TN 104 (04-18)

PS 01825.053 Washington

A. PS 18-049 Does Amendment to Muckleshoot Tribe Minor Trust Change Prior Opinion Regarding SSI Exclusion?

Date: February 1, 2018

1. Syllabus

This Regional Chief Counsel (RCC) opinion examines whether the Restated Minors’ Trust Agreement, established under the Indian Gaming Regulatory Act for Minor Children and Legally Incompetent Adults (IGRA Trust), meets the requirements described in POMS SI 01120.195 for evaluating whether the IGRA Trust assets are resources for Supplemental Security Income (SSI) purposes. The RCC concludes that the IGRA Trust Agreement meets the requirements described in POMS SI 01120.195. Accordingly, the Tribe is treated as the grantor of the Trust, and POMS SI 01120.200 should be used to determine whether the Trust assets are a resource for SSI purposes.

2. Opinion

QUESTION PRESENTED

Whether the Trust established by the Restated Minors’ Trust Agreement, dated October 1, 2017 (the “Trust Agreement”), meets the requirements described in POMS SI 01120.195 for evaluating whether the Trust assets are resources for Supplemental Security Income (SSI) purposes.

BRIEF ANSWER

Yes. The Trust established under the Trust Agreement meets the requirements described in POMS SI 01120.195. Accordingly, the Tribe is treated as the grantor of the Trust, and POMS SI 01120.200 should be used to determine whether the Trust assets are a resource for SSI purposes.

SUMMARY OF FACTS

The Tribe operates a gaming facility. The Tribe distributes a portion of the net revenues of the gaming enterprise on a per capita basis to tribal members. Distributions to minors and legally incompetent adults are deposited into trust accounts.

ANALYSIS

Relevant Authority

Indian tribes may distribute gaming revenues to tribal members if they comply with the Indian Gaming Regulatory Act (IGRA). IGRA requires tribes to prepare a revenue allocation plan. 25 U.S.C. § 2710(b)(3)(A). The revenue allocation plan must provide that gaming revenues will be used only for certain purposes, including providing “for the general welfare of the Indian tribe and its members.” 25 U.S.C. § 2710(b)(2)(B)(ii). As part of providing for its members, tribes are required to ensure that “the interests of minors and other legally incompetent persons who are entitled to receive any of the per capita payments are protected and preserved” and funds are available “in such amounts as may be necessary for the health, education, or welfare of the minor or other legally incompetent person.” 25 U.S.C. § 2710(b)(3)(C). To comply with this provision of IGRA, some Indian tribes create a trust that holds distributions to minors and legally incompetent adults (referred to herein as an IGRA trust).

The Internal Revenue Service’s Revenue Procedure 2011-56 provides a safe harbor under which beneficiaries of an IGRA trust are not required to include amounts in gross income when transferred to, or earned by, the IGRA trust, but must include trust distributions in income when actually or constructively received by the beneficiary. Revenue Procedure 2011-56 establishes nine requirements that, when met, permit a beneficiary to exclude IGRA trust assets from gross income until it is actually or constructively received.

SSA previously treated beneficiaries of IGRA trusts as the grantor of the trust. Following the issuance of and in partial reliance on Revenue Procedure 2011-56, SSA issued POMS SI 01120.195, changing its position for evaluation of IGRA trusts effective November 14, 2014. Under this POMS, a tribe will be treated as the grantor of an IGRA trust if the trust meets nine specific requirements. If the tribe is found to be the grantor, SSA uses the policy in POMS SI 01120.200 to determine if the IGRA trust assets are a resource. If the tribe is not the grantor of the IGRA trust, the policy in POMS SI 01120.201 is used to determine if the IGRA trust assets are a resource.

Trust Documents

The Muckleshoot Indian Tribe Restated Minors’ Trust Agreement, dated October 1, 2017, governs the establishment and administration of a trust (the “Trust”) for Minors and Legally Incompetent Persons to hold per capita distributions of net gaming revenues. 1 Net gaming revenues are distributed pursuant to the Tribe’s Revenue Allocation Plan, and are referred to as “Tribal Gaming Revenue Contributions.” Trust Agreement §§ 1.14, 1.16. A separate bookkeeping account (“Account”) is maintained for each Minor or Legally Incompetent Person who is a beneficiary of the Trust. Trust Agreement § 1.1.

Application of Authority to Trust Documents

Under POMS SI 01120.195, an analysis of whether an IGRA trust is a resource begins with a determination of whether the IGRA trust meets the nine requirements of Section F of the provision. Here, the Trust meets all nine requirements of Section F of POMS SI 01120.195. Each requirement is discussed below.

The Indian tribe establishes the trust for the benefit of tribe members who are minors and legally incompetent adults and it funds the trust using only per capita payments from gaming revenues.

Section 2.1 states the Trust is established for holding Tribal Gaming Revenue Contributions distributed for the benefit of Minors and Legally Incompetent Persons. That section also provides that all contributions to the Trust must be Tribal Gaming Revenue Contributions. This section of POMS SI 01120.195 is satisfied.

