TN 183 (04-20)

PS 01825.053 Washington

A. PS 20-027 Does the Washington Charities Pooled Trust Meet Requirements for Exclusion in SI 01120.203?

March 3, 2020

1. Syllabus

In this opinion, the Regional Chief Counsel (RCC) examines the Washington Charities Pooled Trust to determine if it meets the requirements for the pooled trust exception described in 42 U.S.C. § 1396p(d)(4)(C). The RCC concludes that the trust qualifies as a pooled trust and accordingly 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 Washington Charities Pooled Trust (“Washington Trust”) qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D, 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 Washington Trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. Accordingly, it must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

SUMMARY OF FACTS

M.M. is a disabled individual receiving SSI. See December 3, 2019 email from SEA ARC MOS. In April 2019, M.M. executed a joinder agreement with Charities Pooled Trust (“CPT”) to establish an individual benefit account with CPT. Joinder Agreement at 1. M.M. was the beneficiary of the individual benefit account. Id. M.M. funded her account with $10,000 from a litigation recovery and $801.99 per month from an annuity irrevocably assigned to the trust. Id.

In executing the joinder agreement, M.M. agreed to the terms of the Washington Trust. Id.

ANALYSIS

A. To qualify as 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). Under 42 U.S.C. § 1382b(e), a trust is a resource unless it meets certain requirements, including those articulated in 42 U.S.C. § 1396p(d)(4)(C). Trusts that meet the requirements of § 1396p(d)(4)(C) are considered to be qualifying pooled trusts.

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.D.2. Second, the trust must be “established and managed by a non-profit association.” 42 U.S.C. § 1396p(d)(4)(C)(i); accord POMS SI 01120.203.D.3. 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.D.4. Fourth, the accounts must be “established solely for the benefit of individuals who are disabled.” 42 U.S.C. § 1396p(d)(4)(C)(iii); accord POMS SI 01120.203.D.5. 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.D.6. 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.D.8.

A trust that qualifies as 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 Washington Trust qualifies as a pooled trust.

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

1. Disabled Individual

To begin, the trust account must contain “the assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C); see also POMS SI 01120.203.D.2 (“[T]he individual whose assets were used to establish the trust account must be disabled for SSI purposes . . . .”).

That requirement is satisfied here. M.M. is a disabled individual. See December 3, 2019, email from SEA ARC MOS (stating that M.M. is disabled). M.M. funded her account with $10,000 and a monthly annuity that she recovered in litigation. Joinder Agreement at 1. Therefore, the Washington Trust satisfies the first requirement.

2. Established and Managed by a Nonprofit Association

Second, the trust must be “established and managed by a non-profit association.” 42 U.S.C. § 1396p(d)(4)(C)(i); see also POMS SI 01120.203.D.3 (trust is “established and maintained by the actions of a nonprofit association”).

This requirement is satisfied, as well. According to the Washington Trust, CPT is the settlor, manager, and trustee of the Washington Trust and is a Florida not-for-profit corporation under Section 501(c)(3) of the Internal Revenue Code. See Washington Trust Master Trust Agreement Art. 1, § 1.2; Art. 2, §§ 2.1, 2.2.

Charities Pooled Trust (CPT) is a fictitious name for the Institute for Health Care Advocacy, Inc. The Institute for Health Care Advocacy, Inc. is an active not-for-profit Florida corporation. See http://search.sunbiz.org/Inquiry/CorporationSearch/SearchResultDetail?inquirytype=EntityName&directionType=Initial&searchNameOrder=INSTITUTEFORHEALTHCAREADVOCACY%20N930000037871&aggregateId=domnp-n93000003787-3d08880b-9b2a-400f-bc4b-4f26864703fb&searchTerm=INSTITUTE%20FOR%20HEALTH%20CARE%20ADVOCACY%2C%20INC&listNameOrder=INSTITUTEFORHEALTHCAREADVOCACY%20N930000037871. (last accessed March 2, 2020). The fictitious name registration for CPT expired on December 31, 2019. http://dos.sunbiz.org/scripts/ficidet.exe?action=DETREG&docnum=G09000149562&rdocnum=G09000149562(last accessed March 2, 2020). Under Florida law, the failure of a business to register a fictitious name “does not impair the validity of any contract, deed, mortgage, security interest, lien, or act of such business . . . .” Fla. Stat. § 865.09(9)(b). Accordingly, this requirement is still satisfied in spite of the failure of the Institute for Health Care Advocacy, Inc., to maintain its registration of Charities Pooled Trust as a fictitious name.

3. Separate Accounts, Pooled for Investing

Third, 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.D.4. 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.D.4 (the “trust may pool the funds in the individual accounts . . . for purposes of investment and management of funds”). This requirement is reflected in POMS, which notes that “[t]he trust must be able to provide an individual accounting for each individual.” POMS SI 01120.203.D.4.

The Washington Trust contains these requirements. According to its terms, “[a] separate Trust [Individual Benefit Account] IBA shall be established and maintained for the sole benefit of each Trust Beneficiary, but the Trustee may cause the amounts in the IBA to be pooled for investment and management purposes.” Washington Trust Master Trust Agreement Art. 4, § 4.1; accord Washington Trust Master Trust Agreement Art. 9, § 9.1. The Washington Trust also states that the trustee, or its agent, must “maintain records for each Trust IBA in the name of each Trust Beneficiary and showing the Contributed Amount plus any income earned from the Contributed Amount.” Washington Trust Master Trust Agreement Art. 4, § 4.1. The trust must provide periodic reports, at least annually, about receipts and disbursements to and from the individual’s account. Washington Trust Master Trust Agreement Art. 9, § 9.4. These provisions satisfy the third requirement for a pooled trust.

