In this opinion, the Regional Chief Counsel examines the Tresco, Incorporated Pooled Charitable Trust (Tresco Pooled Trust) to determine if it meets the requirements for the pooled trust exception described in section 1917(d)(4)(C) of the Social Security Act (Act). The RCC concludes that the Tresco Pooled Trust does not qualify as a pooled trust because its provisions do not comply with all five conditions for qualification for the pooled trust exception for counting resources for SSI purposes. Specifically it does not meet the non profit and Medicaid payback requirements.

QUESTIONS PRESENTED

For purposes of identifying the number holder (NH) C, G’s resources for Supplemental Security Income (SSI), you asked whether the Tresco, Incorporated Pooled Charitable Trust (Tresco Pooled Trust), effective February 19, 2008, and the NH’s accompanying Joinder Agreement qualify as a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act), as codified at 42 U.S.C. § 1396p(d)(4)(C). If the Tresco Pooled Trust qualifies under the pooled trust exception, you also inquired whether the NH’s subaccount, established with her own funds on or after January 1, 2000, would be exempt from the Social Security Administration’s (agency’s) resource counting rules for SSI purposes.

SHORT ANSWERS

We believe that there is support for the agency to conclude that the Tresco Pooled Trust does not qualify as a pooled trust under section 1917(d)(4)(c) of the Act because its provisions do not comply with all five conditions for qualification for the pooled trust exception for counting resources for SSI purposes. See 42 U.S.C. § 1396p(d)(4)(C). Although the Trustee Tresco, Incorporated is a non-profit association, as required under 42 U.S.C. § 1396(d)(4)(C), the Tresco Pooled Trust permits the Trustee to appoint a Co-Trustee and permits appointment of a successor Trustee without specifying that any Co-Trustee or successor Trustee must be a non-profit association. The Tresco Pooled Trust also permits the Trustee to allow a for-profit entity to make virtually unfettered investment decisions. Further, the Tresco Pooled Trust contemplates possible early termination of either the master trust or a subaccount through petitioning the court, but does not specifically provide for a Medicaid payback. Because we believe the Tresco Pooled Trust cannot qualify as the pooled trust exception under section 1917(d)(4)(C) of the Act, codified at 42 U.S.C. § 1396p(d)(4)(C), we do not reach the question whether the NH’s subaccount in the Tresco Pooled Trust established with the NH’s own funds after January 1, 2000, is exempt from the agency’s resource counting rules.

BACKGROUND

Tresco, Incorporated (Tresco) is a New Mexico not-for-profit corporation that is federally recognized as tax-exempt under the Internal Revenue Code § 501(c)(3). See Tresco Pooled Trust Preamble; Internal Revenue Service 501(c)(3) Determination Letter. On February 19, 2008, Tresco created the Tresco Pooled Trust as a Master Trust with a purpose “to comply with[] the provisions of 42 [U.S.C. § 1396p(d)(4)(C)]” and “to provide for the collective management and distribution of the Trust Estate on behalf of eligible beneficiaries who are disabled as defined in 42 [U.S.C.] § 1382c(a)(3) for whom Trust Sub-accounts are established.” See Tresco Pooled Trust Art. I, § 1.3. Tresco serves as the Trustee for the Tresco Pooled Trust. See Tresco Pooled Trust Art. II, § 2.12; Art. VII, § 7.1. Tresco can appoint a Co-Trustee, and, if Tresco resigns as Trustee, the court can appoint a new Trustee. See Tresco Pooled Trust Art. II, § 2.12; Art. VII, §§ 7.1-7.2. The Trustee has sole discretion to distribute principal or income in a subaccount for the sole benefit of the beneficiary. See Tresco Pooled Trust Art. I, § 1.3; Art. IV, § 4.1; Art. IV, § 4.6; Art. V, § 5.1. The Trustee’s discretionary disbursements are not to replace government or private benefit assistance. See Tresco Pooled Trust Art. V, § 5.3.

Upon the beneficiary’s death, the Trustee will administrator and distribute any amounts remaining in the beneficiary’s subaccount as follows: 1) pay taxes due to the State or Federal government because of the beneficiary’s death, 2) pay reasonable fees for administration of the beneficiary’s subaccount, and 3) retain remaining amounts by the trust. See Tresco Pooled Trust Art. VI, §§ 6.1-6.3. To the extent that any amount remains in the beneficiary’s subaccount that the trust does not retain, the Trustee will pay to the State(s) Medicaid program up to an amount equal to the total amount of Medicaid assistance paid on the beneficiary’s behalf. See Tresco Pooled Trust Art. VI, § 6.4.

