QUESTION
You asked whether the Master Trust Agreement and Joinder Agreement for the Minnesota
Charities Pooled Trust comply with SSA’s trust policy.
SHORT ANSWER
For the reasons discussed below, we conclude that a self-settled sub-account in the
Trust would be considered a resource for SSI purposes under the Social Security Act
because it does not meet all of the requirements of the pooled trust exception. However,
a third-party sub-account in the Trust would not constitute a resource under the agency’s
regular resource rules. In the case of a commingled sub-account, the portion of the
sub-account attributable to the assets of a third party would not be considered a
resource, whereas the portion attributable to the assets of the grantor-beneficiary
would be considered a resource.
BACKGROUND
The CPT Institute (CPT) states that it is a Florida non-profit corporation, established
in 1994. Master Trust Agreement (MTA) § 2.1; CPT Institute, Home, https://www.cptinstitute.org/ (last visited Mar. 20, 2020). On November 14, 2017, the CPT, as Settlor, executed
a Declaration of Trust establishing the Minnesota Charities Pooled Trust (MN-CPT).
MTA§§ 1.1, 2.1; p. 23. In the MTA, “Trust” means the MN-CPT. MTA § 1.1. The intent
of MN-CPT was to establish a pooled special needs trust, as set forth in 42 U.S.C.
§ 1396p(d)(4)(C), in order to supplement, but not displace, assistance which may otherwise
be available to beneficiaries. MTA §§ 1.5, 3.2, 6.1. The assets held in the Trust
and sub-accounts, called Individual Benefit Accounts (IBA), are not for the primary
support of the beneficiaries but rather their supplemental needs. MTA § 6.1.
The MTA defines “Trust Beneficiary” as a person who meets the criteria for disability
under 42 U.S.C. § 1382(a)(3) and is the recipient of services and benefits from his
or her IBA. MTA §§ 2.4, 13.12 (“Trust Beneficiary”). The Trustee may also accept a
person whom SSA has not declared to be disabled as long as the Trustee reasonably
believes that the person is, or will be determined to be, a person with a disability.
MTA § 3.5. The Trust defines two types of grantors. First, a “Grantor” is defined
as a Trust Beneficiary, the parent, grandparent, or legal guardian of a Trust Beneficiary,
or any person or entity acting under court order or other legal authority, who contributes
assets to a Trust Beneficiary’s IBA. MTA §§ 2.3, 13.12 (“Grantor”). “Grantor” also
includes, when applicable, any person or entity that contributes his, her, or its
own assets to the Trust for the sole benefit of a Trust Beneficiary. MTA §§ 2.3, 13.12
(“Grantor”). The MTA states that a Trust Beneficiary’s IBA is established when the
Trustee accepts an amount contributed for a person desiring to become a Trust Beneficiary
and a Grantor signs a Joinder Agreement agreeing to the terms of the Trust. MTA §§
3.1, 3.3, 4.2. A grantor may also transfer additional assets to the Trust at any time,
subject to acceptance by the Trustee. MTA § 4.5. The Trust also includes a Trust Operating
Account into which any funds remaining in an IBA when the Trust Beneficiary dies,
or when the IBA has otherwise been terminated, are initially held before final distribution.
MTA §§ 7.2, 13.12 (“Remainder Amount,” “Trust Operating Account”).
The MTA makes CPT the Trustee of the MN-CPT. MTA § 2.2. The MTA does not otherwise
define the term “Trustee.” The Trustee has broad administrative powers. See,
e.g., MTA Art. 10. The Trustee has complete control over all distributions of Trust property.
MTA §§ 4.4, 6.1, 7.2. The Trustee may hire an investment advisor to assess, invest,
and manage the assets in the Trust and IBAs, but the Trustee retains at all times
the right to remove and replace any such investment advisor. MTA §§ 2.5, 11.1-11.2.
