QUESTION PRESENTED
For purposes of identifying the number holder (NH) P~’s resources for Supplemental
Security Income (SSI), you asked whether the First Restatement and Amendment of the
State of Texas Life Enrichment Trust (Life Enrichment Trust), and the accompanying
Joinder Agreement for the NH qualify under the pooled trust exception of section 1917(d)(4)(C)
of the Social Security Act (Act), as codified at 42 U.S.C. § 1396p(d)(4)(C). If the
Life Enrichment 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) regular
resource counting rules for SSI purposes.
ANSWER
We believe that there is support for the agency to conclude that the Life Enrichment
Trust qualifies for the pooled trust exception under section 1917(d)(4)(C) of the
Act because its provisions 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). Furthermore, we believe there is support for the agency
to find that the NH’s subaccount in the Life Enrichment Trust established with the
NH’s own funds on or after January 1, 2000, is exempt from the agency’s regular resource
counting rules and should not be considered a resource for SSI purposes.
BACKGROUND
Life Enrichment Trust, Inc. (the Trustee), originally established the Life Enrichment
Trust on June XX, 2014, as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C). On March
XX, 2017, the Trustee amended the Life Enrichment Trust through the First Restatement
and Amendment. See Life Enrichment Trust, p. 1, Pooled Trust paragraph. The NH opened a subaccount in
the Life Enrichment Trust on her own behalf on March XX, 2017, via the Joinder Agreement.
See Joinder Agreement, pp. 1-3. We briefly review the primary provisions of the Life
Enrichment Trust and Joinder Agreement below.
The Trustee is a nonprofit corporation, with tax-exempt status under section 501(c)(3)
of the Internal Revenue Code, 26 U.S.C. § 501(c)(3). See Life Enrichment Trust, p. 1, About the Pooled Trust paragraph, p. 2, What is the
Trustee’s Role paragraph; Internal Revenue Service (IRS) letter dated June 29, 2006
(determining that the Trustee has section 501(c)(3) tax-exempt status). However, the
Trustee will deposit and maintain all funds in the Life Enrichment Trust with a separate
court approved corporate fiduciary. See Life Enrichment Trust, pp. 2-3, What Is The Trustee’s Role paragraph. The Trustee
will maintain managerial control over the Life Enrichment Trust, and the role of a
for-profit entity will be subordinate to the Trustee. See Life Enrichment Trust, p. 5, Potential Conflict of Interest paragraph.
A parent, grandparent, a court, legal guardian or the individual with disabilities
can establish an account in the Life Enrichment Trust. See Life Enrichment Trust, pp. 1-2, Who Can Set Up an Account paragraph. A separate account
is maintained for each beneficiary but the accounts are pooled for investment and
management of the funds. See Life Enrichment Trust, p. 1, About the Pooled Trust paragraph.
The purpose of the Life Enrichment Trust is to supplement, not supplant government
benefits. See Life Enrichment Trust, pp. 2-3, What Is The Trustee’s Role paragraph. The Life Enrichment
Trust is for the sole benefit of the beneficiary, and all distributions must be for
the beneficiary’s benefit. See id. The beneficiary must be an individual who is disabled as defined by section 1382c(a)(3)
of the Act. See Life Enrichment Trust, p. 2, Who Can Be a Beneficiary paragraph. If the Life Enrichment
Trust becomes impossible of impractical to carry out the purposes of the trust, then
the Trustee may terminate the trust and/or resign as trustee. See Life Enrichment Trust, pp. 4-5, Amendment or Termination of the Trust paragraph.
However, the Trustee will attempt to first transfer the funds to another trust that
qualifies under section 1917(d)(4)(C) of the Act. See id. If it is not possible to transfer the funds to such a trust, then the Trustee will
reimburse the states in an amount equal to the total amount of medical assistance
paid under the state’s Medicaid plan. See id. The Trustee will distribute all remaining funds to the trust beneficiary. See id.
Upon the beneficiary’s death, the Life Enrichment Trust may retain up to 50% of the
assets remaining in the beneficiary’s subaccount. See Life Enrichment Trust, pp. 5-6, Residual Amounts At The Beneficiary’s Death paragraph.
The Life Enrichment Trust will reimburse the amount spent on the beneficiary’s behalf,
both before and after the creation of the trust, to the State of Texas and any other
State. See id. The payment to the States will have priority over all other debts and administrative
expenses, except those expenses permitted under Program Operations Manual System (POMS)
SI 01120.203(B)(2)(g), (3). See id.
