You asked us to determine whether the Master Trust Agreement (“Trust”) and National
Joinder Agreement (“Joinder Agreement”) from River Communities Fiduciary Services,
Inc. satisfy the pooled trust exception at 42 U.S.C. § 1396p(d)(4)(C).
The Trust satisfies the pooled trust exception to counting assets in the Trust sub-accounts
as resources. The beneficiary sub-accounts are also not countable as resources under
the regular resource rules.
Definitions, Establishment, and Purpose
Pennsylvania nonprofit corporation River Communities Fiduciary Services, Inc. (“River
Communities” or “the Trustee”) established the Trust. Trust at 4, § A(1). The Trust
seeks to create a pooled trust with sub-accounts for each beneficiary. Trust at 4,
§ A(1). Distributions from each sub-account can “be used to supplement the funds and
services” a beneficiary receives from SSI and Medicaid. Trust at 4, § A. Distributions
can be used to supplement care, provide clothing, provide transportation and travel
expenses for someone to help the Beneficiary receive care, and other purposes. See Joinder Agreement at 2, § C.
The “Trustee” is River Communities. Trust at 5, § A(4). River Communities will receive
and consider requests to distribute funds from each Beneficiary’s subaccount. Trust
at 5, § A(4). A “Beneficiary” is an individual who meets the definition of disability
at 42 U.S.C. § 1382c(a)(3). Trust at 5, § A(3). The Beneficiary “will receive the
benefits” of their sub-account within the Trust. Trust at 4, § (A)(2). A “Settlor”
is the creator of a sub-account within the Trust and can be the Beneficiary herself;
the parent, grandparent, or legal guardian of the Beneficiary; or the court. Trust
at 4, § (A)(2). The Beneficiary and Settlor are specified in the Joinder Agreement,
along with specific kinds of distributions the Settlor would like the Trustee to “especially
consider.” Joinder Agreement at 1-2.
All of the sub-accounts within the Trust are pooled for investment and management
of the funds. Trust at 4, § A(1)-(2).
Amendment, Termination, and Distribution of Assets Upon Termination
The Trust is irrevocable and funds deposited into a sub-account are non-refundable.
Joinder Agreement at 3; Trust at 4, § A(2). However, the Board of River Communities
retains authority to “conform this agreement [the Trust]” to relevant laws and regulations
“while permitting assets to be retained in the Pooled Trust without causing ineligibility.”
Trust at 6, § E. Further, if it becomes impossible or impractical to fulfill the purpose
of the Trust, the Board has discretion to either terminate the Trust or resign as
Trustee, in which case the Board will transfer all sub-account assets to another trust
that meets the requirements of 42 U.S.C. § 1396p(d)(4)(C). If a successor trustee
cannot be found, then the state(s) will be reimbursed, allowed expenses paid, and
all remaining funds distributed to the Beneficiary. Trust at 6, § E. This early termination
provision is discussed later in this opinion.
Absent early termination, a sub-account terminates upon the death of the Beneficiary
and all residual funds are retained by the Trust. Trust at 7, § H. To the extent these
funds are not retained by the Trust, the Trust will pay the state(s) an amount equal
to the total amount of medical assistance paid on behalf of the individual under the
state Medicaid plan. Trust at 7, § H. Finally, the Joinder Agreement allows the Settlor
to specify a residual beneficiary who will receive residual funds upon the Beneficiary’s
death. Joinder Agreement at 3, § E. The residual beneficiary will only receive the
funds “after payment to the State(s) as reimbursement for Medical Assistance received.”
Joinder Agreement at 3, § E.
The Trust states that no money or property in the Beneficiary’s sub-account will be
“pledged, assigned, transferred, or in any manner anticipated, charged or encumbered
by any Beneficiary or remainderman,” except by operation of law. Trust at 5, § B.
The Trust also provides that no money or property in the sub-account will be “in any
manner liable while in the possession of the Trustee for [the Beneficiary’s] debts,
contracts or obligations, voluntary or involuntary or for any claims, legal or equitable
against the Beneficiary or remainderman.” Trust at 5, § B. Finally, the Trust provides
that the Trustee is not liable for the debts of a Beneficiary but may, in its sole
discretion, choose to pay such debts. Trust at 5, § B.