The Trustee similarly has the right to retain, and remove, a vendor to achieve compliance
with the Medicare Secondary Payer Act. MTA §§ 2.6-2.7. The Trustee may also hire accountants,
attorneys, consultants, and other specialists as the Trustee finds necessary. MTA
§ 10.1(f). However, the Trustee retains the “sole and absolute discretion” to approve
and make disbursements from each Trust Beneficiary’s IBA for the sole benefit of a
Trust Beneficiary. MTA §§ 4.4, 6.1(B). The Trustee also has the sole discretion to
decide whether the “costs and expenses of defending the Trust from any claim, demand,
legal or equitable action, suit or proceeding” should be charged on a pro-rata basis
to all the IBAs within the Trust, or charged only against the IBAs of affected Trust
Beneficiaries. MTA § 10.6. In making that decision, the Trustee must consider whether
the issue requiring defense affects a substantial number of Trust Beneficiaries so
as to warrant allocation of expenses among all IBAs, or whether the issue affects
only a single IBA or certain IBAs such that costs should be allocated only to those
IBAs. Id.
A Trust Beneficiary has no right to compel any distribution, or demand that the Trustee
make any distribution. MTA § 9.8. A Beneficiary Advocate is appointed to act as the
agent for each Trust Beneficiary. MTA Art. 5. The Beneficiary Advocate may make recommendations
regarding the Trust Beneficiary’s life care, and request or recommend disbursements
on behalf of the Trust Beneficiary, but has no authority to compel the Trustee to
make such disbursements. MTA §§ 5.4-5.5, 6.1. The Trustee has the authority to remove
and replace a Beneficiary Advocate if the Trustee believes she/he is not acting in
the Trust Beneficiary’s best interests. MTA § 5.7. The Trust Declaration also contains
a spendthrift provision that prohibits assignment by any Trust Beneficiary of any
part of his/her interest in the Trust, or the attachment of any part of the IBA or
Trust by any creditor of a Trust Beneficiary. MTA § 9.9.
The Trust permits a Trust Beneficiary’s assets to be transferred from the MN-CPT to
another qualifying 42 U.S.C. § 1396p(d)(4)(C) pooled trust, with no disbursements
made other than to the accepting trust. MTA § 6.5. It also establishes that if an
IBA is terminated before the Trust Beneficiary’s death, the State(s) would receive
all amounts remaining in the IBA up to an amount equal to the amount of medical assistance
paid on behalf of the Trust Beneficiary under the State Medicaid plan(s), and that
any funds remaining after the payback amount has been paid will be distributed to
the Trust Beneficiary. MTA § 8.1. Neither the Trust Beneficiary nor his or her advocate
or legal representative has the power to terminate an IBA “at any time under any circumstances.”
Id.
Article Seven of the Trust Declaration establishes the distribution of IBA assets
upon the death of a Beneficiary. That paragraph contains Medicaid payback provisions,
under which any amounts remaining in a sub-account after the Beneficiary’s death that
are not retained by the MN-CPT must be paid to any state from which the Beneficiary
received assistance, as required by 42 U.S.C. § 1396p(d)(4)(C)(iv). MTA §§ 7.2(B),
7.4. However, the Trustee also retains part of the funds remaining in the Trust Beneficiary’s
IBA as the Trust Remainder Share. MTA §§ 7.2(A), 7.3. The Trust Declaration establishes
a formula to determine the amount to be paid into the Trust Remainder Share, depending
on whether the funds remaining in the IBA are greater or less than the Medicaid Payback
amount. MTA § 7.2(D). The Trust lets the Trustee pay certain administrative expenses
before paying the state(s) back for any Medicaid expenses, but limits such administrative
expenses to those allowed by SSA’s Program Operations Manual System (POMS). MTA §
7.4(A)-(B). If any funds remain in the IBA after distributions into the Trust Remainder
Share and Medicaid Payback amount, they are distributed to any beneficiaries listed
in the Joinder Agreement. MTA §§7.2(C)-(D), 7.5. If the Trust Beneficiary does not
name any remainder beneficiaries, then any leftover funds are retained by the Trust.
MTA § 7.2(C). Schedule C to the Joinder Agreement reiterates that the Trust will retain
any leftover funds if the Trust Beneficiary does not name any remainder beneficiaries.
Joinder Agreement (JA) at 3 (Schedule C). However, the Joinder Agreement’s introductory
terms and conditions state that if the Trust Beneficiary does not name any remainder
beneficiaries, any remaining assets will be distributed to the Beneficiary’s heirs
at law as determined by state law.[8] JA at 1, term 6.
