QUESTION PRESENTED
You asked whether the Lifetime Care Foundation for the Jewish Disabled Community Trust
II (Trust) meets the requirements for the pooled trust exception, in accordance with
Section 1917(d)(4)(C) of the Social Security Act (the Act), 42 U.S.C. § 1396p(d)(4)(C)
and does not constitute a resource for a Supplemental Security Income (SSI) recipient
or applicant.
OPINION
For the reasons set forth below, the Trust does not qualify for the pooled trust exception
and the Trust Accounts thereunder are not exempted from resource counting under Section
1917(d)(4)(C) of the Act. In particular, the Trust does not meet the requirement that
it be for the sole benefit of the disabled individual.
BACKGROUND
The Lifetime Care Foundation for the Jewish Disabled, Inc. (Lifetime) established
the Trust as an irrevocable pooled trust intended to provide supplemental services
and benefits for disabled individuals. We have reviewed a copy of the signed Trust
Agreement as well as a 2006 Amendment.
RELEVANT TRUST PROVISIONS
Section 2.B (Trust Purpose) states that the purpose of the Trust is to provide for
the collective management and distribution of the Trust Estate on behalf of eligible
disabled beneficiaries with the intent of providing extra and supplemental services
and benefits for the care, support, comfort, education, rehabilitation, and training
of the beneficiaries.
Section 3.B (Establishment of Trust Account) states that Trust Accounts for eligible
beneficiaries shall be established with the assets of the individual by the parent,
grandparent, legal guardian, or by the individual or a court.
Section 4.A (Administration for Exclusive Benefit of Designated Beneficiary) provides
that each Trust Account shall be held for the exclusive benefit of the designated
beneficiary during his or her lifetime and that the Trustees will not use assets in
a beneficiary’s Trust Account for the benefit of other Trust beneficiaries during
a beneficiary’s lifetime, or at any time for purposes not set forth in the Trust Agreement.
Section 4.B (Joint Management of Trust Accounts) states that the Trustees will pool
resources of the Trust Accounts and commingle the assets for purposes of investment
and asset management. Each Trust Account is credited with its proportionate share
of the net income from the Trust estate, and each account will be charged separately
with disbursements and distributions made on behalf of the beneficiary or directly
attributable to that account.
Section 4.D (Accounting) states that upon request, the Trustees will provide the sponsor
with an annual accounting of transactions for the Trust Account and that a copy of
an annual accounting shall be available to government agencies requiring such an accounting
in accordance with applicable law, or to other such persons to whom an annual audited
account must be furnished pursuant to court order.
Section 5.A (Distributions on Behalf of a Designated Beneficiary) provides that, during
the life of a designated beneficiary, the Trustees shall apply Trust funds for the
benefit of the beneficiary; and shall add any income not so applied to the principal
of the Trust Account. Permissible disbursement includes payments for services or benefits
provided for the beneficiary’s support and maintenance, including those provided by
Lifetime, as well as payment of the beneficiary’s own tax liability or for prepaid
funeral services for the beneficiary.
Section 6.A (Payment of Designated Beneficiary’s Trust and Estate Administration Expenses)
states that the Trustees may pay for administration expenses, including taxes and
attorneys’ fees, after the death of the beneficiary, except that reimbursement may
not be made for other expenses prior to reimbursement of the State(s) for medical
assistance (as provided in Section 7, below) for designated beneficiaries who received
SSI.
Section 6.B (Reimbursement of Certain Income Taxes) permits Trustees to reimburse
the parent(s) of a designated beneficiary out of Trust funds for federal, state, and
municipal income taxes that the parent(s) may be required to pay because of payments
of Trust income to or on behalf of a designated beneficiary which are treated as income
to the parent(s) because the payments are deemed to be in discharge of the parents’
legal obligation to support the designated beneficiary.
Section 7 (Dispositive Provisions After Death of Designated Beneficiary) states that
after payment of a designated beneficiary’s administration expenses and other allowable
payments (if any), the Trustees will retain in the Trust the balance remaining in
the designated beneficiary’s account upon death of the designated beneficiary, and
the balance will be available solely for the benefit of other individuals who are
disabled. To the extent any amount remaining in an individual’s account is not retained
by the Trust, the Trustees shall pay the State that provided medical assistance benefits,
if any, from such remaining amounts in the account in an amount equal to the total
amount of medical assistance paid on behalf of the individual under the State Medicaid
plan.
