QUESTION PRESENTED
Does the Oregon Special Needs Trust qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C)
and POMS SI 01120.203.D, such that trust assets must be evaluated under POMS SI 01120.200 to determine if they are countable resources for Supplemental Security Income (SSI)
purposes?
BRIEF ANSWER
Yes, the Oregon Special Needs Trust contains a sub-trust – The First-Party Oregon
Special Needs Trust – that qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C).
The First-Party Oregon Special Needs Trust contains none of the faults that we found
prevented the Oregon Special Needs Trust from qualifying as a pooled trust in our
2019 opinion.
SUMMARY OF FACTS
In June 2019, we opined that the Oregon Special Needs Trust (OSNT) was not a qualifying
pooled trust under 42 U.S.C. § 1396p(d)(4)(C) because it was not managed by a non-profit
and was not established solely for the benefit of individuals who are disabled. After
we issued our opinion, the OSNT submitted draft master trust and joinder agreements
that had been amended to address our concerns. In November 2019, we issued an opinion
stating that the amended agreements, if adopted, would resolve the deficiencies we
noted in our June 2019 opinion, and the OSNT would qualify as a pooled trust under
42 U.S.C. § 1396p(d)(4)(C). In April 2020, the OSNT was amended to (a) adopt the draft
amendments we reviewed in our November 2019 opinion, and (b) create two sub-trusts
of OSNT. Amendment to Master Trust Agreement, Oregon Special Needs Trust, April 24,
2020. Though the sub-trusts each have their own governing documents, they operate
using a single federal trust identification number. Id.
One sub-trust, the First-Party Oregon Special Needs Trust (First-Party OSNT), was
created with the intent of being a qualifying pooled trust under 42 U.S.C. § 1396p(d)(4)(C).
Id.; see First-Party OSNT Agreement, §§ 1.2, 2.3, 2.4(b); First-Party Joinder Agreement,
¶ B. The other sub-trust, the Third-Party Oregon Special Needs Trust (Third-Party
OSNT), consists of sub-accounts containing assets of parents and family members of
persons with disabilities. Third-Party OSNT Agreement, Recitals ¶ B.
The RO has asked if these sub-trusts satisfy the requirements of 42 U.S.C. § 1396p(d)(4)(C).
ANALYSIS
Only the First-Party OSNT appears designed to qualify as a pooled trust under 42 U.S.C.
§ 1396p(d)(4)(C). The Third-Party OSNT is designed to contain the assets of individuals
other than the disabled. Third-Party OSNT Agreement, Recital ⁋ B, §§ 1.2, 2.4. A qualifying
pooled trust under 42 U.S.C. § 1396pd(d)(4)(C) is, by definition, one “containing
the assets of an individual who is disabled” that meets additional criteria. The Third-Party
OSNT is accordingly not a qualifying pooled trust under 42 U.S.C. § 1396p(d)(4)(C).
The existence of a non-qualifying sub-trust within the OSNT, however, does not prevent
another sub-trust – here the First-Party OSNT – from being a qualifying pooled trust.
Accordingly, we analyze whether the First-Party OSNT is a qualifying pooled trust
below.
A. To be a pooled trust, a trust must meet six requirements.
To be eligible for SSI, the dollar value of a claimant’s countable resources cannot
exceed certain statutory limits. 42 U.S.C. §§ 1382(a)(1)(B), (3)(B); 20 C.F.R. §§
416.202(d), 416.1201, 416.1205; POMS SI 01110.003(A). Under 42 U.S.C. § 1382b(e), a trust is a resource unless it meets certain requirements,
including those articulated in § 1396p(d)(4)(C). Trusts that meet the requirements
of 42 U.S.C. § 1396p(d)(4)(C) are considered to be qualifying pooled trusts.[3]
First, to be a qualifying pooled trust, the trust must contain “the assets of an individual
who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); accord POMS SI 01120.203.D.2. Second, the trust must be “established and managed by a nonprofit association.”
42 U.S.C. § 1396p(d)(4)(C)(i); accord POMS SI 01120.203.D.3. Third, the association must maintain “[a] separate account . . . for each beneficiary
of the trust, but, for purposes of investment and management of funds, the trust pools
these accounts.” 42 U.S.C. § 1396p(d)(4)(C)(ii); accord POMS SI 01120.203.D.4. Fourth, the accounts must be “established solely for the benefit of individuals
who are disabled.” 42 U.S.C. § 1396p(d)(4)(C)(iii); accord POMS SI 01120.203.D.5. Fifth, the trust account must be “established . . . by the parent, grandparent,
or legal guardian of such individuals, by such individuals, or by a court.” 42 U.S.C.