The Trust Declaration states that it shall be irrevocable. MTA §§ 1.3, 3.3, 4.2, 8.1,
12.4, 13.2. The Trustee has the authority to amend or modify the terms of the Trust
to comply with the intent of the Trust, comply with changes in applicable laws, and
clarify ambiguities. MTA § 12.1. The Joinder Agreement also states that it is an irrevocable
contract, and the Trust Beneficiary’s funding amount is irrevocably assigned to the
Trust. JA at 1. The Trust is governed by Minnesota law and, where appropriate, federal
law. MTA §§ 1.5, 11.1, 13.1.
The MTA also contains a savings clause which states that if any provision of the MTA
is found invalid or unenforceable by a court of competent jurisdiction, it should
have no impact on the validity of any other provisions of the MTA, and the remainder
of the MTA shall be construed as if the invalid provision had never been included
in the MTA. MTA § 13.9.
DISCUSSION
The Joinder Agreement appears to contemplate that a Trust Beneficiary funds the IBA
with his or her own property. JA at 1. However, due to ambiguous language in the Trust
Declaration, it is not entirely clear whether the MN-CPT allows third-party contributions
to a beneficiary’s IBA.[9] As stated above, the Trust Declaration defines a “Grantor” as a Trust Beneficiary,
the parent, grandparent, or legal guardian of a Trust Beneficiary, or any person or
entity acting under court order or other legal authority, who contributes assets to a Trust Beneficiary’s IBA. MTA §§ 2.3, 13.12 (“Grantor”). It is unclear from this
language whose assets are being contributed to the IBA, but one possible interpretation
is that a parent, grandparent, or guardian could contribute his or her own assets
to a beneficiary’s IBA.
The term “Grantor” also applies, when applicable, to any person or entity who contributes
his, her, or its own assets to the Trust for the sole benefit of a Trust Beneficiary.
MTA §§ 2.3, 13.12 (“Grantor”). The phrase “to the Trust for the sole benefit of a
Trust Beneficiary” is also ambiguous, and could suggest that the person or entity
is contributing to an IBA since the Trust as a whole is not established for the sole
benefit of an individual Trust Beneficiary, while an IBA is. Compare MTA § 1.3 (CPT establishes and manages Trust for “benefit of Persons with Disabilities”)
with MTA §§ 1.5 (assets are held in an IBA for each Trust Beneficiary for his or her sole
benefit), 3.3(D) (CPT manages a Trust Beneficiary’s IBA solely for his or her benefit),
4.2 (contributed amount to a Trust Beneficiary’s IBA is to be used for his or her
sole benefit). This interpretation is also consistent with MTA § 4.5, which discusses
a grantor transferring additional property “to the Trust,” while also referring to
a Joinder Agreement and a “Trust Beneficiary’s IBA.”
Consequently, as the Trust Declaration is currently written, we believe that three
possible types of IBAs could exist within the Trust: (1) an IBA that is funded solely
by assets belonging to the Beneficiary (i.e., a self-settled sub-account); (2) an IBA that is funded solely by third-party assets;
and (3) an IBA that is funded by a combination of funds from the Beneficiary and third
party assets. The following discussion addresses each type separately.
I. Self-Settled Sub-Account
A. Statutory Resource Rules
Under the Social Security Act (Act), a trust created on or after January 1, 2000,
from the assets of an individual generally will be considered a resource for SSI purposes
to that individual to the extent that the trust is revocable or, in the case of an
irrevocable trust, to the extent that any payments could be made from the trust to
or for the benefit of the individual. See 42 U.S.C. § 1382b(e); Program Operations Manual System (POMS) SI 01120.201.D. As relevant here, an exception to this rule exists for trusts that meet the criteria
of 42 U.S.C. § 1396p(d)(4)(C), commonly known as the pooled trust exception.
In order to qualify for the pooled trust exception, the trust must satisfy the following
conditions:
-
1.
The trust is established and managed by a non-profit association.
-
2.
The trust maintains a separate account for each beneficiary, but pools these accounts
for purposes of investment and management of funds.