Trust and Joinder Agreement
The Trust is effective as to a Beneficiary once the Settlor signs and dates the Trust,
completes the Joinder Agreement, and submits funds for deposit in the Beneficiary’s
account. The account is created once accepted by the Trustee. Trust at 4, § A(2);
see also Joinder Agreement at 3. The Trust is irrevocable once the Joinder Agreement is executed
and funds are deposited into the Beneficiary’s account. Trust at 4, § A(2); Joinder
Agreement at 3.
(A) The Trust Meets the Pooled Trust Exception Under 42 U.S.C. § 1396p(d)(4)(C)
In general, irrevocable trusts created after January 1, 2000, that are established
with the assets of an individual by means other than transfer by a will are considered
to be a resource of that individual for SSI eligibility purposes. See 42 U.S.C. § 1382b(e)(2)(A). The purpose of the trust, the discretion of the trustee,
and restrictions on distributions will not affect its status as a resource. See id. at § 1382b(e)(2)(C). However, there is an exception for trusts that are established
under the provisions of § 1917(d)(4)(C) of the Act, commonly known as the pooled trust
exception. See 42 U.S.C. § 1396p(d)(4)(C). For this exception to apply, the pooled trust must satisfy
(1) The trust must be established and maintained by a non-profit association;
(2) A separate account must be maintained for each beneficiary of the trust, but the
trust pools these accounts for purposes of investing and managing the trust;
(3) Accounts in the trust must be established solely for the benefit of the disabled
(4) The sub-account at issue must be established by the individual, a parent, a grandparent,
a legal guardian, or a court; and
(5) The trust must provide that, to the extent that amounts remaining in the beneficiary’s
sub-account upon the death of the beneficiary are not retained by the trust, the state(s)
will receive all amounts remaining in the trust upon the death of the individual up
to an amount equal to the total medical assistance paid on behalf of the individual
under the state Medicaid plans.
See id.; POMS SI 01120.203(B)(2). As discussed below, the Trust meets these requirements.
(1) The Trust Is Established and Maintained by a Nonprofit Association
The Trust was established by River Communities, a Pennsylvania nonprofit. See River Communities IRS 501(c)(3) Letter; Trust at 4, § A(1); 5, § A(4). The Trust states
that River Communities will manage the Trust, and there is no indication that a for-profit
investment advisor or fund manager will be used to oversee the Trust. Trust at 4,
§ A(1). River Communities thus maintains the Trust.
(2) Separate Sub-Accounts Are Maintained
Consistent with the second requirement, each Beneficiary has a separate sub-account
that is pooled for investing and managing the funds. See Trust at 4-5.
(3) The Trust Satisfies the Requirement that Accounts Be Established Solely for the Benefit
of the Disabled Individual
To meet the third requirement, each beneficiary’s sub-account must be established
for the sole benefit of the disabled individual. See POMS SI 01120.203(B)(2)(a), (e). The sub-account cannot benefit any other individual or entity during
the disabled individual’s lifetime, or allow for termination of the account prior
to the individual’s death and payment of the corpus to another individual or entity.
Id. Exceptions are permitted for certain administrative expenses and payments to a third
party for goods, services, and limited travel expenses. POMS SI 01120.201(F)(2)(b)-(c).
Trusts may provide for reasonable compensation of the trustee and for reasonable costs.
POMS SI 01120.201(F)(2)(c). Here, the Trust allows the Trustee to charge monthly fees for trust maintenance
and other services related to the trust. Trust at 6, § C. The Board of River Communities
determines the fee amount on an annual basis. If the fees charged to an account exceed
the annual Trust maintenance fee, the Trustee will seek permission from the court
to charge the account. Trust at 6, § C. Agency policy cautions against “routinely
question[ing] the reasonableness of a trustee’s compensation,” and in this case, there
is no indication that the Trustee’s fees are unreasonable. POMS SI 01120.201(F)(2)(c). Thus, the fees charged by the Trustee satisfy the administrative expenses
exception to the sole benefit requirement.
