QUESTIONS PRESENTED
For purposes of identifying the number holder (NH) C, G’s resources for Supplemental
Security Income (SSI), you asked whether the Tresco, Incorporated Pooled Charitable
Trust (Tresco Pooled Trust), effective February 19, 2008, and the NH’s accompanying
Joinder Agreement qualify as a pooled trust under section 1917(d)(4)(C) of the Social
Security Act (Act), as codified at 42 U.S.C. § 1396p(d)(4)(C). If the Tresco Pooled
Trust qualifies under the pooled trust exception, you also inquired whether the NH’s
subaccount, established with her own funds on or after January 1, 2000, would be exempt
from the Social Security Administration’s (agency’s) resource counting rules for SSI
purposes.
SHORT ANSWERS
We believe that there is support for the agency to conclude that the Tresco Pooled
Trust does not qualify as a pooled trust under section 1917(d)(4)(c) of the Act because
its provisions do not comply with all five conditions for qualification for the pooled
trust exception for counting resources for SSI purposes. See 42 U.S.C. § 1396p(d)(4)(C). Although the Trustee Tresco, Incorporated is a non-profit
association, as required under 42 U.S.C. § 1396(d)(4)(C), the Tresco Pooled Trust
permits the Trustee to appoint a Co-Trustee and permits appointment of a successor
Trustee without specifying that any Co-Trustee or successor Trustee must be a non-profit
association. The Tresco Pooled Trust also permits the Trustee to allow a for-profit
entity to make virtually unfettered investment decisions. Further, the Tresco Pooled
Trust contemplates possible early termination of either the master trust or a subaccount
through petitioning the court, but does not specifically provide for a Medicaid payback.
Because we believe the Tresco Pooled Trust cannot qualify as the pooled trust exception
under section 1917(d)(4)(C) of the Act, codified at 42 U.S.C. § 1396p(d)(4)(C), we
do not reach the question whether the NH’s subaccount in the Tresco Pooled Trust established
with the NH’s own funds after January 1, 2000, is exempt from the agency’s resource
counting rules.
BACKGROUND
Tresco, Incorporated (Tresco) is a New Mexico not-for-profit corporation that is federally
recognized as tax-exempt under the Internal Revenue Code § 501(c)(3). See Tresco Pooled Trust Preamble; Internal Revenue Service 501(c)(3) Determination Letter.
On February 19, 2008, Tresco created the Tresco Pooled Trust as a Master Trust with
a purpose “to comply with[] the provisions of 42 [U.S.C. § 1396p(d)(4)(C)]” and “to
provide for the collective management and distribution of the Trust Estate on behalf
of eligible beneficiaries who are disabled as defined in 42 [U.S.C.] § 1382c(a)(3)
for whom Trust Sub-accounts are established.” See Tresco Pooled Trust Art. I, § 1.3. Tresco serves as the Trustee for the Tresco Pooled
Trust. See Tresco Pooled Trust Art. II, § 2.12; Art. VII, § 7.1. Tresco can appoint a Co-Trustee,
and, if Tresco resigns as Trustee, the court can appoint a new Trustee. See Tresco Pooled Trust Art. II, § 2.12; Art. VII, §§ 7.1-7.2. The Trustee has sole discretion
to distribute principal or income in a subaccount for the sole benefit of the beneficiary.
See Tresco Pooled Trust Art. I, § 1.3; Art. IV, § 4.1; Art. IV, § 4.6; Art. V, § 5.1.
The Trustee’s discretionary disbursements are not to replace government or private
benefit assistance. See Tresco Pooled Trust Art. V, § 5.3.
Upon the beneficiary’s death, the Trustee will administrator and distribute any amounts
remaining in the beneficiary’s subaccount as follows: 1) pay taxes due to the State
or Federal government because of the beneficiary’s death, 2) pay reasonable fees for
administration of the beneficiary’s subaccount, and 3) retain remaining amounts by
the trust. See Tresco Pooled Trust Art. VI, §§ 6.1-6.3. To the extent that any amount remains in
the beneficiary’s subaccount that the trust does not retain, the Trustee will pay
to the State(s) Medicaid program up to an amount equal to the total amount of Medicaid
assistance paid on the beneficiary’s behalf. See Tresco Pooled Trust Art. VI, § 6.4.
