In this opinion, the Regional Chief Counsel (RCC) examines the Georgia Pooled Community Trust to determine if it meets the requirements for the pooled trust exception under section 1917(d)(4)(C) of the Social Security Act. The RCC concludes that the trust meets all of the pooled trust requirements.

 

QUESTION

 

Whether the Georgia Pooled Community Trust (Trust) meets the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS).^[1]

 

OPINION

 

For the reason discussed below, the Trust complies with all the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS.

 

BACKGROUND

 

On November 6, 2008, the Center for Special Needs Trust Administration, Inc. (Center, Settlor, or Trustee), a non-profit corporation under the laws of the State of Florida, executed the Master Trust Agreement (Agreement) establishing the Trust. On May 14, 2020, the Center executed a Restatement and Reformation of the Trust (Restatement). Below are the relevant provisions.

 

I. Purpose and Administration

 

Trustee established the Trust as a pooled special needs trust pursuant to 42 U.S.C. § 1396p (section 1917 of the Act) for the sole benefit of Trust beneficiaries. See Agreement, Art. 1, § 1.1. The Restatement amended and reformed the Trust to comply with applicable laws and to make it compliant with policy interpretations made by the agency. See Restatement, pmbl. The Restatement restated the reformed Agreement in its entirety, with the reformation becoming effective as of its date of execution, May 14, 2020. See Restatement, pmbl.^[2]

 

The Restatement states that Trustee is a non-profit corporation. See Restatement, pmbl., Art. 2, §§ 2.11, 2.18. Trustee also provided a November 7, 2003 letter from the Internal Revenue Service (IRS) stating that Trustee is an exempt organization under section 501(c)(3) of the Internal Revenue Code.^[3]

 

The Restatement defines “life beneficiary,” synonymous with “beneficiary,” as a person who is designated by a Donor to be the sole beneficiary of services and benefits under a particular sub-account established by a Donor. See Restatement, Art. 2, § 2.8. The Restatement indicates that beneficiaries of the Trust are individuals with mental or physical impairments. See Restatement, pmbl; Art. 2, §§ 2.5, 2.6. Impairment is defined as a mental or physical disability that substantially limits one or more major life activities, and where the impairment is verified by medical findings, and/or as defined by § 1614(a)(3) of the Social Security Act. See Restatement, Art. 2, § 2.6. The Restatement defines a Donor as any person who contributes assets to the Trust to establish a sub-account for a beneficiary. See Restatement, Art. 2, § 2.3. However, for the purposes of this opinion, Donor is limited to a beneficiary who establishes and funds a sub-account with his or her own resources. See Restatement, Art. 2, § 2.10.

 

The Trust includes separate sub-accounts maintained for the sole benefit of an individual beneficiary. See Restatement, Art. 2, § 2.14. The Joinder agreement is the individual written agreement between Trustee and a Donor by which the Donor establishes a sub-account for the sole benefit of the beneficiary. See Restatement, Art. 2, § 2.7; Joinder, Art. 1, § 1.6. Although a separate sub-account is established and maintained for the sole benefit of each beneficiary, Trustee may pool the sub-accounts for investment and management purposes. See Restatement, Art. 8, § 8.1. Trustee will provide an accounting to each beneficiary or the beneficiary’s legal representative at least annually showing all receipts, disbursements, and distributions to or from the beneficiary’s sub-account during the reporting period. See Restatement, Art. 8, § 8.3.

 

Any costs or expenses that affect the Trust as a whole may be apportioned on a pro rata basis to all Trust sub-accounts, but any associated costs that affect individual sub-accounts shall be assessed only against the Trust sub-account about which the Trustee seeks such advice or assistance. See Restatement, Art. 8, § 8.5.

 

II. Distribution

 

The Restatement provides the Trustee with sole and absolute discretion to distribute income and/or principle, consistent with restrictions in Article 5 of the Restatement. See Restatement, Art. 5. Article 5 explains the Trustee shall pay or apply amounts from principle or income, or both, for supplemental care or supplemental needs of the beneficiary. See Restatement, Art. 5, § 5.1. Supplemental care is defined as care or needs that are not met by any government programs and include all such benefits that supplement rather than replace those benefits for which a beneficiary may be otherwise eligible. See Restatement, Art. 2, § 2.16. The Restatement prohibits distributions to or for the benefit of a beneficiary, if the distribution would disqualify the beneficiary from eligibility for government or other needs-based programs. See Restatement, Art. 5, § 5.2.

 

III. Irrevocability and Spendthrift

 

The Restatement states that the Trust is irrevocable. See Restatement, Art. 1, § 1.3; Art. 4, § 4.4. However, Settlor has discretion to reform or amend the Agreement and Trust to effectuate its purpose and intent. See Restatement, Art. 1, § 1.4. To ensure irrevocability, each Donor who executes a Joinder designating the Center as a residual beneficiary to receive the sum of twenty-five dollars upon the death of the sub-account beneficiary. See Restatement, Art. 4, § 4.7; Joinder, Art. 5, § 5.3.

 

A beneficiary or any creditor of a beneficiary may not reduce the Trust value, and the existence of the Trust should not terminate or make unavailable public and private assistance benefits of the beneficiaries. See Restatement, Art. 3, § 3.1. The Restatement further explains that Donors and Trustee do not owe any obligation of support to any of the beneficiaries, and none of the beneficiaries are entitled to the Trust corpus or income, except as Trustee elects to disburse the same in its sole, complete, absolute, and unfettered discretion. See Restatement, Art. 3, § 3.1. No part of the Trust is subject to anticipation or assignment or subject to legal or equitable process, and no beneficiary may compel distribution from a sub-account or any other part of the Trust estate. See Restatement, Art. 3, § 3.2.

 

IV. Termination

 

When a beneficiary dies, any amounts in the beneficiary’s sub-account are administered to conform with 42 U.S.C. 1396p pertaining to reimbursement to the states for government assistance provided on behalf of the individual beneficiary. See Restatement, Art. 6, § 6.1.

For sub-accounts funded by the beneficiary, any assets not retained by the Trust as surplus Trust property are subject to government reimbursement claims for all medical assistance provide to the beneficiary under a qualifying state plan. See Restatement, Art. 4, § 4.2, Art. 6, § 6.3. Should the remaining funds be insufficient to fully reimburse all of the states, then each state shall receive its proportional share of the remaining amount based on the proportional share of medical benefits provided to the beneficiary. See Restatement, Art. 6, § 6.3. Funds that remain after meeting the state reimbursement requirement, if any, are retained in the successor trust. See Restatement, Art. 6, § 6.3.

 

V. Governing law

 

The laws of the United States and the State of Georgia govern and interpret the Trust provisions. See Restatement, Art. 10, § 10.3. Any provisions of the Trust that are adjudged invalid or unenforceable under the laws of any place where the terms of the Trust are to be performed, or are sought to be enforced, shall be deemed inoperative without invalidating such provision elsewhere or any other provision of the Trust. See Restatement, Art. 10, § 10.5. If any Trust provision disqualifies a beneficiary for government assistance or causes the Trust to not qualify as a trust under 42 U.S.C. § 1396p(d)(4)(C) (section 1917(d)(4)(C) of the Act), such provision shall be considered void, ab initio, and the remainder of the Trust shall continue in full force and effect. See Restatement, Art. 10, § 10.4.