The trust beneficiary is a minor or legally incompetent adult at the time the trust (or trust account) is established.

Section 3.1 provides that a beneficiary of the Trust must be a Minor or a Legally Incompetent Person at the time his or her Account is established. This requirement of POMS SI 01120.195 is met.

The trust only allows contributions while the beneficiary is still a minor or legally incompetent adult.

Section 3.2 of the Trust Agreement provides that Tribal Gaming Revenue Contributions shall only be allocated to a beneficiary’s trust account while such beneficiary is a Minor or Legally Incompetent Person. This requirement of POMS SI 01120.195 is met.

The trust instrument states that it is a grantor trust and the Indian tribe is the grantor of the trust, and grants to the Indian tribe a power or interest in the trust assets, such as the ability to vote any shares held in trust.

Section 2.2 of the Trust Agreement provides that the Trust is intended to be an irrevocable grantor trust, of which the Tribe is the grantor. See also Trust Agreement § 9.1. The Tribe has multiple powers with respect to the Trust, including borrowing from the Trust, substituting assets, voting stock or securities held by the Trust, and controlling the investment and reinvestment of Trust funds. Trust Agreement § 9.2. This section of POMS SI 01120.195 is satisfied.

The Indian tribe is the owner of the trust for tax purposes and all the trust assets and the trust principal and income are subject to claims of general creditors of the Indian tribe under applicable federal, state, local, and tribal law.

The Trust Agreement expressly states that the Trust is intended to be a grantor trust, of which the Tribe is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code, which regards trust grantors treated as owners. Trust Agreement § 2.2. See, e.g., 26 U.S.C. §§ 671-679. Trust Agreement § 2.3 provides that the Tribe is the owner of the principal of the trust and any earnings on that principal.

Section 4.1 of the Trust Agreement provides that at all times, the Trust Fund is subject to the claims of the Tribe’s general creditors under any applicable federal, state, or tribal law, and in the event of Insolvency. The “Trust Fund” is defined as the Trust’s principal and earnings on that principal. § 1.19. This requirement under POMS SI 01120.195 is satisfied.

At all times while the trust is in effect, the principal and income of the trust must be subject to claims of general creditors under applicable law. In addition, the trust documents must require the trustee to cease payments to or for the benefit of the beneficiary, and must require that the trustee hold trust assets for the benefit of the Indian tribe’s general creditors throughout any period during which the trustee believes or has reason to believe that the Indian tribe is unable to pay its debts as they become due, or is subject to a pending insolvency or bankruptcy proceeding.

Sections 4.1 and 6.2 of the Trust Agreement provide that at all times, the Trust Fund is subject to the claims of the Tribe’s general creditors under any applicable federal, state, or tribal law, and in the event of Insolvency. Further, the Trust Agreement provides that the Trustee must cease all regular and advance distributions and hold the Trust assets for the benefit of general creditors if the Tribe is unable to pay its debts as they become due or the Tribe is subject to a pending insolvency or bankruptcy proceeding as a debtor under applicable federal law. Trust Agreement §§ 1.6, 6.1, 6.2. This requirement under POMS SI 01120.195 is satisfied.

The trust beneficiary does not have any preferred claim or beneficial ownership interest in any assets of the trust, and any rights created under the trust documents must be unsecured rights. In addition, amounts payable to, or for his or her benefit, cannot be anticipated, assigned (either at law or at equity), alienated, pledged, encumbered or subjected to garnishment, levy, or other legal or equitable process.

Section 2.3 of the Trust Agreement provides that beneficiaries have no preferred claim on, or any beneficial ownership interest in, the Trust Fund. Further, all rights created under the Trust Agreement are mere unsecured rights, and beneficiaries do not have the legal authority to revoke or terminate the Trust, or direct the Trust Fund for their own support and maintenance. Trust Agreement § 2.3. Section 16.2 provides that the interest of a beneficiary may not be subject to the claims of any creditor, or spouse for alimony or support, or others, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered, anticipated, assigned (either at law or equity), pledged or subject to attachment, garnishment, levy, execution, or other legal or equitable process prior to the designated date of distribution under Section 5.3. This section of POMS SI 01120.195 is satisfied.

Trust assets are not available to or for the benefit of the beneficiary until the beneficiary ceases to be a minor or legal incompetent, except for the distributions for the beneficiary’s health, education, or welfare made at the discretion of the trustee and pursuant to the trust instrument.

Section 5 of the Trust Agreement provides that distributions are not made until:

a) the beneficiary has reached the age of 19, is not a Legally Incompetent Person, has met education requirements; and has completed a financial education course (Trust Agreement § 5.3.1);2

b) the beneficiary has reached the age of 21, is not a Legally Incompetent Person, and has completed a financial education course (Trust Agreement § 5.3.2);

c) the beneficiary has died and one or more members of his or her family qualify to receive distributions (Trust Agreement § 5.4); or

d) if the beneficiary meets requirements for an advance distribution, which may be made for the beneficiary’s health, education, safety, and welfare3 , or for an “unforeseeable emergency” that causes a severe financial hardship to the beneficiary. Such advances are made at the discretion of the Trustee (Trust Agreement §§ 5.5, 5.6).

