TN 28 (12-14)

PS 01825.023 Maryland

A. PS 15-035 Update to Survey of State Trust Law Within Region III

DATE: November 25, 2014

1. SYLLABUS

Revision of the 2003 Regional Chief Counsel (RCC) opinion on whether a parent or grandparent can establish an empty trust for the purpose of receiving a competent adult’s supplemental security income (SSI) payments at a later date under the law of the jurisdiction within Region III. Since 2003 four out of the six States within Region III have adopted the Uniform Trust Code (UTC) provision requiring identifiable trust property. The two states that have not adopted the UTC provisions do not have statutes that permit empty trusts. No State within Region III will recognize as valid an empty trust, and for a trust to be permissible under the exceptions of Social Security Act § 1917(d)(4)(A) the parent or grandparent that establishes the trust will have to “seed” it with their own money before transferring the individuals money to the trust.

2. OPINION

INTRODUCTION

On August 27, 2003, we provided advice on whether a parent or grandparent can establish an empty trust for the purpose of receiving a competent adult supplemental security income (SSI) beneficiary’s assets at a later date under the laws of the jurisdictions within Region III (Delaware, District of Columbia, Maryland, Pennsylvania, Virginia, and West Virginia). In preparing this advice, we were instructed to assume that the trust agreements that we were to consider satisfied the requirements of Social Security Act § 1613(e)(5), 42 U.S.C. '1382b(e)(5). In 2003, our research of case law led us to conclude that every jurisdiction in Region III would recognize empty trust agreements as valid if there was an expectation of funding, such as from a court order awarding funds that would become the property of a trust. We have recently reviewed the applicable law in the intervening 11 years, and found that the law has evolved more clearly to require some funds be transferred to a trust at the time it is established. Since 2003, four jurisdictions within Region III have adopted the Uniform Trust Code (UTC), thereby offering legal authority other than case law for the establishment of trusts. Although two states did not adopt the UTC, the Restatement (Third) of Trusts also supports our conclusion. Consequently, we believe that jurisdictions within Region III would not recognize as valid trust agreements that satisfy the provisions of Social Security Act § 1613(e)(5) when a parent or grandparent establishes only an empty trust. Therefore, we recommend replacing our

August 27, 2003 memorandum (which is found at SSA POMS PS 01825.042, 2002 

WL 1879916) with this revised opinion.

BACKGROUND

To qualify for SSI, an individual must not have resources that total more than $2,000. 20 C.F.R. ' 416.1205 (2013). In addition, as a general rule, a trust established with the assets of an individual (or spouse) will be considered a resource for SSI eligibility purposes. Social Security Act § 1613(e)(3). There is, however, an exception to these resource provisions. Under Social Security Act § 1613(e)(5), if any agreement satisfies the criteria found in Social Security Act § 1917(d)(4), 42 U.S.C. ' 1396p(d)(4), it is not counted as a resource. Social Security Act § 1917(d)(4)(A) provides the following exception for counting a trust as a resource:

A trust containing assets of an individual under age 65 who is disabled (as defined in section 1614(a)(3)) and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court if the state will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this title.

With respect to trust property, “[i]n the case of a legally competent, disabled adult, a parent or grandparent may establish a ‘seed’ trust using a nominal amount of his or her own money, or if State law allows, an empty or dry trust.” POMS SI 01120.203(B)(1)(f). Consequently, the POMS answers in the affirmative the question of whether a special needs trust can be established with nominal or seed funds, and leaves the resolution of questions pertaining to empty trusts to the individual states.

DISCUSSION

Since we prepared our August 27, 2003 memorandum, the majority of jurisdictions within Region III (Pennsylvania, Virginia, West Virginia, and the District of Columbia) have adopted § 401 of the UTC. See 20 Pa.C.S.A. § 7731 (effective Nov. 6, 2006), VA Code Ann. § 64.2-719 (effective Oct. 1, 2012), W. Va. Code, § 44D-4-401 (effective June 10, 2011), and DC ST

§ 19-1304.01 (effective Mar. 10, 2004). This section of the UTC explains how trusts are established and reads, as relevant:

A trust may be created by:

(1) transfer of property to another person as trustee during the settlor's lifetime or by will or other disposition taking effect upon the settlor's death;

(2) declaration by the owner of property that the owner holds identifiable property as trustee; o