 

DISCUSSION

 

SSI is a general public assistance program for aged, blind, or disabled individuals who meet certain income and resource restrictions and other eligibility requirements. See Act §§ 1602, 1611(a); 20 C.F.R. §§ 416.110, 416.202 (2020).^[4] “Resources” include cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for his or her support and maintenance. See Act § 1613; 20 C.F.R. § 416.1201(a); POMS SI 01110.100.B.1; POMS SI 01120.010.B. “If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . .” 20 C.F.R. § 416.1201(a)(1); see POMS SI 01110.100.B.1, B.3; POMS SI 01110.115.A; POMS SI 01120.010.B.

 

Generally, the agency must consider the principal, or corpus, of a trust established with the assets of an individual to be a resource of the individual. See Act § 1613(e)(1)-(3); POMS SI 01120.201.A.1. However, the rules in section 1613(e) of the Act do not apply to trusts described in section 1917(d)(4) of the Act. Act § 1613(e)(5); see also POMS SI 01120.201.A.1; POMS SI 01120.203.A. Trusts created in accordance with paragraphs (A) and (C) of section 1917(d)(4) are commonly known as Medicaid trust exceptions and consist of two types: Special Needs Trusts (paragraph (A)) and Pooled Trusts (paragraph (C)). See POMS SI 01120.203.A. To satisfy the exception for pooled trusts under section 1917(d)(4)(C), a trust must contain the assets of an individual who is disabled (as defined in section 1614(a)(3)) and meet the following conditions:

 

1. i.  

   The trust is established and managed by a nonprofit association;

2. ii.  

   A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts;

3. iii.  

   Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1614(a)(3)) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court; and

4. iv.  

   To 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 under this title.

 

Act § 1917(d)(4)(C); POMS SI 01120.203.D.1.

 

The Trust appears to satisfy the initial requirement in the first sentence of section 1917(c)(4)(C) that the trust contain assets of a disabled individual. For the purposes of this opinion, we looked only to the self-settled or self-funded portions of the Trust. Under those provisions, Trust sub-accounts are established and funded solely with the beneficiary’s own resources. See Restatement, Art. 2, § 2.10. Beneficiaries of the Trust are individuals with mental or physical impairments. See Restatement, pmbl; Art. 2, §§ 2.5, 2.6.

 

The Trust complies with the first enumerated requirement for a pooled trust under section 1917(d)(4)(C), namely, that the trust be established and managed by an organization that has been established and certified under a state nonprofit statute. Act § 1917(d)(4)(C)(i); POMS SI 01120.203.D.1, .D.3. On November 7, 2003, the IRS issued a letter stating that the Center is an exempt organization under section 501(c)(3) of the Internal Revenue Code, and the IRS lists the Center on its website of tax exempt organizations. See POMS SI 01120.203.J (referring to the procedures in POMS SI 01130.689.E for determining if an organization is a nonprofit or tax-exempt organization); POMS SI 01130.68.E.2, .E.3.a (indicating the agency considers an organization to be a non-profit organization if it produces a determination letter from the IRS and the agency can confirm an organization’s tax-exempt status via the IRS’s website). Additionally, the Restatement specifies that the Center is a non-profit corporation under the laws of Florida and has managerial control over the Trust. Restatement, pmbl.; Art. 1; Art. 8. Thus, the Trust meets the first enumerated requirement of the pooled trust exception.

 

The second requirement is that the trust must maintain a separate account for each trust beneficiary, although the funds may be pooled for investment and management purposes. See Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.D.1, .D.4. The trust must also be able to provide an accounting for each beneficiary’s individual account. See POMS SI 01120.203.D.4. Here, the Trust provides for the creation of sub-accounts that Trustee may pool for management and investment purposes, and beneficiaries of the sub-accounts are entitled to an accounting at least annually. See Restatement, Art. 8, § 8.1, § 8.3. Therefore, the Trust satisfies the second requirement for the pooled trust exception.

 

The Trust also complies with the pooled trust requirement that the sub-accounts are established solely for the benefit of each beneficiary. See Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.D.1, D.5. A trust is established for the sole benefit of the individual if it benefits no one but the individual, whether at the time the trust is established or at any time during the individual’s lifetime. See POMS SI 01120.201.D.5. Here, the Trust expressly provides that sub-accounts are for the sole benefit of each beneficiary. See Restatement, Art. 2, §§ 2.7, 2.12; Joinder, Art. 1, § 1.6. As noted above, beneficiaries of the Trust are individuals with mental or physical impairments. See Restatement, pmbl; Art. 2, §§ 2.5, 2.6. The Restatement defines impairment as a mental or physical disability that substantially limits one or more major lift activities, and where the impairment is verified by medical findings, and/or as defined by section 1614(a)(3) of the Social Security Act. See Restatement, Art. 2, § 2.6. The Restatement further provides that only costs or expenses that affect the Trust as a whole may be apportioned on a pro rata basis to all Trust sub-accounts. See Restatement, Art. 8, § 8.5. Costs and expenses that affect only individual sub-accounts are charged against those specific sub-accounts about which the Trustee seeks such advice or assistance. See Restatement, Art. 8, § 8.5. Because the Trust does not permit distributions that would benefit individuals other than the beneficiary, the Trust meets the sole benefit requirement of the Act.

 

The Trust also satisfies the fourth requirement regarding the repayment to states for medical assistance paid under state Medicaid plans after the beneficiary’s death. For self-funded sub-accounts, the Restatement provides that any assets not retained as surplus Trust property are subject to government reimbursement claims for all medical assistance provide to the beneficiary under a qualifying state plan. See Restatement, Art. 4, § 4.2, Art. 6, § 6.3. Should the remaining funds be insufficient to fully reimburse all of the states, then each state shall receive its proportional share of the remaining amount based on the proportional share of medical benefits provide to the beneficiary. See Restatement, Art. 6, § 6.3. Because Trustee must comply with repayment provisions of the Act, the Trust meets the fourth requirement for as a qualifying pooled trust.

 

Accordingly, the Trust complies with the requirements in section 1917(d)(4)(C) of Act and the POMS provisions implementing those requirements.

 

CONCLUSION

 

The Trust complies with all the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and implementing POMS provisions.

 

This Regional Chief Counsel opinion provides the State laws on trusts established with no funds (i.e., dry or empty trusts) for the states in Region IV, to help field offices address how to consider such purported trusts under the agency's Supplemental Security Income (SSI) resource rules.

QUESTION

You asked us to provide the laws for the states in Region IV, related to trusts established with no funds (i.e., dry or empty trusts), to help field offices address how to consider such purported trusts under the agency’s Supplemental Security Income (SSI) resource rules.

