TN 21 (06-14)

PS 01825.028 Missouri

A. PS 14-092 Review of Revised Terms and Conditions of Missouri Family Trust DBA Midwest Special Needs Trust (MSNT) (Juanita)

DATE: April 14, 2014

1. SYLLABUS

This opinion evaluates whether a trust beneficiary must sign the amended trust agreement of the Midwest Special Needs Trust (MSNT) in order for the trust to remain in effect. The MSNT acted in compliance with the Act and Missouri law in making amendments to the MSNT Agreement. The MSNT is not required to obtain acceptance or denial of the trust amendment, therefore, the trust beneficiary does not have to sign the trust amendment in order for the trust to remain in effect. This opinion also states SSA is not required to advise master trust trustees to obtain the trust beneficiaries’ acceptance or denial of the trust amendments.

2. OPINION

You requested advice regarding the application of Missouri law to amended trust documents related to the MSNT, a statutorily-created special needs trust in the State of Missouri. Specifically, you request assistance in determining how the powers of the Board of Trustees should be executed on a trust beneficiary.

Factual Background

The MSNT was established in 1989 by Missouri statute to administer special needs trusts for person with disabilities. See Mo. Rev. Stat. §§ 402.199-402.208. It allows a beneficiary who is a person with a disability as defined in section 1614(a)(3) of the Social Security Act (Act), 42 U.S.C. § 1382c(a)(3), or the parent, grandparent, or legal guardian of a beneficiary, or a court, as settlor, to contribute assets of the beneficiary to the trust to be held as part of a pooled trust described by 42 U.S.C. § 1396p(d)(4)(C). See Mo. Rev. Stat. § 402.203(1); see also http://midwestspecialneedstrust.org/aboutMSNT/default.htm (last visited Apr. 14, 2014). All contributions are pooled and invested but separate accounts are maintained for each beneficiary. See Mo. Rev. Stat. §§ 402.199-402.208. If properly structured and administered, special needs trusts do not affect an individual’s eligibility for benefits such as supplemental security income (SSI) or Medicaid.

On September 13, 2007, Juanita signed an MSNT Agreement with Juanita as the donor and beneficiary, and her sister, Harriet as the co-trustee. Harriet and Kathie, a representative of the MSNT Board of Trustees signed the document as witnesses.

The MSNT Agreement signed by Juanita included the provisions in effect at that time. In an introductory paragraph on the first page of the MSNT Agreement, it stated that funds in the trust were “to be held on the terms and conditions specified in sections 402.199 through 402.217, Revised Statutes of Missouri [(Mo. Rev. Stat)], Administrative Rules 21 CSR 10[,] and the Terms and Conditions of the [MSNT], incorporated herein by reference.” The MSNT Agreement included acknowledgement of receipt of a copy of the Terms and Conditions of the MSNT. Neither Juanita nor the witnesses initialed as directed to acknowledge receipt of the attached Terms and Conditions.

The attached Terms and Conditions of the MSNT included the following clause under the heading of “Powers of the Board of Trustees:”

The provisions of [Mo. Rev. Stat.] 456.8-813 regarding the duty to inform and report to beneficiaries shall not, except as mandated under [Mo. Rev. Stat.] 456.1-105, apply to any Trust Account. The Board of Trustees reserves the right to amend these Terms and Conditions, from time to time, upon reasonable notice to the then acting Co-trustee, except that as to trusts established as provided in Paragraph 7(c) and 7(d), any such amendment shall not become effective until it has been approved by the appropriate department or agency of the state where the beneficiary resides, if required.

Terms and Conditions of MSNT at 7, Article 15 (emphasis added). [1]

Further, Article 16 of the Terms and Conditions included the following clause under the heading of “Acceptance of Provisions:”

Execution of a [MSNT] Agreement by the Donor and a duly authorized agent or representative of the Board of Trustees shall constitute acceptance of the provisions hereof and of Sections 402.199 through 402.225 [Mo. Rev. Stat.] and the regulations adopted pursuant thereto, as the same may now be in effect or hereafter be amended.

Terms and Conditions of MSNT at 7, Article 16 (emphasis added).

The Terms and Conditions in effect at the time of execution of Juanita’s MSNT Agreement had been adopted on December 15, 1990 by the MSNT Board of Trustees. The Terms and Conditions were amended in November 1996, April 1999, July 2000, August 2004, April 2005, July 2005, February 2006, and June 2006. See Terms and Conditions of MSNT at 7.

On November 3, 2012, MSNT revised their self-settled trust documents and sent a blank of the updated document, titled “Declaration of First Party Trust under the [MSNT] Master Trust,” to their beneficiaries. Per your memorandum, Juanita did not sign the amended trust document.

In a cover letter to the Social Security Administration (SSA) in July 2013, MSNT stated that Juanita’s, as a life beneficiary of the trust, does not have direct access or control of the trust. MSNT stated that they carefully review each distribution request authorized by the co-trustee to ensure such distributions are compliant with federal requirements and do not jeopardize Juanita eligibility for Medicaid or other public benefits. MSNT summarized the laws under which the MSNT was established. MSNT stated that since the execution of Juanita s’ MSNT Agreement, “the MSNT board has amended the trust language, as necessary, to remain compliant with federal requirements.”

Analysis

In order to be eligible to receive SSI benefits, an individual must have income and resources within specified limits, and an individual with countable resources in excess of the statutory limit is not eligible for SSI benefits. Under section 1613(e)(3) of the Act, SSA considers trusts created on or after January 1, 2000, from a disabled beneficiary’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 for the benefit of the disabled beneficiary. See 42 U.S.C. § 1382b(e)(3); Program Operations Manual System (POMS) SI 01120.201.

However, a pooled trust established under section 1917(d)(4)(C) of the Act is not counted as a resource in determining eligibility for SSI. See 42 U.S.C. §§ 1382(b)(e)(5), 1396p(d)(4)(C). To qualify for the pooled trust exception, the trust must contain assets belonging to the disabled beneficiary and must satisfy the following conditions:

(i) The trust is established and managed by a nonprofit association.

(ii) A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.

(iii) Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1382c(a)(3) of this title) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.

(iv) 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 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 under this subchapter.

Section 1917(d)(4)(C), 42 U.S.C. § 1396p(d)(4)(C); see also POMS SI 01120.203(B)(2).