4. Established for the Sole Benefit of the Disabled Individual

The fourth requirement for a pooled trust 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.D.5 (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 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.1.

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.3. The trust also may “provide for reasonable compensation for (a) trustee(s) to manage the trust and 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.4.

The Washington Trust meets this definition. The Washington Trust states that the trustee must “hold, administer, and distribute all property, and all income therefrom from an Individual Trust Beneficiary’s IBA, for the sole benefit of the Trust Beneficiary during the Trust Beneficiary’s lifetime and after Trust termination.” Washington Trust Master Trust Agreement Art. 6, § 6.2 (emphasis in original); see also id. § 6.3 (“Trust Beneficiary’s IBA is for the sole benefit of the Trust Beneficiary.”) (emphasis in original).

The Washington Trust also allows for fees in accordance with a written fee schedule and expenses for administering the trust. See Washington Trust Master Trust Agreement Art., § 9.2, Art. 10, § 10.5. The Washington Trust further states that the trustee will be compensated for “services rendered and reimbursed reasonable expenses incurred on behalf of the Trust or a Trust Beneficiary.” Washington Trust Master Trust Agreement Art. 10, § 10.5. Additionally, the Washington Trust allows for charges of pro rata legal fees to all individual trust accounts, or to accounts of affected beneficiaries, and the trustee will determine “if defense costs affect a substantial number of Trust Beneficiary IBAs” and warrant allocation. Washington Trust Master Trust Agreement Art. 10, § 10.6. These provisions pass muster under the statute because they constitute “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.4

The Washington Trust contains an early termination provision that accounts for a scenario where the trust terminates prior to the death of the beneficiary. See Washington Trust Master Trust Agreement Art. 8. 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 Washington Trust satisfies these criteria. Specifically, the Washington 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. Washington Trust Master Trust Agreement Art. 8, § 8.1. The Washington Trust also states that, after paying the states, “if there are any assets remaining, the Trustee shall distribute all of the remaining assets to the Trust Beneficiary.” Washington Trust Master Trust Agreement Art. 8, § 8.1. Additionally, the beneficiary does not have the power to terminate his or her trust account. Washington Trust Master Trust Agreement Art. 8, § 8.1.[1]

In the end, the Washington Trust provisions comport with the statute and POMS’s description of a trust that solely benefits the disabled individual. Accordingly, the Washington Trust satisfies the fourth requirement for pooled trusts.

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

Fifth, 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.D.6. M.M. executed a joinder agreement, which established her account in the Washington Trust. See Joinder Agreement at 1. Therefore, because M.M. established her trust account through her own actions, the Washington 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.D.8. Taxes and reasonable fees and costs may be paid before paying the state for medical assistance. See POMS SI 01120.203.E.1.

The Washington Trust meets this requirement, as well. Specifically, the Washington Trust allocates remaining assets between the trust, the state(s), and the remainder beneficiaries. See Washington Trust Master Trust Agreement Art. 7, § 7.2. If the state medical assistance amount is equal to or greater than the total amount left in the beneficiary’s trust account, the non-profit will retain 50% of that amount as a trust remainder share and the trustee will pay the remaining amount to the state. Washington Trust Master Trust Agreement Art. 7, § 7.2(D)(1). If the state medical assistance amount is less than the total amount left in the beneficiary’s trust account, the non-profit will retain the first 5% of the amount as the trust remainder share; the trustee will pay the full amount owed to the state; and the trustee will pay any remaining amount to the beneficiary’s heirs. Washington Trust Master Trust Agreement Art. 7, § 7.2(D)(2). This distribution scheme comports with the statute.

In addition, the Washington Trust allows certain administrative expenses, like taxes and reasonable fees and costs, to be paid before paying the state for medical assistance. Washington Trust Master Trust Agreement Art. 7, § 7.4(A). The Washington Trust incorporates by reference the allowable and prohibited expenses in SSA”s Program Operations Manual at POMS SI 01120.203.B.3. Washington Trust Master Trust Agreement Art. 7, § 7.4(A). Although this appears to be a miscitation of POMS SI 01120.203.E, the Washington Trust explicitly contains a provision noted that “[if] a legal citation is incorrectly stated, the correct citation shall be deemed to have been stated.” Washington Trust Master Trust Agreement, Art. 13, § 13.10. This scrivener’s error does not prevent the Washington Trust from satisfying this requirement.

CONCLUSION

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

 

B. PS 19-064 Analysis of the Washington State Developmental Disabilities Endowment Trust Fund II

Date: March 20, 2019

1. Syllabus

This Regional Chief Counsel (RCC) opinion examines whether the Washington State Developmental Disabilities Endowment Trust Fund II (“Washington Endowment Trust Agreement”) qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. The RCC concludes that the Washington Endowment Trust Agreement qualifies as a pooled trust under the statute and POMS. Accordingly, the Washington Endowment Trust Agreement and any distributions from it, including state matching funds, must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for Supplemental Security Income (SSI) eligibility.