The Tresco Pooled Trust provides, “Every reasonable attempt will be made to continue
the Trust for the purposes for which it is established.” See Tresco Pooled Trust Art. VI, § 6.5. However, if the Trustee is unable to effectuate
the purpose of the master trust or the beneficiary’s subaccount, the Trustee will
petition the court for further instructions, giving notice to the beneficiary, the
beneficiary’s legal representative, and the New Mexico Department of Human Services.
See Tresco Pooled Trust Art. VI, §§ 6.5-6.6.
The Tresco Pooled Trust contains a choice-of-law provision indicating that it should
be interpreted pursuant to the laws and regulations of the United States and the State
of New Mexico. See Tresco Pooled Trust, Art. XII, § 12.2. The NH opened a subaccount in the Tresco Pooled
Trust on her own behalf on June 29, 2009, via a Joinder Agreement.[1]
ANALYSIS
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I.
Federal Law and Agency Policy: Trusts as SSI Resources,
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 20 C.F.R. §§ 416.110, 416.202. “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 20 C.F.R. § 416.1201(a). “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 Program Operations Manual System (POMS) SI 01120.010(B).
When determining a claimant’s eligibility for SSI, the agency considers trusts created
on or after January 1, 2000, from a disabled beneficiary’s assets to be a resource
under section 1613(e) (codified at 42 U.S.C. § 1382b(e)) to the extent that the trust
is revocable, or, in the case of an irrevocable trust, to the extent that any payments
can be made from the trust for the benefit of the disabled beneficiary. See 42 U.S.C. § 1382b(e)(3); POMS SI 01120.201(D). However, the rules that include trust assets as a resource in section 1613(e),
as codified at 42 U.S.C. § 1382b(e), do not apply to trusts described in section 1917(d)(4)
of the Act, as codified at 42 U.S.C. § 1396p(d)(4). The excepted Medicaid payback
trusts in section 1917(d)(4) of the Act, as codified at 42 U.S.C. § 1396p(d)(4), are
commonly known as the special needs and pooled trust exceptions. See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(A), (C); POMS SI 01120.203. This legal opinion focuses upon the pooled trust exception.
A pooled trust is a trust that contains many different individuals’ assets, segregated
into separate subaccounts. POMS SI 01120.203(D)(1). A pooled trust that qualifies as a Medicaid payback trust under section 1917(d)(4)(C)
is exempt from the Act’s rules for counting trusts created from a beneficiary’s assets
as a resource. See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(C); POMS SI 01120.203(D)(8). To qualify for the pooled trust exception under the Act, a trust must contain
assets belonging to a disabled beneficiary and must satisfy all of the following conditions:
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The pooled trust must be established and managed by a non-profit association;
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Separate accounts must be maintained for each disabled beneficiary of the trust; but
the assets are pooled for investing and management purposes;
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Accounts in the trust must be established solely for the benefit of disabled individuals;
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Accounts in the trust must be established through the actions of the individual, a
parent, a grandparent, a legal guardian, or a court; and
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The trust must provide that to the extent that any amounts remaining in the beneficiary’s
account, upon the death of the beneficiary, are not retained by the trust, the trust
will pay to the State(s) from such remaining amounts in the account an amount equal
to the total amount of medical assistance paid on behalf of the beneficiary under
State Medicaid plan(s).
42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203(D)(1).
If a trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C), we also consider
whether the subaccount is excluded under the regular resource counting rules. See POMS SI 01120.200, SI 01120.203(D)(1) (Note). Under the regular resource counting rules, the agency considers a trust
a resource, attributable to the beneficiary, if the beneficiary has the legal authority
to revoke or terminate the trust and then use the funds to meet her food or shelter
needs, if the beneficiary can direct the use of the trust principal for her support
and maintenance under the terms of the trust, or if the beneficiary can sell her beneficial
interest in the trust. See 20 C.F.R. § 416.1201(a); POMS SI 01120.200(D)(1)(a).
We first consider the pooled trust exception conditions in evaluating whether the
Tresco Pooled Trust and the NH’s Joinder Agreement qualifies as a pooled trust.
