QUESTION PRESENTED
Does the Secured Futures Pooled Special Needs Trust Agreement, as amended by the Sixth
Alaska Amendment (“Secured Futures Pooled 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
No. The Secured Futures Pooled Trust resolves the issues identified in our May 2019
opinion. However, language used in the Master Trust Agreement impermissibly allows
the Trustee to delegate responsibilities to a for-profit entity that must be retained
by the non-profit Trustee.
Because the Secured Futures Pooled Trust is not a qualifying pooled trust, it must
be evaluated under POMS SI 01120.201.
SUMMARY OF FACTS
Secured Futures, Inc., settled the Pooled Special Needs Trust in 2008. On August 28,
2015, it adopted a new trust agreement, amending and restating the trust (“Master
Trust Agreement”). Secured Futures then amended the trust on November 2, 2016, to
comply with the requirements of the State of Alaska (“Fifth Alaska Amendment”). On
May 19, 2017, [trust beneficiary] M.M.’s court-appointed guardian executed a Joinder
Agreement to the Secured Futures Pooled Trust (“Joinder Agreement”).
In May 2019, we opined that the Fifth Alaska Amendment contained multiple provisions
that prevented the Secured Futures Pooled Trust from being a qualifying pooled trust
under 42 U.S.C. § 1396p(d)(4)(C). On October 23, 2019, Secured Futures amended the
trust (“Sixth Alaska Amendment”) and removed the problematic provisions. The RO asked
OGC if the Secured Futures Pooled Trust, with the Sixth Alaska Amendment, is a qualifying
pooled trust under 42 U.S.C. § 1396p(d)(4)(C).
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). Under 42 U.S.C. § 1382b(e), a trust is a resource unless it meets certain requirements,
including those articulated in § 1396p(d)(4)(C). Trusts that meet the requirements
of 42 U.S.C. § 1396p(d)(4)(C) are considered to be qualifying pooled trusts.[2]
First, to be a qualifying 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 nonprofit 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 Secured Futures Pooled Trust does not qualify as a
pooled trust under 42 U.S.C. § 1396p(d)(4)(C).
The Secured Futures Pooled Trust does not qualify as a pooled trust under 42 U.S.C.
§ 1396p(d)(4)(C) because it potentially provides for an excess delegation of authority
to an entity other than a non-profit association.
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”).
This requirement is satisfied. According to the Office of the Regional Commissioner,
M.M. is a disabled adult. Moreover, M.M.’s court-appointed guardian established M.M.’s
sub-account using family funds. Joinder Agreement, at 1. Funds deposited on behalf
of the beneficiary are “the funds of the Beneficiary.” Master Trust Agreement, Art.
1.
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.D.3 (trust is “established and maintained by the actions of a nonprofit association”).
While the Trust was established by a nonprofit corporation, the Master Trust Agreement
also provides that “the Trustee has the power to delegate to a corporate fiduciary
the exercise of any powers, with the same effect as if the Trustee had joined in the
exercise of such power.” Art. 3.3. By its plain language, the Trust permits the non-profit
Trustee to delegate its powers to a corporate fiduciary without restriction, including,
potentially, for-profit corporate fiduciaries. Pursuant to POMS SI 01120.225.D, a nonprofit corporation may employ a for-profit entity such as an investment advisor
if the nonprofit corporation maintains ultimate managerial control over the Trust.
For example, the nonprofit corporation must remain responsible for determining the
amount of the trust corpus to invest, removing or replacing the trustee, and making
the day-to-day decisions regarding the health and well-being of the pooled trust beneficiaries.
See
id.
The delegation of authority authorized by the Trust appears overly permissive; certain
responsibilities cannot be delegated to a for-profit entity. Assuming that the corporate
fiduciary is a for-profit entity, it raises the possibility that the delegation of
authority could exceed the limits set forth in POMS SI 01120.225. For example, the delegation provision does not make clear that Secured Futures,
as non-profit Trustee, must be responsible for determining the amount of the Trust
corpus to invest. See POMS SI 01120.225. D.
3. Separate Accounts, Pooled for
Investing
To be a pooled trust, the trust must maintain “a separate account . . . for each beneficiary
of the trust.” 42 U.S.C. § 1396p(d)(4)(C)(ii). “[F]or purposes of investment and management
of funds, the trust pools these accounts.” Id. However, “[t]he trust must be able to provide an individual accounting for each
individual.” POMS SI 01120.203.D.4.
This requirement is satisfied. The Secured Futures Pooled Trust maintains “detailed
records of all financial transactions for each Beneficiary Trust Share[,]” Master
Trust Agreement, Art. 3.9, which is a sub-account containing the “distinct share or
portion of [the] trust held on deposit for a disabled individual beneficiary” Id., Art. 1. Beneficiary Trust Shares are “combined [for] investment and administration,
but [are] deemed the distinct share of, or for the benefit of, their respective Beneficiaries.”
Master Trust Agreement, Art 2.2.
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.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
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.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. The Proposed Joinder Agreement’s early termination provision meets all three
criteria in POMS SI 01120.199.F.1.
