QUESTION
You asked whether the Anchor For Special Needs, Inc. Pooled Special Needs Trust (Trust),
as amended on December 19, 2020, is in compliance with the procedures governing the
Agency’s trust policy.
SHORT ANSWER
We conclude that the Trust does not meet the pooled trust exception for self-settled
trusts under 42 U.S.C. § 1396p(d)(4)(C). Specifically, the Trust does not satisfy
the requirement that a nonprofit association manage the trust. Moreover, upon further
review, we have identified additional issues with the Trust that would render a self-settled
sub-account noncompliant with the Agency’s pooled trust requirements—it does not satisfy
the requirement that a trust be able to provide an individual accounting or the requirement
that it be established for the sole benefit of each individual. As such, a self-settled
sub-account in the Trust would be considered a resource. However, with respect to
third-party contributions, neither a third-party sub-account in the Trust nor third-party
assets in a commingled sub-account would be considered a resource under the Agency’s
regular resource rules. We also conclude that the December 2020 Amendment may be applied
retroactively.
BACKGROUND
Anchor For Special Needs, Inc. (Anchor) states that it is an Ohio nonprofit corporation
and qualified 501(c)(3) organization. See Anchor For Special Needs, Inc. Pooled Special Needs Trust Agreement (Trust Agreement
or TA) preamble, § 11.6. According to its website, Anchor is a nationally-operating
nonprofit corporation “formed to provide trustee, trust administration, and informational
and educational services for disabled individuals.” See About Anchor For
Special Needs, Inc., https://www.anchorfsn.org/about/ (last visited Feb. 19, 2021). On January 6, 2015, Anchor, as Settlor and Trustee,
established the Trust for the benefit of individuals with disabilities. See TA preamble. The Trust was created pursuant to the Omnibus Budget Reconciliation Act
of 1993 with the purpose of establishing an irrevocable pooled trust in compliance
with 42 U.S.C. § 1396p(d)(4)(C) and “applicable state regulations and statutes.” TA
§§ 2.1, 3.1. The Trust Agreement was amended and restated several times, most recently
on September 15, 2015. See TA preamble & p. 11; Amendment to the Anchor For Special Needs, Inc. Pooled Special
Needs Trust Agreement (Amendment) preamble. On December 19, 2020, Anchor further amended
the Trust Agreement. See Amendment preamble. The Amendment purports to apply retroactively to January 6, 2015.
See Amendment ¶ 1.
In April 2019, we reviewed Anchor’s Trust Agreement dated September 15, 2015, and
Joinder Agreement and determined that the Trust did not meet the pooled trust exception
for self-settled trusts under 42 U.S.C. § 1396p(d)(4)(C). See Memorandum from Reg’l Chief Counsel, Chicago, to Assistant Reg’l Comm’r-MOS, Review of the Anchor Pooled Special Needs Trust—
REPLY (Apr. 9, 2019) [hereinafter 2019 Memorandum]. Specifically, we concluded that the
Trust did not satisfy the requirement that a non-profit association manage the trust.
See
id.
Subsequently, on December 19, 2020, Anchor amended the Trust Agreement to “comply
with the Social Security Administration’s statutory interpretations and policies regarding
nonprofit management of pooled trusts.” See Amendment at p. 1. Your office submitted the Trust Agreement, Amendment, and Joinder
Agreement for our review. We note that the Joinder Agreement is unchanged.
The Trust Agreement states that the Trust is intended to serve as a repository into
which “funds of individuals with disabilities may be received in trust, to be held
and used in the Trustee’s complete discretion, to supplement, not supplant, a Beneficiary’s
Governmental Benefits.” TA § 3.1. A “Beneficiary” is a disabled person (as defined
by 42 U.S.C. §1382c(a)(3)) who has deposited funds to the Trust or for whom a deposit
to the Trust has been made for the purpose of establishing a “Beneficiary Trust Account,”
the portion of the Trust on deposit for the sole benefit of the Beneficiary. TA Art.
1.A, B. The Trust maintains a separate Beneficiary Trust Account for each Beneficiary,
but for purposes of investment and management of funds, the Trust pools these sub-accounts.
See TA §§ 3.2, 4.1(a).
A Beneficiary Trust Account is created upon execution of a Joinder Agreement by the
Grantor, approval of such Joinder Agreement by the Trustee, and the deposit of Trust
property to establish (or add to) the account. See TA §§ 2.2, 7.1. The Trust and Beneficiary Trust Accounts are irrevocable. See TA §§ 5.1, 5.2, 7.1; JA at p. 3. “Grantor” is defined as the Beneficiary, guardian
of a Beneficiary, parent or grandparent of a Beneficiary, or a court of competent
jurisdiction that may establish or add to a Beneficiary Trust Account. TA Art. 1.E.