II. Application of the Pooled Trust Exception to the Tresco Pooled
Trust
The Tresco Pooled Trust describes itself as a Pooled Charitable Trust intended to
comply with the provisions of the pooled trust exception under 42 U.S.C. § 1369p(d)(4)(C).
See Tresco Pooled Trust, Art. I, §§ 1.2-1.3. The Tresco Pooled Trust indicates a “trust
beneficiary” is a person with a disability, as defined in section 1614(a)(3) of the
Act, as codified at 42 U.S.C. § 1382c(a)(3).[2] See Tresco Pooled Trust, Art. I, § 1.3, Art. II, § 2.1. Pertaining to the NH’s subaccount,
the NH was a disabled individual receiving SSI benefits when she completed her Joinder
Agreement. See Joinder Agreement. As we will now explain, the Tresco Pooled Trust does not satisfy
all five conditions for the pooled trust exception. Rather, it satisfies only the
second, fourth, and fifth conditions.
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A. Condition One: Trust established and managed by a non-profit
association.
The Tresco Pooled Trust satisfies the first part of the first condition that a non-profit
association establish the trust. See 42 U.S.C. § 1396p(d)(4)(C)(i); POMS SI 01120.203(B)(2). Tresco established the Tresco Pooled Trust. See Tresco Pooled Trust Art. I, § 1.1. An IRS 501(c)(3) determination letter establishes
that Tresco is a non-profit corporation. Consequently, the Tresco Pooled Trust was
established by a non-profit association, as the first part of the first condition
requires.
However, the Tresco Pooled Trust does not satisfy the second part of the first condition
that a non-profit association manage the trust. Article II, § 2.12 defines Trustee
as Tresco, or its successor, and any Co-Trustee. Further, a Co-Trustee is permitted
“to assist with the management, administration, allocation, and disbursement of Trust
assets and property.” See Tresco Pooled Trust Art. II, § 2.12; Art. VII, § 7.1. The Tresco Pooled Trust is
unclear whether the Co-Trustee would be subordinate to the Trustee. Should the Trustee
resign, the court will appoint a successor Trustee. See Tresco Pooled Trust Art. VII, § 7.2. The Tresco Pooled Trust does not specify that
the appointed Co-Trustee or successor Trustee must be a non-profit association. Instead,
the Co-Trustee could be “a person or entity, or both.” See Tresco Pooled Trust Art. II, § 2.12. Article IX, §§ 9.1 and 9.2 permit the Trustee
to hire a corporate custodian and investment counsel, and Article 9.2 permits the
Trustee to delegate to investment counsel the ability to “make investments on behalf
of the Trust without requiring prior approval from the Trustee.” See Tresco Pooled Trust Art. IX, §§ 9.1-9.2. Granted, a pooled trust may qualify for an
exception despite employing for-profit entities to effectuate trust functions. POMS
SI 01120.225. Thus, the Trustee’s ability to hire for-profit, private entities is not inherently
fatal to the Tresco Pooled Trust’s status as a valid pooled trust. Nevertheless, the
non-profit association must retain the ultimate authority over the trust. POMS SI 01120.225(D). For example, the non-profit association must be responsible for determining the
amount of trust corpus to invest, removing or replacing the Trustee, and making day-to-day
decisions regarding the health and well-being of the beneficiaries. Id. Here, we believe that the Tresco Pooled Trust permits the Trustee to delegate core
responsibilities to private entities without sufficient oversight to comply with the
POMS authority. This is detailed further below.
POMS SI 01120.225(E) states that the agency will not routinely question the relationship between a
non-profit association and contracted, for-profit entities. POMS 01120.225(D), however,
requires that any for-profit entity must always be subordinate to the non-profit managers
of a pooled trust. In this case, we think that the Trustee’s ability to appoint a
Co-Trustee that is not a non-profit entity to assist with the trust’s management is
inconsistent with POMS SI 01120.255(D) because the Tresco Pooled Trust is unclear whether the Co-Trustee would be subordinate
to the Trustee. Similarly, the Trustee’s ability to delegate the authorization to
make investments, without prior approval, to a for-profit entity likewise shows that
the Tresco Pooled Trust does not make certain that the Trustee will retain sufficient
oversight as POMS SI 01120.225(D) requires. Indeed, as an example of a prohibited practice, POMS SI 01120.225(D) specifically lists a for-profit entity’s ability to determine the amount of trust
corpus to invest. Yet, sections 9.1-9.2 of the Tresco Pooled Trust permits the Trustee
to allow a for-profit entity to make virtually unfettered investment decisions. See Tresco Pooled Trust Art. IX, §§ 9.1-9.2. Accordingly, because the Tresco Pooled Trust
allows for-profit entities to manage the trust without specific oversight, it does
not satisfy the first condition of 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203(B)(2)
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B. Condition Two: Separate accounts maintained for each
beneficiary, but assets are pooled for investment and management
purposes.