Trusts may also allow certain third party payments and still satisfy the sole benefit
requirement. See POMS SI 01120.201(F)(2)(b). Here, the Joinder Agreement allows the Trustee to “especially consider”
certain distribution uses. Joinder Agreement at 2, § C; Trust at 5, §§ A(4), B. These
uses include supplemental care and clothing, which are permitted under the third party
payment exception to the sole benefit rule. See POMS SI 01120.201(F)(2)(b). The Joinder Agreement also states the Trustee will consider transportation
and travel expenses for one person “which are necessary in order for the trust beneficiary
to obtain medical treatment and/or travel expenses to visit a trust beneficiary who
resides in an institution, nursing home, or other long-term care facility…in which
a non-family member or entity is being paid to provide or oversee the individual’s
living arrangement.” Joinder Agreement at 2, § C. The Joinder Agreement clarifies
that the “travel must be for the purpose of ensuring the safety and/or medical well-being
of the individual.” These provisions track agency policy and would fall under the
third party travel expenses exception to the sole benefit rule. See POMS SI 01120.201(F)(2)(b).
The Joinder Agreement also allows for payment of “[t]ravel companion expenses” for
“non-medical related travel” when the need for a travel companion is established by
a doctor’s order. Joinder Agreement at 2, § C. Although not specifically listed in
the POMS related to third-party travel expenses, we understand that the narrow construction
of this POMS is intended to ensure that third-party travel is consistent with the
sole benefit requirement. If a travel companion is required pursuant to a doctor’s
order, this is sufficient to show that the travel is necessary for the sole benefit
of the beneficiary. POMS SI 01120.201(F)(2)(b).
The Joinder Agreement also contains a provision allowing the Trustee to especially
consider distributions for “Moderate Birthday and Holiday presents for the sole benefit
of the Beneficiary.” Joinder Agreement at 2, § C. It is not clear whether this provision
would provide for gifts to the beneficiary, or gifts to others from the beneficiary.
Even if the latter is intended, our view is that an SSI recipient has an interest
in reciprocal gift giving, and as long as the gifts are reasonable, a reciprocal gift
can be viewed as for the beneficiary’s benefit. Thus, we do not believe this provision
violates the sole benefit requirement.See POMS SI 01120.203(B)(1)(e).
Finally, the Trust contains an early termination provision. See Trust at 6, § E. Agency policy provides that a pooled trust with an early termination
provision will be excepted from the resource counting rules if three criteria are
met: (1) after payment of allowable administrative expenses, the State(s) receive
all amounts remaining in the trust up to an amount equal to the amount of medical
assistance paid on behalf of the beneficiary; (2) all remaining funds are distributed
to the beneficiary; and (3) the beneficiary does not have power to terminate the trust.
POMS SI 01120.199(F)(1), (3); POMS SI 01120.203(B)(2)(g). The administrative expenses that may be deducted before State Medicaid
reimbursement include state and federal taxes incurred by the termination of the trust,
and reasonable fees and administrative expenses associated with the termination of
the trust. POMS SI 01120.199(F)(3).
Here, the Trust’s early termination provision satisfies all three criteria. The Trust
first contemplates that, if termination is necessary, the Trustee will transfer sub-account
assets to another trust that meets the pooled trust requirements. Trust at 6, § E.
This is permissible. POMS SI 01120.199(F)(2). Otherwise, the Trust states that upon early termination, “after reimbursement
to the state(s) and payment of allowed expenses, all remaining funds will be distributed
to the beneficiary.” Trust at 6, § E. This language satisfies the first two criteria.
See POMS SI 01120.199(F)(1), (3). The third requirement is also met because the early
termination provision states that the Board of River Communities has “sole and absolute
discretion” to terminate the Trust.
(4) Only Individuals Authorized by Statute May Establish a Sub-Account
To meet the fourth requirement, a sub-account must be established by a parent, grandparent,
legal guardian of an individual, the individual herself, or by a court. See 42 U.S.C.
§ 1396p(d)(4)(C); see also POMS SI 01120.203(B)(2)(f). Here, only those designated parties may establish sub-accounts. See Trust at 4, § A(2); Joinder Agreement at 2, § D(1).