BACKGROUND

SSI is a general public assistance program for aged, blind, or disabled individuals who meet certain income and resource restrictions and other eligibility requirements. See Social Security Act (Act) §§ 1602, 1611(a); 20 C.F.R. §§ 416.110, 416.202 (2017).^[5] The Act does not define “resources” and provides only a list of certain items excluded in determining the resources of an individual. See Act § 1613(a). However, Congress empowered the Commissioner to promulgate rules and regulations to establish the right to SSI payments. See Act §§ 205(a), 1631(d)(1). Pursuant to that authority, the Commissioner has clarified that resources include “any real or personal property interest that an individual . . . owns and could convert to cash to be used for his or her support and maintenance.” 20 C.F.R. § 416.1201(a); see Program Operations Manual System (POMS) SI 01110.100.B.1; POMS SI 01120.010.B. “If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . .” 20 C.F.R. § 416.1201(a)(1); see POMS SI 01110.100.B.1, B.3; POMS SI 01110.115.A; POMS SI 01120.010.B. Even if property has no current market value, it may still be considered a resource if it is property that an individual owns and has the right to convert to cash and the individual is not legally restricted from using the property for his or her support and maintenance. See POMS SI 01110.100.B.2, B.3.

Property held in a trust may or may not be considered a resource for SSI purposes. See Act § 1613(e); POMS SI 01120.200.A.1. Generally, the agency must consider the principal or corpus of a trust established with the assets of an individual to be a resource of the individual. See Act § 1613(e)(1)-(3); POMS SI 01120.201.A.1. Trust principal is a countable resource if the individual (claimant, recipient, deemer) has legal authority to revoke or terminate the trust and use the funds to meet his or her food or shelter needs, or if the individual can direct the use of the trust principal for his or her support and maintenance under the terms of the trust. See POMS SI 01120.200.D.1.a. Also, if an individual can sell his or her beneficial interest in the trust, that interest is a resource. See POMS SI 01120.200.D.1.a. Conversely, if an individual does not have legal authority to revoke or terminate the trust or to direct the use of the trust assets for his or her own support and maintenance, the trust principal is not a resource for SSI purposes. See POMS SI 01120.200.D.2. The revocability of a trust and the ability to direct the use of trust principal depends on the terms in the trust agreement and on state law. See POMS SI 01120.200.D.2.

DISCUSSION

Alabama:

Alabama statutes indicate that a trust may be established through the conveyance of property, but do not otherwise explain the property requirements to establish a trust. See Ala. Code §§ 19-3B-401, 19-3B-402 (2018). Alabama case law indicates the existence of property held by a trustee for the benefit of a trust is an essential element of a trust. SeeCorretti v. First Nat’l Bank of Birmingham, 276 So. 2d 141, 147 (Ala. 1973); Gordon v. Central Park Little Boys League, 119 So. 2d 23, 27 (Ala. 1960). Alabama’s trust code defines “property” generally as “anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein.” See Ala. Code § 19-3B-103(13). Alabama’s statutes regarding wills and estates, however, appear to recognize at least some unfunded trusts by describing situations in which a will may validly transfer property to a trustee of a trust. See Ala. Code Ann. § 43-8-140. Specifically, Ala. Code § 43-8-140 indicates a will may validly transfer property to the trustee of, among other types of trusts, an “unfunded life insurance trust,” and a trust identified in a will, where the terms of the trust are set forth in a written instrument other than a will, “regardless of the existence, size, or character of the corpus of the trust.” Thus, Alabama law appears to recognize a trust may be established with no funds under certain situations.

Florida:

Florida’s trust statutes indicate a trust may be created when property or a property interest is transferred to a trustee, but do not further explain the property requirements to establish a trust. See Fla. Stat. Ann. §§ 736.0401, 736.0402 (West 2018); see also Fla. Stat. Ann. § 736.0103(15) (West 2017) (defining “property” as “anything that may be the subject of ownership, real or personal, legal or equitable, or any interest therein”). Florida case law, however, indicates a trust is not created until property is conveyed for the purpose of the trust. SeeVaughan v. Boerckel, 963 So.2d 915, 920 (Fla. Dist. Ct. App. 2007) (noting a corpus is essential to a valid trust in holding an express trust cannot exist unless there is a transfer of legal ownership in the subject property); McLemore v. McLemore, 675 So. 2d 202, 205 (Fla. Dist. Ct. App. 1996). Thus, Florida does not appear to recognize dry or empty trusts.^[6]

Georgia:

Georgia statutes, which recognize two types of trusts, express and implied,^[7] require express trusts to include trust property, and presume implied trusts include trust property. See Ga. Code Ann. §§ 53-12-2(3), (5); 53-12-20(b)(2); 53-12-130; 53-12-132 (West 2018); see also Ga. Code Ann. § 53-12-20(9) (West 2018) (defining property as “any type of property, whether real or personal, tangible or intangible, legal or equitable”). Georgia case law also holds that an essential element of an express trust is the existence of trust property. SeeHayes v. Clark, 530 S.E.2d 38, 39 (Ga. Ct. App. 2000); Lummus Supply Co. v. Fidelity Fed. Sav. & Loan Ass’n, 234 S.E.2d 671, 672 (Ga. Ct. App. 1977). Georgia’s statutes regarding wills and estates, however, appear to recognize at least some unfunded trusts by describing situations in which a will may validly transfer property to a trustee of a trust. See Ga. Code Ann. § 53-12-101(a). Specifically, Ga. Code Ann. § 53-12-101(a) indicates a will may validly transfer property to the trustee of, among other types of trusts, an “unfunded life insurance trust,” and a trust identified in a will, where the terms of the trust are set forth in a written instrument other than a will, “regardless of the existence, size, or character of the corpus of the trust.” Thus, Georgia law appears to recognize a trust may be established with no funds under certain situations.

Kentucky:

Under the Kentucky statutes’ chapter on trusts, one may create a trust by transferring property to a trustee or by a property owner’s declaration that the owner holds identifiable property as trustee, but the chapter does not further explain the property requirements to establish a trust. See Ky. Rev. Stat. Ann. § 386B.4-010 (West 2017); see alsoKy. Rev. Stat. Ann. § 386B.1-010(12) (West 2017) (defining property as “anything that may be the subject of ownership, whether legal or equitable, or any interest therein”). Kentucky’s statutes regarding wills and estates, however, appear to recognize at least some unfunded trusts by describing situations where a will may validly transfer property to a trustee. SeeKy. Rev. Stat. Ann. § 394.076 (West 2017). Specifically, Ky. Rev. Stat. Ann. § 394.076 indicates a will may validly transfer property to the trustee of, among other types of trusts, an “unfunded life insurance trust,” and a trust identified in a will, where its terms are set forth in a written instrument other than a will, “regardless of the existence, size, or character of the corpus of the trust.” The Supreme Court of Kentucky has recognized that a dry trust is a valid trust pursuant to Ky. Rev. Stat. Ann. § 394.076 and Kentucky’s adoption of the Uniform Testamentary Additions to Trust Act. SeeCummings v. Pitman, 239 S.W. 3d 77, 84 (Ky. 2007) (finding trust existed at the time trust instrument was executed, despite the fact that the trust did not contain assets until settlor’s death, one year after the trust instrument was executed). Thus, Kentucky law does recognize a trust may be established with no funds under certain situations.