The State of Missouri established the Missouri Family Trust (MFT) in 1989 in compliance with the Act. [2] Mo. Rev. Stat. §§ 402.199-402.220. The State established an MFT Board of Trustees, consisting of nine members appointed by the Governor, to “establish policies, procedures, and other rules and regulations necessary to implement” the MFT. Mo. Rev. Stat. § 402.201. The Board of Trustees has all the powers granted to trustees under Chapter 456 of the Missouri Statutes, but the duty to inform and report to beneficiaries does not apply. See Mo. Rev. Stat. §§ 402.202, 456.8-813. The MFT Board of Trustees does business as the MSNT. MFT and MSNT were verified as nonprofit associations as defined in section 501(c) of the Internal Revenue Code and have tax exempt status. See POMS SI KC01120.203.

Section 402 of the Missouri Statutes was substantially revised effective August 28, 2011. Based on this change the MSNT revised the MSNT trust documents to reflect the statutory provisions. http://midwestspecialneedstrust.org/trustDocs/default.htm.

The amendments made to the Terms and Conditions were necessary for MSNT to remain compliant with federal and state requirements. A review of the November 2012 MSNT agreement demonstrates that the amendments were predominantly to bring the Terms and Conditions into one document, instead of providing them as an attachment.

You asked five questions with regard to the applicability of the Act and the Missouri statute to the amendment of the Terms and Conditions by the MSNT.

  1. 1) 

    What action(s) is required (what is SSA’s responsibility) and the trustee’s responsibility, e.g., to notify the trust beneficiaries of the amendment or to obtain acceptance or denial of the amendment?

    Under the specific terms of the MSNT Agreement signed by Juanita, the MSNT reserved the right to amend the Terms and Conditions “upon reasonable notice to the then acting Co-trustee,” in this case, Harriet. This clause of the MSNT Agreement is consistent with Missouri statute provisions that exclude the MSNT from the duty to inform that is generally applicable to other trusts. See Mo. Rev. Stat. §§ 402.202, 456.8-813. The MSNT does not need to obtain acceptance or denial of the amendment from Juanita or Harriet. The fact that neither Juanita nor Harriet initialed the MSNT Agreement indicating receipt of the Terms and Conditions is not relevant, as the MSNT Agreement expressly incorporated those Terms and Conditions by reference. Assuming MSNT notified Harriet of any amendment, MSNT has complied with the MSNT Agreement and with the Missouri Statutes. SSA has no responsibility to notify Juanita of this change.

    It is notable that going forward, the Terms and Conditions of the trust indicate:

    The Trustee reserves the right to amend the Trust, from time to time, upon reasonable notice to the then acting Co-trustee, except that any such amendment shall not become effective until it has been approved by the appropriate department or agency of the state where the Life Beneficiary resides, if required.

    Declaration of First Party Trust under the MSNT Master Trust § 7.1. Thus, any future amendments may require approval by a state agency in the state in which the beneficiary resides. Previously this additional requirement applied only to accounts created as a result of the death of the beneficiary in specific situations.

  2. 2) 

    Under the Act, should SSA advise master trust trustees that they must obtain their SSI beneficiaries’ acceptance or rejection of trust amendments?

    There is nothing in the Act or the POMS that would require SSA to do so. Juanita signed the MSNT Agreement, acknowledging that the Terms and Conditions could be amended with notice only (no need for acceptance or rejection) to Harriet. Unless an amendment of the MSNT Agreement or Terms and Conditions brought it out of compliance with the Act, thus removing the protection of the trust from resource counting, there is no basis for SSA to interfere in the relationship between the trustee and the beneficiary/cotrustee.

  3. 3) 

    Under Missouri law, if the SSI beneficiary does not execute (sign) the amended trust agreement then do the terms of the signed trust agreement remain in effect?

    No. There is no requirement under Missouri law that the beneficiary sign the amended agreement. The MSNT Agreement itself allows for amendment with notice to the co-trustee.

  4. 4) 

    Under Missouri law, are trust beneficiaries deemed to have accepted the trust amendments, without an executed (signed) document?

    The Missouri Statutes do not address this issue, but the MSNT does not have the duty to inform or report to beneficiaries that is required for other trusts in Missouri. See Mo. Rev. Stat. § 402.202. And, as noted above, the MSNT Agreement, signed by Juanita’s, grants the MSNT the power to make amendments as necessary with notice to Harriet.

  5. 5) 

    Under Missouri law, can we enforce trust amendments retroactively or prospectively?

    The MSNT does not appear to be requesting retroactive applicability of any amended provisions of the MSNT agreement contained in the November 2012 Declaration of First Party Trust under the MSNT Master Trust. The amendments were made, per the MSNT, to remain compliant with Federal law. The MSNT Agreement signed by Harriet remains in effect with any amendments made to the Terms and Conditions effective November 3, 2012.

Conclusion

In conclusion, we believe MSNT acted in compliance with the Act and Missouri law in making amendments to the MSNT Agreement signed by Juanita by providing notice of the amendments. There is no duty for MSNT to have the amended trust document signed by Juanita’s.

Kristi A. Schmidt

Chief Counsel, Region VII
By: ______________

Pamela A. Kultgen
Assistant Regional Counsel

B. PS 00-475 Determination of Ownership of Inherited Real Property When Such Property is Part of an Estate and is to be Held in Trust and the Heir/Beneficiary Seeks SSI Entitlement

DATE: August 20, 1999

1. SYLLABUS

Inherited property left in trust for an SSI claimant/recipient is not a resource if the claimant/recipient cannot revoke the trust or direct the use of trust assets, even during the period that the decedent's estate has not been closed.

2. OPINION

Background

You requested a legal opinion regarding whether Opal ("claimant") had a resource in the form of 150 acres bequeathed to her by her father during the time the estate remained open. Your request was occasioned by an alert letter from the Internal Revenue Service (IRS). The estate has been open for over 18 years.

The claimant was bequeathed 150 acres by her father in his July 3, 1972, will. The will, in Item 2, states: "To Russell , in trust for my daughter, Opal, the following described land located in Sullivan County, Missouri. . . ." Monies were also bequeathed to the claimant to be held in trust by Russell. (Item 6). Item 10 of the will states that the trustee, or any successor, shall have at any time the full power to sell, lease, assign, convey, exchange, improve, mortgage, or otherwise encumber all or any part or parts of the property constituting the trust estate. Item 12 denies the beneficiary of the trust any right to sell or otherwise transfer or convey any interest in the trust estate or the income derived therefrom.

The estate is represented by an attorney, N. William. William stated that the only person with the authority to sell the land was the trustee. While he once believed that the other heirs could sell the property in question and receive whatever proceeds were available upon the death of claimant, he has since taken the view that the will gives only the trustee such power of sale.