Section 12.A (Irrevocable Transfer) provides that a sponsor or other contributor to
the Trust cannot revoke a sponsor agreement or withdraw any funds contributed to the
Trust Estate.
ANALYSIS
Trusts created on or after January 1, 2000 using an individual’s own assets are generally
counted as a resource when considering the individual’s eligibility for SSI. Act §
1613(e), 42 U.S.C. § 1382b(e); Program Operations Manual System (POMS) SI 01120.201.A.1. However, certain exceptions are provided for trusts that are established in
accordance with Section 1917(d)(4) of the Act. 42 U.S.C. § 1396p(d)(4); see Act § 1613(e)(5). Pooled trusts are one such exception. Act § 1917(d)(4)(C); see POMS SI 01120.203B.2 (describing an exception in accordance with Section 1917(d)(4)(C) as a “pooled trust”).
A trust established with the assets of a disabled individual that is part of a pooled
trust may be exempted and not counted as a resource if it meets the following conditions:
(1) the trust must be managed by a non-profit association; (2) a separate account
must be maintained for each beneficiary of the trust; (3) accounts in the trust must
be established for the sole benefit of the beneficiaries by a parent, grandparent,
legal guardian, by the beneficiaries themselves, or by a court; and (4) to the extent
any amounts remaining in the beneficiary’s account upon the beneficiary’s death are
not retained by the trust, the trust must pay the State(s) from any remaining amounts
in the account an amount equal to the total amount of medical assistance paid on behalf
of the beneficiary under the State Medicaid plan(s). Act § 1917(d)(4)(C); POMS SI 01120.203B.2.a. In this case, the terms of the Trust Agreement does not meet all of the requirements
of the pooled trust exception, as set forth below:
a. Assets of a Disabled Individual. POMS provides that the individuals whose assets are used to establish the trust account
must meet the definition of disabled for purposes of the SSI program. POMS SI 01120.203.B.2.b. The Trust Agreement states that the Trust Accounts are established for the
sole benefit of individual beneficiaries who are defined as disabled pursuant to Section
1614(a) (3) of the Act, codified at 42 U.S.C. § 1382c(a)(3). Trust Agreement, Sections
2.B, 3.B. The Trust Accounts are intended to be funded with assets of the disabled
individual. Trust Agreement, Section 3.B.
b. Nonprofit Association. The Trust must be established and maintained by an organization that has been established
and certified under a State nonprofit statute in order to meet the pooled trust exception.
Act § 1917(d)(4)(C)(i) (providing that “[t]he trust is established and managed by
a nonprofit association”); POMS SI 01120.203.B.2.c. The Trust was established and is managed by the Lifetime Care Foundation for
the Jewish Disabled, Inc., a non-profit corporation incorporated under the laws of
the State of New York on June 12, 1996, according to the NYS Department of State Division
of Corporations online database.[2]
c. Separate Accounts. The pooled trust exception requires that the Trust must maintain a separate account
for each Trust beneficiary, although the funds may be pooled for investment and management
purposes. Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.B.2.d. Furthermore, the Trust must be able to provide an individual accounting for
the individual. POMS SI 01120.203.B.2.d. The Trust Agreement requires that individual Trust Accounts be maintained
for each beneficiary and authorizes the trustee to commingle and jointly manage the
assets of the Trust Accounts. Trust Agreement, Sections 3.B, 4.A, 4.B. In addition,
the trustee of the Trust is required to submit, upon request, an annual accounting
of the transactions in a Trust Account to its Sponsor; and a copy of an annual accounting
shall be available for any government agency requiring such accounting. Trust Agreement,
Section 4.D.
d. Sole Benefit of the Beneficiary. POMS state that a trust is considered to be for the sole benefit of an individual
“if the trust 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 001120.201.F.2.a.