(5) The Trust Properly Provides for Medicaid Reimbursement
The Trust also satisfies the fifth requirement. As permitted by the POMS, the Trust
states that any amounts remaining in a sub-account following a Beneficiary’s death
“shall be retained by the Trust.” See Trust at 7, § H; POMS SI 001120.203(B)(2)(g). It also states that “[t]o the extent
amounts remaining in an individual’s sub-account are not retained by the Trust, the
Trust will pay 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 individual under the
state Medicaid Plan.” Trust at 7, § H. The Joinder Agreement also allows a Settlor
to specify a residual beneficiary upon the Beneficiary’s death, but this provision
clarifies that such distribution can only occur “after payment to the State(s) as
reimbursement for Medical Assistance received.” Joinder Agreement at 3, § E. Since
the Trust and Joinder Agreement contain Medicaid payback provisions that are not limited
to any particular state, and since the Joinder Agreement’s distribution provision
gives priority to the states over payments to residual beneficiaries, the Trust adequately
provides for Medicaid reimbursement. See POMS SI 01120.203(B)(1)(h), (3)(b).
(B) The Sub-Accounts Are Not a Resource Under the Regular Resource Counting Rules
Even where a pooled trust meets all of the above requirements, sub-accounts must still
be evaluated under the regular resource rules. See POMS SI 01120.203(B)(1)(A), SI 01120.200. Under these rules, trust property may be a resource for SSI purposes if the individual:
(1) has the authority to revoke the trust and then use the funds to meet her basic
needs for food or shelter; (2) can direct the use of the trust principal for her support
and maintenance; or (3) can sell her beneficial interest in the trust. See POMS SI 01120.200(D)(1)(a)-(b).
(1) Is the Trust Revocable?
No, the Trust is not revocable. The Trust and Joinder Agreement provide that the Trust
sub-account and all funds deposited into it are irrevocable. Trust at 4, § A(2); Joinder
Agreement at 3. Despite this language, Pennsylvania follows the general principle
of trust law that if a settlor is also the sole beneficiary of a trust, the trust
is revocable regardless of language to the contrary. See Long v. Tradesmen’s Nat’l Bank & Trust. Co., 165 A. 56 (1933); see also Schellentrager v. Tradesmens Nat’l Bank & Trust Co., 88 A.2d 773 (Pa. 1952) (citing Restatement (First) of Trusts § 339). In this case,
the Trust remains irrevocable because the Trust provides that, upon the death of a
beneficiary, all residual funds shall be retained by the Trust. Trust at 7, § H. This
makes the Trust itself an identifiable residual beneficiary.
(2) Can the Beneficiary Direct the Use of the Trust Principal?
No, the Beneficiary cannot direct the use of the Trust principal for her support and
maintenance. The authority to control the Trust principal may be indicated by either
“specific trust provisions allowing the beneficiary to act on his or her own or by
permitting the beneficiary to order actions by the trustee.” POMS SI 01120.200(D)(1)(b). Here, while the Joinder Agreement allows the Settlor to specify certain
distribution uses that she would like the Trustee to “especially consider,” the Trustee
retains the power to “determine whether the request [for a distribution] will be honored.”
Joinder Agreement at 2, § C; Trust at 5, §§ A(4), B. Thus, the Beneficiary cannot
direct the use of the Trust principal.
(3) Can the Beneficiary Sell Her Beneficial Interest in the Trust?
The Beneficiary might be able to sell her interest in the Trust, but it would have
no significant market value. The Trust contains a spendthrift provision precluding
the Beneficiary from assigning or otherwise transferring her interest in her sub-account.
See Trust at 5, § B; see also POMS SI 01120.200(D)(1)(a).
In the event the Beneficiary is also funding her own sub-account, the spendthrift
provision may be invalid. See In re Bower’s Trust Estate, 29 A.2d 519, 521 (Pa. 1943). In such case, though, the Beneficiary’s interest in
the Trust would have no significant market value because the disbursements are ultimately
within the discretion of the Trustee. See Trust at 5, § A(4). Thus, the Beneficiary’s interest in the Trust would have zero
market value. See POMS SI 01120.200(D)(1)(a) (stating that if the beneficiary can sell his interest
in the trust, that interest is a resource); POMS SI 01140.044(A)(1).
We conclude that the Trust satisfies the pooled trust exception as well as the regular
resource rules. Therefore, sub-accounts should not be counted.