Regulatory Definitions

Generally, a resource, for SSI purposes, includes assets that an individual owns and could convert to cash to be used for his or her support. See 20 C.F.R. § 416.1201. If the individual has the right, authority, or power to liquidate the property (or his or her share of the property), it is a resource. See id. Similarly, income includes anything one receives in cash or in-kind that can be used to meet one's needs for food, clothing, or shelter. 20 C.F.R. § 416.1102. Payments for one's well-being from a trust count as unearned income in accordance with 20 C.F.R. § 416.1120.

Trust Issues

In the present case, claimant's rights as the beneficiary of the trust created by her father's will are defined by the will itself. Because the will, in Items 11 and 12, precludes claimant from any access to the trust's assets or from transferring any interest in the trust's assets, these assets cannot be counted as her resources. However, any money paid directly to claimant from the trust may be counted as unearned income in accordance with 20 C.F.R. § 416.1123.

C. PS 00-468 Determination of Irrevocability of a Nebraska Trust Kyle, SSN: ~

DATE: February 23, 2000

1. SYLLABUS

The issue concerns what language is sufficient to establish that a grantor trust is irrevocable in Iowa, Kansas, Missouri, and Nebraska.

Although the laws of Nebraska have not specifically addressed it, it appears that Nebraska would follow the general rule that a trust is revocable if the grantor is the sole beneficiary, even if there is a provision making the trust irrevocable.

There does not appear to be any Kansas statute or case applying the grantor trust rule in Kansas. Generally, a trust is revocable when the grantor is the sole beneficiary.

Missouri has explicitly adopted the rule that a trust is revocable if the grantor is the sole beneficiary.

There does not appear to be any Iowa statute or case applying the grantor trust rule in Iowa. It appears Iowa would follow general trust law regarding revocability of a trust when the grantor is the trust's sole beneficiary.

Thus, in all Region VII States, the words "child," "children," "issue," "descedents," or "words of similar import" create a residual beneficiary and make a grantor trust irrevocable. If the grantor uses the words "heirs," "heirs-at-law," "next of kin," or "by intestate succession," in most cases it would justify a finding that a residual beneficiary was not created and a grantor trust is revocable.

2. OPINION

You have asked for our assistance in determining the irrevocability of a trust designated as the Kyle Special Needs Trust, ~. You also asked us revisit the question of what language is sufficient to establish that a grantor trust is irrevocable in Iowa, Kansas, Missouri, and Nebraska.

I. TRUST PROVISIONS

The Kyle Special Needs Trust (SNT) was funded with an insurance settlement in the amount of $26,129.20, the result of litigation involving personal injury suffered by Kyle. The Trust Agreement names the County Court of Buffalo County, Nebraska, as the grantor and Kyle's aunt, Catherine, as the trustee. The Trust Agreement, executed on August 13, 1999, and signed by the County Judge and by the Trustee, describes Kyle, born October, as the Beneficiary who is "a disabled person within the meaning of 42 U.S.C. § 1382c(a)(3)." Trust Agreement, Article 1.

The Trust Agreement specifies that the trust is irrevocable and that "the beneficiary, his guardians or conservator, shall have no right whatsoever to alter, revoke or terminate this Trust, in whole or in part." However, "[t]he Trust may be amended by the Court with notice to the State of Nebraska, Department of Health and Human Services Finance and Support, if amendment would benefit the disabled's [sic] beneficiary." Trust Agreement, Article 4. The Trust Agreement also provides that-

[t]his Trust is established pursuant to the 1993 Omnibus Reconciliation Act[,] 469 NAC 2.009.07A5B (4) and Neb. Rev. Stat. 68-1047. This trust is not for the support of Kyle. It is the intent of the Grantor to make provisions in this Trust Agreement to provide funds necessary to Kyle D. S~'s happiness over and above the essential, primary support and services otherwise available to him. This Trust is not to replace or make unnecessary any public or private assistance that Kyle may now or in the future qualify to receive. It is the intent to provide resources for non-support purposes including comfort over and above the essentials provided by any state or federal government agency or program. The supplemental resources provided through this Trust may include, but shall not be limited to education, personal care needs, attendants, entertainment, and other goods and services not otherwise provided by public aid or private sources, but which are reasonable and necessary for the rehabilitation and special non-support needs of the Beneficiary.

Trust Agreement, Article 2. In addition, the Trust Agreement provides that-

     [w]hile it is the intention that the Trustee have broad and effective powers to carry out the provisions of this Trust Agreement, no power conferred upon any Trustee by this article, shall be exercised in such a manner that it deprives the Trust of an otherwise available tax exemption, deduction, exclusion or credit, nor to deprive the Beneficiary of any public or private assistance as described above. This Trust is intended to qualify under 42 U.S.C. § 1396p(d)(4)(A) and the Trustee shall have no power which is inconsistent with such law and its regulations, and all provisions of this Trust shall be interpreted in a manner consistent with such law.

Trust Agreement, Article 2.

Concerning the Trustee's powers, the Trust Agreement provides that—

      [t]he Trustee may distribute income or principal or both, . . . [and] in its sole and absolute discretion, shall apply and distribute such part, all or none of the net income and principal of the Trust estate in such amounts and proportions as the Trustee, in the Trustee's absolute discretion, deems necessary or appropriate for Kyle's best interest, [but only after exhausting] all other resources available . . . from all sources other that his trust including, without limitation, payments, services and programs administered, provided or sponsored by any governmental (federal, state or other), private or institutional agency, authority or provider, any rule or regulation of such agency, authority or provider to the contrary notwithstanding.

Trust Agreement, Article 2. The Trust Agreement also includes a spendthrift clause intended to prohibits creditors from attaching the assets of a trust. Trust Agreement, Article 8.

The Trust Agreement provides that the trust terminates upon Kyle's death and "any remaining undistributed income or principal . . . shall be first paid to the State of Nebraska, and to any other state who has made payments under Title XIX" on Kyle's behalf. "In the event that either principal or income remain [after the State is reimbursed], it shall be paid over and distributed pursuant to the intestacy laws of the State of Nebraska." Trust Agreement, Article 11.

II. TRUSTS AS RESOURCES

Generally, if trust principal is available to the trust beneficiary, it will be considered a resource to him for purposes of determining his eligibility to SSI benefits. Regulations define resources for SSI eligibility as follows:

(a) Resources; defined. For purposes of this subpart L, resources means 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. (1) If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual[.]