The Tresco Pooled Trust satisfies the second condition, which requires that separate
accounts be maintained for each beneficiary, even though funds are pooled for investment
and management purposes. See 42 U.S.C. § 1396p(d)(4)(C)(ii); POMS SI 01120.203(D)(1). The Tresco Pooled Trust provides that the trust separately maintain and account
for individual beneficiary’s subaccounts. See Tresco Pooled Trust Art. II, § 2.8, Art. IV, § 4.1. However, the Trustee may pool
the resources of all subaccounts for investment and administration. See Tresco Pooled Trust Art. IV, § 4.2. The Tresco Pooled Trust also states that the Trustee
must provide periodic reports to each beneficiary of all the receipts, disbursements,
and distributions from the beneficiary’s subaccount. See Tresco Pooled Trust Art. IV, § 4.4. These provisions satisfy the second condition
for the pooled trust exception.
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C. Condition Three: Account must be established solely for the
benefit of the disabled individuals.
The Tresco Pooled Trust does not satisfy the third condition for the pooled trust
exception, which requires that accounts in a trust solely benefit disabled individuals.
See 42 U.S.C. § 1396p(d)(4)(C)(iii); POMS SI 01120.203(B)(2). The Tresco Pooled Trust contains two early termination provisions, which potentially
permit the Trustee to terminate an individual’s subaccount or the Tresco Pooled Trust
as a whole. Early termination clauses, however, are only acceptable under the pooled
trust exception under narrowly defined circumstances. Specifically, a pooled trust
with an early termination clause will not be excepted from the resources counting
rules unless:
1. States 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 by the State
Medicaid plans;
2. With limited exceptions, no entity other than the trust beneficiary could benefit
from the early termination; and
3. The early termination clause gives the power to terminate to someone other than
the trust beneficiary.
POMS SI 01120.199(F)(1). Article VI, §§ 6.5 and 6.6 of the Tresco Pooled Trust provide for early termination
that requires the Trustee to petition a court for “further instructions.” See Tresco Pooled Trust Art. VI, § 6.5 (if the Trustee has reasonable cause to believe
that a beneficiary will become liable for basic maintenance, support, or care that
has otherwise been provided by a government agency or private program, the Trustee
will petition the court for further instructions); Art. VI, § 6.6 (the Trustee will
petition the court for instructions if carrying out the Tresco Pooled Trust’s purpose
becomes impossible or impracticable with respect to all beneficiaries). As such, although
the court might ultimately undertake actions compliant with the POMS, the Tresco Pooled
Trust itself does not facially guarantee States Medicaid Plan reimbursement or that
no one other than the trust beneficiary could benefit from the early termination.
Thus, the Tresco Pooled Trust does not satisfy the third condition for the pooled
trust exception.
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D. Condition Four: Accounts established by the individual,
parent, grandparent, legal guardian, or court.
The Tresco Pooled Trust satisfies the fourth condition that accounts in the trust
are established by the individual, a parent, grandparent, legal guardian, or the court.
See 42 U.S.C. § 1396p(d)(4)(C)(iii); POMS SI 01120.203(D)(6) A trust beneficiary joins the Tresco Pooled Trust when a sponsor signs a joinder
agreement. See Tresco Pooled Trust Art. III, § 3.1. As defined in the Tresco Pooled Trust, a sponsor
is the trust beneficiary, parent, grandparent, legal guardian, legal representative,
or court. See Tresco Pooled Trust Art. 2, § 2.7. Although we have concerns that permitting a “legal
representative” to establish a subaccount could run afoul of the fourth condition,
we need not address that concern under the facts of the present opinion because the
NH established her account in the Tresco Pooled Trust when she signed the Joinder
Agreement and funded her subaccount—making it self-settled. See Joinder Agreement. Because the NH established her trust account through her own actions,
the Tresco Pooled Trust and the NH’s Joinder Agreement satisfy the fourth condition
for the pooled trust exception.