§ 1396p(d)(4)(C)(iii); accord POMS SI 01120.203.D.6. Sixth, and finally, “[t]o the extent that amounts remaining in the beneficiary’s
account upon the death of the beneficiary are not retained by the trust, the trust
pays to the State from such remaining amounts in the account an amount equal to the
total amount of medical assistance paid on behalf of the beneficiary under the State
plan . . . .” 42 U.S.C. § 1396p(d)(4)(C)(iv); accord POMS SI 01120.203.D.8.
A trust that qualifies as a pooled trust must still be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.
B. The First-Party OSNT qualifies as a pooled trust under 42 U.S.C. §
1396p(d)(4)(C).
The First-Party OSNT meets all six requirements for a pooled trust. The First-Party
OSNT Agreement and the First-Party Joinder Agreement contain amendments that address
the issues we identified in our June 2019 opinion.
1. Disabled Individual
To begin, the trust must contain “the assets of an individual who is disabled.” 42
U.S.C. § 1396p(d)(4)(C); see also POMS SI 01120.203.D.2 (“[T]he individual whose assets were used to establish the trust account must
be disabled for SSI purposes . . . .”). The First-Party OSNT complies with this requirement.
Each Joinder Agreement creating a sub-account of the First-Party OSNT must designate
a person with disabilities as the Beneficiary. First-Party OSNT Agreement, § 1.1.
Only assets belonging to that Beneficiary may be accepted by the Trustee as trust
assets. Id., § 1.2; First-Party Joinder Agreement, ¶¶ A, F.
2. Established and Managed by a Nonprofit Association
Second, the trust must be “established and managed by a nonprofit association.” 42
U.S.C. § 1396p(d)(4)(C)(i); see also POMS SI 01120.203.D.3 (trust is “established and maintained by the actions of a nonprofit association”).
A nonprofit corporation may employ a for-profit entity as investment manager if the
nonprofit corporation maintains ultimate managerial control over the Trust. POMS SI 01120.225.D. The nonprofit must be responsible for determining the amount of the trust corpus
to invest, removing or replacing the trustee, and making the day-to-day decisions
regarding the health and well-being of the trust beneficiaries. Id.
This requirement is satisfied. The First-Party OSNT Agreement is between The Arc of
Oregon, Trustor, and Key Bank National Association, Trustee (KeyBank). First-Party
OSNT Agreement, at 1. According to this trust agreement, “The Arc is an Oregon nonprofit
corporation providing advocacy and other services to residents of Oregon with disabilities.”
Id.See also Search Oregon Charities, Oregon Department of Justice Charitable Activities,
https://justice.oregon.gov/charities (search “The Arc of Oregon”) (last visited July 28, 2020).
KeyBank, the Trustee, is a for-profit entity.[4] The non-profit Trustor has the discretion to remove KeyBank as Trustee. First-Party
OSNT Agreement, § 4.4. The non-profit Trustor also has “absolute discretion” to direct
trust fund distributions to the beneficiary. Id., §§ 2.2, 3.1; see also First-Party
Joinder Agreement ¶ G.3. Additionally, the non-profit Trustor has “sole authority
to determine what portion of the Trust Corpus the Trustee may invest.” First-Party
OSNT Agreement, § 4.1.
The First-Party OSNT Agreement provides that, “[s]ubject to any restrictions contained
in this agreement, Trustee shall have all the powers conferred upon a Trustee by the
laws of the State of Oregon.” Id., § 4.2. While the laws of the State of Oregon grant
a trustee powers of “management” of trust property (Or. Rev. Stat. § 130.720), this
provision is not an excess delegation of power to a for-profit entity. Oregon law
explains that, ultimately, a trustee’s powers are “limited by the terms of the trust.”
Or. Rev. Stat. § 130.720. Here, the terms of the trust limit the trustee’s management
of trust property and vest the day-to-day decisions regarding the health and well-being
of the beneficiaries in the non-profit Trustor. For instance:
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•
The non-profit Trustor “shall be solely responsible for determining the Special Needs
of the Beneficiary,” which are the goods, services, and benefits that are paid for
by the Trust. First-Party OSNT Agreement, §§ 2.1-2.2. The Trustor shall then use the
income and principal of each sub-account for the Special Needs of the Beneficiary.