2. Opinion

QUESTION PRESENTED

Does the Washington State Developmental Disabilities Endowment Trust Fund II (“Washington Endowment Trust Agreement”) qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D, 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 Washington Endowment Trust Agreement qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. Accordingly, it and any distributions from it, including state matching funds, must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

SUMMARY OF FACTS

Roy B~ is a disabled individual receiving SSI. See Joinder Agreement II (“Joinder Agreement”) at 6. In October 2012, Bridge Disability Ministries, the guardian for Roy B~, executed a Joinder Agreement with The Arc of Washington State. See generally id. The Joinder Agreement defined Bridge Disability Ministries as the “Primary Donor” and Mr. B~ as the “Beneficiary.” Id. at 3. By executing the agreement, Bridge Disability Ministries enrolled Mr. B~ in the Washington Endowment Trust Agreement. Id. This established an individual trust account for Mr. B~. Id. at 2.

ANALYSIS

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.D.1. 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.D.1. 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.D.1. 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.D.1. 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.D.1. 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.D.1.

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

The Washington Endowment Trust Agreement qualifies as a pooled trust.

The Washington Endowment Trust Agreement meets all six requirements for a pooled trust.

  1. 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.D.2 (“[T]he individual whose assets were used to establish the trust account must be disabled for SSI purposes . . .”).

    That requirement is satisfied here. A representative of Bridge Disability Ministries, Mr. B~’s guardian, executed the Joinder Agreement, creating an individual trust account for Mr. B~’s benefit. See generally Joinder Agreement. According to the Joinder Agreement, Mr. B~ was “the contributor of the assets.” Id. at 14. As that document also notes, “Only a Beneficiary’s own assets may be contributed to an Individual Trust Account maintained under the [Washington Endowment Trust Agreement].” Id. at 2. The Washington Endowment Trust Agreement reflects this point, as well: “The Individual Trust Account shall be established and funded only with property that belongs to the Beneficiary.” Washington Endowment Trust Agreement Art. ¶ 2.1. In addition, Mr. B~ was a disabled individual receiving SSI payments when Bridge Disability Ministries executed the Joinder Agreement for his benefit. Joinder Agreement at 6.

    Granted, the Washington Endowment Trust Agreement permits an individual trust account to include funds from the State of Washington “for the purpose of matching private contributions with public funds.” Washington Endowment Trust Agreement ¶¶ 1.7, 5.1. However, Section 1396p does not prohibit this. Instead, the statute states that the trust must have “assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C). We do not read this provision to mean that the individual trust account must contain only a claimant’s own assets, to the exclusion of any other assets. Instead, we read this provision to mean an account must be established and initially funded with claimant’s own assets. Here, the matching funds are not the claimant’s assets until those funds are irrevocably allocated or disbursed to the individual. Washington Endowment Trust Agreement Art. ¶ 5.1. Until that time, the State retains “[a]ll right title and interest in” the matching funds and those funds are subject to reversion to the trust fund. Id. Thus, the addition of matching funds (to an account established initially with the beneficiary’s assets) does not disqualify the Washington Endowment Trust Agreement.[2] We also note that the agency evaluates §1396p(d)(4)(C) trusts that contain assets of third parties in keeping with POMS SI 1120.200(A)(1)(b).

    Therefore, the Washington Endowment Trust Agreement satisfies the first requirement.

  2. 2. 

    Established and Managed by a Nonprofit Association

    Second, 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.D.3 (trust is “established and maintained by the actions of a nonprofit association”).

    This requirement is satisfied, as well. According to the Washington Endowment Trust Agreement, the Washington State Legislature established a trust fund “to finance long-term care for persons with developmental disabilities.” Washington Endowment Trust Agreement at pg. 1 (Recitals). The state’s Governing Board and Department of Health, in turn, authorized The Arc of Washington State “to establish and manage [the Washington Endowment Trust Agreement] in order to comply with the requirements of Section 1917(d)(4)(C) of the Social Security Act (42 U.S.C. 1396(d)(4)(C)).” Id. Thus, under the Washington Endowment Trust Agreement, The Arc of Washington State is the settlor, trustee, and manager. See id. ¶¶ 1.9, 1.12, 1.13.

    The Arc of Washington State is a nonprofit corporation. See id. at pg. 1 (Recitals). See also The Arc of Washington State’s website, available at http://arcwa.org/aboutus (confirming non-profit organization status); Washington Secretary of State Business Information, available athttps://ccfs.sos.wa.gov/#/BusinessSearch/BusinessInformation (last visited Dec. 11, 2018). Thus, the second requirement is met.

  3. 3. 

    Separate Accounts, Pooled for Investing

    Third, 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.D.4. 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.D.4 (the “trust may pool the funds in the individual accounts . . . for purposes of investment and management of funds”). This requirement is reflected in POMS, which notes that “the trust must be able to provide an individual accounting for each individual.” POMS SI 01120.203.D.4.

    The Washington Endowment Trust Agreement contains these requirements. According to its terms, “[a] separate Individual Trust Account shall be maintained for each Beneficiary by the Trustee.” Washington Endowment Trust Agreement ¶ 10.1. However, “the WSIB [Washington State Investment Board] may, in its sole discretion, pool Assets of the Individual Trust Accounts with each other, with the Matching Contributions and with other funds subject to investment by the WSIB.” Id.[3]

    Further, “the Trustee or its designee shall maintain separate recordkeeping of the contributions, distributions, fees and investment income or losses of each Individual Trust Account.” Id. ¶ 6.2. The trustee also must “obtain from the WSIB the necessary investment performance information . . . to enable the Trustee and Manager or their authorized agents, (a) to maintain records; (b) to prepare reports and tax returns for each Individual Trust Account; and (c) to show the Assets contributed and matched for each Beneficiary, along with increase in, expenditures from and costs of each such Individual Trust Account.” Id. ¶ 10.1. The trustee must “provide periodic accountings, at least annually, to each Beneficiary.” Id. ¶ 10.2.