As defined by the Trust Agreement, unforeseeable emergency means a severe financial hardship to the beneficiary resulting from (i) a sudden and unexpected illness or accident of the beneficiary or a dependent of the beneficiary, (ii) the loss of the beneficiary’s property due to casualty, or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the beneficiary. Trust Agreement § 5.5.3.1. The Tribe intends that unforeseeable emergencies will be evaluated under IRS regulations and guidance issued under Internal Revenue Code Section 457(d)(1)(A)(iii), and such distributions are capped at $10,000.4 Trust Agreement §§ 5.5.3.1, 5.5.3.2.

This requirement under POMS SI 01120.195 is satisfied.

Upon the beneficiary’s death, the beneficiary’s share must be paid to the Indian tribe, unless the trust document provides for payment either:

  • to persons who may inherit from the beneficiary under applicable state or tribal inheritance laws; or

  • based on the terms of a valid will or trust of the beneficiary.

Section § 5.4 of the Trust Agreement states that upon the death of the beneficiary, the amount in the Account is distributed to his or her estate in accordance with a valid will or, if the beneficiary dies intestate, to the beneficiary’s surviving children or to a spouse who is a member of the Tribe. In the absence of a will or surviving children or a spouse who is a member of the Tribe, the remainder of the beneficiary’s Account reverts to the Tribe. Trust Agreement § 5.4. This requirement under POMS SI 01120.195 is satisfied.

CONCLUSION

The Trust established pursuant to the Trust Agreement meets the requirements described in POMS SI 01120.195. Accordingly, the Tribe is treated as the grantor of the Trust, and POMS SI 01120.200 should be used to determine whether the Trust assets are a resource for SSI purposes.

B. PS 17-132 Does the Lifetime Advocacy Plus Master Pooled Asset Special Needs Trust Meet Requirements for Exclusion

Date: August 9, 2017

1. Syllabus

The Lifetime Trust qualifies as a pooled trust under Section 1917(d)(4)(C) (42 U.S.C. § 1396p(d)(4)(C)) and POMS SI 01120.203.B.2. Accordingly, the Lifetime Trust must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI eligibility. POMS SI 01120.203.B.2.a.

2. Opinion

QUESTION PRESENTED

Does the Lifetime Advocacy Plus Master Pooled Asset Special Needs Trust (“Lifetime Trust”) qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.B.2, such that the trust must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for Supplemental Security Income (SSI) purposes?

BRIEF ANSWER

Yes. The Lifetime Trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.B.2. Accordingly, it must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes. POMS SI 01120.203.B.2.a.

SUMMARY OF FACTS

M~, a disabled individual, established an individual account to be administered under the Lifetime Trust, as amended and restated, on February XX, 2015. M~ named herself as the beneficiary, with Lifetime Advocacy Plus as trustee. As documentation of the trust, we have the Joinder Agreement executed by M~, the Lifetime Trust establishing document, an amendment dated August 31, 2010, and an Amendment and Restatement dated March 6, 2015. Because the Amendment and Restatement from March 2015 (“2015 Restatement”) is current and contains all needed requirements, this will be the principal document cited in this opinion.

ANALYSIS

For a claimant to be eligible for SSI, the dollar value of her resources cannot exceed certain statutory limits. 42 U.S.C. § 1382(a)(1)(B) & (3)(B); 20 C.F.R. §§ 416.202(d), 416.1201, 416.1205; POMS SI 01110.003(A). A trust that meets the criteria of 42 U.S.C. § 1396p(d)(4)(C) is considered to be a pooled trust, which must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

A trust is a pooled trust under the statute if satisfies the following criteria:

(1) The trust contains the assets of an individual who is disabled;

(2) The trust is established and managed by a nonprofit association;

(3) 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;

(4) Accounts in the trust are established solely for the benefits of individuals who are disabled;

(5) The individual, his or her parent, grandparent, or legal guardian, or a court must establish the trust account;

(6) Any amounts remaining in the beneficiary’s account upon his or her death that are not retained by the trust must be paid to the State in an amount equal to the total amount of medical assistance paid by the State on behalf of the beneficiary.

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

Here, the Lifetime Trust meets the criteria for a pooled trust. This opinion will address each criterion in turn.

1. Disabled Individual

To qualify as a pooled trust, the trust must contain “the assets of an individual who is disabled[.]” 42 U.S.C. § 1396p(d)(4)(C); see also POMS SI 01120.203.B.2.b (“[T]he individual whose assets were used to establish the trust account must meet the definition of disabled for purposes of the SSI program.”). The Lifetime Trust was funded with M~’s assets, and she is a disabled individual. The trust, therefore, meets this requirement.