Id., § 2.1
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•
Distributions from the trust by the Trustee are only to be made “in accordance with
directions from the Trustor, in its sole discretion.” First-Party Joinder Agreement,
¶ G.3.
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•
If the trust receives a request for a distribution, it is the non-profit Trustor who
reviews the request. Id.
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•
The non-profit Trustor determines whether spending trust assets is in Beneficiary’s
best interest. Id., ¶ H.1.
Because the non-profit Trustor makes day-to-day decisions regarding the health and
well-being of the beneficiaries, has the power to remove or replace the Trustee, and
determines the amount of the trust corpus to invest, the second requirement is met.
3. Separate Accounts, Pooled for Investing
Third, to be a pooled trust, the trust must maintain “a separate account . . . for
each beneficiary of the trust.” 42 U.S.C. § 1396p(d)(4)(C)(ii). “[F]or purposes of
investment and management of funds, the trust pools these accounts.” Id. However,
“[t]he trust must be able to provide an individual accounting for each individual.”
POMS SI 01120.203.D.4.
The First-Party OSNT contains these requirements. According to its terms, “[e]ach
sub-trust established for a Beneficiary shall be held and administered by Trustee
as a separate account or “sub-trust”, but all such trust assets may be commingled
by Trustee for investment and other purposes” First-Party OSNT Agreement, § 1.4. The
Trustee must maintain accounting records for each sub-trust, and send them at least
annually to each Beneficiary. Id., § 1.5.
Given these provisions, the First-Party OSNT meets the third requirement.
4. Established for the Sole Benefit of the Disabled Individual
The fourth requirement for a pooled trust is that the trust account is “established
solely for the benefit of individuals who are disabled.” 42 U.S.C. § 1396p(d)(4)(C)(iii);
see also POMS SI 01120.203.D.5 (trust “must be established for the sole benefit of the disabled individual”).
The statute does not provide guidance on “sole benefit.” See 42 U.S.C. § 1396p(h)
(setting forth definitions, but not defining this term). But POMS explains that a
trust is “established for the sole benefit of an individual” when it “benefits no
one but that individual, whether at the time the trust is established or at any time
for the remainder of the individual’s life.” POMS SI 01120.201.F.1. The trust may pay third parties for goods or services for the beneficiary and
still be for the “sole benefit” of the beneficiary. POMS SI 01120.201.F.3. The trust also may “provide for reasonable compensation for a trustee(s) to
manage the trust, as well as reasonable costs associated with investment, legal or
other services rendered on behalf of the individual with regard to the trust.” POMS
SI 01120.201.F.4.
The First-Party OSNT meets this requirement. Distributions from the trust “shall be
made for the sole benefit of the Beneficiary.” First-Party Joinder Agreement, ¶ G.1,
see also First Party OSNT Agreement, § 2.1. The First-Party OSNT also allows for “reasonable
compensation” for the services of the Trustor and Trustee. Id., § 4.8.
Additionally, the First-Party OSNT contains an early termination provision and a decanting
provision, both of which satisfy the requirement that the trust be for the sole benefit
of the individuals who are disabled.
The early termination provision allows the Trustor to terminate the trust before the
beneficiary’s death and then (1) pay taxes and reasonable expenses, and reimburse
the states for Medicaid before (2) disbursing all remaining funds to the beneficiary
or the beneficiary’s account in another qualifying pooled trust under 42 U.S.C. §
1396p(d)(4)(C). First-Party OSNT Agreement, § 2.4(a)-(b).
Early termination is allowable under the pooled-trust exception so long as three criteria
are met: (1) “[u]pon early termination (i.e., termination prior to the death of the
beneficiary), the State(s), as primary assignee, would receive all amounts remaining
in the trust at the time of termination up to an amount equal to the total amount
of medical assistance paid on behalf of the individual under the State Medicaid plan(s);”
(2) “[o]ther than payment for those expenses [for taxes, reasonable fees, and administrative
expenses], no entity other than the trust beneficiary may benefit from the early termination
(i.e., after reimbursement to the State(s), all remaining funds are disbursed to the
trust beneficiary);” and (3) “[t]he early termination clause gives the power to terminate
to someone other than the trust beneficiary.” POMS SI 01120.199.F.1 (bold in original). The trust may pay taxes, reasonable fees, and administrative
expenses before reimbursing any state(s) for medical assistance. POMS SI 01120.199.F.3.