Under the Trust Agreement, Anchor serves as Trustee and has the “power and authority
to take any action necessary to accomplish the purposes of the trust.” See TA § 4.1. Anchor’s December 2020 Amendment amended Article 1.K of the Trust Agreement
to read: “‘Trustee’ shall mean persons or organizations serving as trustee under this Agreement, whether
or not appointed or confirmed by any court.”[1] Amendment ¶ 2.
Section 4.1 of the Trust Agreement provides a non-exhaustive list of the Trustee’s
powers, including the power to “exercise sole and absolute discretion over the decision
to make a disbursement or not to make a disbursement, as may be requested by the Grantor/Beneficiary.”
TA § 4.1(j). The Trust Agreement further provides that the Trustee may, at its sole
and unqualified discretion, distribute the income and principal of each Beneficiary
Trust Account for the benefit of the Beneficiary during his or her lifetime to provide
for the Beneficiary’s Supplemental Needs. TA § 7.3. All disbursements made by the
Trustee must be for the sole benefit of the Beneficiary. TA § 7.2. To request funds,
the Beneficiary (or power of attorney or Guardian) may complete a Disbursement Request
Form. See Disbursement Request Form, available at
http://www.anchorfsn.org/wpress/wp-content/uploads/2018/03/Anchor-for-Special-Needs-Inc.-Disbursement-Request-Form.pdf (last visited Feb. 24, 2021).
As amended, the Trust Agreement still allows the Trustee to designate a Co-Trustee
and delegate powers to a corporate fiduciary. See Amendment ¶¶ 3–4 (amending TA § 4.1(h)–(i)). However, Section 4.1(h) was amended
to clarify that Anchor serves as the initial “Managing Trustee” and that “at all times
a non-profit association shall serve as Managing Trustee.” Amendment ¶ 3. In addition, Sections 4.1(h) and (i) were amended to state that the Managing Trustee
shall “retain ultimate managerial control over the Trust, including retaining sole
authority to remove or replace any co-trustee, determine the amount of trust corpus
to invest, and make day-to-day decisions regarding Beneficiaries’ health and well-being,”
and that any Co-Trustee or corporate fiduciary is “subordinate to the Managing Trustee.”
See Amendment ¶¶ 3–4.
The Trust Agreement states that a Beneficiary shall have no entitlement to the income
or principal of his or her Beneficiary Trust Account, except as the Trustee, in its
complete and absolute discretion, determines to pay or disburse. TA § 7.3. A distribution
cannot be compelled by a Beneficiary or the Beneficiary’s family member, creditor,
or adverse litigant. TA § 7.5. Moreover, no interest in the income or principal is
subject to any form of alienation or hypothecation by the Beneficiary, nor can any
such interest be subject to the claims or liens of any creditor of the Beneficiary.
Id.
The Trust Agreement contains a defense clause indicating that legal fees incurred
in connection with the operation and any defense of the Trust may be apportioned equitably
among and paid from the existing Beneficiary Trust Accounts. See TA § 9.4.
The Trust Agreement contains early termination provisions in Articles Ten and Eleven.
Under Article Ten, if there is reasonable cause to believe that the income or principal
in a Beneficiary Trust Account is or will become liable for the Beneficiary’s basic
maintenance, support, or care that has been or would otherwise be provided by local,
state, or federal government, the Trustee may do either of the following:
-
a.
Pay to the state(s) all amounts remaining in the Trust Sub-Account at the time of
the termination up to an amount equal to the total amount of medical assistance paid
on behalf of the Beneficiary under the state Medicaid plan(s) pursuant to 42 U.S.C.
sec. 1396, et
seq . After reimbursement to the state(s), all remaining funds in the Trust Sub-Account
shall be disbursed to the Beneficiary; or
-
b.
Transfer the assets remaining in the Trust Sub-Account to another Trust Sub-Account
that meets the definition of a pooled trust as set forth in Article 2.1 of this Trust
Agreement, and as further established under separate arrangement with the affected
Beneficiary, or his or her Guardian.
TA § 10.1.
Under Article Eleven, if, during the lifetime of the Beneficiary, it becomes impossible
or impracticable to meet the objectives of the Trust Agreement, the Trustee may terminate
the Trust Agreement and transfer the Beneficiary Trust Accounts to another pooled
special needs trust in accordance with Article Ten. See TA § 11.3.
The Trust Agreement provides that, upon the death of a Beneficiary, any amounts remaining
in his or her Beneficiary Trust Account that are not retained by the Trust shall be
used to first repay the medical assistance paid by all states on behalf of the Beneficiary
under the state Medicaid plan(s), after allowable taxes and administrative expenses
are satisfied. See TA § 8.2.[2] If any balance remains, the balance shall be disbursed to the remainder beneficiaries
named in the Joinder Agreement. Id.