    Given these provisions, the Washington Endowment Trust Agreement meets the third requirement.

  4. 4. 

    Established for the Sole Benefit of the Disabled Individual

    The fourth requirement for a pooled trust 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.D.5 (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 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.1.

    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.3. 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 and 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.4.

    The Washington Endowment Trust Agreement meets this definition. The Washington Endowment Trust Agreement states that “[a]ll Assets of an Individual Trust Account shall be used for the sole benefit of the Beneficiary of such Account.” Washington Endowment Trust Agreement ¶ 2.5. The Washington Endowment Trust Agreement also allows for fees, expenses, and costs for investing the assets of the trust fund and individual trust accounts. Id.

    The Washington Endowment Trust Agreement contains an early termination provision that accounts for a scenario where the trust terminates prior to the death of the beneficiary. See Washington Endowment Trust Agreement ¶ 13.1. 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. An early termination provision “does not need to meet the above criteria if the clause solely allows for a transfer of the beneficiary’s assets from one Section 1917(d)(4)(C) trust to another Section 1917(d)(4)(C) trust.” POMS SI 01120.199.F.2.

    The Washington Endowment Trust Agreement satisfies these criteria. An individual beneficiary may not terminate or revoke an individual account. See Joinder Agreement at 9 (§ K, ¶1); Washington Endowment Trust Agreement ¶ 4.1. However, the Washington Endowment Trust Agreement gives the governing board the “discretion to distribute the assets in the Individual Trust Account to another trust established pursuant to Section 1917(d)(4)(c) of the Social Security Act (42 U.S.C. 1396p(d)(4)(C)),” after making disbursements in a certain order:

    1. a. 

      Any matching contributions (i.e., funds that the state contributed to match private contributions) will go back to the trust fund and be available for future contributions to other individual trust accounts.

    2. b. 

      Payments for State and federal taxes.

    3. c. 

      Payment for reasonable trustee fees and administrative expenses associated with terminating the account.

    See Washington Endowment Trust Agreement ¶ 13.2. In the event that the board does not distribute the remaining assets to another individual trust account, the funds will be distributed in this order:

    1. a. 

      Matching contributions go back to the trust fund.

    2. b. 

      State and federal taxes are paid.

    3. c. 

      Reasonable trustee fees and administrative expenses associated with terminating the trust are paid.

    4. d. 

      Each state gets reimbursed for medical assistance under the State Medicaid Plan of Title XIX Medicaid Assistance benefits, as required by 42 U.S.C. § 1396p(d)(4)(C).

    5. e. 

      Any remaining funds go to the primary beneficiary designated in the joinder agreement for the individual account.

    Id. ¶ 13.3.[4] The Joinder Agreement contains a different distribution scheme for early termination, but to the extent there is a conflict, the Washington Endowment Trust Agreement controls. Joinder Agreement at 15.

    In the end, the Washington Endowment Trust Agreement provisions comport 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. Accordingly, the Washington Endowment Trust Agreement satisfies the fourth requirement for pooled trusts.

  5. 5. 

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

    Fifth, 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.D.6. Bridge Disability Ministries executed the Joinder Agreement to establish an individual trust account for Mr. B~. See Joinder Agreement at 15. Bridge Disability Ministries is the guardian and legal representative for Mr. B~. Id. at 3-4. Therefore, because Mr. B~’s account was established “by . . . [his] legal guardian,” 42 U.S.C. § 1396p(d)(4)(C)(iii), Washington Endowment Trust Agreement meets the fifth requirement.

  6. 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.D.8. Taxes and reasonable fees and costs may be paid before paying the state for medical assistance. See POMS SI 01120.203.E.1.

    The Washington Endowment Trust Agreement embodies this concept. Specifically, the trust states that, upon the death of a beneficiary, any remaining funds from the individual trust account be distributed in a particular order:

    1. a. 

      Matching contributions revert to the trust fund for future matching contributions to other individual accounts.

    2. b. 

      The trust pays state and federal taxes resulting from terminating the trust account.

    3. c. 

      Reasonable trustee fees and administrative expenses are paid.

    4. d. 

      The trust retains any amount that the primary beneficiary designed to be retained for the benefit of other beneficiaries in the trust agreement.

    5. e. 

      Each state is reimbursed for medical assistance under a State Medicaid Plan of Title XIX Medicaid Assistance benefits.

    6. f. 

      Any remaining funds go to the final remainder beneficiaries, as designated in the joinder agreement.

    Washington Endowment Trust Agreement ¶ 13.4.

    This distribution scheme comports with the statute. Essentially, to the extent the Washington Endowment Trust Agreement does not retain funds or pay federal and state taxes, it distributes them to the state for medical assistance and then to any remaining beneficiaries. Also, the Joinder Agreement states that any remaining funds can be retained by the trust, which is permissible. See Joinder Agreement at 9. Accordingly, the Washington Endowment Trust Agreement satisfies the last requirement.

CONCLUSION

In sum, the Washington Endowment Trust Agreement qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. Accordingly, the Washington Endowment Trust Agreement and any distributions from it, including state matching funds, must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI eligibility.