The trust’s early termination clause satisfies these criteria. First, the early termination
clause gives the power to terminate the trust to the Trustor, not the beneficiary.
First-Party OSNT Agreement, § 2.4. Second, it requires that “claims for reimbursement
for services by the State of Oregon or other state that has provided Medicaid benefits
to the Beneficiary shall be satisfied in full if possible.” Id., § 2.4(a). Third,
it provides that, other than for the payment of taxes, reasonable fees, and administrative
expense, no entity other than the trust beneficiary may benefit from the early termination.
Id., § 2.4(a)-(b).
The First-Party OSNT also contains a decanting provision. First-Party Joinder Agreement,
¶ G.4. It provides that, if the beneficiary moves to another state, the Trustor may
cease making any distributions from the trust until “appropriate arrangements can
be made, within the sole discretion of the Trustor, including, but not limited to”
transfer of assets to another comparable pooled trust.[5] Id. This decanting provision satisfies the requirements of POMS SI 01120.199.F.2. POMS SI 01120.199.F.2 requires that a decanting clause contain specific language that precludes disbursement
of funds to anything other than a qualifying Section 1917(d)(4)(C) trust or to pay
allowable expenses. Here, the First-Party Joinder agreement states sub-account property
will be transferred “directly” to a qualifying pooled trust. Id., ¶ G.4(a). Moreover,
the trust will only decant its assets to another qualifying pooled trust under 42
U.S.C. § 1396p(d)(4)(C). Id., ¶ L.2(d).
Accordingly, the First-Party OSNT satisfies the fourth requirement for pooled trusts.
5. Established Through the Actions of the Individual, Parent, Grandparent,
Legal Guardian, or Court
Fifth, to qualify as a pooled trust, the trust account must be “established . . .
by the parent, grandparent, or legal guardian of such individuals, by such individuals,
or by a court.” 42 U.S.C. § 1396p(d)(4)(C)(iii); accord POMS SI 01120.203.D.6.
Here, the Joinder Agreement specifies that a sub-account “may only be established
by a competent Beneficiary or by his or her parent, grandparent, guardian, or the
court.” First-Party Joinder Agreement, ¶ C. While this requirement will need to be
evaluated on a sub-account by sub-account basis, the First-Party Joinder Agreement
correctly articulates the legal requirement.
The First-Party OSNT contains no provision that violates this requirement.
6. Remaining Amounts Paid to the State
The sixth requirement is that, “[t]o the extent that amounts remaining in the beneficiary’s
account upon the death of the beneficiary are not retained by the trust, the trust
pays to the State from such remaining amounts in the account an amount equal to the
total amount of medical assistance paid on behalf of the beneficiary under the State
plan.” 42 U.S.C. § 1396p(d)(4)(C)(iv); accord POMS SI 01120.203.D.8. Taxes and reasonable fees and costs may be paid before paying the state for
medical assistance. See POMS SI 01120.203.E.1.The First-Party OSNT satisfies this requirement. Specifically, the trust states
that on the beneficiary’s death, a percentage of funds will be retained by the Trust.[6] First-Party OSNT Agreement, § 2.3(a); First-Party Joinder Agreement, ¶ J.1. Then,
surplus funds will be subject to recovery by the State of Oregon, and if applicable,
any other state, up to the amount of medical benefits paid on behalf of the Beneficiary.
First-Party OSNT Agreement, § 2.3(b). To the extent funds “are insufficient to repay
all such states, distributions will be made in proportion to each state’s share of
the total amount of medical assistance paid on behalf of the Beneficiary.” Id.; see
First-Party Joinder Agreement, ¶ J.2. If there are any funds remaining after the states
have been reimbursed for medical assistance, those funds are distributed to the remainder
beneficiaries or are retained by the trust. First-Party Joinder Agreement, ¶ J.3.
This distribution scheme comports with the statute. Accordingly, the First-Party OSNT
satisfies the last requirement.
CONCLUSION
In sum, the First-Party OSNT is a qualifying pooled trust under 42 U.S.C. § 1396p(d)(4)(C)
and POMS SI 01120.203.D even though the Third-Party OSNT is not. As long a sub-account of the First-Party
OSNT is established through the actions of a court, the beneficiary, or the beneficiary’s
parent, grandparent, or legal guardian, the sub-account must be evaluated under POMS
SI 01120.200.