2. Established and Managed by a Nonprofit Association

To be a pooled trust, the trust must be “established and managed by a nonprofit association[.]” 42 U.S.C. § 1396p(d)(4)(C)(i); see also POMS SI 01120.203.B.2.c (“For purposes of the pooled trust exception, a nonprofit association is an organization established and certified under a State nonprofit statute.”).

In the trust document, Lifetime Advocacy Plus, the trustee of the Lifetime Trust, holds itself out as a nonprofit organization established under the laws of Washington State. 2015 Restatement, Art. 6(A), Art. 9. The Washington Secretary of State’s Office Registration Data Search confirms this.5 Lifetime Advocacy Plus also represents in the trust document that it established and manages the Lifetime Trust. 2015 Restatement, Art. 6(A). Thus, the trust satisfies this requirement.

3. Separate Accounts for Each Beneficiary, Pooled for Investing

The trust must maintain a separate account for each beneficiary of the account while pooling the accounts “for purposes of investment and management of funds[.]” 42 U.S.C. § 1396p(d)(4)(C)(ii); see also POMS SI 01120.203.B.2.d (“A separate account within the trust must be maintained for each beneficiary of the pooled trust, but for purposes of investment and management of funds, the trust may pool the funds in the individual accounts.”).

The trust document states that the Lifetime Trust maintains separate accounts for all trust beneficiaries but pools the separate accounts for investment and fund management purposes. 2015 Restatement, Art. 6(B). Therefore, the trust satisfies this requirement.

4. Established Solely for the Benefit of Disabled Individuals

The statute requires that trust accounts must be “established solely for the benefit of individuals who are disabled[.]” 42 U.S.C. § 1396p(d)(4)(C)(iii); see also POMS SI 01120.203.B.2.e (“[T]he individual trust account must be established for the sole benefit of the disabled individual.”).

In considering whether a trust is solely for the benefit of the disabled individual, neither the trust corpus nor its income can be paid to a beneficiary other than the disabled individual for which the trust was established. POMS SI 01120.201.F.2.a. Exceptions to this rule include payment for administrative expenses or payments to third parties for goods or services for the benefit of the beneficiary or any travel incident to providing such goods and services. POMS SI 01120.201.F.2.b–c. A trust can terminate early and still meet this requirement if it (1) pays the State “all amounts remaining in the trust at the time of termination up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan(s);” (2) provides that “no entity other than the trust beneficiary may benefit from the early termination” other than payment for taxes or reasonable fees and administrative expenses; and (3) “gives the power to terminate to someone other than the trust beneficiary.” POMS SI 01120.199.F.1 (discussing early termination provisions in trusts). Taxes and administrative fees from the termination of the trust may be paid prior to reimbursement to the State for medical assistance. POMS SI 01120.199.F.3.

The trust document indicates that Lifetime Trust beneficiaries must be disabled, as defined under Title 20, Part 416, Subpart I of the Code of Federal Regulations. The trust explicitly provides that it is for the sole benefit of the beneficiary and that amounts shall be distributed to the beneficiary or to third-parties providing goods or services to the beneficiary. 2015 Restatement, Art. 6(C), (D), Art. 7, ¶ 7.1. The trust also provides that, in the event of early termination, the Lifetime Trust will pay State and Federal taxes, as well as any reasonable fees and administrative expenses, associated with the termination. 2015 Restatement, Art. 8, ¶ 8.5. Following payment of taxes, reasonable fees, and administrative expenses, the trust will reimburse the State or States for Title XIX Medical Assistance benefits. 2015 Restatement, Art. 8, ¶ 8.5. Any funds remaining after paying reasonable fees, administrative expenses, taxes and the Medicaid reimbursement “shall be” distributed to the beneficiary. 2015 Restatement, Art. 8, ¶ 8.5. The beneficiary has no power to terminate the trust early. 2015 Restatement, Art. 4. Thus, the trust satisfies this requirement.

5. Established Through the Actions of the Individual, Parent, Grandparent, Legal Guardian, or Court

The next criterion states that the accounts in the trust must be established by the disabled individual; by a parent, grandparent, or legal guardian of the individual; or by a court. 42 U.S.C. § 1396p(d)(4)(C)(iii); see also POMS SI 01120.203.B.2.f (“[T]he trust account must have been established through the actions of the disabled individual himself or herself or through the actions of the disabled individual’s parent(s); grandparent(s); legal guardian(s); or a court.”).

Here, the documentation shows that M~ established the trust for her own benefit. See M~’s Joinder Agreement. Thus, the trust satisfies this requirement.

6. Remaining Amounts Paid to the State

Finally, to qualify as a pooled trust, any amounts remaining in the beneficiary’s account upon his or her death that are not retained by the trust must be used to reimburse the State for “the total amount of medical assistance paid on behalf of the beneficiary” under the State Medicaid plan. 42 U.S.C. § 1396p(d)(4)(C)(iv); see also POMS SI 01120.203.B.2.h (“[T]he trust must contain specific language that provides that upon the death of the individual, the State(s) will receive all amounts remaining in the trust, up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan(s).”).