Similarly, the Joinder Agreement offers Beneficiaries two options for how assets will
be distributed on their death. Under the first option, Anchor will retain all remaining
assets in the Trust and use them for the benefit of persons with disabilities. JA
at p. 2; see also
TA § 8.3. Under the second option, Anchor will 1) pay claims by state(s) for reimbursement
of medical assistance expenditures made on behalf of the Beneficiary; and 2) if monies
remain, pay any remainder beneficiaries identified in the Joinder Agreement. JA at
p. 2.
The Trust Agreement indicates that Anchor has the right to amend the Trust Agreement
“at the discretion of the Trustee and in writing” and that, unless otherwise specified,
“any amendment shall apply to the beneficiary trust accounts so existing at the time
of the amendment, as well as to beneficiary trust accounts established after the amendment
is adopted and shall apply prospectively, except as otherwise stated and if necessary
to ensure the Trust’s compliance with applicable federal or state regulations.” TA
§ 11.2.
The Trust Agreement is governed and interpreted under Ohio law. TA § 11.6.
DISCUSSION
Initially, we note that the language in the Trust Agreement is unclear as to who may
contribute funds to a Beneficiary Trust Account. On the one hand, it appears that
the Trust is intended to contain self-settled sub-accounts. For example, the Trust’s
purpose is to establish a repository “into which the funds of individuals with disabilities
may be received in trust.” TA § 3.1. Similarly, it is intended that the Trust allow
“funds of the Beneficiaries” to be deposited into Beneficiary Trust Accounts. TA §
3.2. Anchor’s website also refers to a “self-settled” pooled special needs trust account.
See What is a Pooled Special Needs Trust, https://www.anchorfsn.org/what-is-a-pooled-special-needs-trust/ (last visited Feb. 22, 2021).
But on the other hand, as written, the Trust Agreement does not limit the source of
assets in a Beneficiary Trust Account. The definition of “Beneficiary” includes a
person “who has deposited funds to this trust or for whom a deposit to this trust has been made.” TA Art. 1.A (emphasis added). In addition, the Trust Agreement indicates that “[f]unds
on deposit in a Beneficiary Trust Account may be the funds of the Beneficiary deposited by, or on behalf of the disabled Beneficiary.”
TA Art. 1.B (emphasis added). This provision permits, but does not require, deposited
funds to belong to the Beneficiary. Likewise, the Joinder Agreement asks for the source
of the assets for the trust, and while it gives examples that seemingly pertain to
the Beneficiary’s property (personal injury lawsuit, mass tort lawsuit, inheritance),
it does not require the assets to be his or her property. See JA at p. 1. Therefore, as written, the Trust Agreement and Joinder Agreement both
appear to allow a Beneficiary Trust Account to contain third-party assets.[3]
Consequently, we believe that three possible types of sub-accounts may exist within
the Trust: 1) a sub-account that is funded solely by assets belonging to the Beneficiary
(i.e., a self-settled sub-account); 2) a sub-account that is funded solely by third-party
assets; and 3) a commingled sub-account containing assets from both the Beneficiary
and third parties. The following discussion addresses each type separately. In addition,
we also discuss whether amendments to the Trust Agreement can have retroactive effect.
I. Self-Settled Beneficiary Trust Account
A. Statutory Resource Rules
Under the Social Security Act (Act), a trust created on or after January 1, 2000,
from the assets of an individual generally will be considered a resource for SSI purposes
to that individual to the extent that the trust is revocable or, in the case of an
irrevocable trust, to the extent that any payments could be made from the trust to
or for the benefit of the individual. See 42 U.S.C. § 1382b(e); POMS SI 01120.201D. However, an exception to this rule exists for certain trusts that meet the criteria
of 42 U.S.C. § 1396p(d)(4)(C), commonly known as the pooled trust exception. See POMS SI 01120.203.
In order to qualify for the pooled trust exception, the trust must contain assets
belonging to a disabled individual and satisfy the following conditions:
-
1.
The trust is established and managed by a nonprofit association;
-
2.
The trust maintains a separate account for each beneficiary, but pools the assets
for purposes of investment and management;
-
3.
Each account in the trust is established solely for the benefit of the disabled individual;
-
4.
The account is established through the actions of the individual, a parent, a grandparent,
a legal guardian, or a court; and
-
5.
The trust provides 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
the state Medicaid plan(s).
See 42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203D.