The Tresco Pooled Trust provides, “Every reasonable attempt will be made to continue the Trust for the purposes for which it is established.” See Tresco Pooled Trust Art. VI, § 6.5. However, if the Trustee is unable to effectuate the purpose of the master trust or the beneficiary’s subaccount, the Trustee will petition the court for further instructions, giving notice to the beneficiary, the beneficiary’s legal representative, and the New Mexico Department of Human Services. See Tresco Pooled Trust Art. VI, §§ 6.5-6.6.

The Tresco Pooled Trust contains a choice-of-law provision indicating that it should be interpreted pursuant to the laws and regulations of the United States and the State of New Mexico. See Tresco Pooled Trust, Art. XII, § 12.2. The NH opened a subaccount in the Tresco Pooled Trust on her own behalf on June 29, 2009, via a Joinder Agreement.^[1]

ANALYSIS

1. I.  

   Federal Law and Agency Policy: Trusts as SSI Resources,

SSI is a general public assistance program for aged, blind, or disabled individuals who meet certain income and resource restrictions and other eligibility requirements. See 20 C.F.R. §§ 416.110, 416.202. “Resources” include cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for his or her support and maintenance. See 20 C.F.R. § 416.1201(a). “If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . .” 20 C.F.R. § 416.1201(a)(1); see Program Operations Manual System (POMS) SI 01120.010(B).

When determining a claimant’s eligibility for SSI, the agency considers trusts created on or after January 1, 2000, from a disabled beneficiary’s assets to be a resource under section 1613(e) (codified at 42 U.S.C. § 1382b(e)) to the extent that the trust is revocable, or, in the case of an irrevocable trust, to the extent that any payments can be made from the trust for the benefit of the disabled beneficiary. See 42 U.S.C. § 1382b(e)(3); POMS SI 01120.201(D). However, the rules that include trust assets as a resource in section 1613(e), as codified at 42 U.S.C. § 1382b(e), do not apply to trusts described in section 1917(d)(4) of the Act, as codified at 42 U.S.C. § 1396p(d)(4). The excepted Medicaid payback trusts in section 1917(d)(4) of the Act, as codified at 42 U.S.C. § 1396p(d)(4), are commonly known as the special needs and pooled trust exceptions. See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(A), (C); POMS SI 01120.203. This legal opinion focuses upon the pooled trust exception.

A pooled trust is a trust that contains many different individuals’ assets, segregated into separate subaccounts. POMS SI 01120.203(D)(1). A pooled trust that qualifies as a Medicaid payback trust under section 1917(d)(4)(C) is exempt from the Act’s rules for counting trusts created from a beneficiary’s assets as a resource. See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(C); POMS SI 01120.203(D)(8). To qualify for the pooled trust exception under the Act, a trust must contain assets belonging to a disabled beneficiary and must satisfy all of the following conditions:

• •

  The pooled trust must be established and managed by a non-profit association;

• •

  Separate accounts must be maintained for each disabled beneficiary of the trust; but the assets are pooled for investing and management purposes;

• •

  Accounts in the trust must be established solely for the benefit of disabled individuals;

• •

  Accounts in the trust must be established through the actions of the individual, a parent, a grandparent, a legal guardian, or a court; and

• •

  The trust must provide that to the extent that any 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) from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under State Medicaid plan(s).

42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203(D)(1).

If a trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C), we also consider whether the subaccount is excluded under the regular resource counting rules. See POMS SI 01120.200, SI 01120.203(D)(1) (Note). Under the regular resource counting rules, the agency considers a trust a resource, attributable to the beneficiary, if the beneficiary has the legal authority to revoke or terminate the trust and then use the funds to meet her food or shelter needs, if the beneficiary can direct the use of the trust principal for her support and maintenance under the terms of the trust, or if the beneficiary can sell her beneficial interest in the trust. See 20 C.F.R. § 416.1201(a); POMS SI 01120.200(D)(1)(a).

We first consider the pooled trust exception conditions in evaluating whether the Tresco Pooled Trust and the NH’s Joinder Agreement qualifies as a pooled trust.

 

II. Application of the Pooled Trust Exception to the Tresco Pooled Trust

The Tresco Pooled Trust describes itself as a Pooled Charitable Trust intended to comply with the provisions of the pooled trust exception under 42 U.S.C. § 1369p(d)(4)(C). See Tresco Pooled Trust, Art. I, §§ 1.2-1.3. The Tresco Pooled Trust indicates a “trust beneficiary” is a person with a disability, as defined in section 1614(a)(3) of the Act, as codified at 42 U.S.C. § 1382c(a)(3).^[2] See Tresco Pooled Trust, Art. I, § 1.3, Art. II, § 2.1. Pertaining to the NH’s subaccount, the NH was a disabled individual receiving SSI benefits when she completed her Joinder Agreement. See Joinder Agreement. As we will now explain, the Tresco Pooled Trust does not satisfy all five conditions for the pooled trust exception. Rather, it satisfies only the second, fourth, and fifth conditions.