-
3.
Accounts in the trust are established solely for the benefit of the disabled individual.
-
4.
The account is established through the actions of the individual, parent, grandparent,
legal guardian, or court.
-
5.
To the extent that amounts remaining in the beneficiary’s account upon the death of
the beneficiary are not retained by the trust, the trust will pay to the State(s)
the amount remaining in the account up to the total amount of medical assistance paid
on behalf of the beneficiary under the State Medicaid plan(s).
See 42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203.D.1.
Here, even if the Trust and sub-accounts are irrevocable, a self-settled Trust sub-account
would be a resource under the statute, because payments could be made from the sub-account
for the individual Trust Beneficiary’s benefit. MTA §§ 1.5, 6.1, 6.2; JA. Accordingly,
we consider whether the Trust qualifies for the pooled trust exception. As discussed
below, we do not believe that the MN-CPT satisfies all of the requirements for this
exception. Consequently, a self-settled sub-account in the Trust would not be excepted
from resource counting.
1. Established and Managed by a Non-Profit
Association
To satisfy the first requirement of the pooled trust exception, the trust must be
established and managed by a non-profit association. 42 U.S.C. § 1396p(d)(4)(C)(i);
POMS SI 01120.203.D.3. A non-profit association may employ the services of a for-profit entity, but
the non-profit association must maintain ultimate managerial control over the trust.
POMS SI 01120.225.D. For example, the non-profit association must be responsible for determining the
amount of the trust corpus to invest, removing or replacing the trustee, making day-to-day
decisions regarding the health and well-being of the beneficiaries, and determining
whether to make discretionary disbursements from the trust. POMS SI 01120.225.D, E.
Here, CPT, a non-profit association, established and manages the MN-CPT. See MTA § 1.2. While some sections of the Trust Declaration appear to contemplate the
possibility of a Trustee other than CPT, the Trust Declaration makes no provision
for the appointment of any such Trustee.
The Trustee has the authority to hire an independent investment advisory firm as the
Investment Advisor to manage certain investment functions with respect to each IBA
and Trust beneficiary. MTA § 2.5. Notably, there is no indication that the Investment
Advisor must be a non-profit association. Moreover, the Trust Declaration contains
ambiguous language regarding the Investment Advisor’s powers. For example, it states
that “[t]he Non Profit, Trustee, and Investment Advisor shall perform their respective
duties . . . to receive, hold, manage and control all income and principal in the
IBAs and to do such other acts or things concerning the Trust as may be appropriate
to effectuate the intent and purpose of the Trust.” MTA § 10.1. Similarly, it states:
The Trustee and Investment Advisor, as appropriate, shall have the continuing, absolute,
and discretionary power to deal with any property, real or personal, held in the Trust.
The Trustee and Investment Advisor shall perform their respective duties . . . to
receive, hold, administer, manage, invest, and control all the income and principal
and to do such other acts or things concerning the Trust and Trust Beneficiary’s IBA.
MTA § 11.1. It also states that the “Non Profit, Trustee, or Investment Advisor shall
have the authority, within their scope of responsibility,” to perform a list of functions,
but the listed functions only refer to the “Trustee.” MTA § 10.1. The language of
these provisions is confusing, but could possibly suggest that some of the Trustee’s
powers are shared with the Investment Advisor. Thus, it is not entirely clear whether
the Trust Declaration allows the Investment Advisor, which could be a for-profit entity,
to exercise core managerial duties. CPT should clarify this point in order to meet
this requirement of the pooled trust exception.
The Trustee also has the authority to hire and compensate attorneys, accountants,
consultants, government benefit specialists, and other agents as may be necessary.
MTA § 10.1(f). It is possible that the Trustee could hire for-profit entities for
such positions. However, we believe that the language of the Trust Declaration, construed
as a whole, indicates that CPT maintains ultimate managerial control over the Trust,
as required by POMS SI 01120.225.D. For example, the Trust Declaration states that the Trustee retains oversight responsibility
for the custody and investment of all funds contributed for the Trust Beneficiaries.
MTA §§ 2.2, 10.1. The Trustee also retains “sole and absolute” discretion to approve
or deny disbursement of funds to any Trust Beneficiary. MTA §§ 2.2, 4.4, 6.1.