Here, the Trust Agreement states that the Trust and Beneficiary Trust Accounts are
irrevocable. See TA §§ 5.1, 5.2, 7.1, JA at p. 3. Nevertheless, a Beneficiary Trust Account would
be considered a resource under the statutory provisions, since payments could be made
from the sub-account for the individual’s benefit. TA § 7.3. Accordingly, we consider
whether the Trust qualifies for the pooled trust exception. As discussed below, we
do not believe that the Trust, as amended in December 2020, meets the pooled trust
exception. In particular, the Trust does not appear to satisfy the first requirement
of the exception, as it does not comply with Agency policy concerning nonprofit management.
In addition, upon further review we have identified other provisions that appear to
be inconsistent with the second and third requirements of the exception. Consequently,
a sub-account in the Trust would not be excepted from resource counting.
1. Established and Managed by a Nonprofit Association
To satisfy the first requirement of the pooled trust exception, the trust must be
established and managed by a nonprofit association. 42 U.S.C. § 1396p(d)(4)(C)(i);
POMS SI 01120.203D.3. A nonprofit association may employ the services of a for-profit entity, but the nonprofit
association must maintain ultimate managerial control over the trust. POMS SI 01120.225D. For example, the nonprofit association must be responsible for determining the amount
of the 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. Also, a for-profit entity must not be allowed to determine whether to make discretionary
disbursements from the trust. POMS SI 01120.225E.
Here, Anchor, a nonprofit association, established and manages the Trust as Trustee,
having the “power and authority to take any action necessary to accomplish the purposes
of the trust.” See TA preamble, § 4.1. We previously expressed concern that the Trust Agreement allowed
for the possibility that a for-profit entity acting as a Co-Trustee could manage the
Trust or execute core managerial duties. See 2019 Memorandum, supra. We also expressed concern that the Trust Agreement allowed the Trustee to delegate
to a corporate fiduciary the exercise of any powers of the Trustee. See id.
Anchor’s December 2020 Amendment sought to remedy these deficiencies by amending three
provisions of the prior Trust Agreement. See Amendment ¶¶ 2–4. The definition of “Trustee” in Article 1.K was amended to mean “persons
or organizations serving as trustee under this Agreement, whether or not appointed
or confirmed by any court.” Amendment ¶ 2. The Trust Agreement still gives the Trustee
the “power to designate a co-trustee, as may be necessary or advisable,” and “the
power to delegate to a corporate fiduciary the exercise of any powers, with the same
effect as if the Trustee had joined in the exercise of such power.” See Amendment ¶¶ 3–4 (amending TA § 4.1(h)–(i)). However, Section 4.1(h) was amended to clarify that Anchor serves as the initial “Managing
Trustee” and that “at all times a non-profit association shall serve as Managing Trustee.”
Amendment ¶ 3. And Sections 4.1(h) and (i) were amended to state that the Managing Trustee shall
“retain ultimate managerial control over the Trust, including retaining sole authority
to remove or replace any co-trustee, determine the amount of trust corpus to invest,
and make day-to-day decisions regarding Beneficiaries’ health and well-being,” and
that any Co-Trustee or corporate fiduciary is “subordinate to the Managing Trustee.”
See Amendment ¶¶ 3–4.
Despite these changes, we believe that the amended Trust Agreement still does not
comply with Agency policy because of its language regarding the powers of the corporate
fiduciary. In particular, § 4.1(i), as amended, still allows the Trustee to delegate
any powers to the corporate fiduciary. As such, the Trustee could delegate core managerial
duties, including the Trustee’s discretion to make disbursements. TA §§ 4.1(j), 7.3.
We believe this is too broad a delegation of power to a for-profit entity and is in
conflict with the language in § 4.1(i) that the Managing Trustee shall always retain
ultimate managerial control over the Trust and that the corporate fiduciary is subordinate
to the Managing Trustee. Amendment ¶ 4. Thus, Anchor should revise or clarify this
provision in order to meet the first requirement of the pooled trust exception. See POMS 01120.225.
With respect to the Co-Trustee, the amended Trust Agreement does not indicate what
the powers of the Co-Trustee are, but it does not appear that the Co-Trustee has the
power to determine whether to make discretionary disbursements. Although the Managing
Trustee does not explicitly reserve that power in § 4.1(h) of the amended Trust Agreement,
other provisions make clear that the Trustee (which does not include a Co-Trustee)
has sole discretion to make disbursements from the Trust. TA §§ 4.1(j), 7.3. Nonetheless,
and particularly since we have concluded that the Trust does not qualify for the pooled
trust exception for other reasons, we recommend that § 4.1(h) be amended to specify
that any for-profit entity acting as a Co-Trustee would not be able to determine whether
to make discretionary disbursements from the Trust. See POMS 01120.225E.
2. Maintenance of Separate Accounts for Each Trust Beneficiary
To satisfy the second requirement of the pooled trust exception, the trust must maintain
a separate account for each trust beneficiary, although it is acceptable to pool the
funds in the individual accounts for investment and management purposes. 42 U.S.C.