See Act § 1917(d)(4)(C)(iii) (providing that accounts “are established solely for the
benefit of individuals who are disabled”). Therefore, aside from payments for goods
or services for the trust beneficiary, certain specified third party travel expenses,
and reasonable administrative expenses, the trust must not (1) provide a benefit to
any other individual or entity during the disabled individual’s lifetime, or (2) allow
for termination of a trust account prior to the individual’s death and payment of
the assets to another individual or entity. POMS SI 001120.201.F.2, 01120.203.B.2.e.
The Trust Agreement provides that that each Trust Account be held for the sole benefit
of the designated beneficiary during his/her lifetime. Trust Agreement, Sections 3.B,
4.A; see Trust Agreement Section 5.A. The Trust Agreement prohibits a Sponsor from revoking
a Sponsor Agreement or withdrawing any funds. Trust Agreement, Section 12.A. There
are no early termination clauses in the Trust Agreement. The Trust Agreement also
properly permits payment for services provided to the beneficiary, as well as payment
for administrative expenses. Trust Agreement, Section 5.A.
However, the Trust Agreement also provides that the trustees may reimburse the parents
of the beneficiaries out of Trust funds for federal, state, and municipal income taxes
that such parents may be required to pay because of payments of Trust income to or
on behalf of beneficiaries that are treated as income to the parents. Trust Agreement,
Section 6.B. Because the Trust provides for Trust funds to be paid to someone other
than the SSI applicant, the Trust is not for the “sole benefit” of the individual.
POMS SI 001120.201.F.2.a, 01120.203.B.2.e. Additionally, the payment of Trust funds
to a beneficiary’s parents as reimbursement for income taxes does not meet one of
the exceptions to the sole benefit rule for third party payments. See POMS SI 01120.201.F.2.b, 01120.201.F.2.c. Accordingly, the Trust does not meet the requirement that
it be for the sole benefit of the disabled individual.
e. Establishing Person or Entity. The Trust Agreement provides that a Trust Account be established by the beneficiary,
the beneficiary’s parent, grandparent, legal guardian, or by a court. Trust Agreement,
Section 3.B. This meets the requirements of the pooled trust exception. See Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.f.
f. Disposition upon Death of Beneficiary. POMS explains that the trust must contain specific language that provides that,
to the extent that amounts remaining in the individual’s account upon the death of
the individual are not retained by the trust, the trust pays to the State(s) from
such remaining amounts in the account an amount equal to the total amount of medical
assistance paid on behalf of the individual under the State Medicaid plan(s).
POMS SI 01120.203.B.2.g; see Act § 1917(d)(4)(C)(iv). The Trust must provide reimbursement to any State(s) that
may have provided medical assistance under the State Medicaid plan(s) and payback
may not be limited to any particular State(s) or period of time, such as after establishment
of the Trust. POMS SI 01120.203.B.2. Furthermore, POMS also state that to the extent the Trust does not retain funds
in the account, States must be listed as first payee with priority except over (1)
taxes due from the Trust to the State(s) or Federal government because of the death
of the beneficiary and (2) reasonable fees for administration of the Trust estate
or required actions associated with termination and wrapping up of the Trust. POMS
SI 01120.203.B.2.g, 01120.203.B.3.a. The Trust Agreement states that any funds remaining in an
individual’s account upon death, following the payment of taxes and administration
fees, shall be paid to the State that provided medical assistance benefits, if any,
in an amount equal to the total amount of medical assistance paid on behalf of the
individual under the State Medicaid plan. Trust Agreement, Section 7; see Trust Agreement, Section 6A. We do note that the Trust Agreement describes “the State
that provided medical assistance benefits, if any” as singular rather than plural.
Trust Agreement, Section 7. However, the Trust does not name any particular state,
and essentially mirrors the language of the Act insofar as it provides that the Trustees
will pay “an amount equal to the total amount of medical assistance paid on behalf
of the individual under the State Medicaid plan.” Id,: see Act § 1917(d)(4)(C)(iv) (providing that a trust must pay “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”).
Because the Trust Agreement does not require the Trust funds be used for the sole
benefit of the beneficiary, the provisions of the Trust Agreement do not meet the
requirements of the pooled trust exception.
CONCLUSION
For the reasons discussed above, the Trust Agreement does not meet the requirements
of the pooled trust exception and the Trust Accounts thereunder would be a resource
for SSI purposes.