C. CPM 19-059 - Does the Brain Injury Alliance Washington Master Trust Meet Requirements for Exclusion in SI 01120.203?

Date: March 6, 2019

1. Syllabus

This Regional Chief Counsel (RCC) opinion examines whether the Brain Injury Alliance Washington (BIAWA) Trust meets the requirements for the pooled trust exception. The RCC concludes that the trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. Accordingly, it must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

2. Opinion

QUESTION PRESENTED

Does the Brain Injury Alliance Washington Trust (“BIAWA Trust Agreement”) qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D, 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 BIAWA Trust Agreement qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.D. Accordingly, it must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI purposes.

SUMMARY OF FACTS

On October 11, 2018, M. C~, the guardian of NH C~, executed a Joinder Agreement with BIAWA, which created an individual trust account in the BIAWA Trust Agreement. See Joinder Agreement at 13; see also Letters of Guardianship. NH is a disabled individual receiving disability benefits from SSA. See Joinder Agreement at 2, 4.

ANALYSIS

  1. 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.D.1. 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.D.1. 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.D.1. 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.D.1. 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.D.1. 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.D.1.

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

  2. b. 

    The BIAWA Trust Agreement qualifies as a pooled trust.

    The BIAWA Trust Agreement meets all six requirements for a pooled trust.

    1. 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.D.2. (“[T]he individual whose assets were used to establish the trust account must be disabled for SSI purposes.”).

      That requirement is satisfied here. M. C~ executed the Joinder Agreement, creating an individual trust account for NH C~’s benefit. See Joinder Agreement at 13. According to the Joinder Agreement, “[t]e Beneficiary’s Individual Trust Account must be funded with the Beneficiary’s own assets.” Id. at 4; accord id. at 11. In addition, NH was a disabled individual receiving disability payments when M~ executed the Joinder Agreement. Id. at 2,4.

      The BIAWA Trust Agreement permits an individual trust account to include additions from “any source and at any time.” BIAWA Trust Agreement ¶ 4.3. However, Section 1396p does not prohibit this. Instead, the statute states that the trust must have “assets of an individual who is disabled.” 42 U.S.C. § 1396p(d)(4)(C). Note, trusts that contain assets of third parties must still be evaluated under POMS SI 1120.200.

      Therefore, the BIAWA Trust Agreement satisfies the first requirement.

    2. 2. 

      Established and Managed by a Nonprofit Association

      Second, 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.D.3. (trust is “established and maintained by the actions of a nonprofit association”).

      This requirement is satisfied, as well. According to the BIAWA Trust Agreement, BIAWA established the trust and is a Washington state nonprofit corporation. BIAWA Trust Agreement at 4, 7 (Preamble). Although the Washington Secretary of State website does not contain information about BIAWA’s non-profit status, BIAWA’s website confirms that it is a 501(c)(3) non-profit and provides the organization’s tax ID number. See https://www.biawa.org /about (last visited Dec. xx, 2018). BIAWA also manages the trust. BIAWA Trust Agreement at 4.

      The second requirement is met.

    3. 3. 

      Separate Accounts, Pooled for Investing

      Third, 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.D.4. 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.D.4 (the “trust may pool the funds in the individual accounts . . . for purposes of investment and management of funds”). This requirement is reflected in POMS, which notes that “the trust must be able to provide an individual accounting for each individual.” POMS SI 01120.203.D.4.

      The BIAWA Trust Agreement contains these requirements. “A separate Individual Trust Account shall be maintained for each Beneficiary . . . but, for purposes of investment and management of funds, the Trust pools the Individual Trust Accounts.” BIAWA Trust Agreement at 6 (Preamble), see also ¶ 8.4 (requiring Trustee to maintain separate records for each account). Further, the trustee has a duty to keep the beneficiary informed of her account, which includes providing various statements, receipts, and disbursement information. See BIAWA Trust Agreement ¶ 8.10.

      Given these provisions, the BIAWA Trust Agreement meets the third requirement.

    4. 4. 

      Established for the Sole Benefit of the Disabled Individual

      The fourth requirement for a pooled trust 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.D.5. (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 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.1.

      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.3. The trust may pay certain travel expenses for a third party to accompany the beneficiary during travel. 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.4.

      The BIAWA Trust Agreement meets this definition. The BIAWA Trust Agreement states that “[e]ach Account shall be established solely for the benefit of an individual.” BIAWA Trust Agreement at 6 (Preamble); see also id. ¶¶ 5.3, 6.10, 6.14. The BIAWA Trust Agreement also allows for compensation for the trustee to manage the trust, including expenses incurred from managing it. BIAWA Trust Agreement ¶ 11.1-11.6.

      The BIAWA Trust Agreement contains an early termination provision that accounts for a scenario where the trust terminates prior to the death of the beneficiary. See BIAWA Trust Agreement ¶ 7.2. 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. An early termination provision “does not need to meet the above criteria if the clause solely allows for a transfer of the beneficiary’s assets from one Section 1917(d)(4)(C) trust to another Section 1917(d)(4)(C) trust.” POMS SI 01120.199.F.2.