§ 1396p(d)(4)(C)(ii); POMS SI 01120.203D.4. In addition, the trust must be able to provide an individual accounting for each
individual. POMS SI 01120.203D.4. Upon further review, we conclude that the Trust does not meet this requirement.
The Trust satisfies the first part of this requirement in that it maintains a separate
sub-account (Beneficiary Trust Account) for each beneficiary, but, for purposes of
investment and management of funds, the Trust pools the sub-accounts. See TA §§ 3.2, 4.1(a). However, the Trust Agreement does not state that the Trust must
be able to provide an individual accounting for each individual. To ensure compliance
with Agency policy, the Trust Agreement should include specific language indicating
that the Trust must be able to provide an individual accounting for each individual.
See POMS SI 01120.203D.4.
3. Established for the Sole Benefit of the Individual
To satisfy the third requirement of the pooled trust exception, the individual trust
account must be established for the sole benefit of the disabled individual. 42 U.S.C.
§ 1396p(d)(4)(C)(iii); POMS SI 01120.203D.5. A trust account is considered to be established for the sole benefit of an individual
if the trust benefits no one but that individual, either at the time the trust is
established or at any time for the remainder of the individual’s life. POMS SI 01120.201F.1. Conversely, a trust account is not established for the sole benefit of the disabled
individual if it: 1) provides a benefit to any other individual or entity during the
disabled individual’s lifetime; or 2) allows for termination of the trust account
prior to the individual’s death and payment of the corpus to another individual or
entity. POMS SI 01120.203D.5.
Here, the Trust Agreement and Joinder Agreement indicate that a Beneficiary Trust
Account is for the sole benefit of a disabled Beneficiary. TA § 1.B; JA at 3. All
disbursements made by the Trustee must also be for the sole benefit of the Beneficiary.
See TA § 7.2. However, as explained below, upon further review we believe that the Trust
Agreement’s defense provisions are inconsistent with Agency policy that Trust sub-accounts
must be established for the sole benefit of the individual.
i. Benefit to Another Individual or Entity During the Disabled Individual’s
Lifetime
The Trust Agreement states that the Trustee has the power to prosecute, defend, or
take any legal action necessary for the protection or benefit of the Trust or any
Beneficiary Trust Account, and to incur costs and expenses associated with such defense.
TA § 4.1(f). It further provides that legal fees incurred in connection with the operation
of and any defense of the Trust may, at the sole discretion of the Trustee, be apportioned
equitably among and paid from the existing Beneficiary Trust Accounts. See TA § 9.4. Upon further review, we note that these defense provisions appear to be
inconsistent with Agency policy. When read together, the provisions are sufficiently
ambiguous as to whether a Beneficiary Trust Account could be charged for legal expenses
even when that particular sub-account is unaffected by the litigation in question.
In particular, we recommend that the language in Section 9.4 of the Trust Agreement—that
legal fees “may, at the absolute and sole discretion of the Trustee, be apportioned
equitably” among the Beneficiary Trust Accounts—be revised or clarified to avoid ambiguities.
See POMS PS 01825.017 (PS 18-085) (May 14, 2018) (recommending that a defense clause be clarified to the
extent it contemplated the potential use of a beneficiary’s assets in a sub-account
for the benefit of other beneficiaries).
ii. Termination of the Trust Account Prior to the Individual’s Death and Payment of
the Corpus to Another Individual or Entity
As noted above, the Trust Agreement contains two early termination provisions. Under
the POMS, an early termination clause is acceptable only if all of the following criteria
are met: 1) the state(s), as primary assignee, would receive all amounts remaining
in the trust up to an amount equal to the amount of medical assistance paid on behalf
of the individual under the state Medicaid plan(s); 2) other than payment of allowable
administrative expenses listed in POMS SI 01120.199E.3 and SI 01120.201F.4, all remaining funds are disbursed so as solely to benefit the trust beneficiary;
and 3) the power to terminate is given to an individual or entity other than the trust
beneficiary. See POMS SI 01120.199E.1. Agency policy also permits an early termination clause that solely allows for a transfer
of the beneficiary’s assets from one 42 U.S.C. § 1396p(d)(4)(C) pooled trust to another
42 U.S.C. § 1396p(d)(4)(C) pooled trust of which the same individual is the beneficiary.
See POMS SI 01120.199E.2. In that case, the early termination clause must contain specific limiting language
that precludes the early termination from resulting in disbursements other than to
the secondary 42 U.S.C. § 1396p(d)(4)(C) trust or to pay for allowable administrative
expenses listed in SI 01120.199E.3 and SI 01120.201F.4. See
id.
