You asked whether the Springhill First-Party Pooled Trust (the “Trust”) is in compliance
with the procedures governing the Agency’s pooled trust policy. For the reasons discussed
below, we conclude that the sub-accounts in the Springhill First-Party Pooled Trust
would not be considered resources and that the Trust meets the criteria for the pooled
trust exception. BACKGROUND
Springhill Housing Corporation, Inc. (“Springhill”), a non-profit corporation, established
and manages the Springhill First-Party Pooled Trust (the “Trust”), serving as both
the Settlor and Trustee. See Fourth Restatement & Decl. of Trust for Springhill First-Party
Pooled Trust (“Fourth Restatement”), Art. One, Sect. 1.01. Springhill first established
the Trust on May XX, 1997. Id.; see also Fourth Rest., p.1. The Fourth Restatement was executed on August XX, 2016, after
Springhill, acting as Trustee, nominated M~ to act as Trust Protector. See Fourth Rest., p. 1.
The Trust consists of pooled individual sub-accounts that are established and managed
for the sole benefit of the specified beneficiary. Fourth Rest., Art. Three, Sect.
3.01; Art. Thirteen, Sect. 13.17. Under the Trust, a “beneficiary” is a disabled person,
as defined in 42 U.S.C. § 1382c(a)(3), who is the sole recipient of services and benefits
of his Trust sub-account created by a “Grantor.” Fourth Rest., Art. Thirteen, Sect.
13.02. The Grantor, in turn, is defined by the Fourth Restatement as a parent, grandparent,
agent acting for the beneficiary under a power of attorney, guardian, the beneficiary
himself, or any person or entity acting pursuant to a court order, who establishes
a sub-account through the execution of an Irrevocable Joinder Agreement for the beneficiary
and funds the sub-account with the beneficiary’s assets. Fourth Rest., Art. Thirteen,
The primary purpose of Trust II is to supplement available government benefits to
ensure the beneficiary’s comfort and happiness during his or her lifetime. MTA, Art.
VII(B). Payments from Trust II are made on behalf of the beneficiary from Trust II
assets at the sole discretion of the Trust II Trustee. MTA, Art. VII(A). The MTA specifies
that Trust II is established for the sole benefit of each individual beneficiary and
that it is an irrevocable trust. Id.; MTA, Art. X; Instrument of Adoption, Art. I.
Each sub-account is funded with assets from the sub-account beneficiary and solely
benefits the individual beneficiary. Fourth Rest., Art. One, Sects. 1.01 & 1.05.
The Trust is intended to be a pooled trust established pursuant to 42 U.S.C. § 1396p(d)(4)(C)
and the sub-accounts of the Trust are intended to serve as supplemental and emergency
funds for the beneficiaries. Fourth Rest., Art. One, Sect. 1.04; Art. Two, Sect. 2.01.
Because of their supplemental nature, distributions from the Trust should not be made
to, or for the benefit of, a beneficiary if the effect of such a distribution would
be to supplant, replace, or disqualify a beneficiary from receiving government assistance.
Fourth Rest., Art. Four, Sect. 4.02. Thus, generally distributions are not made by
the Trustee on behalf of a beneficiary in excess of any applicable resource or income
limitations of any public benefit program to which the beneficiary is entitled. Id.
Distributions from any of the individual Trust sub-accounts are made subject to “the
Trustee’s sole and absolute discretion.” Fourth Rest., Art. Four, p.4 & Sect. 4.01
& 4.04. The Fourth Restatement specifies that “[u]nder no circumstance can the Beneficiary
compel a distribution from the trust for any purpose” nor can the beneficiary transfer
any interest in the irrevocable trust. Fourth Rest., Art. Four, Sect. 4.04.
Regarding the management of the Trust, while Springhill serves as the Trustee, Springhill
may appoint a Trust Administrator to perform the ministerial administration functions
associated with the Trust operations on behalf of the Trustee. Fourth Rest., Art.