The Trustee has discretion regarding distributions, provided that all distributions
are for the sole benefit of the beneficiary and may not result in reduction of governmental
benefits to the beneficiary. See Life Enrichment Trust, pp. 2-3, What is the Trustee’s Role paragraph; Joinder Agreement,
p. 2, Distributions paragraph. The Life Enrichment Trust’s subaccounts are irrevocable.
See Life Enrichment Trust, pp. 1-2, Who Can Set Up an Account paragraph; Joinder Agreement,
p. 3, acknowledgment and signature paragraph. The Life Enrichment Trust does not contain
a choice-of-law provision; however, the trust documents reference the State of Texas,
and the NH is from Texas. See Life Enrichment Trust, p. 1, Pooled Trust paragraph; Joinder Agreement.
ANALYSIS
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). Property held in a trust may or may not be a resource for
SSI purposes. See POMS SI 01120.200.A.1.
In general, when determining a claimant’s eligibility for SSI, pursuant to section
1613(e) of the Act (codified at 42 U.S.C. § 1382b(e)), the agency considers trusts
created on or after January 1, 2000, from a disabled beneficiary’s (or the beneficiary’s
spouse’s) assets to be a resource 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 to or for the benefit of the disabled beneficiary (or the beneficiary’s
spouse). See 42 U.S.C. § 1382b(e)(3); POMS SI 01120.201(D). However, section 1613(e)’s general rules for counting trusts as resources do
not apply to trusts that qualify under section 1917(d)(4) of the Act (as codified
at 42 U.S.C. § 1396p(d)(4)). See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(A), (C); POMS SI 01120.201, SI 01120.203. Section 1917(d)(4)(A) and (C) of the Act set forth the Medicaid trust exceptions,
which are commonly known as the special needs trust exception and pooled trust exception.
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(B)(2)(a). As stated, a pooled trust that qualifies as a Medicaid trust exception
under section 1917(d)(4)(C) of the Act is exempt from the Act’s normal rules for counting
trust assets as a resource for SSI purposes. See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(C); POMS SI 01120.203(B)(2). 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:
1. The trust must be established and managed by a non-profit association;
2. A separate account must be maintained for each disabled beneficiary of the trust;
but, for purposes of investment and management of funds, the trust may pool these
accounts;
3. Accounts in the trust must be established solely for the benefit of disabled individuals
(as defined in section 1382c(a)(3) of the Act);
4. Accounts in the trust must be established by the parent, grandparent, or legal
guardian of such disabled beneficiaries, by such disabled beneficiaries, or by a court;
and
5. The trust must provide that to the extent that any amounts are remaining in the
disabled beneficiary’s account upon the death of the beneficiary are not retained
by the trust, the trust must pay to the State the amount remaining up to an amount
equal to the total amount of medical assistance paid on behalf of the disabled beneficiary
under the State Medicaid plan.
42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(C); POMS SI 01120.203(B)(2).
If a trust qualifies for the pooled trust exception under 42 U.S.C. § 1396p(d)(4)(C)
(such that the trust assets do not count as a resource to the beneficiary), we must
also consider whether the sub-account is excluded under the agency’s regular resource
counting rules. See POMS SI 01120.200, SI 01120.203. 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 his or her food or shelter needs,
if the beneficiary can direct the use of the trust principal for his or 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 next apply the pooled trust exception and regular resource counting
rules to the Life Enrichment Trust.
II. Application of the Pooled Trust Exception to the Life Enrichment
Trust
A. Condition One: Trust established and managed by a non-profit
association
The Life Enrichment Trust satisfies the first condition that the trust be established
and managed by a non-profit association. See 42 U.S.C. § 1396p(d)(4)(C)(i); POMS SI 01120.203(B)(2). The Trustee, Life Enrichment Trust, Inc., established the Life Enrichment
Trust. As stated above, the Trustee is a non-profit corporation and has submitted
letters from the United States Internal Revenue Service documenting its non-profit
status. Consequently, the Life Enrichment Trust was established by a non-profit association,
as required by the first condition.
Although the Life Enrichment Trust states the Trustee will deposit and maintain all
funds in the Life Enrichment Trust with a separate court-approved corporate fiduciary,
the Trustee will maintain managerial control over the Life Enrichment Trust. The role
of a for-profit entity will be subordinate to the Trustee. See Life Enrichment Trust, p. 5, Potential Conflict of Interest paragraph.
POMS SI 01120.225(E) states that the agency will not routinely question the relationship between a
non-profit entity and contracted, for-profit entities. Under these circumstances,
the Life Enrichment Trust complies with POMS 01120.225(D)’s requirement that any for-profit
entity retained to help manage the trust must always be subordinate to the non-profit
managers of a pooled trust. Accordingly, the Life Enrichment Trust satisfies the first
condition of 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203(B)(2).