20 C.F.R. § 416.1201(a)(1). Regulations further define resources as liquid or nonliquid. Liquid resources are resources in the form of-

cash or other property which can be converted to cash within 20 days . . . . Examples of resources that are ordinarily liquid are stocks, bonds, mutual fund shares, promissory notes, mortgages, life insurance policies, financial institution accounts (including savings, checking, and time deposits, also known as of deposit) and similar items. Liquid resources, other than cash, are evaluated according to the individual's equity in the resources[.]

Id. at § 416.1201(b).

The Commissioner has further construed the meaning of "resource," by issuing interpretive guidelines in the Program Operation Manual System (POMS). With respect to trust instruments, the POMS provides that-

if an individual (claimant, recipient or deemor) has the legal authority to revoke the trust and then use the funds to meet his food, clothing or shelter needs, or if the individual can direct the use of the trust principal for his/her support and maintenance under the terms of the trust, the trust principal is a resource for SSI purposes.

POMS SI 01120.200D.1.a (emphasis in original). However,

[i]f an individual does not have the legal authority to revoke the trust or direct the use of the trust assets for his/her own support and maintenance, the trust principal is not the individual's resource for SSI purposes.

POMS SI 01120.200D.2 (emphasis in original). The revocability of a trust and the ability to use the trust principal is determined by the terms of the trust and/or by State law. POMS SI 01120.200D.1.a and SI 01120.200D.2. "Most States follow the general principle of trust law that if a grantor is also the sole beneficiary of a trust, the trust is revocable regardless of language in the trust document to the contrary." POMS SI 01120.200D.3 (emphasis in original).

A trust is generally irrevocable if the grantor fails to reserve the power to revoke or modify it. Restatement (Second) of Trusts §§ 330 and 331 (1957). Nevertheless, the general law of trusts recognizes an exception to this rule when the grantor is the sole beneficiary of the trust agreement. Where the grantor is the sole beneficiary of a trust, he may amend or terminate the trust, even without having reserved the power to do so. Id. at § 339.

Although the laws of Nebraska have not specifically addressed this issue, we believe that Nebraska would follow the general rule. While the Trust Agreement at issue here names the Court as Grantor, the consideration funding the trust belonged to Kyle. Thus, Kyle is the grantor and, if Kyle is the sole beneficiary of the trust, it is revocable notwithstanding the Trust Agreement language to the contrary. However, if the grantor is not the sole beneficiary, the trust would not be revocable.

The trust herein appears to be a "Medicaid Special Needs Trust," a trust created by means other than a will, and which includes a Medicaid payback provision upon termination of the trust or the death of the individual. SSA's policy is that the Medicaid trust "affects the individual's eligibility for Medicaid only, and has no effect on the SSI income and resource determinations." POMS SI 01120.200H.1.a (emphasis in original). In addition, the POMS provide that-

[a]ccording to the law in most States, the State is not considered a residual or contingent beneficiary, but is a creditor and the reimbursement is payment of a debt. This law may or may not apply in your State . . . .

POMS SI 01120.200H.1.b. .

Our research indicates that the purpose of including the State reimbursement provision in the SNT is to qualify the beneficiary for medical assistance from the State. If the SNT meets the exception set out in 42 U.S.C. § 1396p(d)(4)(A) and State requirements, the State does not consider the trust to be a resource and the grantor/beneficiary is eligible for medical assistance. Where there is a pre-existing Medicaid lien, several courts have held that the State may require satisfaction of the lien before any third-party settlement can be put into a SNT. In Nebraska, a Medicaid grantor SNT is considered to be void and revocable by operation of law upon filing for or receiving State public assistance unless the SNT is ordered by a court of competent jurisdiction, for good cause shown. Neb. Rev. Stat. § 68-1047. Although no court order was included in the material received, we are assuming that this requirement was met.

You ask whether the words "pursuant to the intestacy laws of the State of Nebraska" created a residual beneficiary. The Restatement (Second) of Trusts provides that at common law there was a rule of the law of real property that the owner of land could not, by a conveyance inter vivos, create a remainder interest in his heirs. An attempt to do so created a reversionary interest in himself, rather than a remainder interest in his heirs. However, there is no longer any such rule of law. There is only a question of construction. Restatement (Second) of Trusts § 127 cmt. b (1957).

If the owner manifests an intention to create a contingent interest in remainder, legal or equitable, in the persons who on his death may become his heirs, he can do so. In the absence of evidence of a contrary intent, however, the inference is that he does not intend to create a remainder interest in his heirs. The Restatement (Second) provides that if the beneficial interest is limited to the grantor for life and on his or her death the property is to be conveyed to his or her "children, or issue, or descendants" then he or she is not the sole beneficiary of the trust and a remainder interest is created in his or her children, issue, or descendants. Id. at § 127 cmt. b. Where the owner of property, however, transfers it in trust to pay the income to himself or herself for life and upon his or her death to pay the principal to "his heirs or next of kin," in the absence of a manifestation of a contrary intention, "the inference is that he is the sole beneficiary of the trust, and that he does not intend to create any interest in the persons who may become his or her 'heirs or next of kin.'" Id.

Likewise, the inference is that the grantor is the sole beneficiary where the income is to be paid to the grantor for life and upon his or her death the principal is to be paid "as he may by deed or will appoint, and in default of appointment to his heirs or next of kin." If he or she reserves power to appoint by will alone, and in default of appointment the property is to be conveyed to his or her heirs or next of kin, the Restatement (Second) indicates that this is some indication that the grantor intended to confer an interest on his or her heirs or next of kin of which they could be deprived only by a testamentary appointment, "but this is not of itself sufficient to overcome the inference that he intended to give them no such interest but intended to be the sole beneficiary of the trust." Id.

Restatement (Second) presents an example similar to the trust herein. The illustration provides: "A transfers property to B in trust to pay the income to A for life and on A's death to pay the principal as A may by deed or by will appoint and in default of appointment to A's heirs or next of kin. A is the sole beneficiary of the trust." Restatement (Second) § 127 cmt. b, illus. 2. In addition, the Nebraska Supreme Court has held that an inter vivos trust which purports to convey an interest in property only after the death of the grantor is testamentary in character and passes no present interest in the property. Such a purported conveyance was found to be void because it was in effect a will, and the statutory requirements for the execution of a will had not been met. Thus, it had no validity. Young et al. v. McCoy et al., 40 N.W.2d 540, 542 (Neb. 1950). The court stated that these words were expressly limited to take effect only after the death of the grantor; thus, they were necessarily revocable words. Id.

