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.