Mississippi:

Under the Family Trust Preservation Act of 1998, Mississippi statutes define trusts to mean an express trust, private or charitable, or a trust created or determined by a judgment or decree under which the trust is to be administered in the manner of an express trust. See Miss. Code Ann. § 91-9-501(a) (West 2017). Mississippi statutes do not appear to contain any additional explanation regarding any property requirements to establish a trust. Furthermore, Mississippi case law does not appear to address whether there are property requirements to establish a trust. Cases that describe the essentials of an express trust do not address this question. See, e.g., Sligh v. First Nat’l Bank of Holmes Cty., 735 So. 2d 963, 974 (Miss. 1999); Ogle v. Durley, 77 So. 2d 688, 691-92 (Miss. 1955); Smiley v. Yllander, 105 So. 3d 1171, 1175 (Miss. Ct. App. 2012). Thus, we found no Mississippi statute or case law recognizing or prohibiting the establishment of a trust with no funds.

North Carolina:

North Carolina statutes identify a number of requirements to create a trust, and indicates a trust may be established when property is transferred to or held by a trustee, but do not describe any particular property requirements to establish a trust. See N.C. Gen. Stat. Ann. §§ 36C-4-401, 36C-4-402 (West 2017); see also N.C. Gen. Stat. Ann. § 36C-1-103(14) (defining property as “[a]nything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein”). North Carolina’s trust code includes a provision on trusts based on life insurance or death benefit interests, which indicates an unfunded trust is valid where the trust is a designated beneficiary of a life insurance policy or retirement benefits. See N.C. Gen. Stat. Ann. § 36C-4-401.1, comment (West 2017). North Carolina statutes on testamentary additions to trusts also indicate a will may devise property to a trustee of a trust that is established at the testator’s death, if the trust is identified in the will and its terms are described in a written instrument executed before or concurrently with the execution of the will, “regardless of the existence, size, or character of the corpus of the trust during the testator’s lifetime.” N.C. Gen. Stat. Ann. § 31-47(a)(2). These statutory provisions indicate North Carolina does recognize that a trust may be established with no funds under certain situations.

South Carolina:

South Carolina statutes indicate that a trust may be established when property is transferred to a trustee or through a written, signed declaration from an owner of property that the owner is holding the property as a trustee, but does not further explain the property requirements to establish a trust. See S.C. Code Ann. § 62-7-401 (2017). South Carolina case law indicates that a trust generally can exist only if it is funded. SeePatterson v. Witter, 791 S.E.2d 294, 301 (S.C. Ct. App. 2016) (listing trust corpus as a necessary element to establish existence of a trust); Mayer v. M.S. Bailey & Son, 555 S.E.2d 406, 410 (S.C. Ct. App. 2001) (noting a trust generally can exist only if it is funded). South Carolina’s trust code defines “property” generally as “anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein,” including interests created through beneficiary designations in insurance policies, financial instruments, deferred compensation, and other retirement arrangements. S.C. Code Ann. § 62-7-103(11), comment. Thus, although South Carolina defines “property” to broadly include interests in retirement arrangements and other financial instruments or policies, South Carolina law does not appear to recognize a trust that is established with no property.

Tennessee:

Tennessee’s Uniform Trust Code identifies the requirements for creating a trust, particularly with respect to identifying a settlor with the requisite capacity and intention, a trustee with duties to perform, and a definite beneficiary; but, it does not further identify any property requirements to establish a trust. See Tenn. Code Ann. § 35-15-402 (West 2017). Tennessee case law appears to indicate that an express trust cannot exist without trust property. SeeIn re Estate of Darken, No. M2016-00711-COA-R3, CV, 2016 WL 7378806, at *10 (Tenn. Ct. App. Dec. 20, 2016); Myers v. Myers, 891 S.W.2d 216, 218 (Tenn. Ct. App. 1994). Tennessee’s trust code defines “property” generally as “anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein,” including interests created through beneficiary designations under insurance policies, financial instruments, deferred compensation, and other retirement arrangements. See Tenn. Code Ann. § 35-15-103(23), comment. Additionally, under Tennessee’s statutes on wills, Tennessee appears to recognize at least some unfunded trusts by describing situations in which a will may validly transfer property to a trustee of a trust. See Tenn. Code Ann. § 32-3-106. Specifically, Tenn. Code Ann. § 32-3-106(a)(1) indicates a will may validly transfer property to the trustee of, among other types of trusts, an “unfunded life insurance trust,” and a trust identified in a will, where its terms are set forth in a written instrument other than a will, “regardless of the existence, size, or character of the corpus of the trust.” Thus, while Tennessee appears to generally require trust property to establish a trust, Tennessee defines “property” for trust purposes to include interests created through beneficiary designations under insurance policies, financial instruments, and deferred compensation and other retirement arrangements. Tennessee law additionally appears to recognize a trust may be established with no funds under certain situations.

CONCLUSION

[None]

This Regional Chief Counsel opinion examines whether the Charities Pooled Trust (CPT), which operates in every state of Region IV (Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, and Tennessee), qualifies as a pooled trust under the Social Security Act, 42 U.S.C. § 1396p(d)(4)(C), and the implementing provisions of the Program Operations Manual System. The opinion concludes that the CPT qualifies as a pooled trust in all states of Region IV.

QUESTION

Whether the Charities Pooled Trust (CPT), which operates in every state in this region, qualifies as a pooled trust under the Social Security Act (Act), 42 U.S.C. § 1396p(d)(4)(C), and the relevant provisions of the Program Operations Manual System (POMS).

OPINION

CPT qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and the relevant POMS provisions.

BACKGROUND

Between October 2016 and July 2018, CPT executive director, W~, executed Master Trust Agreements (MTAs) in Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, and Tennessee. Each trust established CPT as a pooled trust in these respective states. The MTA for each state includes identical provisions, except with respect to the extent to which the MTA addresses directed trustees, whether the trustee will notify the state’s Medicaid agency about a beneficiary’s death, and how the trust will distribute the remainder funds in an individual benefit account (IBA) upon a beneficiary’s death. The MTAs also have identical joinder agreements.

NH1, a number holder living in Kentucky, NH2, a number holder living in Tennessee, and NH3, a number holder living in Florida, receive Supplemental Security Income (SSI). NH1 signed a Joinder Agreement with CPT under the Kentucky MTA on February 13, 2017. NH2’s parent and grandparent signed a Joinder Agreement with CPT under the Tennessee MTA on July 3, 2019. NH3 signed a Joinder Agreement with CPT under the Florida MTA on August 22, 2018. NH1, NH2, and NH3 funded the IBAs of their respective trusts through the transfer of their own assets to the trusts.

I. Purpose and Establishment of the Trust

CPT’s MTAs identify CPT as the Trustee. See MTA, § 2.2.^[8] They identify CPT as a non-profit corporation recognized as tax-exempt under section 501(c)(3) of the Internal Revenue Code. Seeid.