Thirteen, Sect. 13.16. The Fourth Restatement gives Springhill the power to designate
Co-Trustees to assist with the management, administration, allocation, and disbursement
of Trust assets and property, as well. Fourth Rest., Art. Nine, Sect. 9.02; Art. Thirteen,
Sect. 13.03. The Trustee may also employ or seek the advice or assistance of other
persons or entities such as attorneys, accountants, managers, and financial institutions.
Fourth Rest., Art. Nine, Sect. 9.01. Still, the Fourth Restatement notes at several
points that the Trustee maintains sole and absolute discretion over decisions made
regarding the distributions from sub-accounts. Fourth Rest., Art. Four, p. 2 & Sects.
4.01 & 4.04. The Trustee is obligated under the Fourth Restatement to provide regular
accountings—at least annually—to the beneficiary or his legal representative. Fourth
Rest., Art. Three, Sect. 3.02.
Springhill has asked the Agency to review their Fourth Restatement for the Trust,
executed on August 22, 2016, to determine if it complies with the Agency’s policies
regarding pooled trusts.
I. Self-Funded Individual Sub-Accounts in Springhill First-Party Pooled Trust
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 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 01120.201(D). However, if a trust meets the criteria of either an individual special needs
trust under 42 U.S.C. § 1396p(d)(4)(A) or a pooled trust under § 1396p(d)(4)(C), the
trust is excluded from this rule. See POMS SI 01120.203.
We must first determine the revocability of the self-funded trust shares in the Springhill
Trust. Here, the express terms of the Fourth Restatement confirm that the individual
sub-accounts are irrevocable. Fourth Rest., Art. One, Sect. 1.03; Art. Two, Sect.
2.02. Notwithstanding these provisions, the sub-accounts would be still be considered
revocable if the grantor is also the sole beneficiary. See POMS SI CHI01120.200(C). In this case, however, the grantor would not be the sole beneficiary. Rather,
the Trust creates a contingent remainder interest in the Trustee, Springhill Housing
Corporation. Fourth Rest., Art. Eight, Sects. 8.03, 8.04, 8.05, 8.08 & 8.09. Further,
the self-funded sub-accounts in the Trust create contingent remainder interests in
the remaindermen designated by the beneficiary or the Grantor pursuant to the instructions
in the Irrevocable Joinder Agreement. Fourth Rest., Art. Eight, Sect. 8.06. Because
there are residual beneficiaries, the beneficiary (or grantor) could not revoke his
trust share unilaterally, but would need the consent of the remaindermen. See POMS SI CHI01120.200(C) (“[I]f the trust names a residual beneficiary to receive the benefit of the trust
interest after a specific event, usually the death of the primary beneficiary, the
trust is irrevocable. The primary beneficiary cannot unilaterally revoke the trust;
he needs the consent of the residual beneficiary.”). Michigan law, which governs the
Fourth Restatement according to Article One, Section 1.02, also prohibits a primary
beneficiary from unilaterally revoking a trust. See Mich. Stat. § 700.7411. Specifically, Michigan law provides that a noncharitable
irrevocable trust can only be modified in one of three ways:
(1) by a court upon the consent of a trustee and the qualified trust beneficiaries,
if the court concludes that the modification or termination of the trust is consistent
with the material purposes of the trust or that continuance is not necessary to achieve
any material purpose;
(2) upon the consent of the qualified trust beneficiaries and a trust protector who
is given power under the terms of the trust to grant, veto, or withhold approval of
termination or modification; or
(3) by a trustee or trust protector to whom a power to direct the termination or modification
of the trust has been given by the terms of a trust. Id. Because a beneficiary (or
grantor) cannot unilaterally revoke his trust under the law or pursuant to the terms
in the Fourth Restatement of the Trust, we consider self-funded sub-accounts in the
Trust to be irrevocable.
As stated above, an irrevocable trust generally will be considered a resource to the
extent that any payments could be made from the trust to or for the benefit of the
individual. Here, the Trustee of the Springhill Trust has the sole discretion to use
the income and the principal in the individual sub-accounts for the sole benefit of
the beneficiary for whom the trust sub-account was established. Fourth Rest., Art.