Here, the Lifetime Trust provides that, upon the death of the beneficiary, the corpus shall either be retained by the trust or used to reimburse the State for the amount of Medicaid assistance paid, with any remaining funds paid to residual beneficiaries once the State is repaid. 2015 Restatement, Art. 8, ¶ 8.2, 8.4. This complies with the requirement.

CONCLUSION

The Lifetime Trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.B.2. Accordingly, the Lifetime Trust must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI eligibility. POMS SI 01120.203.B.2.a.

C. PS 17-131 Does the Beagle, Burke and Associates Master Pooled Trust Meet Requirements

Date: August 9, 2017

1. Syllabus

The Regional Chief Counsel (RCC) opinion examines whether the Beagle, Burke and Associates Master Pooled Asset Special Needs Trust (“Beagle Trust”) qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.B.2, such that the trust must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for Supplemental Security Income (SSI) purposes. In sum, the RCC concluded that the Beagle Trust does qualify as a pooled trust and must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI eligibility.

2. Opinion

QUESTION PRESENTED

Does the Beagle, Burke and Associates Master Pooled Asset Special Needs Trust (“Beagle Trust”) qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.B.2, such that the trust must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for Supplemental Security Income (SSI) purposes?

BRIEF ANSWER

Yes. The Beagle Trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.B.2. Accordingly, it must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

SUMMARY OF FACTS

In December 2015, C~ received $33,000 to settle a lawsuit against an insurance company. In October 2016, C~ enrolled as a beneficiary in the Beagle Trust by executing a subscription agreement. At the time she enrolled, she received monthly SSI payments of $653.00. Several months later, $16,891.05, representing C~’s net proceeds from her lawsuit settlement, was deposited in C~’s account in the Beagle Trust. Although the depositing check was signed by an individual named S~, according to the subscription agreement, C~’s assets were used to establish her account. See 10/7/16 Subscription Agreement ¶ D (indicating that the grantor or donor was the same as the beneficiary).

ANALYSIS

A. To be a pooled trust, a trust must meet six requirements.

To be eligible for SSI, the dollar value of a claimant’s countable resources cannot exceed certain statutory limits. 42 U.S.C. § 1382(a)(1)(B) & (3)(B); 20 C.F.R. §§ 416.202(d), 416.1201, 416.1205; POMS SI 01110.003(A). A trust that meets the requirements of 42 U.S.C. § 1396p(d)(4)(C) is considered to be a pooled trust, which must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

First, to be a pooled trust, the trust must contain “the assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); accord POMS SI 01120.203.B.2.b. Second, the trust must be “established and managed by a nonprofit association.” 42 U.S.C. § 1396p(d)(4)(C)(i); accord POMS SI 01120.203.B.2.a. Third, the association must maintain “[a] separate account . . . for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.” 42 U.S.C. § 1396p(d)(4)(C)(ii); accord POMS SI 01120.203.B.2.a. Fourth, the accounts must be “established solely for the benefit of the individuals who are disabled.” 42 U.S.C. § 1396p(d)(4)(C)(iii); accord POMS SI 01120.203.B.2.a. Fifth, the trust account must be “established . . . by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.” 42 U.S.C. § 1396p(d)(4)(C)(iii); accord POMS SI 01120.203.B.2.a. Sixth, and finally, “[t]o 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 . . . .” 42 U.S.C. § 1396p(d)(4)(C)(iv); accord POMS SI 01120.203.B.2.a.

A trust that qualifies a pooled trust must still be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

B. The Beagle Trust qualifies as a pooled trust.

The Beagle Trust meets all six requirements for a pooled trust.

1. Disabled Individual

To begin, the trust must contain “the assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); see also POMS SI 01120.203.B.2.b. (“[T]he individual whose assets were used to establish the trust account must meet the definition of disabled for purposes of the SSI program.”). That requirement is satisfied here. C~, who is younger than 65 years old, received monthly SSI payments when she enrolled in the Beagle Trust. Accordingly, C~ must have met the definition of disabled for SSI. Moreover, C~ established her account with her own assets.

2. Established and Managed by a Nonprofit Association

Next, the trust must be “established and managed by a nonprofit association.” 42 U.S.C. § 1396p(d)(4)(C)(i); see also POMS SI 01120.203.B.2.a. (trust is “established and maintained by a nonprofit association”).

This requirement is met, too. Beagle, Burke and Associates established The Beagle Trust. See Beagle Trust Intro. ¶ A. Beagle, Burke and Associates represents that it “is a non-profit association organized under the laws of the state of Washington.” Id. The Washington Secretary of State website confirms that Beagle & Associates of Washington has non-profit status. See https://www.sos.wa.gov/corps/search_results.aspx?search_type=simple&criteria=all&name_type=starts_with&name=Beagle&ubi= (last visited July 21, 2017).