The MTAs indicate that the trust intends to comply with 42 U.S.C. § 1396p(d)(4)(C) (§ 1917(d)(4)(A) of the Act). See MTA, § 1.5. They indicate that each trust shall establish a separate account for each beneficiary, but may pool the amounts in the separate accounts for investment and management purposes. See MTA, §§ 4.1, 9.1.

The MTAs classify a trust beneficiary as a person with a disability, as defined by 42 U.S.C. § 1382c(a)(3) (codifying § 1614(a)(3) of the Act), whom a grantor identifies as the sole recipient of services and benefits from the individual account created within the trust for such person with a disability. See MTA, § 13.12; Alabama, Georgia, Mississippi, North Carolina, South Carolina MTA, § 2.4; Florida, Kentucky, Tennessee MTA, § 2.6. A trust beneficiary, or the trust beneficiary’s parent, grandparent, or legal guardian, or another person or entity acting pursuant to a court order or other legal authority, can be a grantor and can establish an account for a trust beneficiary in the Trust and contribute assets to the trust for the sole benefit of the trust beneficiary. See MTA, § 3.1; Alabama, Georgia, Mississippi, North Carolina, South Carolina MTA, § 2.3; Florida, Kentucky, Tennessee MTA, § 2.5. The stated purpose of the trust is to supplement, not displace, a beneficiary’s government benefits. See MTA, § 3.2.

II. Distribution and Powers of the Trustee

The Trustee is responsible for overseeing the custody, investment asset allocation model selection, and disbursement of funds contributed to the trusts. See MTA, § 2.2. In carrying out this responsibility, the Trustee may retain an independent investment advisor to handle the custody, investment, and management of the trust assets. See Alabama, Georgia, Mississippi, North Carolina, South Carolina MTA, § 2.5; Florida, Kentucky, Tennessee MTA, § 2.7. The Trustee and any investment advisor shall perform their duties provided in the trusts to receive, hold, manage, and control all income and principal in the IBAs comprising the Trust as may be appropriate to effectuate the intent and purpose of the trusts. See MTA, § 10.1.

The Trustee shall hold, administer, and distribute all property and income from an individual trust beneficiary’s IBA for the sole benefit of the beneficiary. See MTA, §§ 6.1, 6.2. Distributions are solely within the Trustee’s discretion, but the Trustee must make them for the sole benefit of a beneficiary and should make them if the distribution has the effect of supplanting or replacing any government assistance or disqualifying a beneficiary from receiving government assistance. See MTA, § 6.1.

The Trustee assesses enrollment fees for the fees and expenses associated with a beneficiary enrolling in one of the trusts and establishing an IBA and annual administration fees for the administration and maintenance of an IBA at the time a beneficiary enrolls in the trust. See MTA, § 9.2. The Trustee may adjust the enrollment fees schedule and annual administration fees schedule from time to time. See id.

III. Irrevocability and Spendthrift

The trusts established under each state’s MTA are irrevocable upon the Trustee’s acceptance of a beneficiary’s joinder agreement and related required documents, and the grantor’s contributed amount, and upon the grantor and beneficiary completing the enrollment requirements to join the trust. See MTA, § 1.3. The MTA treats the amount contributed to a beneficiary’s IBA as irrevocably assigned, transferred, conveyed and delivered to the Trustee to be used for the sole benefit of the beneficiary. MTA, § 4.2. Once the Trustee accepts the contributed amount, it is not refundable to the beneficiary. Seeid. A beneficiary has no right to demand a distribution from the trust for his or her own support or maintenance. See MTA, § 9.8.

Each trust is a spendthrift trust. See MTA, § 9.9. No beneficiary can subject any part of either trust to an assignment; attachment; levy; a creditor’s control; a creditor’s legal or equitable action, proceeding, suit, or procedure to take from the Trust; or a compelled distribution to any beneficiary’s creditor. Seeid.

IV. Termination

Upon a beneficiary’s death, the Trustee will use remaining funds in the beneficiary’s IBA to pay back to a state’s Medicaid agency or agencies an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under a state Medicaid plan. See MTA § 7.2B, D. If the payback amount is equal or greater than the amount remaining in the IBA, the MTAs for Alabama, Georgia, and North Carolina indicate that the trust will retain ten percent of the remaining amount and use the remaining ninety percent to pay back the Medicaid agency or agencies. Alabama, Georgia, North Carolina MTA, § 7.2D.1. The MTAs for the rest of the states in the Atlanta region indicate that under the same circumstances, the Trust will retain fifty percent of the remaining amount and use the remaining fifty percent to pay back the Medicaid agency or agencies. See Kentucky, Mississippi, South Carolina, Tennessee MTA, § 7.2D.1. If the payback amount is less than the amount remaining in the IBA, the MTAs for every state in the Atlanta region indicate that the Trust will retain five percent of the amount remaining in the IBA and pay back the full amount to the Medicaid agency or agencies. See MTA, § 7.2D.2. The Trustee will distribute any remaining amount left after the Trust retains five percent and pays back the Medicaid agency or agencies to any remainder beneficiaries of the deceased beneficiary identified in the IBA joinder agreement. See MTA, § 7.2C, D.2.

A beneficiary cannot terminate the Trust or any part of the beneficiary’s IBA at any time, under any circumstances. See MTA, § 8.1. If the Trust terminates during the lifetime of a beneficiary, the Trustee will use any funds remaining in an IBA to pay back a state’s Medicaid agency or agencies an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under a state Medicaid plan, with the remaining amounts distributed to the beneficiary. See MTA, § 8.1.

DISCUSSION

A. To qualify as a pooled trust, a trust must meet six requirements.

To be eligible for Supplemental Security Income (SSI), the dollar value of a claimant’s countable resources cannot exceed certain statutory limits. See 42 U.S.C. § 1382(a)(1)(B), (3)(B); 20 C.F.R. §§ 416.202(d), 416.1201, 416.1205; POMS SI 01110.003(A). Under 42 U.S.C. § 1382b(e), a trust is a resource unless it meets certain requirements, including those articulated in § 1396p(d)(4)(C). Trusts that meet the requirements of 42 U.S.C. § 1396p(d)(4)(C) are considered to be qualifying pooled trusts.

B. The MTAs for every state in the Atlanta Region qualifies as a pooled trust.

The MTAs for every state in this region qualify as pooled trusts. As further explained below, the MTAs meet each of the six criteria articulated in 42 U.S.C. § 1396p(d)(4)(C) as follows:

1. Disabled Individual

To qualify as a pooled trust, the trust must contain “the assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); see POMS SI 01120.203.D.2 (stating that “the individual whose assets were used to establish the trust account must be disabled for SSI purposes . . . .”). That requirement is satisfied here.