      The BIAWA Trust Agreement comports with POMS. If the trustee terminates an individual trust early, the trustee will distribute the assets to another trust established under 42 U.S.C. § 1396p(d)(4)(C). BIAWA Trust Agreement ¶ 7.2.2[5] . In addition, the BIAWA Trust Agreement permits a court to order early termination if the court determines the beneficiary (1) “is fully competent,” (2) “is without legal disability,” and (3) “does not meet the requirements of the federal disability criteria statute mentioned above [i.e., 42 U.S.C. § 1382c(a)(3)].” Id. ¶ 7.2.1. This, too, is permissible, as the BIAWA Trust Agreement notes that except for allowable taxes, fees and expenses and Medicaid payback, “no entity other than the beneficiary may benefit from the early termination of an Individual Trust Account.” Id. In the end, the BIAWA Trust Agreement provisions comport 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. Accordingly, the BIAWA Trust Agreement satisfies the fourth requirement for pooled trusts.

    5. 5. 

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

      Fifth, 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.D.6. M. C~ executed the Joinder Agreement to establish an individual trust account for NH C~. See Joinder Agreement at 13. M~ is the legal guardian for NH. See Letters of Guardianship. Therefore, because NH’s account was established “by . . . [her] legal guardian,” 42 U.S.C. § 1396p(d)(4)(C)(iii), the BIAWA Trust Agreement meets the fifth requirement.

    6. 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.D.8. Taxes and reasonable fees and costs may be paid before paying the state for medical assistance. See POMS SI 01120.203.E.1.

      The BIAWA Trust Agreement embodies this concept. Specifically, the trust states that, to the extent the trustee does not retain those assets for the benefit of other beneficiaries of the trust, the trustee will distribute the assets to any state that provided medical assistance. BIAWA Trust Agreement ¶¶ 7.3, 7.4. The BIAWA Trust Agreement also permits payment of taxes and reasonable fees and expenses prior to Medicaid reimbursement. Id. ¶ 7.5.

      This distribution scheme comports with the statute. Accordingly, the BIAWA Trust Agreement satisfies the last requirement.

CONCLUSION

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

D. PS 19-012 Analysis of the National Foundation of Special Needs Integrity Pooled Trust

Date: October xx, 2018

1. Syllabus

This Regional Chief Counsel (RCC) opinion examines whether a sub-account in the National Foundation of Special Needs Integrity Pooled Trust for the State of Washington (“NFSNI Trust”) qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203.B.2. The RCC concludes that the NFSNI Trust meets all requirements to qualify as a pooled trust. Accordingly, the NFSNI Trust must be evaluated under POMS SI 01120.200 to determine if it is a countable resource for SSI eligibility.

2. Opinion

QUESTION PRESENTED

Does C~'s sub-account trust with the National Foundation of Special Needs Integrity Pooled Trust for the State of Washington (“NFSNI 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 NFSNI 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 July 2009, C~, a disabled individual receiving SSI, funded an individual benefit account with the NFSNI Trust. See Letter from NFSNI dated April xx, 2018 (“Letter”). He executed a joinder agreement with the NFSNI Trust to establish an individual sub-account in the NFSNI Trust for C~’s sole benefit. Id. C~ placed approximately $7,341.08 in his account. See Letter.

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 as 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 NFSNI Trust qualifies as a pooled trust.

The NFSNI Trust meets all six requirements for a pooled trust. Our analysis is based on the terms of the Declaration of Master Trust Document for the State of Washington (hereinafter the Declaration of Trust) and C~’s Joinder Agreement (Joinder Agreement).

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. The claimant is a disabled individual receiving SSI payments when he enrolled in the NFSNI Trust. See Joinder Agreement at 7 (stating he receives SSI); 5/18/18 email from SEA ARC MOS (stating that C~ is disabled). C~ funded the account with $7,341.08 on July 17, 2009. See Joinder Agreement at 4 (stating account to be funded with approximately $10,000); Letter (stating actual funding).

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 satisfied. The Trust is established and managed by The National Foundation for Special Needs Integrity, Inc., a 501(c)(3) non-profit corporation. See Declaration of Trust at 1.

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 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 Declaration of Trust contains these requirements.

The Declaration of Trust states that the NFSNI Trust may pool together the assets in all of the sub-accounts for investment and management purposes, but that each sub-account constitutes a separate account. Declaration of Trust, art. 2. The Declaration of Trust also states that contributions; deductions and disbursements; earning and losses; and all other expenses specific to each beneficiary shall be recorded and accounted for separately for each beneficiary. Declaration of Trust, art. 2

4. Established for the Sole Benefit of the Disabled Individual

The next requirement for a pooled trust 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 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.

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 NFSNI Trust meets this definition. The Declaration of Trust and Joinder Agreement both define a Beneficiary as a person with a disability qualified under the Social Security Act. Declaration of Trust, art. 5.D; Joinder Agreement, art. 1.D. The Declaration of Trust states that “all disbursements made by the Trustee shall be for the sole benefit of the Beneficiary.” Declaration of Trust, art. 13.3. In addition, the Declaration of Trust repeatedly and expressly indicates that accounts in the Trust are established solely for the benefit of the Beneficiary. See, e.g., Declaration of Trust, art. 2, 6, 9, 11, 12, 13; see also Joinder Agreement, art. VI.

The NFSNI Trust also allows for fees and expenses for administering the trust, in accordance with the Joinder Agreement. Joinder Agreement, art. III. This provision passes muster under the statute. See 42 U.S.C. § 1396p(d)(4)(C)(iii);POMS SI 01120.201.F.2.b, c.