The primary objective of the Kyle trust appears to be to provide for the grantor/life beneficiary, and not to preserve the trust principal for the grantor's heirs. Examination of the trust agreement does not reveal any manifestation of intent to convey a remainder interest to the grantor's heirs. For the reasons given above, if there is no named residual beneficiary, absent additional language manifesting a contrary intent, we believe you would be justified in finding that the words "distributed pursuant to the intestacy laws of the State of Nebraska" in a grantor trust make the trust revocable despite trust language to the contrary. However, we believe a residual beneficiary would be created by words that any remainder should go to a named beneficiary or to the individual's children, issue, or descendants. In Ellengrod v. Trombla, 95 N.W.2d 635, 638 (Neb. 1959), in interpreting a will devise and the Uniform Property Act, the court said that conveyance of property to a person and his "children," "issue," "descendants" and "words of similar import" create a life interest in the person and a remainder in the life beneficiary's descendants unless a contrary intent is manifested. If no children, issue, or descendants exist presently, the remainder is contingent. Id. at 640. In Wilkins v. Rowan, 185 N.W. 437, 438-39 (Neb. 1921), the court defined "issue," "lawful issue," or "issue of the body" to include children and lineal descendants of every degree in the absence of qualifying words showing a contrary intent.

III. REVIEW OF PRIOR ADVICE

As you requested, we have reviewed our prior advice concerning the revocability of grantor trusts in Region VII. On this issue, although the laws of Nebraska have not specifically addressed it, we believe that Nebraska would follow the general rule that a trust is revocable if the grantor is the sole beneficiary, even if there is a provision making the trust irrevocable. Restatement (Second) of Trusts § 339 (1957). The grantor is the sole beneficiary of a trust if he or she does not "manifest an intention to give a beneficial interest to anyone else." If the grantor "manifests an intention to create a vested or contingent interest in others, as for example, his children, or the persons who may be his heirs or next of kin on his death, he is not the sole beneficiary unless such intended interests are invalid. . . ." Id. at § 339 cmt. b. Thus, the question is whether the language of a trust creates a valid remainder interest. If no valid remainder interest is created, the grantor is the sole beneficiary of the trust, the trust is revocable, and the trust principal is a resource (see discussion above).

We found no Kansas statute or case applying the grantor trust rule in Kansas. However, Kansas law does provide that all gifts and conveyances of goods and chattels (but not land) to a trust made for the use of the person making the trust are valid and effective except as to all past, present or future creditors and a nonconsenting wife's statutory rights. Newman v. George, 755 P.2d 18, 20 (Kan. 1988). A trust is irrevocable unless the power to amend or revoke is reserved in the trust agreement. Kan. Stat. Ann. § 58-2417 (1994). Where State law is silent, Kansas courts "have often turned to the guidance of the Restatement of Trusts[.]" In the Matter of the Estate of S~, 929 P.2d 153 (Kan. 1996). Accord Neeley v. Neeley, §§§ P.2d §§§, 2000 W.L. 45835 at *1 (Kan. App.). Although it was not dispositive in the case, in Daughters of the American Revolution of Kansas, Topeka Chapter v. Washburn College, 164 P.2d 128, 132 (Kan. 1945), the Kansas Supreme Court acknowledged the Restatement rule that a trust is revocable when the grantor is the sole beneficiary. The court did not indicate that the rule was improper or would not be followed in Kansas. We believe Kansas would follow this rule in the appropriate case. Kansas law is consistent with the Restatement (Second) in holding that the primary consideration in the construction of trusts is the intention of the grantor as evidenced by an examination of the document. In the Matter of the Estate of Sam S~, 625 P.2d 458, 465 (Kan. 1981). In the case of In re Watts, 162 P.2d 82, 87 (Kan. 1945), in interpreting a will, the court made "unknown heirs" parties to the litigation. "'[T]he same rules that apply to [the] construction [of wills] apply to trusts and most other written documents." In the Matter of the Estate of S~, 929 P.2d at 158, quoting In re Estate of H~, 223 P.2d 707 (Kan. 1950).

In Missouri, rights to trust income and property are determined by the trust agreement. Hillyard v. Leonard, 391 S.W.2d 211 (Mo. 1965). Missouri has explicitly adopted the rule that a trust is revocable if the grantor is the sole beneficiary. Couch v. Director, Missouri State Division of Family Services, 795 S.W.2d 91, 94 (Mo. App. 1990); Pilgrim Evangelical v. Lutheran Church-Missouri Synod Foundation, 661 S.W.2d 833, 838 (Mo. App. 1983). The intention of the settlor is the key to the construction of a trust. Tidrow v. Director, Missouri State Division of Family Services, 688 S.W.2d 9 (Mo. App. 1985). The term "bodily heirs" is a technical term which should be accorded its technical meaning unless a contrary meaning clearly appears from the context of the will. Central Trust Bank v. Stout, 579 S.W.2d 825 (Mo. App. 1979). "Nearest blood kin" has no settled meaning but where the testator does not indicate otherwise, the definition in the Restatement of Property will be used. Graves v. Hyer, 626 S.W.2d 661 (Mo. App. 1981). It has been held in Missouri that where one transfers property inter vivos in trust to pay the income to himself for life and on his death it is to be conveyed to his "heirs or next of kin," that he is the sole beneficiary. Stephens v. Moore, 249 S.W. 601 (Mo. 1923).

We found no Iowa statute or case applying the grantor trust rule in Iowa. We believe that Iowa would follow general trust law regarding the revocability of a trust when the grantor is the trust's sole beneficiary. Iowa's probate code defines the word "issue," for purposes of intestate succession, as including "all lawful lineal descendants of a person, whether biological or adopted, except those who are the lineal descendants of the person's living descendants." I.C.A. § 633.3.24 (Supp. 1992). The Iowa Supreme Court has indicated that "heir" is given the popular meaning of issue, children, or descendants when language of the entire will and circumstances in which the will was executed indicated that intention. Cook v. Underwood, 228 N.W. 629 (Iowa 1930). The court subsequently stated that the word "heirs" is a flexible term to which the technical meaning of the word is frequently not applied. The meaning to be given to "heirs" is a question of the testator's intent. In re A~'s Estate, 20 N.W.2d 445 (Iowa 1945). The court also stated that the word "heirs" used by a testator does not have a fixed meaning and meaning must be determined from the instrument read as a whole and in light of all relevant facts and circumstances under which the instruments were executed. Schaefer v. Merchants Nat. Bank of Cedar Rapids, Iowa, 160 N.W.2d 318, 320-21 (Iowa 1968). In a will devising the remainder of a trust estate to an old folks' home if a son died without leaving heirs, the word "heirs" meant "descendants." In re C~'s Estate, 218 N.W. 926 (Iowa 1928).