Four, p. 2 & Sects. 4.01 & 4.04. Thus, self-funded sub-accounts in the Trust would
be resources under these provisions, unless an exception applies.
II. Springhill First-Party Pooled Trust: Pooled Trust Exception
In order to qualify for the pooled trust exception, the Trust must contain the 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 these accounts
for purposes of investment and management of funds.
3. Accounts in the trust are established solely for the benefit of the disabled individual
by the individual, parent, grandparent, legal guardian, or court.
4. To the extent that 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.
See 42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203(B)(2).
Here, the Springhill Trust appears to meet all the conditions of the pooled trust
First, the Springhill Trust was established and is managed by the Springhill Housing
Corporation, Inc., a non-profit association. Fourth Rest., p.1. Pursuant to the Fourth
Restatement, Springhill acts as both Trustee and Settlor of the Trust. Id. While the
Fourth Restatement grants Springhill the power to designate Co-Trustees, a Trust Administrator,
and a Trust Protector, and to employ the services of agents, attorneys, advisors,
and others to assist or advise in the administration of the Trust, Springhill retains
ultimate managerial authority over the Trust. Fourth Rest., Art. Four, p. 2 & Sects.
4.01 & 4.04; Art. Nine, Sects. 9.01-9.03; see also POMS SI 01120.225(D) & (E).
While Agency policy allows a non-profit pooled trust manager to employ the services
of a for-profit entity, the policy dictates that the non-profit association must maintain
ultimate managerial control over the trust. See POMS SI 01120.225(D). This means that, among other things, Springhill must maintain ultimate control
over determining the amount of the trust corpus to invest and making the day-to-day
decisions regarding the health and well-being of the pooled trust beneficiaries. Id.
The use of a for-profit entity must always be subordinate to the non-profit manager.
Here, we note that there is some language in the Fourth Restatement that could be
drafted more clearly and seems, in some sections, to grant coextensive authority to
the Trustee and to any Co-Trustees and/or the Trust Administrator. For example, under
Article Four, Section 4.01, it states that “[t]he Trustee and/or Trust Administrator
may in their sole and absolute discretion distribute any or all of the corpus of the
Trust sub-account for the purposes stated herein” and that “[t]he Trustee and/or Trust
Administrator shall possess and exercise the authority to allocate all distributions
between principal and income as they determine in their sole and absolute discretion.”
However, this provision comes under the umbrella qualification for all of Article
Four that “[s]ubject to the Trustee’s sole and absolute discretion, distributions
from any of the individual Trust sub-accounts may be made as follows . . .” Fourth
Rest., p.4. Because of this umbrella statement, and when read in combination with
other provisions in the Fourth Restatement echoing this point, we believe that this
is sufficient to show that the non-profit Springhill Housing Corporation retains ultimate
managerial authority over the Trust to meet the first condition of the exception.
In addition, although not identified in the Fourth Restatement, it appears that the
Trust Administrator for the Springhill Trust is the Community Housing Network, Inc.
(“CHN”). See https://springhillpooledtrust.org/. According to CHN’s website, it is also a non-profit organization that provides homes
for people in need and assists people with disabilities. See https://communityhousingnetwork.org/about-us/. Thus, we believe that even to the extent that the Trust Administrator is involved
in decisions regarding distributions from the Trust and day-to-day management activities,
this would not run afoul of first criteria for meeting the pooled trust exception.
Second, the Trust maintains separate sub-accounts for each beneficiary, but pools
the trust sub-accounts for purposes of investment and management. Fourth Rest., Art.
Three, Sect. 3.01.
As for the third condition of the exception, the Fourth Restatement specifies that
individual Trust sub-accounts are established and maintained for the sole benefit
of the individual beneficiaries. Fourth Rest., Art. Three, Sect. 3.01; see also Art. Two, Sect. 2.01; Art. Thirteen, Sect. 13.02. Each sub-account is established
by the individual beneficiary or his parent, grandparent, agent acting for the beneficiary
under a power of attorney, legal guardian, or any person or entity acting pursuant
to a court order on behalf of the beneficiary (the “Grantor”). Fourth Rest., Art.
