and hold trust assets for the benefit of the tribe’s general creditors during any period in which the Tribe is “Insolvent.” The tribe is Insolvent when it is unable to pay its debts as they become due or when it is subject to a pending insolvency proceeding or pending proceeding as a debtor under the United States Bankruptcy Code. Trust Agreement § 3(a), Amendment. If a person claiming to be a creditor of the Tribe alleges in writing to the Trustee that the Tribe has become Insolvent, the Trustee must discontinue payment of benefits to beneficiaries pending the Trustee’s determination regarding Insolvency. Trust Agreement § 3(b)(1).

The Trust Agreement does not state that the principal and income of the trust is subject to the claims of general creditors at all times while the Trust is in effect, but rather only in the event of Insolvency. Trust Agreement §§ 1(d), 3(b). However, even if the Trust Agreement contained such language, the Tribe could still elect the source of funds from which it pays claims of general creditors. The availability of the Trust assets to pay claims of general creditors becomes important only when the Tribe does not have other sources to pay those claims – that is, when the Tribe is not paying its debts as they become due and is Insolvent. In such a case, the Trust assets are subject to the claims of general creditors. Accordingly, we deem this requirement met.

7. The trust beneficiary does not have any preferred claim or beneficial ownership interest in any assets of the trust, and any rights created under the trust documents must be unsecured rights.

In addition, amounts payable to, or for his or her benefit, cannot be anticipated, assigned (either at law or at equity), alienated, pledged, encumbered or subjected to garnishment, levy, or other legal or equitable process.

Trust Agreement § 1(d) states that beneficiaries have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. It further states that any rights are mere unsecured contractual rights. Trust Agreement § 13(b) provides that amounts payable to the beneficiary may not be anticipated, assigned, alienated, pledged, encumbered, or subject to garnishment, levy, or other legal or equitable processes. This section of POMS SI 01120.195 is satisfied.

8. Trust assets are not available to or for the benefit of the beneficiary until the beneficiary ceases to be a minor or legal incompetent, except for the distributions for the beneficiary’s health, education, or welfare made at the discretion of the trustee and pursuant to the trust instrument.

Trust Agreement § 2 provides that trust funds are be distributed to beneficiaries to the extent provided in § B.1.d and e of the Plan. Plan § B.1.d provides that distributions may be made for the education, health, or housing of the beneficiary at the sole discretion of the Tribal Council, the trustee of the Trust.

Plan § B.1.e.ii. provides that trust assets will be distributed upon termination of the Trust. Plan § B.1.e provides that the Trust terminates on a Minor’s 21st birthday, if not legally incompetent, or upon the death of the Minor. It also provides that, for Incompetents, the Trust terminates at such time as the beneficiary is deemed to be legally competent or upon the person’s death. This section of POMS SI 01120.195 is satisfied.

9. Upon the beneficiary’s death, the beneficiary’s share must be paid to the Indian tribe, unless the trust document provides for payment either:

to persons who may inherit from the beneficiary under applicable state or tribal inheritance laws; or

based on the terms of a valid will or trust of the beneficiary.

Upon the death of the beneficiary, the trust assets will be paid to the beneficiary’s designated successor or parents, or will be transferred in accordance with the Oregon Probate Code (except that any provision for property to revert to the state of Oregon will provide for the property to revert to the Tribe). Plan § B.1.e.ii. This section of POMS SI 01120.195 is satisfied.

CONCLUSION

If the relevant trust account benefits a minor or legally incompetent adult, the trust meets the requirements described in POMS SI 01120.195. In such cases, the Tribe is treated as the grantor of the trust, and POMS SI 01120.200 should be used to determine whether the trust is a resource for SSI purposes.

However, if the relevant trust account benefits a person between the ages of 18 and 21 who does not meet the education requirements set by Tribal Council Resolution amd who is not a legally incompetent adult, per capita distributions into the trust account between the ages of 18 and 21 would not satisfy the requirements described in POMS SI 01120.195. In such cases, the Tribe is not treated as the grantor of the portion of the trust account attributable to such distributions, and POMS SI 01120.201 should be used to determine whether that portion of the trust is a resource for SSI purposes.

In light of these distinctions, we recommend that trust accounts established for the benefit of a Minor be reevaluated once the Minor beneficiary reaches age 18. If the beneficiary is competent and has met the education requirements set by Tribal Council Resolution, no further evaluation is needed. However, if the beneficiary is competent and has not met the education requirements set by Tribal Council resolution, Per Capita Payments will be made into the trust after the Minor stops being a Minor. These contributions would not satisfy the requirements of POMS SI 01120.195. Accordingly, the Tribe should not be treated as the grantor of such trust contributions made between the ages of 18 and 21, and that portion of the trust should be evaluated under POMS SI 01120.201.