B. Condition Two: Separate accounts maintained for each
beneficiary
The Life Enrichment Trust satisfies the second condition, which requires that separate
accounts be maintained for each beneficiary, even though funds may be pooled for investment
and management purposes. See 42 U.S.C. § 1396p(d)(4)(C)(ii); POMS SI 01120.203(B)(2). The About the Pooled Trust paragraph states the Trustee must maintain separate
accounts, which the Trustee may pool solely for investment and management purposes,
for each beneficiary. Accordingly, this condition is satisfied.
C. Condition Three: Trust must be established solely for the benefit of
disabled individuals
We also believe the Life Enrichment Trust satisfies the third condition, 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 Life Enrichment Trust and the Joinder Agreement specifically state that
the trust is for the sole benefit of the beneficiary, and all distributions must be
for the beneficiary’s benefit. See Life Enrichment Trust, pp. 2-3, What Is The Trustee’s Role paragraph; Joinder agreement,
p. 2. Only an individual with a disability may submit a Joinder Agreement and thus
join the Life Enrichment Trust.
We do note that the Life Enrichment Trust permits the Trustee to amend it at any time,
which under different circumstances might trigger concerns about the potential for
the Life Enrichment Trust to benefit non-disabled individuals, but here amendment
is permitted “to conform this agreement to the [pooled trust exception] requirements
of 42 U.S.C. [§] 1396p(d)(4)(C).” See Life Enrichment Trust, pp. 4-5, Amendment or Termination of the Trust paragraph.
Thus, we do not believe the Trustee has the authority to amend the trust so as to
impermissibly benefit non-disabled individuals because any amendment must still qualify
the trust as a pooled trust, as defined by federal law.
The Life Enrichment Trust also contains a permissible early termination provision
that does not violate the sole benefit criterion. An early termination provision does
not violate the sole benefit condition if the provision allows for transfer of the
beneficiary’s assets from one pooled trust to another. POMS SI 01120.199(F)(2). If the early termination provision does not simply provide for transferring
the beneficiary’s assets from one pooled trust to another, then the provision is permissible
only if it satisfies the following three requirements:
1. Medicaid Payback - States will 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. Sole Benefit - With limited exceptions, no entity other than the trust beneficiary can benefit
from the early termination; and
3. Power to Terminate Granted Someone Other Than the Beneficiary- The early termination clause gives the power to terminate to someone other than
the trust beneficiary.
POMS SI 01120.199(F)(1).
Here, the Life Enrichment Trust early termination provision states the Trustee will
first attempt to transfer the beneficiary’s assets to another pooled trust that qualifies
under the pooled trust exception of section 1917(d)(4)(C) of the Act (codified at
42 U.S.C. § 1396p(d)(4)(C)). See Life Enrichment Trust, p. 4, Amendment or Termination of the Trust paragraph. A transfer
from one pooled trust to another is permissible under POMS SI 01120.199(F)(2). The Life Enrichment Trust further states that if it is not possible to transfer
the beneficiary’s assets to such a trust, then the Trustee will satisfy the Medicaid
Payback requirement by reimbursing the states in an amount equal to the total amount
of medical assistance paid under the state’s Medicaid plan. The Trustee will then
distribute all remaining funds to the trust beneficiary, satisfying the sole benefit
requirement. Finally, the early termination provision gives the power to terminate
the Life Enrichment Trust to the Trustee, and, thus, the power to terminate is granted
to someone other than the beneficiary. As a result, the early termination provision
is permissible.
As a result, there is support for the agency to conclude that the Life Enrichment
Trust satisfies the third condition because it provides that the trust is for the
sole benefit of the beneficiary. Although the Trustee has the power to amend the Life
Enrichment Trust, the power is permitted only to conform to the pooled trust exception
requirements under 42 U.S.C. § 1396p(d)(4)(C). Finally, the Life Enrichment Trust
contains an early termination provision that satisfies all agency requirements.
D. Condition Four: Accounts established by the individual, parent,
grandparent, legal guardian, or court
The Life Enrichment 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(a), (f). The Life Enrichment Trust only permits parents, grandparents, legal guardians,
beneficiaries themselves, and courts to complete and sign a Joinder Agreement. See Life Enrichment Trust, pp. 1-2, Who Can Set Up an Account paragraph. In the instant
case, the NH established the trust with her own assets. See Joinder Agreement, pp. 1-3. Thus, the fourth condition is satisfied.