Thirteen, Sect. 13.05; see also Art. 1, Sect. 1.05; Art. Two, Sect. 2.01. Although the Trust contains early termination
provisions, the provisions comply with the requirements of POMS SI 01120.199(F)(2) because they solely allow for a transfer of the beneficiary’s assets from one
§ 1396p(d)(4)(C) trust to another such trust. Fourth Rest., Art. Eight, p.9 & Sect.
Finally, the Springhill Trust meets the last condition of the pooled trust exception
because it provides for the repayment of medical assistance under any State(s) Medicaid
plans upon the death of the beneficiary. Fourth Rest., Art. Eight, Sect. 8.04. Specifically,
the Fourth Restatement provides that, upon the death of a beneficiary, the Trustee
shall retain 20% or $10,000.00 (whichever is greater) and, after this initial retention
of funds, the Trust “has an automatic duty to repay to the State(s) in an amount equal
to the total amount of medical assistance paid on behalf of the individual under the
State(s) Medicaid plan(s) in accordance with 42 U.S.C. 1396(a).” Id. As acknowledged
by the Fourth Restatement in Article Eight, Section 8.04, to the extent the Trust
does not retain the funds in the account, the State(s) in which the beneficiary received
Medicaid Assistance shall be the first payee(s) and have priority over payment of
other debts and administrative expenses, except as those listed in POMS SI 01120.203(B)(3). Under Section 8.05, prior to repaying the medical assistance to the State(s),
the Trust may pay taxes due from the Trust because of the death of the beneficiary
and reasonable fees for administration of the trust estate associated with the termination
of the trust. Fourth Rest., Art. Eight, Sect. 8.05.
III. The Springhill First-Party Pooled Trust Would Not Be Considered A Countable Resource
Having determined that the Springhill Trust self-funded sub-accounts would satisfy
the pooled trust exception, the regular resource rules in POMS SI 01120.200 apply to determine whether a sub-account would be considered a resource. See POMS SI 01120.203(B)(2)(a). Under Agency rules, the trust principal will be a resource if the individual
can (1) revoke or terminate the trust and use the assets to meet his needs for food
or shelter, or (2) direct the use of the trust principal for his support and maintenance
under the terms of the trust. POMS SI 01120.200(D)(1)(a). In addition, the individual’s beneficial interest in the trust is a resource
if it can be sold. Id.
As discussed above, the sub-account, a grantor trust, would be considered irrevocable
because the beneficiary cannot revoke it without the consent of Springhill or any
other residual beneficiaries identified in the Irrevocable Joinder Agreement used
to establish the sub-account. Fourth Rest., Art. Eight, Sects. 8.03, 8.04, 8.05, 8.06,
8.08 & 8.09; see also POMS SI CHI01120.200(C), (D); Mich. Stat. § 700.7411. In addition, the beneficiary can neither demand
payments nor expect to receive mandatory disbursements, as Springhill, acting as Trustee,
has “sole and absolute discretion” in making all distributions. Fourth Rest., Art.
Four, p.4 & Sects. 4.01-4.04. Therefore, the sub-account principal would not be considered
Further, the Fourth Restatement of the Trust contains a spendthrift clause prohibiting
the sale of a beneficiary’s interest and providing that no beneficiary’s interest
in principal or income shall be subject to voluntary or involuntary alienation. Fourth
Rest., Art. Four, Sect. 4.03. Generally, states that allow spendthrift trusts do not
allow a grantor to establish a spendthrift trust for his own benefit. See POMS SI 01120.200(B)(16). However, it appears that Michigan does allow spendthrift trust provisions.
See Mich. Stat. § 700.7502(1) (“A spendthrift provision is valid and enforceable.”).
Accordingly, the beneficiary’s interest in the Trust should not be considered a resource.
For the reasons discussed above, we conclude that the self-funded sub-accounts in
the Springhill First-Party Pooled Trust would not be considered resources under the
Act as it meets the pooled trust exception.