CONCLUSION

In summary, we believe that you would be justified in finding that, in all Region VII states, the words "child," "children," "issue," "descendants," or "words of similar import" create a residual beneficiary and make a grantor trust irrevocable. If the grantor uses the words "heirs," "heirs-at-law," "next-of-kin," or "by intestate succession, "we believe you would be justified, in most cases, in finding that a residual beneficiary was not created and a grantor trust is revocable. Accord G.C. Opinion, Accessibility of Discretionary Support Trust Fund as a Resource for Supplemental Security Income Purposes in Nebraska Where Grantor Is also the Sole Beneficiary, dated March 17, 1997. However, if considering the document as whole indicates that the grantor had a different intention, the words "heirs," "heirs-at-law," or "next-of-kin" may make the trust irrevocable. For example, you attached a previous legal opinion concerning the Felicia B~ trust. See G.C. Opinion, Determination of Irrevocability of a Grantor Trust, dated June 21, 1994. You asked whether the naming of heirs in general constituted naming another beneficiary making the trust irrevocable. We affirmed that it did. We cannot conclude, however, that our response was inconsistent with the advice herein. The B~ trust reveals that it was the grantor's intention that any undistributed principal and income should be distributed to Felicia's "descendants who survive." Therefore, we believe the advice given was correct.

As illustrated by the cases cited above, words such as "heirs" do not have a precise meaning and are defined inconsistently by the courts. We are not able to provide a general rule that will apply to all trusts. If the grantor's intent is not clear from a trust document, we suggest you submit the trust document for review by this office.

D. PS 00-466 Request for Iowa, Kansas, Missouri, and Nebraska State Law on Grantor Trusts; SSI Resource Issue

DATE: June 16, 1999

1. SYLLABUS

The regional attorney was asked if a State reimbursement provision in a Medicaid Trust creates a residual beneficiary or creditor status for the States of Missouri, Kansas, Iowa and Nebraska.

All four states are considered creditors and not beneficiaries. Even if a trust contains a State reimbursement provision, it would be revocable if the SSI recipient was the grantor and the sole beneficiary since the state is a creditor and not a beneficiary.

CAUTION: Because of a change in the Social Security Act, this opinion may only be applicable to trusts established before 1/1/00.

2. OPINION

You have asked whether in Missouri, Kansas, Nebraska, and Iowa, a State reimbursement provision in a Medicaid Trust creates a residual beneficiary or creditor status for the state. We are of the opinion that in all four states, the state would be considered a creditor. None of the states specifically address a trust which contains a state reimbursement provision; however, all four states have statutes that address reimbursement of Medicaid benefits. As you are aware, each state also follows the rule that a trust is revocable if the grantor is the sole beneficiary. See GC Opinion: Request for Interpretation of State Trust Law, dated June 29, 1992. The following is a discussion of each state's Medicaid statute.

MISSOURI

In Missouri, the statute provides as follows:

Upon the death of a person, who had been a recipient of aid, assistance, care, services, or who has had moneys expended on his behalf by the Department of Health, Department of Social Services, or the Department of Mental Health, . . . the total amount paid to the decedent or expended on his behalf . . . shall be a debt due the state . . . .

Mo. Ann. Stat. § 473.398. The statute further provides that claims consisting of moneys paid on the behalf of a recipient as defined in 42 U.S.C. § 1396 (Medicaid) shall be allowed, except if the cost of collection will exceed the amount of the claim, or the collection of the claim will adversely affect the need of the surviving spouse or dependents of the decedent to reasonable care and support from the estate. Id.

SUMMARY

The laws of each state provide the circumstances under which the state may be reimbursed by a recipient or his estate for Medicaid payments. In all states, the law provides that monies expended for Medicaid payments which are recoverable are categorized as a debt due to the applicable department, or the department may file a claim against the estate of the recipient. Consequently, we believe the state is properly considered as a creditor and not a beneficiary of the trust. Because each state's statute provides for the right to reimbursement, we do not believe it is relevant whether or not a Medicaid Trust contains a state reimbursement provision. The inclusion of such a provision in a trust would not be of any consequence where the grantor is the sole beneficiary. In all four of the Region VII states, a trust would be revocable, and thus available as a resource for SSI purposes, where the grantor is the sole beneficiary, even if the trust contained a state reimbursement provision.

E. PS 00-383 Illinois Trust for Lorraine

DATE: July 17, 1997

1. SYLLABUS

Under Missouri law, a party cannot, by contract or agreement, alter his obligation to pay future child support without judicial modification of the support decree. Therefore, payments made by one parent to a trust in lieu of court ordered support payments are considered the child's income, available for the child's support and maintenance.

Caution: Because of a change in the Social Security Act, this precedent may only be applicable to trusts established before 1/1/00.

2. OPINION

You requested a legal opinion regarding a document creating a discretionary supplemental trust with SSI recipient Lorraine (Lorraine) as beneficiary. You inquired whether Lorraine has unrestricted access to the trust principal for her support and maintenance, i.e., whether the trust principal is a resource for SSI purposes. You also inquired as to the validity of the Statement of Intent by which Lorraine's father agreed that support payments would be paid into the trust.

We conclude that the Statement of Intent, which sought to modify the court order of support, would be held invalid under applicable state law, and that the trust assets should be considered Lorraine's income or resources for SSI purposes, at least to the extent that the assets were derived from payments made pursuant to the Statement of Intent or from other property which had been owned by Lorraine or by her guardian on Lorraine's behalf.

Background

Pertinent Documents Other than the Declaration of Trust

Lorraine, currently twenty-one years old, is the disabled daughter of Deborah (Deborah) and David (David). Deborah and David were divorced in Missouri in 1995. The Judgment/Decree of Dissolution (divorce decree), entered on November 1, 1995, states that there were two children of the marriage: Lorraine, born March, and Lynne, born October. Divorce Decree at 2. The divorce decree awards child support "for the parties' minor children" in the amount of $566 per month per child to be paid by David to Deborah. It further states, "The Court hereby finds that the child LORRAINE is incapacitated and in need of parental support past the age of emancipation." Divorce Decree at 3. It incorporates all terms of a Marital Settlement Agreement (settlement agreement). Divorce Decree at 2. It also permits Deborah to remove the residency of the children to Illinois. Divorce Decree at 4.