2. Maintenance of Separate Accounts for Each Trust
Beneficiary
To satisfy the second requirement of the pooled trust exception, the trust must maintain
a separate account for each trust beneficiary, although it is acceptable for individual
accounts to be pooled for investment and management purposes. 42 U.S.C. § 1396p(d)(4)(C)(ii);
POMS SI 01120.203.D.4. In addition, the trust must be able to provide an individual accounting for
each individual. POMS SI 01120.203.D.4. The MN-CPT satisfies this requirement, as it maintains a separate IBA for each
Trust Beneficiary, but for purposes of investments and management of funds, the Trustee
pools the IBAs. MTA §§ 4.1, 9.1. Also, the Trustee, or its authorized agent, maintains
records for each Trust IBA. MTA §§ 4.1, 9.1.
3. Established for the Sole Benefit of the
Individual
To satisfy the third requirement of the pooled trust exception, the trust account
must be established for the sole benefit of the disabled individual. 42 U.S.C. § 1396p(d)(4)(C)(iii);
POMS SI 01120.203.D.5. A trust is considered to be established for the sole benefit of an individual
if the trust benefits no one but that individual, either 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 POMS states that an individual trust account does not meet the pooled trust
exception if the trust account “provides a benefit to any other individual or entity
during the disabled individual’s lifetime.” POMS SI 01120.203.D.5.
Here, the Trust provides that all IBAs will be held for the sole benefit of the individual.
See MTA §§ 1.5, 3.3(D), 4.1-4.2, 6.1-6.2, 9.1; JA at 1. However, the Trust includes a
defense clause which states that the Trustee has the sole discretion to decide whether
the “costs and expenses of defending the Trust from any claim, demand, legal or equitable
action, suit or proceeding” should be “(a) charged on a pro rata basis to all Trust
Beneficiary IBAs; or (b) charged only against the IBAs of the affected Trust Beneficiaries.”
MTA § 10.6. In making that decision, the Trustee must consider whether the issue requiring
defense affects a substantial number of Trust Beneficiaries so as to warrant allocation
of expenses among all IBAs, or whether the issue affects only a single IBA or certain
IBAs such that costs should be allocated only to such IBAs. Id. We have previously advised that pro-rata defense clauses do not comply with agency
policy that accounts be held for the sole benefit of the individual, because they
could allow the Trustee to use funds from beneficiary accounts even where that beneficiary
is not affected by the claim, demand, action, suit, or proceeding. See
POMS PS 01825.017 (PS 18-085) (trust should be clarified where it appeared that the trust allowed the
use of a beneficiary’s assets for the cost of defending another sub-account); POMS
PS 01825.011 (PS 17-026, PS 16-172) (trust does not meet the sole benefit criteria if an account
can be charged for legal fees even where the account is not affected by the legal
action). In this case, we believe that the language permitting the allocation of defense
costs on a pro-rata basis to all IBAs when the costs “affect a substantial number
of Trust Beneficiary IBAs” is problematic. Because a “substantial” number of IBAs
may be less than “all” IBAs, it is possible that IBAs that are not affected could
be charged for a portion of the defense costs that only affect other beneficiaries’
IBAs. However, there is no requirement in the Trust Declaration that the Trustee determine
that it would be in the best interest of an unaffected beneficiary (or beneficiaries)
to share in the cost of defending the affected beneficiaries’ IBAs.This could run
afoul of agency policy that accounts must be established for the sole benefit of the
disabled individual. Therefore, the MTA’s defense clause should be modified or clarified
accordingly.
The POMS also states that an individual trust account does not meet the pooled trust
exception if the trust account “allows for termination of the trust account prior
to the individual’s death and payment of the corpus to another individual or entity.”