The MTAs require that a trust beneficiary be a person with a disability. See MTA, § 13.12; Alabama, Georgia, Mississippi, North Carolina, South Carolina MTA, § 2.4; Florida, Kentucky, Tennessee MTA, § 2.6. Although a grantor besides the trust beneficiary may contribute assets to the trust, the grantor makes those contributions for the sole benefit of the trust beneficiary. See MTA, § 3.1; Alabama, Georgia, Mississippi, North Carolina, South Carolina MTA, § 2.3; Florida, Kentucky, Tennessee MTA, § 2.5. Additionally, the individuals who established IBAs under the MTAs for Florida, Kentucky, and Tennessee are disabled and used their own assets to fund their IBAs.

2. Established and Managed by a Nonprofit Association

Second, the trust must be “established and managed by a non-profit association.” 42 U.S.C. § 1396p(d)(4)(C)(i); see POMS SI 01120.203.D.3 (trust is “established and maintained by the actions of a nonprofit association”). This requirement is satisfied as well.

According to the MTAs, CPT is the settlor and trustee of the MTAs and is a non-profit corporation under section 501(c)(3) of the Internal Revenue Code. MTA, § 2.2. CPT is a fictitious name for the Institute for Health Care Advocacy, Inc. See sunbiz.org – Florida Department of State, http://dos.sunbiz.org/scripts/ficidet.exe?action=DETREG&docnum=G09000149562&rdocnum=G09000149562 (last accessed Feb. 24, 2020). The Institute for Health Care Advocacy, Inc. is an active not-for-profit Florida corporation. See sunbiz.org – Florida Department of State, http://search.sunbiz.org/Inquiry/CorporationSearch/SearchResultDetail?inquirytype=EntityName&directionType=Initial&searchNameOrder=INSTITUTEFORHEALTHCAREADVOCACY%20N930000037871&aggregateId=domnp-n93000003787-3d08880b-9b2a-400f-bc4b-4f26864703fb&searchTerm=Institute%20for%20Health%20Care%20Advocacy&listNameOrder=INSTITUTEFORHEALTHCAREADVOCACY%20N930000037871 (last accessed Feb. 24, 2020). The fictitious name registration for CPT expired on December 31, 2019. See sunbiz.org – Florida Department of State, http://dos.sunbiz.org/scripts/ficidet.exe?action=DETREG&docnum=G09000149562&rdocnum=G09000149562 (last accessed Feb. 24, 2020). However, under Florida law, the failure of a business to register a fictitious name “does not impair the validity of any contract, deed, mortgage, security interest, lien, or act of such business . . . .” Fla. Stat. Ann. § 865.09(9)(b). Accordingly, this requirement is still satisfied in spite of the failure of the Institute for Health Care Advocacy, Inc., to maintain its registration of CPT as a fictitious name.

3. Separate Accounts, Pooled for Investing

Third, to be a pooled trust, the trust must maintain a separate account for each beneficiary. 42 U.S.C. § 1396p(d)(4)(C)(ii); see POMS SI 01120.203.D.4. However, “for purposes of investment and management of funds, the trust pools these accounts.” 42 U.S.C. § 1396p(d)(4)(C)(ii); seePOMS SI 01120.203.D.4 (the “trust may pool the funds in the individual accounts . . . for purposes of investment and management of funds”). This requirement is reflected in POMS, which notes that “[t]he trust must be able to provide an individual accounting for each individual.” POMS SI 01120.203.D.4. The MTAs for every state in this region meet these requirements.

The MTAs indicate that each trust shall establish a separate account for each beneficiary, but trust may pool the amounts in the separate accounts for investment and management purposes. MTA, §§ 4.1, 9.1. The MTAs also indicate that the trustee, or its agent, must “maintain records for each Trust IBA in the name of each Trust Beneficiary and showing the Contributed Amount plus any income earned from the Contributed Amount.” MTA, § 4.1. The trust must provide periodic reports, at least annually, about receipts and disbursements to and from the individual’s account. See MTA, § 9.4.

4. Established for the Sole Benefit of the Disabled Individual

The fourth requirement for a pooled trust is that the trust account is “established solely for the benefit of individuals who are disabled.” 42 U.S.C. § 1396p(d)(4)(C)(iii); accord POMS SI 01120.203.D.5 (trust “must be established for the sole benefit of the disabled individual”). The statute does not provide guidance on “sole benefit,” but the POMS explains that a trust is “established for the sole benefit of an individual” when it “benefits no one but that individual, whether at the time the trust is established or at any time for the remainder of the individual’s life.” POMS SI 01120.201.F.1.

The trust may pay third parties for goods or services for the beneficiary and still be for the “sole benefit” of the beneficiary. POMS SI 01120.201.F.3. The trust also may “provide for reasonable compensation for (a) trustee(s) to manage the trust and reasonable costs associated with investment, legal, or other services rendered on behalf of the individual with regard to the trust.” POMS SI 01120.201.F.4.

The MTAs for every state in this region meet this requirement. The MTAs indicate that the trustee must “hold, administer, and distribute all property, and all income therefrom from an Individual Trust Beneficiary’s IBA, for the sole benefit of the Trust Beneficiary during the Trust Beneficiary’s lifetime and after Trust termination.” MTA, § 6.2 (emphasis in original); MTA, § 6.3 (“Trust Beneficiary’s IBA is for the sole benefit of the Trust Beneficiary.”) (emphasis in original).

The MTAs also allow for fees in accordance with a written fee schedule and expenses for administering the trust. MTA, §§ 9.2, 10.5. The MTAs further state that the trust will compensate a trustee for “services rendered and reimbursed reasonable expenses incurred on behalf of the Trust or a Trust Beneficiary.” MTA, § 10.5. Additionally, the MTAs allow for charges of pro rata legal fees to all individual trust accounts, or to accounts of affected beneficiaries, and the trustee will determine “if defense costs affect a substantial number of Trust beneficiaries” and warrant allocation. MTA, § 10.6. These provisions pass muster under the statute because they constitute “reasonable costs associated with investment, legal, or other services rendered on behalf of the individual with regard to the trust.” POMS SI 01120.201.F.4.

The MTAs contain an early termination provision that accounts for a scenario where the trust terminates prior to the death of the beneficiary. MTA, Art. 8. An early termination provision is allowable under the pooled-trust exception so long as three criteria are met: (1) “[u]pon early termination (i.e., termination prior to the death of the beneficiary), the State(s), as primary assignee, would receive all amounts remaining in the trust at the time of termination up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan(s);” (2) “[o]ther than payment for those expenses [for taxes, reasonable fees, and administrative expenses], no entity other than the trust beneficiary may benefit from the early termination (i.e., after reimbursement to the State(s), all remaining funds are disbursed to the trust beneficiary);” and (3) “[t]he early termination clause gives the power to terminate to someone other than the trust beneficiary.” POMS SI 01120.199.F.1 (bold in original). The trust may pay taxes, reasonable fees, and administrative expenses before reimbursing any state(s) for medical assistance. See POMS SI 01120.199.F.3.