An early-termination provision need not satisfy these three criteria if it solely
allows for the “decanting” of a beneficiary’s assets from one pooled trust under 42
U.S.C. § 1396p(d)(4)(C) to another 42 U.S.C. § 1396p(d)(4)(C) trust. POMS SI 01120.199.F.2. However, the trust must specify that, in such a trust-to-trust transfer, the
only permissible disbursements are the transfer of sub-account funds to the secondary
trust and the payment of allowable administrative expenses. POMS SI 01120.199.F.2.
The Sixth Alaska Amendment’s provision governing trust termination under court order[3] satisfies the early termination criteria of POMS SI 01120.199.F. The Amendment now provides that, if the trust share terminates prior to the beneficiary’s
death upon court order, the beneficiary’s trust share is either transferred to “another
recognized Medicaid trust established pursuant to 42 U.S.C. § 1396p(d)(4)(C) that
is approved by the State of Alaska Department of Health and Social Services,” or is
used to repay medical assistance provided by the states. Sixth Alaska Amendment, at
¶ 6 (amending Art. 6 of the Master Trust Agreement). The trust goes on to explain
that “After repayment to [sic] of Medical Assistance to all states under this Paragraph,
any funds remaining in the Beneficiary Trust Share shall be disbursed to the Beneficiary.”
Id.
The Sixth Alaska Amendment’s decanting after-termination-by-court-order provision
satisfies the criteria of POMS SI 01120.199.F.2. It specifically states that, with the exception of the payment of allowable
administrative expenses, the beneficiary’s funds “shall” be placed into another 42 U.S.C. § 1396p(d)(4)(C) trust. Sixth Alaska Amendment,
at ¶ 6 (amending Art. 6 of the Master Trust Agreement).
The trust also contains two early termination provisions that govern when the trust
is terminated early without a court order: a second decanting provision, Master Trust
Agreement, Art. 7, 9.1, and an early termination with distribution provision, Id. at Art. 9.2. Neither violates the sole benefit requirement.
The first of the trust’s provisions governing early termination without a court order
– another decanting provision – satisfies the criteria of POMS SI 01120.199.F.2. See Master Trust Agreement, Art. 7, 9.1. The trust specifies that a “transfer under this
Article shall not result in any disbursement other than the” transfer of funds to
a qualifying trust, and allowable administrative expenses.[4] Master Trust Agreement, Art. 7.2.
The second of the trust’s provisions governing early termination without a court order
satisfies the criteria of POMS SI 01120.199.F.1. First, the trust provides that, upon early termination, the trustee “shall first
repay the Medical Assistance paid by all states . . . after allowable administrative
expenses and taxes are paid.” Master Trust Agreement, Art. 9.2. Second, the trust
provides that, after the repayment of medical assistance to the states and allowable
taxes and administrative fees, “the balance of the Beneficiary Trust Share shall be
distributed to the Beneficiary.” Id. Third, the beneficiary does not have the power to terminate the Trust. Master Trust
Agreement, Art. 7.1, 9.1.
Otherwise, the Secured Futures Pooled Trust satisfies the sole benefit requirement.
The Master Trust Agreement provides that the Trust is “solely for the benefit of the
Beneficiaries.” Master Trust Agreement, at 2; see
also Master Trust Policies and Procedures, at 1 (“funds disbursed must be for the sole
benefit of the beneficiary.” The Agreement also states the sub-account assets must
be used for the “Beneficiary’s Supplemental Needs,” Master Trust Agreement, Art. 6.2,
which benefit the beneficiary, Id., Art. 1.
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.D.6.
F.C. executed the Joinder Agreement as M.M’s court-appointed guardian. Joinder Agreement,
at 1, 3. The Secured Futures Pooled Trust thus meets the fifth requirement.
6. Remaining Amounts Paid to the
State
Lastly, “[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. The trust may, however, retain funds, pay taxes due, as well as charge reasonable
fees for the administration of the trust before repaying the States for medical assistance
provided. POMS SI 01120.203.D.8, E.1.
The Secured Futures Pooled Trust satisfies this requirement. Specifically, the Master
Trust Agreement provides that, “[u]pon the death of the Beneficiary, any amounts that are not retained by the trust and that were the funds
of the beneficiary prior to the establishment of the trust share, shall first repay the Medical Assistance paid by all states on behalf of the Beneficiary
. . . after allowable administrative expenses and taxes are paid.” Master Trust Agreement,
Art. 6.12 (emphasis in original). The trust’s allowance for retaining funds, and payment
of taxes and reasonable fees for the administration of the trust estate before repayment
to the States for medical assistance is consistent with the requirements of 42 U.S.C.
§ 1396p(d)(4)(C)(iv).
CONCLUSION
The Secured Futures Pooled Trust does not qualify as a pooled trust under 42 U.S.C.
§ 1396p(d)(4)(C). The trust provides that the Trustee can delegate to a potentially
for-profit corporate fiduciary any powers, which conflicts with the requirement that
the non-profit Trustee must retain certain types of authority. Accordingly, the Secured
Futures Pooled Trust must be evaluated under POMS SI 01120.201.