3. Separate Accounts, Pooled for Investing

To be a pooled trust, the trust must maintain a separate account for each beneficiary. 42 U.S.C. § 1396p(d)(4)(C)(ii); see also POMS SI 01120.203.B.2.d. However, “for purposes of investment and management of funds, the trust pools these accounts.” 42 U.S.C. § 1396p(d)(4)(C)(ii); see also POMS SI 01120.203.B.2.d (the “trust may pool the funds in the individual accounts . . . for purposes of investment and management of funds”). This requirement is reflected in the POMS, which notes that “the trust must be able to provide an individual accounting for the individual.” POMS SI 01120.203.B.2.d.

The Beagle Trust contains these characteristics. According to the trust documentation, “Beagle, Burke and Associates maintains separate accounts for all trust beneficiaries for whom it provides management services.” Beagle Trust Intro. ¶ B; see also Beagle Trust I.1.1 (“A separate account shall be maintained for each Beneficiary of the Trust.”); Subscription Agreement ¶ A (“All funds contributed by the undersigned [i.e., C~] will be accounted for as a separate account of the Trust.”). The Beagle Trust also “pool[s] such separate accounts for certain investment and fund management purposes.” Beagle Trust Intro. ¶ B.

In addition, the Beagle Trust must “submit an annual accounting to the Beneficiary or his or her designated agent with respect to such Beneficiary’s individual account.” Beagle Trust IV.4.1. Beagle & Associates provided SSA with information about C~’s individual account (see 5/3/17 letter from C2~), which shows, by way of example, that the Beagle Trust maintains a separate account for each beneficiary. See 42 U.S.C. § 1396p(d)(4)(C)(ii). Accordingly, the Beagle Trust satisfies the third requirement for pooled trusts.

4. Established for the Sole Benefit of the Disabled Individual

The next requirement for the pooled trust exception is that the trust account is “established solely for the benefit of individuals who are disabled.” 42 U.S.C. § 1396p(d)(4)(C)(iii); see also POMS SI 01120.203.B.2.e. (trust “must be established for the sole benefit of the disabled individual.”). The statute does not provide guidance on “sole benefit.” See 42 U.S.C. § 1396p(h) (setting forth definitions, but not defining this term). But the POMS explains that a trust is “established for the sole benefit of an individual” when it “benefits no one but that individual, whether at the time the trust is established or at any time for the remainder of the individual’s life.” POMS SI 01120.201.F.2.a.

Notably, the trust may pay third parties for goods or services for the beneficiary and still be for the “sole benefit” of the beneficiary. POMS SI 01120.201.F.2.b. The trust may pay certain travel expenses for the beneficiary’s medical treatment. Id. The trust also may “provide for reasonable compensation for a trustee(s) to manage the trust, as well as reasonable costs associated with investment, legal or other services rendered on behalf of the individual with regard to the trust.” POMS SI 01120.201.F.2.c.

The Beagle Trust meets this definition. The Beagle Trust states, “During the life of each Beneficiary, the Trustee shall hold, administer and distribute the amounts in each individual account for the sole benefit of the Beneficiary of such account.” Beagle Trust II.2.1; see also Beagle Trust Intro. ¶ D (“the individual accounts for each trust beneficiary are maintained for the sole benefit of such beneficiary”). The “express purpose of the [Beagle] Trust is to provide for the Beneficiary’s extra and supplemental care.” Beagle Trust II.2.1(a).

The Beagle Trust also allows for “payments for the reasonable compensation of the Trustee to manage the trust” and “costs associated with investment, legal or other services rendered in connection with the operation of the trust.” Beagle Trust II.2.1. The Beagle Trust permits disbursements to third parties “who provide goods or services to such Beneficiary,” as well. Id. These provisions align with the statutory and POMS’s description of a trust that solely benefits the disabled individual. See 42 U.S.C. § 1396p(d)(4)(C)(iii); POMS SI 01120.201.F.2.b, c.

Granted, the Beagle Trust contains an early termination provision that allows the trust to terminate prior to the death of the beneficiary. See Beagle Trust First Amendment 2.2(b). An early termination provision is allowable under the pooled-trust exception so long as three criteria are met: (1) “[u]pon early termination (i.e., termination prior to the death of the beneficiary), the State(s), as primary assignee, would receive all amounts remaining in the trust at the time of termination up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan(s);” (2) “[o]ther than payment for those expenses [for taxes, reasonable fees, and administrative expenses], no entity other than the trust beneficiary may benefit from the early termination (i.e., after reimbursement to the State(s), all remaining funds are disbursed to the trust beneficiary);” and (3) “[t]he early termination clause gives the power to terminate to someone other than the trust beneficiary.” POMS SI 01120.199.F.1 (bold in original). The trust may pay taxes, reasonable fees, and administrative expenses before reimbursing any state(s) for medical assistance. POMS SI 01120.199.F.3.