The notarized settlement agreement, signed by David on August 15, 1995, in Missouri, and by Deborah on October 25, 1995, in Illinois, requires David to pay to Deborah $566 per month, per child "for the parties' children as and for child support for the care, support and education of the parties' minor children." Settlement agreement at 6. It further states: The parties agree and stipulate that the child LORRAINE is incapacitated and is in need of parental support past the age of emancipation, and said support shall continue until her death, the death of the Respondent, or further Order of the Court. Settlement agreement at 6. Paragraph 15 provides that no modification or waiver of any of the terms will be valid unless it is made in writing and executed with the same formality as the settlement agreement. Settlement Agreement at 10.

On October 24, 1995, one day before the settlement agreement was finally executed, David signed a notarized Statement of Intent agreeing to contribute monthly to a trust to be created for Lorraine's benefit, in lieu of the court ordered child support payments.

On January 26, 1996, the Circuit Court of Kane County, Illinois appointed Deborah as Lorraine's guardian.

Declaration of Trust

On January 30, 1996, Deborah executed, in Illinois, a declaration of trust (declaration), as "Settlor and Trustee," creating the "Lorraine Discretionary Supplemental Trust." The declaration recites that Deborah transferred $10.00 to the trustee which, along with any additional property received from her or any other person and all investments and reinvestments, was to constitute the trust estate. Declaration at 1.

The declaration makes clear that Deborah's intent as settlor is to provide supplemental support beyond any support which can be provided by any governmental, public, or private agency. To this end, it states that no part of the trust is to be considered owned by Lorraine, that Lorraine has no vested right or interest in the income or principal, and that no property, goods or services purchased or owned by the trust for Lorraine's use is to be considered as under Lorraine's control. 1. The declaration prohibits any expenditure for "basic food, clothing and shelter" or making any trust income or principal available to Lorraine for conversion into such items, unless all governmental and private agency benefits for which Lorraine may be eligible because of her disability have been fully exhausted. 3, § 4. The declaration also prohibits any direct payment to Lorraine and prohibits the trustee from making any distribution for Lorraine's support if such support is otherwise available through a governmental agency. 1,3.

Within this framework, the Trustee has sole discretion to distribute principal or income for Lorraine's exclusive benefit to provide for her supplemental support and maintenance, but only to the extent that such items are not otherwise available through any governmental entity or private agency. 2; 3, §§ 5-9. The declaration also contains spendthrift provisions, protecting the trust estate from the creditors' claims and prohibiting assignment of a beneficiary's interest. 3, § 3; 5, § 2.

Deborah is Trustee. If her acting as Trustee in any way jeopardizes Lorraine's entitlement to government benefits or subjects the trust to claims of reimbursement by any private or governmental body, successor trustees are named. 5.

Deborah, as settlor, has reserved the right to amend the trust "in whole or in part for whatever reason" and has given the Trustee the right to amend or reform the trust provisions the Trustee deems it necessary, due to changes in law, in order to preserve the stated intent of the trust. 3, § 10. In the event of a court determination that reimbursement is required or disqualification from, or reduction, in governmental benefits, the declaration directs the Trustee to amend or reform the trust to effect the Settlor's purpose and, if that cannot be done, to terminate the trust and distribute the trust principal and income to Deborah, "not in any fiduciary capacity, but as [Deborah's] sole and exclusive property without any preconditions or requirements on the use or application of those funds." 3, § 11. If Deborah is deceased at the termination of the trust, distribution is to be made to Lorraine's guardians, also as their sole and exclusive property and not in any fiduciary capacity, or, if no guardian to the Trustees as their sole and exclusive property and not in any fiduciary capacity. Id. If the trust is still in existence at Lorraine's death, the trust estate is to be distributed to Deborah or to her heirs, per stirpes. 4.

DISCUSSION

Resources, for SSI purposes, include assets that a person owns and can convert to cash to be used for the person's support and maintenance. See 20 C.F.R. § 416.1201(a). If the person has the right or power to liquidate property, or her share of the property, it is a resource. Id. Trust assets are considered an SSI recipient's resource if the SSI recipient has the power to revoke the trust and use the trust assets to meet his needs for food, clothing, or shelter, or if he can direct use of the trust assets for such purposes. See POMS SI 01120.200(D)(1)(a). Whether the person can revoke the trust or direct use of the trust assets depends on the terms of the declaration of trust and on applicable State law. POMS SI 01120.200(D)(2).

We deal first with the additions to the trust made pursuant to the Statement of Intent signed by Lorraine's father, David. If the support payments had been made by Lorraine's father to Deborah in compliance with the settlement agreement that the Missouri court incorporated into the divorce decree, the payments would have been considered Lorraine's income for SSI purposes. See 20 C.F.R. 416.1121(b). The Statement of Intent seeks to modify the court's support order in two ways. First, instead of making support payments directly to Deborah for Lorraine's benefit, in accordance with divorce decree, the Statement of Intent contemplates payment of the same amount to Deborah as Trustee of the discretionary trust. Second, the divorce decree required that the payments be used for Lorraine's "support." As Lorraine's guardian, Deborah has a duty to use the funds for Lorraine's support. Under the terms of the discretionary trust, however, Deborah could use the funds for supplemental costs, but she would be precluded from making disbursements for basic food, clothing and shelter, and she would have no obligation to make any disbursements at all.

The question is whether Lorraine's parents can enter into an agreement which affects Lorraine's rights and effectively modifies the order of the Missouri court. The duty of support which is applicable is that of the law of the state where the obligor is present, in this case the father's domiciliary state of Missouri. See 750 ILCS 20/7. Illinois law also recognizes a child support order issued in another state, if it is the only such order. 750 ILCS 22/207. In addition, a post-majority child support obligation entered into pursuant to a divorce settlement agreement will be recognized by Illinois courts. See In re Marriage of L~, 590 N.E.2d 1027, 1028 (Ill. App. 1992). Thus, the support order encompassed by the Missouri court's divorce decree is controlling and would be recognized by an Illinois court.

Under Missouri law, a party cannot, by contract or agreement, alter his obligation to pay future child support. Because child support payments are for the benefit of the child, the parties cannot settle or compromise future payments without judicial modification of the support decree. Only a court has the power to alter future child support payments. Mora v. Mora, 861 S.W.2d 226, 227 (Mo. App. 1993); see also, Boland v. State of Missouri, Dept. of Social Services, 910 S.W.2d 754, 758 (Mo. App. 1995), McLaughlin v. Horrocks, 883 S.W.2d 95, 97 (Mo. App. 1994).

Illinois case law is in accord. See Blisset v. Blisset, 526 N.E.2d 125, 127 (Ill. 1988) (parents may modify an agreement for child support only by petitioning the court for modification); Miller v. Miller, 516 N.E.2d 837 (Ill. App. 1987)(mother could not consent to modification of settlement, incorporated into divorce decree, which provided that father would pay college expenses for child, even after age 18).