POMS SI 01120.203.D.5. An early termination clause is acceptable only if all of the following criteria
are met: (1) the State(s) receives all amounts remaining in the trust up to an amount
equal to the amount of medical assistance paid on behalf of the individual under the
State Medicaid plan(s); (2) after payment of allowable administrative expenses,[10] all remaining funds are distributed to the trust beneficiary; and (3) the power to
terminate is given to someone other than the trust beneficiary. See POMS SI 01120.199.F.1. However, an early termination clause that solely allows for a transfer of the
beneficiary’s assets from one section 1917(d)(4)(C) qualifying pooled trust to another
section 1917(d)(4)(C) qualifying pooled trust complies with SSA’s rules governing
pooled trusts. See POMS SI 01120.199.F.2. In that case, the early termination clause must contain specific limiting language
that precludes the early termination from resulting in disbursements other than to
the secondary 42 U.S.C. § 1396p(d)(4)(C) trust or to pay for allowable administrative
expenses listed in POMS SI 01120.199.F.3 and SI 01120.201.F.4. See id.
Here, the Trust Declaration allows for the transfer of funds between pooled trusts
in accordance with POMS SI 01120.199.F.2. MTA § 6.5. The Trust also contains an early termination clause which meets the
requirements of POMS SI 01120.199.F.1. MTA § 8.1. Therefore, the Trust’s early termination provisions appear to satisfy
this requirement of the pooled trust exception.
4. Established Through the Actions of the Beneficiary, a Parent,
Grandparent, Legal Guardian, or a Court
The fourth requirement of the pooled trust exception is that the trust account must
be established through the actions of the beneficiary, his or her parent, grandparent,
legal guardian, or a court. 42 U.S.C. § 1396p(d)(2), (d)(4)(C)(iii); POMS SI 01120.203.D.6. The MN-CPT does not appear to meet this requirement. The MTA states that an
IBA is established when a Grantor executes a Joinder Agreement. MTA §§ 3.1, 3.3, 4.2.
As indicated above, the MTA contains two definitions of “Grantor.” First, it defines
a grantor as a beneficiary, parent, grandparent, legal guardian, or any person or
entity acting pursuant to a court order or other legal authority, who contributes
assets to a beneficiary’s IBA. MTA §§ 2.3, 13.12 (“Grantor”). This definition appropriately
limits the individuals who may take action to establish an IBA to those permitted
under the statute. However, the MTA’s second definition of grantor is problematic.
The MN-CPT also allows a grantor to be “any person or entity that contributed his,
her or its own assets to the Trust for the sole benefit of a Trust Beneficiary.” MTA
§§ 2.3, 13.12 (“Grantor”). Thus, the second definition would potentially allow any individual, not just those permitted under the statute, to take action to establish
an IBA, in contravention of the fourth requirement of the pooled trust exception.
Consequently, in order to meet this requirement, CPT would need to specify that only
the individuals permitted under the statute may execute a Joinder Agreement and establish
an IBA.
5. Reimbursement to the State(s) Upon the Beneficiary’s
Death
To satisfy the fifth requirement of the pooled trust exception, the trust must contain
“specific language” that provides that upon a beneficiary’s death, to the extent amounts
remaining in the beneficiary’s account are not retained by the trust, the State(s)
are reimbursed an amount equal to the total amount of medical assistance paid on behalf
of the deceased beneficiary under the State Medicaid plan(s) during his or her lifetime.
42 U.S.C. § 1396p(d)(4)(C)(iv); POMS SI 01120.203.D.8. This is known as the Medicaid payback requirement of the pooled trust exception.
Here, the Trust includes provisions concerning termination upon death. MTA §§ 7.1-7.6.
The Trust Declaration includes a specific formula under which the Trust retains a
portion of any funds remaining in an IBA. MTA §§ 7.2, 7.3. The retention of such funds
is permissible under the Medicaid payback requirement. 42 U.S.C. § 1396p(d)(4)(C)(iv);
POMS SI 01120.203.D.8. The Trust Declaration also contains specific language for paying “an amount
equal to the total amount of medical assistance paid on behalf of the Trust Beneficiary
under a State(s) Medicaid plan(s) . . . to be paid to the State(s) Medicaid agency(ies),”
to the extent that sufficient funds remain in the IBA at the time of the Trust Beneficiary’s
death. MTA § 7.2(B), (D). Thus, the Trust contains the necessary language to satisfy
the Medicaid payback requirement.