The MTAs for this region satisfy these criteria. Specifically, the MTAs indicate that, if the trust terminates during the beneficiary’s life, all remaining funds in that account will be paid to reimburse each state for medical assistance paid on behalf of the beneficiary. MTA, § 8.1. The MTAs also indicate that, after paying the states, “if there are any assets remaining, the Trustee shall distribute all of the remaining assets to the Trust Beneficiary.” MTA, § 8.1. Additionally, the beneficiary does not have the power to terminate his or her trust account. See MTA, § 8.1.^[9]

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

To qualify as a pooled trust, the trust account also must be “established... by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.” 42 U.S.C. § 1396p(d)(4)(C)(iii); see POMS SI 01120.203.D.6. The MTAs here meet this requirement, as they require that a beneficiary or a grantor, who must be a parent, grandparent, legal guardian, or other person acting pursuant to a court order, execute the joinder agreement to establish an IBA under the MTA. MTA, §§ 3.1, 13.2; Alabama, Georgia, Mississippi, North Carolina, South Carolina MTA, § 2.3; Florida, Kentucky, Tennessee MTA, § 2.5. The joinder agreements submitted for NH1, NH2, and NH3 for the Florida, Kentucky, and Tennessee MTAs, respectively, also show that each of these individuals have established their IBAs either through their own actions or through the actions of their parents.

6. Remaining Amounts Paid to the State

Sixth, “[t]o the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan.” 42 U.S.C. § 1396p(d)(4)(C)(iv); accord POMS SI 01120.203.D.8. The trustee may pay taxes and reasonable fees and costs before paying the state for medical assistance. SeePOMS SI 01120.203.E.1.

The MTAs meet this requirement, as well. Specifically, the MTAs allocate remaining assets between the trust, the state(s), and the remainder beneficiaries. MTA, § 7.2. If the state medical assistance amount is equal to or greater than the total amount left in the beneficiary’s IBA, the MTAs for Alabama, Georgia, and North Carolina state that the trust will retain ten percent of the remaining amount and use the remaining ninety percent to pay back the Medicaid agency or agencies. See Alabama, Georgia, North Carolina MTA, § 7.2D.1. The MTAs for the rest of the states in the Atlanta region state that under the same circumstances, the trust will retain fifty percent of the remaining amount and use the remaining fifty percent to pay back the Medicaid agency or agencies. See Kentucky, Mississippi, South Carolina, Tennessee MTA § 7.2D.1. If the state medical assistance amount is less than the amount left in the beneficiary’s IBA, the trust in every state in the Atlanta region will retain the first five percent of the amount; the trustee will pay the full amount owed to the state; and the trustee will pay any remaining amount to the beneficiary’s heirs. See MTA, § 7.2D.2. This distribution scheme comports with the statute.

In addition, the MTAs allow the trustee to pay certain administrative expenses, such as taxes and reasonable fees and costs, before paying the state for medical assistance. MTA, § 7.4A. The MTAs incorporate by reference the allowable and prohibited expenses in SSA’s POMS, by stating the Trustee will not pay any administrative expenses not allowed by the SSA’s POMS. MTA, § 7.4B.

CONCLUSION

The Trust complies with all the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the implementing POMS provisions.

This opinion examines whether or not the trust in question (established in 1996) is considered irrevocable under Georgia law. A trust is a countable resource for SSI purposes if an individual has legal authority to revoke the trust and then use the funds to meet his/her food or shelter needs, or if the individual can direct the use of the trust principal for his/her support and maintenance. The revocability of a trust and the ability to use the trust principal is determined by the terms of the trust and/or State law. In this case, the trust identifies the claimant's "heirs" as the residual beneficiary. Under Georgia law, a trust must specify a particular person or entity as the residual beneficiary. The reference to "heirs" in this trust is too indefinite to create a residual interest under Georgia law thus making the trust revocable and a countable resource for SSI purposes.

QUESTION

You asked whether a the "Jaime M. N~ Irrevocable Trust" (the N~ Trust) established under Georgia law is irrevocable when it only designates that, upon the death of Jaime M. N~ (Claimant), the residual funds in the trust pass to the State of Georgia and then to "the heirs of" Claimant. You also asked whether Program Operations Manual System (POMS) SI ATL 01120.201 correctly interprets Georgia law regarding when a trust should be considered revocable.

ANSWER

Although the trust meets requirements under the Agency's special needs trust exception, it is countable as a resource available to Claimant under ordinary resource rules, because it is not irrevocable under Georgia law. As stated in POMS SI ATL 01120.201, a trust in Georgia is considered revocable when the trust states that the residual of the trust will go "to my estate" or "to my heirs."

FACTS

Claimant is child of Geoffrey and Diane N~ (Claimant's parents). On September 21, 1991, when Claimant was five years old, she experienced an anoxic brain injury, which left her with extensive brain damage, primarily on the left side of her brain. On August 15, 1996, when Claimant was about ten years old, Claimant's parents established a trust for Claimant. The trust corpus was comprised of an initial $10.00 and settlement funds that were payable to Claimant because of a lawsuit her parents filed on her behalf against an ambulance company. The N~ Trust, Art. 2, §§ 1, 2. The provisions state that its intended purpose is "to be in full compliance with . . . the provisions and requirements contained in 42 U.S.C. Section 1396p or related Statutes . . . ." Id., Art. 3, § 1. The trust provisions further indicates that the trustee "shall pay to . . . [Claimant] in monthly or other convenient installments, that amount of net income that will not cause [Claimant] to be ineligible for governmental financial assistance" in the event that she receives such assistance. Id., Art. 4, § 1.1 (emphasis supplied). The trust provisions also state that the trustee "may distribute discretionary amounts of principal for [Claimant's] special needs" that are not otherwise provided by governmental financial assistance and benefit providers. Id., Art. 3, § 1.2 (emphasis supplied). Finally, the trust provisions state that, upon Claimant's death, the Trustee shall distribute "the balance of the trust property to the Department of Human Services, or its successor agency, as reimbursement to the Medical Assistance Program of the State of Georgia, for benefits provided by them to the Beneficiary during the Beneficiary's lifetime." Id., Art. 4, § 1.3. If any assets remain after reimbursing the State of Georgia for medical assistance, "the remainder, after reasonable expenses and costs for maintaining the trust, shall be distributed to the estate of [Claimant]." Id. The same distribution plan to the State and then to Claimant's "estate" would occur if the trust were to terminate; and if there are no other persons to receive such property, the trust balance would be distributed under the law of Georgia to Claimant's heirs as if she died intestate. Id., Art. 5.

Claimant applied for SSI on August 9, 2004, and the Agency subsequently approved her application. After a "limited issue" redetermination, the Agency found that Claimant's trust was revocable due to the general language designating beneficiaries. According to POMS SI ATL 01120.201, the residual beneficiary language in Claimant's trust was too non-specific to render the trust, funded mostly with Claimant's assets, irrevocable under Georgia law. Thus, Claimant was no longer eligible for SSI due to the value of her trust, which, per the Agency's interpretation, was a countable resource. Claimant disagrees with the redetermination finding and contends that her trust is irrevocable.