In the end, the NFSNI Trust provisions comport 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 NFSNI 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 joinder agreement, which established his account in the NFSNI Trust. See Joinder Agreement. Therefore, because C~ established his trust account through his own actions, the NFSNI 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 NFSNI Trust embodies this concept. The Declaration of Trust and the Joinder Agreement provide that to the extent that amounts remaining in the sub-account upon the death of the Trust Beneficiary are not retained by the Trust, the Trust will pay the State, or states as it may be the case, from such remaining amounts in the sub-account, equal to the total amount of Government Assistance benefits paid to or on behalf of the Trust Beneficiary. See Declaration of Trust, art. 14.1, 14.2; see also, Joinder Agreement, art. IV, V; see also, Wash. Admin. Code 388-561-0100(6)(b)(iv).

CONCLUSION

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

E. PS 18-083 Does the Tulalip IGRA Trust Meet Requirements for Exclusion in POMS SI 01120.195

Date: May xx, 2018

1. Syllabus

This Regional Chief Counsel (RCC) opinion examines whether the trust accounts of the Tulalip Tribes (the Tribe), established pursuant to the Indian Gaming Regulatory Act (IGRA), meet the requirements described in POMS SI 01120.195.F for evaluating whether the trust accounts are resources for Supplemental Security Income (SSI) purposes. The RCC concludes that the trust documentation does not meet all nine requirements of that section. Therefore, the Tribe should not be treated as the grantor of the trust accounts, and POMS SI 01120.201 should be used to determine whether the trust accounts are resources for SSI purposes.

2. Opinion

QUESTION

Whether trust accounts established pursuant to the Indian Gaming Regulatory Act benefitting minors and legally incompetent adults of the Tulalip Tribes (the Tribe) meet the requirements described in POMS SI 01120.195.F for evaluating whether the trust accounts are resources for Supplemental Security Income (SSI) purposes.

BRIEF ANSWER

No. Accordingly, the Tribe is not treated as the grantor of the trust accounts, and POMS SI 01120.201 should be used to determine whether the trust accounts are a resource for SSI purposes.

SUMMARY OF FACTS

The Tribe operates a gaming facility. A portion of the Tribe’s share of the net revenues of the gaming enterprise is distributed on a per capita basis to tribal members. Distributions to tribal minors and legally incompetent tribal members may be deposited, in part or whole, as elected by the minor or incompetent’s parent or guardian, into a trust.

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 the new 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 is 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 is a resource.

Tribal Documents

The Tribe has adopted the Tulalip Tribal Per Capita Trusts Code (Trust Code or TC), Chapter 5.25, to govern trust accounts held on behalf of minors and incompetent adults[6] in accordance with the Tribe’s Gaming Revenue Allocation Plan. The Tribe has also adopted a Minor Trust Account Policy (Policy) to define processes discussed in the Trust Code.

Application of Authority to Tribal 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 Tribe’s documentation of the trust accounts does not meet all nine requirements. Each of the nine requirements is recited and discussed below:

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

This requirement is not met. Tribal documentation provides that the Tribe establishes trusts for minors and legal incompetents. TC § 5.25.020(3). However, documentation permits trusts to be funded with funds that are not per capita payments. Policy § 7 provides that money from “disability checks” may be deposited into trust. Further, the Trust Code provides that if an individual who inherits money from a former beneficiary is also a minor or legal incompetent, the inheritance is retained in trust under the provisions of the Trust Code. TC § 5.25.050(2)(f).

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

This requirement is met. A beneficiary of the trust must be a minor or legal incompetent at the time the trust interest is established. TC § 5.25.020(1).

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

This requirement is met. The Trust Code defines IGRA Trust to mean a trust established under IGRA “to receive and invest per capita payments for its members who are minors or legal incompetents pending distribution of the trust assets to those members after they attain the age of majority or cease to be legal incompetents.” TC § 5.25.020(3). Further, the definition of beneficiary provides that “all contributions to the trust with respect to [a] beneficiary are made for the period that the beneficiary is a minor or legal incompetent.” TC § 5.25.020(1).

4. 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.

This requirement is met. Trust Code §§ 5.25.040(1) and 5.25.050(1)(c) state that the Tribe shall be treated as the grantor and owner of the trust. Further, the Tribe retains some power or interest in the trust assets; for example, it may substitute assets of equal fair market value for any asset held in the trust, TC § 5.25.050(5)(e), and, through its Board, adopt and rescind policies permitting parents or guardians to direct investment options, TC § 5.25.050(5)(d); Policy § 2.

5. 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.

Tribal documentation represents that this requirement is met. Sections 5.25.040 and 5.25.050(1)(c) of the Trust Code represent that the Tribe is the grantor and owner of the trusts. Section 5.25.050(3)(b) of the Trust Code provides that trust assets are subject to claims of the Tribe’s general creditors under Federal and other applicable law.

6. 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.

This requirement is not met. Section 5.25.050(3)(a) of the Trust Code provides that the Trustee must cease payments to beneficiaries if the Tribe is “insolvent.” The Tribe is insolvent when (a) the Tribe comes subject to a pending proceeding as a debtor under the United States Bankruptcy Code, or (b) the Courts of the Tribe determine that the Tribe’s liabilities exceed its assets and that, as a result, the Tribe is unable to meet its financial obligations without concessions from the Tribe’s general creditors.

This definition of insolvency fails to include insolvency proceedings other than those under the United States Bankruptcy Code. Accordingly, the Tribal documentation does not provide that the Trustee shall cease payment and hold assets for the benefit of general creditors if the Tribe is subject to any pending insolvency or bankruptcy proceeding, but rather only a proceeding as a debtor under the United States Bankruptcy Code.