The Beagle Trust contains language to this effect. Specifically, the Beagle Trust states that, if the trust terminates during the beneficiary’s life, all remaining funds in that account will be paid to reimburse each state for medical assistance paid on behalf of the beneficiary. See Beagle Trust First Amendment 2.2(b). The Beagle Trust also states that, prior to reimbursing the state, account funds “may be used to pay all state and Federal taxes owed by the trust because of the termination of the trust account and reasonable fees and administrative expenses associated with the termination of the trust account.” Id. Additionally, the beneficiary does not have the power to terminate his or her trust account. Id. The early termination provision in the Beagle Trust passes muster.

In the end, the Beagle Trust provisions align with the statute and POMS’s description of a trust that solely benefits the disabled individual. See 42 U.S.C. § 1396p(d)(4)(C)(iii); POMS SI 01120.201.F.2.b, c. Accordingly, the Beagle Trust satisfies the fourth requirement for pooled trusts.

5. Established Through the Actions of the Individual, Parent, Grandparent, Legal Guardian, or Court

To qualify as a pooled trust, the trust account must be “established . . . by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.” 42 U.S.C. § 1396p(d)(4)(C)(iii); accord POMS SI 01120.203.B.2.f. C~ executed a subscription agreement, which established her account in the Beagle Trust. See 10/7/16 Subscription Agreement ¶ K. Therefore, because C~ established her trust account through her own actions, the Beagle Trust meets the fifth requirement.

6. Remaining Amounts Paid to the State

Sixth, “[t]o 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.” 42 U.S.C. § 1396p(d)(4)(C)(iv); accord POMS SI 01120.203.B.2.g.

The Beagle Trust contains such language. It states: “To the extent the Trustee does not exercise its discretion to hold and administer the funds in the trust account for the benefit of other beneficiaries of the Trust, the remaining funds shall first be paid to reimburse each state for the amount of medical assistance under a State Medicaid Plan . . . paid on behalf of the Beneficiary. . . .” Beagle Trust First Amendment 2.2(c). The Beagle Trust also states that, prior to reimbursing the states for medical assistance, any remaining funds will be used to pay state and Federal taxes and reasonable fees associated with terminating the account. Id. This, too, comports with the statute and POMS. See 42 U.S.C. § 1396p(d)(4)(C)(iv); POMS SI 01120.203.B.3.a. Accordingly, the Beagle Trust satisfies the last requirement.

CONCLUSION

In sum, the Beagle Trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.B.2. Accordingly, the Beagle Trust must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI eligibility.

D. PS 15-173 The effective date of a nunc pro tunc trust amendment

July 29, 2015

1. Syllabus

This legal opinion involves the issue of whether the effective date of a nunc pro tunc trust amendment in a special person care trust is retroactive to the date the trust was executed. Under Washington law, amendments nunc pro tunc can be used to correct clerical or ministerial errors but not mistakes of law. The language in the Trust that disqualified it from the special needs trust exception was the product of more than a ministerial or clerical error, and its correction changed the substance of the Trust beyond a mere technical amendment. Therefore, the substantive nunc pro tunc amendment does not have retroactive effect, and the trust is compliant with the special needs trust exception in POMS SI 01120.203 as of the amendment date.

2. Opinion

QUESTION PRESENTED

Is SSA required to effectuate a trust amendment retroactively due to the term “nunc pro tunc” being included in the amendment to the trust?

BRIEF ANSWER

No. Because under governing law “nunc pro tunc” can only be used to correct clerical or ministerial errors, this substantive amendment does not have retroactive effect.

SUMMARY OF FACTS

  • On January 16, 2014, the AKB Special Person Care Trust (the Trust) was executed.

  • On initial review and reconsideration, SSA determined the Trust was not excepted as a resource under the special needs trust exception outlined in POMS SI 01120.203 because it allowed payment to creditors prior to the reimbursement of Medicaid expenses. See Trust, Art. 4.1; 42 U.S.C. § 1396p(d)(4)(A).

  • The individual then filed for a hearing before an Administrative Law Judge and submitted the First Amendment to AKB Special Person Care Trust (the Amendment). The Amendment brought the Trust into compliance with POMS SI 01120.203. The Amendment states “This First Amendment is executed on April 21, 2015 nunc pro tunc January 16, 2014.”

ANALYSIS

You requested a legal opinion about whether SSA must reopen the initial determination and exclude the Trust from countable resources effective with the original Trust execution date.

A. The trustee’s power to amend is prospective, not retrospective

The trustee has some power to amend the Trust. See Trust Art. 7.11;Restatement (Third) of Trusts § 64 (2003). However, the powers granted to the Trustee are prospective, not retroactive. The power to amend authorizes the trustee to amend the Trust to “keep the trust in compliance” with the Social Security Act or amend the Trust to comply with laws or regulations “in the future.” Trust Art. 7.11. While Washington law provides mechanisms to reform trusts6 , the trustee’s power is limited by the Trust to prospective changes and “technical amendments.” Because the Trustee’s power was only prospective, the Amendment could only take effect as of the date it was executed: April 15, 2015.