Here, the Trust Agreement’s early termination provisions appear to comply with Agency
policy. Article Ten states that, if there is reasonable cause to believe that the
income or principal in a Trust sub-account is or will become liable for the Beneficiary’s
basic maintenance, support, or care that has been or would otherwise be provided by
local, state, or federal government, the Trustee may either 1) pay to the state(s)
all remaining amounts in the Trust sub-account up to the total amount of medical assistance
paid on behalf of the Beneficiary under the state Medicaid plan(s) and then disburse
any remaining funds to the Beneficiary; or 2) transfer the remaining funds in the
Trust sub-account to another trust sub-account that meets the definition of a pooled
trust under 42 U.S.C. § 1396p(d)(4)(C). See TA § 10.1. Moreover, Article Eleven provides that if, during the lifetime of the Beneficiary,
it becomes impossible or impracticable to meet the objectives of the Trust Agreement,
the Trustee may terminate the Trust Agreement and transfer the Beneficiary Trust Accounts
to another pooled special needs trust in accordance with Article Ten. See
TA § 11.3. It adds that, in the event of such a transfer, no disbursements may be
made from a Beneficiary’s sub-account other than to the secondary 42 U.S.C. § 1396p(d)94)(C)
trust, or as payment of reasonable fees and administrative expenses, including payment
of any taxes due from the trust to the State(s) or Federal government, associated
with the termination of the Trust. See id. These provisions appear to meet the requirements of POMS SI 01120.199E.
4. Established Through the Actions of the Beneficiary, a Parent, Grandparent, Legal
Guardian, or a Court
The fourth requirement of the pooled trust exception requires that the trust account
be established through the actions of the account beneficiary; the beneficiary’s parent,
grandparent, or legal guardian; or a court. 42 U.S.C. § 1396p(d)(4)(C)(iii); POMS
SI 01120.203D.6. Here, the Trust Agreement provides that a Beneficiary Trust Account is established
upon the execution of a Joinder Agreement by a Grantor, approval of the Joinder Agreement
by the Trustee, and delivery to and acceptance of assets by the Trustee. See TA Art. 1.G, §§ 2.2, 7.1. Under the Trust Agreement, the “Grantor” is the Beneficiary;
the Beneficiary’s guardian, parent, or grandparent; or a court of competent jurisdiction.
TA Art. 1.E. Thus, the Trust satisfies this requirement.
5. Reimbursement to the State(s) Upon the Beneficiary’s Death
To satisfy the fifth requirement of the pooled trust exception, the trust must contain
“specific language” that provides that, to the extent that amounts remaining in the
individual’s account upon the death of the individual are not retained by the trust,
the trust will pay to the state(s) an amount equal to the total amount of medical
assistance paid on behalf of the beneficiary under the state Medicaid plan(s). 42
U.S.C. § 1396p(d)(4)(C)(iv); POMS SI 01120.203D.8. This is known as the Medicaid payback requirement of the pooled trust exception.
Here, the Trust Agreement provides that, upon the death of a Beneficiary, any amounts
remaining in his or her Beneficiary Trust Account that are not retained by the Trust
shall be used to first repay the medical assistance paid by all states on behalf of
the Beneficiary under the state Medicaid plan(s), after allowable taxes and administrative
expenses are satisfied. See
TA § 8.2. We note that such administrative expenses are allowed under POMS SI 01120.203E.1. If any balance remains, the balance shall be disbursed to the remainder beneficiaries
named in the Joinder Agreement. TA § 8.2. The Joinder Agreement, in turn, offers Beneficiaries two options for how assets will
be distributed on their death. Under the first option, Anchor will retain all remaining
assets in the Trust. JA at p. 2; see also TA § 8.3. Under the second option, Anchor will 1) pay claims by state(s) for reimbursement
of medical assistance expenditures made on behalf of the Beneficiary; and 2) if monies
remain, pay any remainder beneficiaries identified in the Joinder Agreement. JA at
p. 2. We believe that these provisions satisfy the fifth requirement of the pooled
trust exception.
Ultimately, however, we believe that a self-settled Beneficiary Trust Account in the
Trust would be considered a resource for SSI purposes because the Trust does not meet
the first, second, or third requirement of the pooled trust exception.
B. Regular Resource Rules
If Anchor is able to cure the above defects and qualify for the pooled trust exception,
the regular resource counting rules in POMS SI 01120.200 would apply to determine whether a self-settled sub-account in the Trust would be
counted as a resource. See POMS SI 01120.200A.1, SI 01120.203D.1. Pursuant to POMS SI 01120.200D.1.a, trust principal is a resource if: 1) the beneficiary has legal authority to revoke
or terminate the trust and then use the funds to meet his or her food or shelter needs;
or 2) the beneficiary can direct the use of the trust principal for his or her support
and maintenance under the terms of the trust. In addition, if the beneficiary can
sell his or her beneficial interest in the trust, that interest is a resource. Id .
