TN 9 (02-10)

PS 01825.024 Massachusetts

A. PS 10-058 Trust Resource Opinion – Dorothy R~ Trust

DATE:January 28, 2010

1. SYLLABUS

This opinion examines whether or not a trust established prior to January 1, 2000, with the assets of a third party is a resource for Supplemental Security Income (SSI) purposes. The trust is not subject to the statutory trust provisions in Section 1613(e) of the Social Security Act. If an individual has the legal authority to revoke or terminate the trust or to direct the use of the trust assets for his or her own support and maintenance, the trust principal is a resource for SSI purposes. In this case, the claimant, who is the beneficiary and one of three trustees, cannot unilaterally act to revoke or terminate the trust or to direct the use of the trust assets. Therefore, the trust is irrevocable and not a resource for SSI purposes.

2. OPINION

This Memorandum responds to your 12/29/09 Memorandum asking whether the Trust at issue here is a countable resource for Supplemental Security Income (SSI) eligibility purposes. For the reasons set forth below, the Trust is not a countable resource.

BACKGROUND

The claimant, Harry L. R~, III, is the residual beneficiary of the “Dorothy R~ Trust,” which was established on March 13, 1990. The claimant was one of two original Trustees; a third Trustee was added in February 2005. At this writing, the claimant remains one of the three Trustees charged with administering the Trust. The original beneficiary of the Trust, Dorothy R~, is deceased, and pursuant to the terms of the Trust, the claimant receives monthly income of $400/month as the residual beneficiary. The Trust, by its own terms, terminates twenty years from the date of its execution, that is, on March 13, 2010. However, the terms of the Trust also vest the power of termination in the Trustees. Article VII, Paragraph 1 provides:

Notwithstanding any provisions contained in this instrument, the Original Trustees or Successor Trustees hereby reserve the right to terminate this Trust wholly or in part or from time to time and shall convey and distribute the Trust Assets as hereinbefore provided.

You asked whether the claimant, as a Trustee, can unilaterally act to terminate the Trust. For the reasons set forth below, the claimant lacks legal authority to terminate the Trust without the consent of at least one of the other two Trustees. Therefore, the Trust is irrevocable, and is not a countable resource for SSI purposes.

DISCUSSION

A trust is considered a resource for SSI eligibility purposes if the claimant has legal authority to revoke the trust and use its funds to meet food, clothing or shelter needs or to direct the use of trust principal for his support and maintenance. POMS SI 01120.200 D.1.a. Under the terms of the Dorothy R~ Trust, the Trustees “have the absolute control, management, and disposition of the Trust Property as if they were absolute owners thereof, free from the control of the beneficiaries.” R~ Trust, art. IV. Since the Trustees retain absolute control over the Trust, the claimant’s role as residual beneficiary gives him no authority to revoke the Trust or direct the use of the Trust principal for his support and maintenance.

You inquired whether the claimant might “singlehandedly terminate” the Trust under art. VII, ¶ 1, which gives the original or successor Trustees the right to terminate the Trust. You question whether the word “act” in art. III, ¶ 2 means that two Trustees must administer the Trust or that at least two Trustees must consent to any actions taken, including Termination of the trust. Your question appears to posit the possibility that the requirement of two Trustees might only apply to administration of the Trust, and not to the other powers conferred to the Trustees under the Declaration of Trust. The precise definition of “act” is irrelevant to answering the question posed, because unless the Trust specifically defined “act,” a commonsense definition would be applied. Cf. Sampson, et al. v. Metropolitan District Comm’n., 184 N.E.2d 465, 466 (Mass. 1933) (“It is a canon of the law of statutory construction that the words of a statute ordinarily are to be taken in their common and approved meaning.”). “Act” is not defined in the Trust, in the governing Massachusetts statutes, or in the case law. Black’s Law Dictionary defines the term as “[s]omething done or performed, esp. voluntarily; a deed… and [t]he process of doing or performing; an occurrence that results from a person’s will be exerted on the external world…” BLACK’S LAW DICTIONARY 26 (8th ed. 2004). Thus, whether two Trustees must administer the Trust or two Trustees must consent to any action taken regarding the Trust, the result is the same – the claimant cannot terminate the Trust without another Trustee voluntarily doing or performing some task. BLACK’S LAW DICTIONARY 26.

The express language of the Trust, the intention of the settlors as manifested by their actions as Trustees, and Massachusetts law indicate that at least two Trustees must consent to any actions taken, including termination of the Trust.

Article III, ¶ 2, provides, in its entirety, that

At least two of the Trustees shall act with respect to the administration of the Trust hereunder or to exercise any of the powers hereby conferred. The introductory clause “at least two of the Trustees shall act” modifies both “administration of the Trust” and “to exercise any of the powers hereby conferred.” The conjunction “or” makes this clear. See BRYAN A. GARNER,THE REDBOOK, A MANUAL ON LEGAL STYLE 178 (2d ed. 2002) (the word “or,” as a coordinating conjunctions “join[s] clauses of equal stature”). Thus, the requirement that at least two Trustees “shall act” applies equally to administration of the trust and exercise of any powers conferred in the Trust instrument, including the power of termination provided in art. VII, ¶ 1.