BACKGROUND

Under the Social Security Act (Act), aged, blind, or disabled individuals who meet certain income and resource limitations are eligible for SSI. See Act § 1611(a) (42 U.S.C. § 1382(a)). "Income" is defined as funds that are earned as wages or other employment-type compensation or as unearned income from a variety of sources, which can be used to meet a claimant's food and shelter needs. See Act at § 1612(a)(1)-(2) (42 U.S.C. § 1382a(a)(1)-(2)); accord 20 C.F.R. § 416.1102 (2007). Resources are cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for his or her support and maintenance. See 20 C.F.R. § 416.1201(a) (2007).

The Act did not contain a specific SSI resource provisions for trusts created prior to December 30, 1999; however, the Act contained other provisions for Medicaid trusts. The Omnibus Budget Reconciliation Act of 1993 (OBRA) amended § 1917 of the Act to incorporate new provisions for the treatment of trusts established on or after August 11, 1993. See OBRA, Pub. L. 103-66, 107 Stat 312, § 13611 (Aug. 10, 1993). Of relevance here, a trust could be established for the purpose of an individual's Medicaid eligibility, if: (1) the trust is composed only of pension, Social Security, and other income to the individual, including accumulated income in the trust; (2) upon the death of the individual, funds remaining in the trust are paid to the State in an amount equal to the total medical assistance paid on behalf of the individual; and (3) the state makes Medicaid available to individuals with incomes at or below a special income level, but does not make Medicaid available to medically needy individuals for nursing facility services. Act at § 1917(d)(4)(B) (42 U.S.C. § 1396p(d)(4)(B)); accord POMS § SI 0730.048 Medicaid Trusts.

For trusts created with an individual's assets before January 1, 2000, the principal is countable as a resource for SSI purposes "if an individual (claimant, recipient, or deemor) has legal authority to revoke the trust and then use the funds to meet his food or shelter needs, or if the individual can direct the use to the trust principal for his/her support and maintenance . . ." or if the trust provides for mandatory disbursements to the beneficiary that the beneficiary could assign. See POMS SI 01120.200D. However, if the individual does not have the legal authority to revoke the trust or direct the use of the trust assets for his or her own support and maintenance, then the trust principal is not the individual's resource for SSI purposes. See id. The revocability of a trust and the ability to use the trust principal is determined by the terms of the trust and/or State law. See POMS SI 01120.200D.2.

DISCUSSION

Our analysis applies through September 11, 2007 only. On September 12, 2007, Claimant's representative amended her trust to read that upon her death, after Medicaid reimbursement, taxes, etc, the remaining funds would be distributed to the Claimant's spouse and descendents, per stirpes, and, if none, to Claimant's parents in equal shares, per stirpes.

Georgia law controls in this case because this trust was established in Fulton County, Georgia. See The N~ Trust, p. 10-8. Georgia law defines a trust as an equitable obligation, either express or implied, resting upon a person by reason of a confidence reposed in him or her, to apply or deal with property for the benefit of some other person, or for the benefit of himself or herself and another or others, according to such confidence. See Peach Consolidated Properties, L.L.C. v. Carter, 628 S.E.2d 680 (2006) (citing Smith v. Francis, 144 S.E.2d 439 (1965)). In Georgia, an express trust, as is present here, requires the following:

(a) An express trust shall be created or declared in writing;

(b) An express trust shall have each of the following elements, ascertainable with reasonable certainty;

(1) An intention by a settlor to create a trust;

(2) Trust property;

(3) A beneficiary;

(4) A trustee; and

(5) Active duties imposed on the trustee, which duties may be specified in the writing or implied by law.

CODE OF GA. ANN., § 53-12-20 (1991). Also, Georgia law states that a settlor is not empowered to modify or revoke trust without reservation of such power -- specifically, that "a settlor shall have no power to modify or revoke a trust in the absence of an express reservation of such power. A power to revoke will be deemed to include a power to modify and an unrestricted power to modify will be deemed to include a power to revoke. Any revocation or modification of an express trust must be in writing." CODE OF GA. ANN., § 53-12-150 (1991).

Despite these general provisions within the Georgia Code, however, longstanding caselaw has held a settler, who is the sole beneficiary of a trust, has the right to termination the trust despite language in the trust instrument that states the trust is irrevocable. See Moore v. First Nat'l Bank & Trust Co. of Macon, 130 S.E. 2d 718, 721-22 (Ga. 1963). This holding was reiterated in a later Georgia case. See Woodruff v. Trust Co. of Ga., 210 S.E. 2d 321, 324 (Ga. 1974). In 1996, several years after the current Georgia trust law had been in effect, the court again cited with favor the holding from Moore, but distinguished that holding on the basis that the settler in that case was another party, the beneficiary's father. See Ivey v. Ivey, 465 S.E. 2d 434, 438 (Ga. 1996). Thus, even after the 1991 law went into effect, the concept from Moore persists that a settler/sole-beneficiary trust is revocable.

Regional POMS state that, in Georgia, the language of a trust must specify a particular person or entity as the residual beneficiary. See POMS SI ATL 01120.201. A trust provision that states that after death of the individual the trust will go to a specifically named person or entity or states that the trust is to go "to my children, or issue, or descendants" is specific enough to identify a person and the trust is irrevocable. See id. On the other hand, trust language that says that after the individual's death, the trust will go "to my estate" or "to the heirs" of the primary beneficiary (or some other non-specific general term) is too indefinite to create an interest in someone who could prevent revocation. See id. Given the review of the above caselaw, this POMS remains unchanged with regard to Georgia.

Here, while the Claimant's trust intended to create an irrevocable trust per the specific language of the trust instrument, this trust is revocable under the laws of Georgia as established in Moore. Thus, even though the trust indicates that Claimant, as the true grantor, shall have no power to control and direct payment, remove trust property, or alter, amend, revoke, or terminate this trust, see The N~ Trust, Art. 1, § 3, Claimant as the grantor and sole beneficiary of the trust had unrestricted ability to revoke the trust and use the funds for her support. Her actions of amending and reforming this trust to include appropriate residual beneficiaries as of September 12, 2007, provides further evidence that this trust was not irrevocable.

Finally, even though this trust provides that, either at Claimant's death or at the termination of the trust, the trustee shall first reimburse the State of Georgia for medical assistance Claimant received for medical care, before distributing any remaining trust amounts Claimant's estate or heirs," see The N~ Trust, Art. 4, Art. 5, those provision do not create any remainder interest for the state. Instead, these provisions creates a "creditor" interest in the state. See Carden v. Astrue, 2008 WL 867942, *4 (S.D. W.Va. 2008) (finding that West Virginia had not indicated that the state was a beneficiary). The state's interest is only payable if there are funds left in the trust when Claimant dies, after administrative costs are paid. If nothing is left, nothing is owed the state(s). As in Carden, no Georgia statute or caselaw indicates that the state should be a residual beneficiary rather than a creditor.

CONCLUSION

For the reasons stated above, this trust is countable as a resource available to Claimant under ordinary resource rules because it is not irrevocable under Georgia law. Also, the guidance stated in POMS SI ATL 01120.201 remains in force with regard to Georgia trusts.

Sincerely,

Mary A. S~

Regional Chief Counsel

Jerome M. A~

Assistant Regional Counsel