E. Condition Five: State reimbursed for medical expenses upon death of
beneficiary
The Life Enrichment Trust satisfies the fifth condition, which requires that upon
a beneficiary’s death, a trust reimburse the State for medical expenses paid on behalf
of the disabled beneficiary under the State Medicaid plan, to the extent the funds
are not retained by the trust. See 42 U.S.C. § 1396p(d)(4)(C)(iv); POMS SI 01120.203(a), (g). Here, the Life Enrichment Trust states it will retain up to 50% of the beneficiary’s
assets. See Life Enrichment Trust, pp. 5-6, Residual Amounts At The Beneficiary’s Death paragraph.
The Life Enrichment Trust will pay to the State of Texas and any other State the amount
they spent on behalf of the beneficiary’s lifetime, both before and after the creation
of the trust. See id. Further, the payment to the States will have priority over all other debts and administrative
expenses, except those expenses permitted under Program Operations Manual System (POMS)
SI 01120.203(B)(2)(g), (3). See id. Thus, the Life Enrichment Trust contains a Medicaid payback provision that satisfies
condition five.
Accordingly, we believe that there is support for the agency to conclude that the
Life Enrichment Trust’s provisions comply with all five conditions under 42 U.S.C.
§ 1396p(d)(4)(C) and that it qualifies under the Act’s pooled trust exception to the
resource counting rules. If a trust qualifies as a pooled trust under 42 U.S.C. §
1396p(d)(4)(C), we also consider whether the sub-account is excluded under the agency’s
regular resource counting rules. See POMS SI 01120.203(B)(2)(a) (“CAUTION: A trust which meets the exception to counting the trust under
the SSI statutory trust provisions of 1613(e) must still be evaluated under the instructions
in SI 01120.200 to determine if it is a countable resource.”). Thus, we address this issue next.
III. Application of the Agency’s Regular Resource Counting Rules for SSI to
the NH’s Subaccount
The NH opened a subaccount in the Life Enrichment Trust on her own behalf on March
15, 2017, via the Joinder Agreement. The NH’s subaccount is exempt from the SSI statutory
trust provisions because the Life Enrichment Trust, in combination with the Joinder
Agreement, qualify for the pooled trust exception, as explained above. See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(C); POMS SI 01120.203(B)(2). However, we must still evaluate whether the subaccount qualifies as a countable
resource under the regular resource counting rules pursuant to POMS SI 01120.200. See POMS SI 01120.203(B)(2)(a).
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 his or her food or shelter needs,
if the beneficiary can direct the use of the trust principal for his or 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).
Here, the NH’s subaccount does not qualify as a resource under our regular resource
counting rules. The NH’s subaccount is irrevocable once funds are deposited into the
account. See Life Enrichment Trust, pp. 1-2, Who Can Set Up an Account paragraph. Thus, the NH
does not have the legal authority to revoke or terminate the trust and use the funds
to meet her food or shelter needs. See POMS SI 01120.200(D)(1)(a).
Furthermore, the Life Enrichment Trust contains a spendthrift provision stating that
none of the principal or income of a beneficiary’s sub-account can be “pledged, assigned,
transferred, or in any way anticipated, charged or encumbered . . . .” See Life Enrichment Trust, p. 3, How Are Funds Distributed paragraph. No trust property
is available to the beneficiary until actually delivered to her. The Trustee is not
liable for the beneficiary’s debts and may choose not to honor them. Although the
beneficiary or someone on the beneficiary’s behalf may request a distribution, the
Trustee is given the sole discretion to approve any distribution. Thus, the NH cannot
direct the use of the trust principal for her support and maintenance under the terms
of the trust and cannot sell her beneficial interest in the trust. See POMS SI 01120.200(D)(1)(a). Because the Life Enrichment Trust is irrevocable and the NH cannot direct
the use of the trust principal for her support or sell her beneficial interest in
the trust, the NH’s subaccount is exempt from the agency’s regular resource counting
rules and should not be considered a resource for SSI purposes.
CONCLUSION
We believe that the agency may reasonably conclude that the Life Enrichment Trust
qualifies under the pooled trust exception of 42 U.S.C. § 1396p(d)(4)(c) because its
provisions comply with all five conditions for the pooled trust exception for counting
resources for SSI purposes. Furthermore, the NH’s subaccount is not a resource under
the agency’s regular resource counting rules pursuant to POMS SI 01120.200(D)(1)(a). Therefore, the NH’s subaccount is eligible for the pooled trust exception
and should not be counted as a resource to the NH for SSI purposes.