Although David signed the Statement of Intent prior to the date of the divorce decree, in the divorce decree the court refers only to the settlement agreement. There is no indication that the court was aware at that time, or was subsequently informed, of the Statement of Intent or the plans to create a discretionary trust. Since payment of the support into the discretionary trust amounts to a modification of the court's support order, we conclude that such modification would not be valid without court approval. Therefore, the payments made by David to the trust in lieu of the court ordered support payments should be considered Lorraine's income, available for her support and maintenance, the purpose apparently intended by the Missouri court's divorce decree.

Even if the Statement of Intent were found to be valid, we believe that the portion of the trust assets derived from the payments made pursuant to the Statement of Intent should, nevertheless, be treated as Lorraine's income for SSI purposes. We also think it reasonable to conclude, in the absence of any indication that the rest of the trust assets were derived from property belonging to someone other Lorraine, that all of the trust assets should be considered Lorraine's resource. This is especially true since the Declaration of Trust suggests that Deborah, as settlor, contributed only $10.00 to the trust.

Under Illinois law, a discretionary trust for the benefit of a disabled person is not liable to pay or reimburse the State or any public agency for financial aid or services to the disabled person, except to the extent that the trust was created by the disabled person or the trust assets are distributed to, or under the control of, the disabled person. 760 ILCS 5/15.1 (1996 Supp.). Although the exception is not applicable where the trust complies with federal Medicaid reimbursement requirements, id., the declaration in this case, while referring to the applicable Illinois statute, see 1, does not provide for Medicaid reimbursement. See POMS SI 01730.048.

Under the terms of the declaration of trust, Lorraine does not, herself, have any right to revoke the trust or direct use of the trust assets for her support. Nor is Lorraine named as the person who created the trust (settlor). However, Lorraine's mother and guardian, Deborah, has virtually total control over use of the trust assets. As settlor, Deborah retained the right to amend the trust, in whole or in part, for any reason, which amounts to the power to revoke. See B~, Trusts 516 (6th ed. 1987)(under a power to amend, an irrevocable trust may be made revocable).

Deborah is also Lorraine's guardian. Where a guardian holds legal title, on behalf of a sole beneficiary of a trust, to assets which are subsequently transferred into a trust, the trust beneficiary is, in effect, the settlor of the trust. See In re Estate of H~, 635 N.E.2d 853, 855 (Ill. App. 1994), cert. denied, 642 N.E.2d 1281 (one who furnishes consideration is the settlor of the trust). Therefore, if Lorraine is the sole beneficiary of the trust, she is the settlor, at least with regard to whatever portion of the trust res was derived from assets which were hers or which her guardian held for her benefit. As we discuss below, contributions of the support payments to the trust should be considered contributions from Lorraine.

In this case, it is not clear from the documents submitted whether Deborah created the trust in her own right or in her capacity as Lorraine's guardian; nor is it clear what portion of the trust assets were derived from property which had been owned by Lorraine or which Deborah held on Lorraine's behalf. The declaration does not indicate whether even the $10.00 that initially funded the trust was Deborah's money or Lorraine's money. Nor is there any information about additions to the trust other than the payments made by David pursuant to the Statement of Intent. If Deborah created the trust as Lorraine's guardian, or if all of the assets of the trust derived from property previously held by Lorraine or by Deborah on Lorraine's behalf as guardian, then Lorraine is the true settlor of the trust and can revoke the entire trust, or amend it to allow access for her support and maintenance. Thus, all of the trust assets would be her resources for SSI purposes.

Under the agreement between Lorraine's parents, Deborah receives the "support" payments as trustee for Lorraine. Nevertheless, those support payments are, in effect, Lorraine's income. Thus, as to the portion of the trust res traceable to those "support" payments, Lorraine is actually the settlor of the trust. Through her guardian, she has the power to revoke the trust by virtue of Deborah's retention of the unconditional power to amend the trust. If she is the sole beneficiary of the trust, Lorraine also has the power to revoke any portion of the trust for which she can be considered the settlor. See Stewart v. Merchants National Bank of Aurora, 278 N.E.2d 10, 12 (Ill. App. 1972) (trust settlor who is also the sole beneficiary can revoke the trust without the trustee's consent, even though no power of revocation was reserved when the trust was created). Thus, the portion of the trust which is derived from the "support" payments should be considered Lorraine's resource for SSI purposes.

That the declaration calls for disbursement, upon termination of the trust, to Deborah in her own right, rather than on Lorraine's behalf does not change the result. Since Deborah retained the unconditional right to amend the trust, including the right to amend the provisions for disbursement upon termination of the trust, no intent to create a remainder interest in someone other than Lorraine can be implied. Thus, Lorraine is the sole beneficiary of the trust and has the power to revoke the portion of the trust as to which she is the settlor. Furthermore, as Lorraine's guardian, Deborah would have a fiduciary duty to use that portion of the trust assets which derived from Lorraine's assets not for her own benefit, but for Lorraine's benefit. To receive the assets of the trust in her own right would be a violation of Deborah's fiduciary duty as Lorraine's guardian.

While the declaration recites that Deborah paid $10.00 into the trust at its creation, there is no clear indication whose funds were used to create the trust, nor is there any indication as to whether there were any subsequent additions to the trust res. We think it unlikely that Deborah, who would have to provide an accounting as guardian, would combine Lorraine's property with another person's property in forming the trust res. Deborah is receiving additions to the trust from David in lieu of the court ordered support payments, additions which are actually Lorraine's property. This implies that the trust was created by Deborah as Lorraine's guardian with Lorraine's assets and that Lorraine is, therefore, the true settlor. As settlor, Lorraine would have the power, through her guardian, to revoke the trust or to compel payments from the trust for her support and maintenance. We conclude that, unless Deborah can show that she did not create the trust in her capacity as guardian and that certain trust assets were derived from sources other than Lorraine's property, all of the assets of the trust should be considered Lorraine's resources for SSI purposes.


Footnotes:

[1]

Paragraphs 7(c) and 7(d) relate to distribution of trust amounts at the death of the beneficiary.

[2]

On March 27, 1989, the Office of the General Counsel, Region VII issued an opinion to the then Assistant Regional Commissioner, Programs, indicating that the assets in the then proposed MFT would not be countable resources for purposes of SSI.


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PS 01825.028 - Missouri - 06/05/2014
Batch run: 06/05/2014
Rev:06/05/2014