The revocability of a trust depends on the terms of the trust and applicable state
law—here, Ohio. See POMS SI 01120.200D.2. According to the terms of the Trust, both the Trust and the Beneficiary Trust Accounts
are irrevocable. TA §§ 5.1, 5.2, 7.1; JA at p.3. We note that, as a general principle
of trust law, when a grantor is also the sole beneficiary of a trust, the trust is
revocable even if the trust document states that the trust is irrevocable. See Restatement (Third) of Trusts § 65 Reporter’s Notes (2003); see also POMS SI 01120.200D.3, SI CHI01120.200C. However, under Ohio law, if a trust described in 42 U.S.C. § 1396p(d)(4) explicitly
states that it is irrevocable, then the trust should be considered irrevocable even
if the grantor is the sole beneficiary. See Ohio Rev. Code § 5804.18; see also POMS SI CHI01120.200D.5. Here, the Trust is intended to be administered pursuant to 42 U.S.C. § 1396p(d)(4)(C),
and it explicitly states that it is irrevocable. See TA §§ 3.1, 5.1, 5.2, 7.1; JA at p. 3. Thus, a Trust sub-account would be considered
irrevocable.
Nor can a Beneficiary direct the use of the Trust principal for his or her support
or maintenance. Under the terms of the Trust, all distributions are made at the sole
and complete discretion of the Trustee. TA §§ 7.3, 7.4; JA at p. 3. No part of the
principal or income of a Beneficiary Trust Account is considered available to the
Beneficiary, and the Beneficiary does not have entitlement to the income or principal
of his or her Beneficiary Trust Account except as the Trustee in its discretion determines
to pay or disburse. TA § 7.3. Moreover, a Beneficiary cannot compel a distribution
for any purpose. TA § 7.5.
With respect to the Beneficiary’s ability to sell his or her beneficial interest in
a self-settled sub-account, the Trust Agreement contains a spendthrift provision which
states that no interest in income or principal of a Beneficiary Trust Account shall
be subject to any form of alienation or hypothecation by the Beneficiary, and that
no such interest can be subject to the claims or liens of any creditor of the Beneficiary.
TA § 7.5. Ohio generally recognizes the validity of such spendthrift clauses in trusts. Ohio
Rev. Code § 5805.01. However, under Ohio law, even if an irrevocable trust contains
a spendthrift provision, “a creditor or assignee of the settlor may reach the maximum
amount that can be distributed to or for the settlor’s benefit.” Ohio Rev. Code §
5805.06(A)(2). That said, the Office of the General Counsel has previously determined
that this provision is best read to apply only to assignees who are creditors, rather
than to purchasers for value.[4] See POMS PS 01825.039 (PS 09-104) (May 8, 2009) (six-state legal opinion on spendthrift clauses). We believe
that Ohio would likely follow the Restatement (Third) of Trusts, which provides that
in the case of a self-settled discretionary trust, this rule generally applies only
to the settlor-beneficiary’s creditors and not to transferees (i.e., purchasers). See Restatement (Third) of Trusts § 60, cmt. f; Ohio Rev. Code § 5801.05 (common law of
trusts continues to apply in Ohio). Therefore, the spendthrift provision should be
considered valid and effective to prevent settlor-beneficiaries from selling their
beneficial interests in the Trust.
In sum, if Anchor can cure the above-discussed defects and satisfy all of the requirements
of the pooled trust exception, a self-settled sub-account in the Trust would not be
a resource under the regular resource rules.
II. Third-Party Beneficiary Trust Account
As noted above, it appears that the Trust permits third parties to fund or contribute
their assets to a Beneficiary Trust Account. TA Art. 1.A, B; JA at p. 1. In the case
of a Beneficiary Trust Account established solely with the assets of a third party,
the regular resource rules set forth in POMS SI 01120.200 apply to determine whether the assets in the sub-account are a resource.
Here, a third-party sub-account would not be a resource under the regular resource
rules. The Trust does not give the Beneficiary the power to terminate his or her Beneficiary
Trust Account. See POMS SI 01120.200D.1.b.2 (“A trust beneficiary generally does not have the power to terminate a trust.”).
Moreover, as discussed above, the terms of the Trust do not allow the Beneficiary
to direct the use of the Trust principal for his or her support or maintenance . Finally,
with respect to a Beneficiary’s power to otherwise sell his or her beneficial interest
in the Trust, as noted above, the Trust contains a spendthrift provision, which Ohio
recognizes in third-party trusts. Ohio Rev. Code § 5805.01. Accordingly, neither the
principal nor the beneficial interest in a third-party sub-account would be considered
a resource to the Beneficiary.