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E. Condition Five: State reimbursed for medical expenses upon
death of beneficiary.
The Tresco Pooled Trust satisfies the fifth condition, which requires that upon a
beneficiary’s death, a trust reimburse the States for medical expenses paid on behalf
of the disabled beneficiary under the State’s Medicaid plans, to the extent the trust
does not retain the funds. See 42 U.S.C. § 1396p(d)(4)(C)(iv); POMS SI 01120.203(D)(8).
The Tresco Pooled Trust provides that upon the trust beneficiary’s death, the remaining
assets will be allocated as follows: 1) pay taxes due to the State or Federal government
because of the beneficiary’s death, 2) pay reasonable fees for administration of the
beneficiary’s subaccount, and 3) retain remaining amounts by the trust. See Tresco Pooled Trust Art. VI, §§ 6.1-6.3. To the extent that any amount remains in
the beneficiary’s subaccount that the trust does not retain, the Trustee will pay
to the State(s) Medicaid program up to an amount equal to the total amount of Medicaid
assistance paid on behalf of the beneficiary. See Tresco Pooled Trust Art. VI, § 6.4.
The Tresco Pooled Trust separates expenses that the POMS permits the Trustee to pay
before paying back the states for medical expenses. See POMS SI 00120.203(E). The Tresco Pooled Trust allows the Trustee to pay certain administrative expenses,
like taxes due from the trust because of the beneficiary’s death and reasonable fees
and costs, to be paid before paying the states for medical assistance. See Tresco Pooled Trust Art. VI, § 6.2. Thus, the Tresco Pooled Trust satisfies the fifth
condition for the pooled trust exception.
In sum, the Tresco Pooled Trust does not qualify as a valid, pooled trust under 42
U.S.C. § 1396p(d)(4)(C) as it does not satisfy all five conditions for the pooled
trust exception. We next consider whether the Tresco Pooled Trust savings clause could
cure the identified infirmities to allow the trust to qualify as a pooled trust under
42 U.S.C. § 1396p(d)(4)(C).
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III. The Tresco Pooled Trust Savings Clause Cannot Cure the
Infirmities Identified Above
The Tresco Pooled Trust contains a savings clause, providing that if a trust provision
is found to be invalid or unenforceable the remaining provisions of the trust will
continue to be fully effective. See Tresco Pooled Trust Art. XII, § 12.3. The Joinder Agreement also contains a savings
clause, stating that the Tresco Pooled Trust is meant to conform with 42 U.S.C. §
1396p as a pooled trust, and that to the extent there is conflict between the terms
of the trust and the governing law, the law and regulations will control. See
Joinder Agreement, section G(4). New Mexico generally enforces savings clauses in
trusts and similar instruments. See Bolton v. Bd. Of Cty. Comm’rs
of Valencia County, 890 P.2d 808, 818 (N.M. App. 1994) (citing City of Santa Fe v. First Nat’l Bank, 65 P.2d 857, 862-63 (1937)). Nevertheless, the agency has determined that a savings
clause does not cure an otherwise defective trust instrument. POMS SI 01120.227(D). Rather, the agency evaluates trust provisions as written. Id. Thus, neither Article 12.3 of the Tresco Pooled Trust nor section G(4) of the Joinder
Agreement cures the infirmities identified above.
CONCLUSION
We believe that the agency may reasonably conclude that the Tresco Pooled Trust does
not qualify as a valid, pooled trust under 42 U.S.C. § 1396p(d)(4)(c) because its
provisions do not comply with two of the five statutory conditions for determining
whether a trust qualifies for the pooled trust exception for counting resources for
SSI purposes. Specifically, (a) the Tresco Pooled Trust permits the Trustee to delegate
core responsibilities to for-profit entities without sufficient oversight, and b)
the Tresco Pooled Trust contains improper early termination provisions. Therefore,
the agency cannot consider the NH’s subaccount as a pooled trust exception, and it
is not exempt from the agency’s resource counting rules.