B. “Nunc pro tunc” can only correct ministerial or clerical errors, not mistakes of law.

The trustee purported to bring the Trust into compliance with a “nunc pro tunc” amendment. Amendment, Art. 3. “Nunc pro tunc signifies now for then, or in other words, a thing is done now, which shall have the same legal force and effect as if done at [the] time when it ought to have been done.” United States v. Allen, 153 F.3d 1037, 1044 (9th Cir.1998). Washington law governs the Trust. Trust, Art. 9.8. Under Washington law, amendments nunc pro tunc can be used to correct clerical or ministerial errors but not mistakes of law. See State v. Ryan, 146 Wash. 114, 117, 261 P. 775 (1927) (“[A motion nunc pro tunc] may be used to make the record speak the truth, but not to make it speak what it did not speak but ought to have spoken.”). Nunc pro tunc action is not appropriate to resolve substantive issues differently. “Instead, a nunc pro tunc order is generally appropriate to correct only ministerial or clerical errors, not judicial errors. A clerical or ministerial error is one made by a clerk or other judicial or ministerial officer in writing or keeping records.” State v. Hendrickson, 165 Wash. 2d 474, 479, 198 P.3d 1029 (2009) (citation omitted); see also Singh v. Mukasey, 533 F.3d 1103, 1110 (9th Cir. 2008).

The original language, which specifies that some creditors may be paid before Medicaid benefits are reimbursed, reflects more than a simple clerical or ministerial error, and the change had substantive implications that exceeded the scope of a simple technical amendment. There is no evidence that the original language does not comport with the Trust author’s initial intent. While the Trust author evidently intended that the Trust be excluded as a resource, see Trust Arts. 3.6 and 7.11, there is no evidence that the Trust author “misspoke” when he or she initially allowed certain creditors to be paid prior to the state. See Trust Art. 4.1. The error appears to stem from a mistaken interpretation of the law, not a ministerial or clerical flaw.

CONCLUSION

The language in the Trust that disqualified it from the special needs trust exception was the product of more than a ministerial or clerical error, and its correction changed the substance of the Trust beyond a mere technical amendment. The trustee did not have or exercise the power to reform the Trust with changes relating back to the date the Trust was executed. The nunc pro tunc Amendment is not sufficient to reform the Trust as it was originally written. Therefore, the Amendment only takes effect as of the date the trustee had power to amend the Trust: April 15, 2015.


Footnotes:

[1]

. The definitions of Minor and Legally Incompetent Person in the Trust Agreement are consistent with those contained in POMS SI 01120.195.C. Trust Agreement §§ 1.8, 1.9.

[2]

. For beneficiaries reaching the age of 18 on or before September 30, 2018, distributions may be made once the beneficiary reaches the age of 18 and satisfies the other requirements. Trust Agreement § 5.3.3.

[3]

. The Trust Agreement permits advance distributions for the benefit of disabled beneficiaries or legally incompetent persons only for the individual’s “Supplemental Needs.” Trust Agreement § 5.6. Supplemental Needs refers to the requisites for maintaining the good health, safety, and welfare of a Beneficiary, when those requisites are not being provided by any public agency, office, or department of the state of residence or the United States, or not otherwise provided for by the beneficiary’s other sources of income. 5.6.1. This falls within the scope of the POMS requirements.

[4]

. The Trust Agreement recites Revenue Code Section 457(d)(1)(iii). This appears to be a scrivener’s error. As anticipated by the IRS and the Trust Agreement, an “unforeseeable emergency” could result from costs incurred by a third party; for example, they may include costs for a dependent’s funeral or sudden illness. Rev. Ruling 2010-27. Accordingly, facially, it may appear that such distributions would not be for the benefit of the beneficiary. However, these costs must become attributable to the beneficiary before they result in an “unforeseeable” emergency, because they must “cause a severe financial hardship to the beneficiary”. Trust Agreement § 5.5.3.1 (emphasis added). Further, the concept of “welfare” is a broad construct that exceeds the normal trust constructs of health, education, support, or maintenance. See, e.g., Estate of Little v. Commissioner, 87 T.C. 599, 603 n.10 (1986). Accordingly, distributions for unforeseeable emeregencies are reasonably considered distributions for the health, education, or welfare of the beneficiary consistent with the POMS requirements.

[5]

. . . See https://www.sos.wa.gov/corps/search_detail.aspx?ubi=601141586

[6]

. . . Under RCW 11.96A.125, a mistake of fact or law “may be reformed by judicial proceedings under this chapter to conform the terms to the intention of the testator or trustor if it is proved by clear, cogent, and convincing evidence that both the intent of the testator or trustor and the terms of the will or trust were affected by a mistake of fact or law, whether in expression or inducement.”


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PS 01825.053 - Washington - 04/20/2018
Batch run: 04/20/2018
Rev:04/20/2018