Furthermore, the definition of insolvency too narrowly limits the scope of the trustee’s power to determine whether the Tribe is unable to pay its debts. The trustee may have reason to believe that the Tribe is unable to pay its debts as they become due even before the Tribe is subject to a bankruptcy proceeding or before a tribal court determines the Tribe’s liabilities exceed its assets.

7. 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.

Tribal documentation represents that this requirement is met. Trust Code § 5.25.050(1)(d) provides that trust beneficiaries have no preferred claim on, or any beneficial ownership interest in, any assets of the trust, and that any rights created by the Trust Code are mere unsecured contractual rights. Further, benefits payable to beneficiaries may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. TC § 5.25.050(13)(b).

8. 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.

This requirement is not met. Trust Code §§ 5.25.030, 5.25.050(2)(a) provides that, once an IGRA trust contribution is deposited into trust, no disbursement of trust assets shall be made to a minor except upon the age of majority or for health, education, and welfare hardship payments. Section 5.25.050(b) of the Trust Code permits distributions to incompetents only once they are no longer legally incompetent or for the health, education, or welfare of that member.

However, the Tribe permits the beneficiary’s parent or guardian to elect whether 50%, 75%, or 100% of the per capita distribution is placed into the trust. Policy § 1. Any money distributed directly to the parents or legal guardians must be used for the health, education, and welfare of the minor or legal incompetent. The parent or guardian is required to maintain adequate records to verify that expenditures of the election disbursement were for the health, education, or welfare of the minor. TC § 5.25.030(1). If not, the parent or guardian is “responsible for reimbursing the trust any amounts that would otherwise have been treated as IGRA trust contributions.” TC § 5.25.030(1); see also Policy § 10 (if a complaint about the use of the distribution is made and satisfactory receipts are not delivered, the parent is required to pay back the last distribution).

Under this structure, a parent or legal guardian is permitted to elect immediate distribution of what would otherwise have been an IGRA distribution and, if the immediate distribution is not used for the beneficiary’s health, education, or welfare, the parent is required to make the trust whole by reimbursing the trust (rather than the beneficiary). Accordingly, under this scheme, what appears to be an election regarding immediate and direct disbursement of a per capita payment is actually an election regarding immediate and direct disbursement of what is considered trust assets. That initial distribution is not made at the discretion of the trustee.

9. 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.

This requirement is not met. Tribal documentation does provide that, upon the beneficiary’s death, remaining trust benefits will become payable to the beneficiary’s spouse, issue, parents, siblings, or grandparents. TC § 5.25.050(2)(f). If no such successor beneficiary exists, then the remaining trust benefits accrue to the Tribe. Id.

However, the Trust Code identifies circumstances under which the decedent beneficiary’s share is not paid to an inheriting person, but rather kept in trust. The Trust Code provides that if an individual who inherits money from a former beneficiary is also a minor or legal incompetent, the trust benefits are retained in trust under the provisions of the Trust Code. TC § 5.25.050(2)(f).

CONCLUSION

The Tribe should not be treated as the trust grantor under POMS SI 01120.195.F because the tribal documentation does not satisfy all nine requirements of that section. Accordingly, POMS SI 01120.201 should be used to determine whether the trust accounts established pursuant to the tribal documentation are a resource for SSI purposes.

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

Date: February xx, 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 xx, 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. [7] 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);[8]

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 welfare[9] , 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.[10] 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.

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

Date: August xx, 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.[11] 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.

H. 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/xx/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.

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

July xx, 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 xx, 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 xx, 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 trusts[12] , 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 xx, 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 xx, 2015.


Footnotes:

[1]

The Washington Trust also permits transfer of the Beneficiary’s assets to another Section 1396p(d)(4)(C) trust, noting that this does not constitute early termination and does not require the State Medicaid agency to be reimbursed. Washington Trust Master Trust Agreement Art. 6, § 6.6. POMS permits this: “[A]n early termination clause does not need to meet the above criteria [for early termination] if the clause solely allows for a transfer of the beneficiary’s assets from one Section 1917(d)(4)(C) trust to another Section 1917(d)(4)(C) trust.” See POMS SI 01120.199.F.2.

[2]

Note, third-party matching contributions should be evaluated under the resource rules in POMS SI 01120.200(D) and SI 01110.100(B).

[3]

 

According to Wash. Rev. Code 43.330.432(1), “[t]he state investment board has the full power to invest, reinvest, manage, contract, sell, or exchange investment money in the developmental disabilities endowment trust fund.” The relationship between The Arc of Washington State and WSIB is not completely clear. Nevertheless, the fact that the trust accounts are maintained separately pooled satisfies the third requirement.

[4]

As noted, the third-party matching funds provided by Washington state do not disqualify the trust because those funds are not the assets of the individual. Thus, the fact that these assets return to the fund does not violate the early termination provision rules.

[5]

Section 7.2.2 actually refers to the statute as § 1396p(2)(d)(4)(C). This appears to be a typographical error in the document, as such subsection does not exist.

[6]

. The definitions of minor and legal incompetent in the Trust Code are consistent with those contained in POMS SI 01120.195.C. TC § 5.25.020(5), (7).

[7]

. 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.

[8]

. 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.

[9]

. 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.

[10]

. 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.

[11]

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

[12]

. 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 - 04/10/2020
Batch run: 04/10/2020
Rev:04/10/2020