For the reasons stated above, we believe that the MN-CPT does not meet the third and
fourth requirements of the pooled trust exception. We also believe that ambiguous
language in the MTA should be rewritten to make clear that the Trustee retains ultimate
managerial control over the Trust. The MTA’s severability clause, MTA § 13.9, cannot
cure these defects, because the POMS expressly disallows savings clauses. POMS SI 01120.227.D.1. When considering a special needs trust, “the trust must meet all of the criteria
set forth in [POMS] SI 01120.199 through SI 01120.203 and SI 01120.225, without regard to the present of a null and void clause.” Id. The POMS defines “null and void clause” to encompass all savings clauses, even if
they do not actually use the phrase “null and void.” POMS SI 01120.227.B. The POMS clearly states that “a null and void clause does not cure an otherwise defective trust instrument,” and “cannot overcome missing or conflicting
trust provisions.” POMS SI 01120.227.D (emphasis in original).
B. Regular Resource Rules
Even if the MN-CPT cures the defects described above so that it meets the pooled trust
exception, the regular resource counting rules in POMS SI 01120.200 still apply to determine whether a self-settled IBA would be counted as a resource.
See 42 U.S.C. § 1382b(e)(1); POMS SI 01120.203.D.1. Pursuant to POMS SI 01120.200.D.1.a, trust principal will count as a resource if the beneficiary either: (a) has
the legal authority to revoke or terminate the trust and then use the funds to meet
his or her food or shelter needs; or (b) can direct use of the trust principal for
his or her support and maintenance under the terms of the trust. Additionally, if
the beneficiary can sell his or her beneficial interest in the trust, that interest
is a resource. Id.
Whether a trust can be revoked depends on the terms of the trust and applicable state
law—here, Minnesota. See POMS SI 01120.200.D.2. The Trust states that it is irrevocable, and that any IBA becomes irrevocable
as soon as CPT or the Trustee accepts the Joinder Agreement, required documents, and
the contributed amount. MTA §§ 1.3, 3.3, 4.2. The Joinder Agreement reiterates that
it is irrevocable. JA at 1. However, Minnesota follows the rule that even an irrevocable
trust can be revoked if the grantor and all beneficiaries agree. Minn. Stat. § 501C.0411(a)
(noncharitable irrevocable trust may be modified or terminated upon consent of the
settlor and all beneficiaries); Presbytery of the Twin
Cities Area v. Eden Prairie Presbyterian Church, Inc., No. A16-0945, 2017 WL 1436050, at *7 (Minn. Ct. App. Apr. 24, 2017) (citing In re
Scholl, 297 N.W.2d 282, 284 (Minn. 1980)). Therefore, if the grantor were the sole beneficiary
of the IBA, he or she could revoke the IBA unilaterally and gain access to its assets.
See Restatement (Third) of Trusts § 65 Reporter’s Notes (2003) (if grantor is also sole
beneficiary of a trust, trust is considered revocable regardless of contrary language
in the trust); POMS SI 01120.200.D.3, SI CHI01120.200.C. However, if the trust names a residual beneficiary or beneficiaries to receive
the benefit of the trust interest after a specific event—usually the death of the
primary beneficiary—then the trust is irrevocable, because the primary beneficiary
could not unilaterally revoke the trust; rather, he or she would need the consent
of the residual beneficiary or beneficiaries. See POMS SI CHI01120.200.C. Here, the grantor of a self-settled IBA is not the sole beneficiary. The Trust
is a remainder beneficiary for each IBA, since the Trust retains some portion of any
remaining funds on the death of the beneficiary. MTA § 7.2. The Trust also creates
remainder interests in any remainder beneficiaries designated by the beneficiary in
the Joinder Agreement. MTA §§ 7.2(C), 7.5(B); JA at 3 (Schedule C). Thus, there is
at least one residual beneficiary and, consequently, a self-settled IBA is not revocable.
Nor can the Beneficiary direct the use of trust assets. Specifically, the Trust Declaration
provides that Trust assets are not available to any Trust Beneficiary, and that a
Trust Beneficiary has no right to demand a distribution for his or her own support
or maintenance. MTA §§ 6.1(C), 9.8. In addition, the Trustee, in its sole discretion,
may make any payments under the Trust for the supplemental needs of each Trust Beneficiary.