III. Commingled Beneficiary Trust Account
Furthermore, it appears that the Trust permits Beneficiary Trust Accounts to contain
assets attributable to both the Beneficiary and one or more third parties. TA Art.
1.A, B; JA at p. 1. Agency policy provides that, in the case of a commingled trust
established on or after January 1, 2000, with the assets of both an SSI claimant (or
spouse) and third parties, the regular resource rules apply to the portion of the
comingled trust attributable to the assets of third parties, and the statutory resource
rules apply to the portion attributable to the assets of the SSI claimant (or spouse).
See POMS SI 01120.200A.1.b, SI 01120.201C.2.c.
Here, in the event that a Beneficiary Trust Account receives any contributions from
a third party, the portion of the Beneficiary Trust Account attributable to the assets
of the third party would not be a resource under the regular resource rules, as discussed
in Section II above. However, the portion of the sub-account attributable to the assets
of the Beneficiary would be considered a resource under the Act, based on the defects
discussed in Section I.A above.
IV. Retroactivity of Amendments
As noted above, Anchor most recently amended the Trust Agreement on December 19, 2020.
Amendment preamble. The Amendment purports to apply retroactively to January 6, 2015. See Amendment ¶ 1. We believe this is permissible.
Initially, we note that the terms of the Trust appear to allow a retroactive amendment.
The Trust Agreement states that Anchor has the right to amend the Trust Agreement
“at the discretion of the Trustee and in writing.” TA § 11.2. It also states:
Unless otherwise specified, any amendment shall apply to the beneficiary trust accounts
so existing at the time of the amendment, as well as to beneficiary trust accounts
established after the amendment is adopted and shall apply prospectively, except as
otherwise stated and if necessary to ensure the Trust’s compliance with applicable
federal or state regulations.
Id. In other words, although the Trust Agreement indicates that amendments will generally
be applied prospectively, it also allows them to apply retroactively if the amendment
states otherwise and if necessary to comply with applicable federal or state regulations.
We did not find any Ohio statutory or case law that addresses a settlor’s ability
to amend a trust retroactively without a court order. However, in general, at common
law the settlor of a trust has the right to amend or modify a trust to the extent
the terms of the trust provide. See
Restatement (Third) of Trusts § 63 (2003). If the terms of the trust outline particular
amendment procedures, the settlor can only exercise its right to amend by substantial
compliance with the prescribed method. See id. Ohio case law recognizes this common law principle. See Magoon v. Cleveland Tr. Co., 134 N.E.2d 879, 882 (Ohio Ct. App. 1956) (discussing the ways in which the settlor
of a trust can reserve the right to alter, amend or revoke the trust, noting that
the power to alter a trust must be executed according to its terms) (citing 4 Bogert on Trusts and Trustees (part 2) § 996); WesBanco, Inc. v.
Blair, 971 N.E.2d 420, 424 (Ohio Ct. App. 2012) (“A settlor has the right to reserve power
to revoke or amend a trust.”).
Thus, in the absence of any Ohio law that prohibits a retroactive amendment of a trust,
we believe that an amendment may be retroactively applied if the terms of the Trust
allow it. Here, as discussed above, the Trust Agreement allows amendments to apply
retroactively if the amendment states so and if necessary to comply with applicable
federal or state regulations. See
TA § 11.2. The December 2020 Amendment explicitly states that it “is adopted retroactively to
January 6, 2015,” and that it was made “to conform the Trust Agreement to comply with
applicable federal and state law and regulations,” specifically “the Social Security
Administration’s statutory interpretations and policies regarding nonprofit management
of pooled trusts.” See Amendment preamble, ¶ 1. Therefore, we believe that the December 2020 Amendment, properly
executed pursuant to Article Eleven, may be given retroactive effect. Cf. POMS PS 01825.035 (PS 16-197) (Sept. 15, 2016) (rejecting the retroactivity of a pooled trust amendment
because the original trust agreement “did not provide an avenue for retroactive amendments”).
CONCLUSION
For the reasons discussed above, we conclude that a self-settled Beneficiary Trust
Account in the Anchor for Special Needs, Inc. Pooled Special Needs Trust does not
meet all of the requirements to be excepted from resource counting under 42 U.S.C.
§ 1396p(d)(4)(C). However, if the defects identified above can be cured, then a self-settled
Beneficiary Trust Account would not be a resource under the regular resource rules.
In addition, a third-party Beneficiary Trust Account would not be a resource under
the regular resource rules, nor would third-party assets in a commingled Beneficiary
Trust Account. We also conclude that Anchor’s December 2020 Amendment to the Trust
Agreement may be applied retroactively.