While the language in art. VII, ¶ 1 stating that “Notwithstanding any provision contained in this instrument” arguably limits the application of the two Trustee requirement contained in art. III, ¶ 2 to art. VII, ¶ 1, Massachusetts law requires that at least a majority of Co-Trustees act together to bind the trust, in the absence of a clear contradictory intent in the Declaration of Trust. See Horwitz v. Horwitz, 327 N.E.2d 918, 919 (Mass. App. Ct. 1975) (even if trust contained a power of revocation, “such a power would have been exercisable only by two trustees acting jointly in the absence of a provision to the contrary in the trust instrument”) (citing Comm’r of Corps. & Taxn. v. Springfield, 71 N.E.2d 593 (1947)). No such clear contradictory intent exists here, as art. VII, ¶ 1 expressly refers to Original or Successor Trustees in the plural. Courts generally look to the settlor’s intent when interpreting the terms of the trust. Watson v. Baker, 829 N.E.2d 648, 652 (Mass. 2005) (“It is fundamental that a trust instrument must be construed to give effect to the intention of the donor as ascertained from the language of the whole instrument considered in the light of circumstances known to the donor at the time of its execution.”) (citations omitted). Here, the settlors were the Original Trustees. The settlors’ intent regarding the need for joint action may be inferred from the creation of a joint tenancy, and from their past practice in amending the trust. See also RESTATEMENT (THIRD) OF TRUSTS § 39 (2003) (“[u]nless otherwise provided by the terms of the trust, if there are two trustees their powers may be exercised only by concurrence of both of them…”).

Art. VII, ¶ 2, includes the same introductory provision as art. VII, ¶ 1, and explains that any change, modification, alteration, or termination of the Trust, “including a change in the identity of the Trustees” may be made by written instrument executed and duly acknowledged in the manner required for deeds and filed at the appropriate Registry of Deeds. The Original Trustees, in February 2005, acted jointly in executing a written instrument changing the identity of the Trustees by appointing a new trustee. The change was filed with the Registry of Deeds, and significantly, became effective on February 10, 2005, even though one of the Trustees had signed the appointment on February 8, 2005. The appointment was not effective until signed by the second Co-Trustee. This strongly suggests that the Trustees view art. III, ¶ 2 as applying to Article VII.

As explained above, the Declaration of Trust does give the Trustees the right to terminate the trust. R~ Trust, art. VII, ¶ 1. However, Article III of the trust limits the Trustees by requiring “[a]t least two of the Trustees … to exercise any of the powers hereby conferred.” R~ Trust, art. III, ¶ 2 (emphasis added). Because the Trust explicitly requires the presence of at least two Trustees at all times, the claimant could not act alone to terminate the Trust even if the other Trustees resigned. R~ Trust, art. III, ¶ 1. Since the plain terms of the Declaration of Trust require at least two Trustees to exercise any power conferred upon the Trustees, one Trustee, acting alone lacks authority to exercise any of the powers assigned to the Trustees. See RESTATEMENT (THIRD) OF TRUSTS § 64 cmts. b-d (describing Connecticut case where court, acting under its equitable authority to prevent abuse, invalidated a trustee’s attempt to terminate a trust “in his sole discretion.”).

Additionally, Massachusetts law has long held that when several trustees hold trust property jointly, all trustees are necessary parties to an action concerning it. See DeLongchamps v. Duquette, 512 N.E.2d 1146, 1147 (Mass. App. Ct. 1987) (“[u]nless granted the specific power to do so by the terms of a trust, one trustee cannot act on behalf of the trust without the consent of his cotrustees.”) (citing Boston v. Robbins, 126 Mass. 384, 388 (1879)); see also Kline v. Reed, 479 N.E.2d 714, 716 (Mass. App. Ct. 1985) (“the usual rule… would require that all trustees join in such a transaction [to make permissible changes to the trust]”). The Declaration of Trust specifies that the Trustees hold the Trust Property as joint tenants. R~ Trust, art. II, ¶ 1. Further, the Declaration of Trust instructs that all Trust powers and provisions shall be construed according to the laws of Massachusetts. R~ Trust, art. VIII. Given the plain language of the Declaration of Trust, the prohibition under Massachusetts law of unilateral action by a trustee without consent of cotrustees, and the past actions of the Trustees, the claimant lacks authority to revoke or terminate the Trust without the consent of at least one Co-Trustee.

CONCLUSION

Based on the above, the claimant is without legal authority to revoke or terminate the Trust without the consent of at least one additional Co-Trustee. Thus, the Trust is irrevocable and is not a countable resource for purposes of SSI eligibility.


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/1601825024
PS 01825.024 - Massachusetts - 02/04/2010
Batch run: 02/04/2010
Rev:02/04/2010