MTA §§ 4.4, 6.1.
Finally, the Trust Beneficiary cannot sell his or her beneficial interest in the Trust.
The Trust Declaration contains a spendthrift provision that bars a Trust Beneficiary
from assigning his or her interest in the Trust principal or income; prohibits attachment
or compelled distribution of any part of the Trust principal or income by any creditor
of a Trust Beneficiary; and ensures that a Trust Beneficiary’s interest in the Trust
shall not be subject to a taking by legal or equitable proceedings by any creditor.
MTA § 9.9. Minnesota generally recognizes the validity of spendthrift clauses in trusts.
Minn. Stat. Ann. § 501C.0502. However, under Minnesota law, even if an irrevocable
trust has a spendthrift provision, a “creditor or assignee of the settlor may reach
the maximum amount that can be distributed to or for the settlor’s benefit.” Minn.
Stat. Ann. § 501C.0505(2). Nevertheless, we believe this provision is best read to
apply only to assignees who are creditors of secured interests in the property, rather
than a purchaser to whom property has been transferred for fair market value. We believe
that Minnesota would likely follow the Restatement (Third) of Trusts, which provides
that in the case of a self-settled discretionary trust, this rule generally applies
only to the settlor-beneficiary’s creditors and not to transferees (i.e. , purchasers). See Restatement (Third) of Trusts § 60, cmt. f; see also Minn. Stat. Ann. § 501C.0106 (common law of trusts supplement Minnesota Trust Code).
Consequently, a self-settled sub-account in the Trust would not constitute a resource
under the agency’s regular resource rules.
II. Third-Party Sub-Accounts
As noted above, it appears that the Trust, as currently written, may permit at least
parents, grandparents, and legal guardians, and possibly other third parties, to contribute
their assets to a beneficiary’s IBA. MTA §§ 2.3, 13.12 (“Grantor”). In the case of
an IBA established solely with the assets of a third party, the regular resource rules
set forth in POMS SI 01120.200 apply to determine whether the assets in the Trust are a resource.
As with a self-settled IBA, a third-party IBA would not be a resource under the regular
resource rules. First, the Trust does not permit the Trust Beneficiary to terminate
his or her IBA. See MTA § 8.1. Second, as discussed above, the Trust contains no provision allowing the
Trust Beneficiary to direct the use of trust principal for his or her support or maintenance.
Finally, with respect to a beneficiary’s power to otherwise sell his or her beneficial
interest in the Trust, as noted above, the Trust contains a spendthrift provision,
MTA § 9.9, which Minnesota fully recognizes in third-party trusts. See Minn. Stat. Ann. § 501C.0502. Thus, the spendthrift provision would prevent the beneficiary
from selling his or her interest in the Trust. See POMS SI 01120.200.B.13. Accordingly, neither the principal nor the beneficial interest in a third-party
IBA would be considered a resource to the Trust Beneficiary.
III. Commingled Sub-Accounts
It appears possible for an IBA to contain assets attributable to both the beneficiary
and one or more third parties. Agency policy provides that, in the case of a commingled
trust established on or after January 1, 2000, with the assets of both an SSI claimant
(or spouse) and third parties, the regular resource rules apply to the portion of
the commingled trust attributable to the assets of third parties, and the statutory
resource rules apply to the portion attributable to the assets of the SSI claimant
(or spouse). See POMS SI 01120.200.A.1.b, SI 01120.201.C.2.c.
Here, in the event that an IBA in the Trust receives any contributions from a third
party, the portion of the IBA attributable to the assets of the third party would
not be a resource under the regular resource rules, as discussed in Section II above.
However, with respect to the portion of the IBA attributable to the assets of the
grantor-beneficiary, that portion would be considered a resource under the Act based
on the defects discussed in Section I above.
CONCLUSION
For the reasons discussed above, we conclude that a self-settled sub-account in the
MN-CPT does not meet all of the requirements for an exception to resource counting
under 42 U.S.C. § 1396p(d)(4)(C). Third-party sub-accounts would not count as a resource
under the regular resource counting rules, nor would third-party assets in a commingled
sub-account.