A. Condition One: Trust established and managed by a non-profit association.

The Tresco Pooled Trust satisfies the first part of the first condition that a non-profit association establish the trust. See 42 U.S.C. § 1396p(d)(4)(C)(i); POMS SI 01120.203(B)(2). Tresco established the Tresco Pooled Trust. See Tresco Pooled Trust Art. I, § 1.1. An IRS 501(c)(3) determination letter establishes that Tresco is a non-profit corporation. Consequently, the Tresco Pooled Trust was established by a non-profit association, as the first part of the first condition requires.

However, the Tresco Pooled Trust does not satisfy the second part of the first condition that a non-profit association manage the trust. Article II, § 2.12 defines Trustee as Tresco, or its successor, and any Co-Trustee. Further, a Co-Trustee is permitted “to assist with the management, administration, allocation, and disbursement of Trust assets and property.” See Tresco Pooled Trust Art. II, § 2.12; Art. VII, § 7.1. The Tresco Pooled Trust is unclear whether the Co-Trustee would be subordinate to the Trustee. Should the Trustee resign, the court will appoint a successor Trustee. See Tresco Pooled Trust Art. VII, § 7.2. The Tresco Pooled Trust does not specify that the appointed Co-Trustee or successor Trustee must be a non-profit association. Instead, the Co-Trustee could be “a person or entity, or both.” See Tresco Pooled Trust Art. II, § 2.12. Article IX, §§ 9.1 and 9.2 permit the Trustee to hire a corporate custodian and investment counsel, and Article 9.2 permits the Trustee to delegate to investment counsel the ability to “make investments on behalf of the Trust without requiring prior approval from the Trustee.” See Tresco Pooled Trust Art. IX, §§ 9.1-9.2. Granted, a pooled trust may qualify for an exception despite employing for-profit entities to effectuate trust functions. POMS SI 01120.225. Thus, the Trustee’s ability to hire for-profit, private entities is not inherently fatal to the Tresco Pooled Trust’s status as a valid pooled trust. Nevertheless, the non-profit association must retain the ultimate authority over the trust. POMS SI 01120.225(D). For example, the non-profit association must be responsible for determining the amount of trust corpus to invest, removing or replacing the Trustee, and making day-to-day decisions regarding the health and well-being of the beneficiaries. Id. Here, we believe that the Tresco Pooled Trust permits the Trustee to delegate core responsibilities to private entities without sufficient oversight to comply with the POMS authority. This is detailed further below.

POMS SI 01120.225(E) states that the agency will not routinely question the relationship between a non-profit association and contracted, for-profit entities. POMS 01120.225(D), however, requires that any for-profit entity must always be subordinate to the non-profit managers of a pooled trust. In this case, we think that the Trustee’s ability to appoint a Co-Trustee that is not a non-profit entity to assist with the trust’s management is inconsistent with POMS SI 01120.255(D) because the Tresco Pooled Trust is unclear whether the Co-Trustee would be subordinate to the Trustee. Similarly, the Trustee’s ability to delegate the authorization to make investments, without prior approval, to a for-profit entity likewise shows that the Tresco Pooled Trust does not make certain that the Trustee will retain sufficient oversight as POMS SI 01120.225(D) requires. Indeed, as an example of a prohibited practice, POMS SI 01120.225(D) specifically lists a for-profit entity’s ability to determine the amount of trust corpus to invest. Yet, sections 9.1-9.2 of the Tresco Pooled Trust permits the Trustee to allow a for-profit entity to make virtually unfettered investment decisions. See Tresco Pooled Trust Art. IX, §§ 9.1-9.2. Accordingly, because the Tresco Pooled Trust allows for-profit entities to manage the trust without specific oversight, it does not satisfy the first condition of 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203(B)(2)

B. Condition Two: Separate accounts maintained for each beneficiary, but assets are pooled for investment and management purposes.

The Tresco Pooled Trust satisfies the second condition, which requires that separate accounts be maintained for each beneficiary, even though funds are pooled for investment and management purposes. See 42 U.S.C. § 1396p(d)(4)(C)(ii); POMS SI 01120.203(D)(1). The Tresco Pooled Trust provides that the trust separately maintain and account for individual beneficiary’s subaccounts. See Tresco Pooled Trust Art. II, § 2.8, Art. IV, § 4.1. However, the Trustee may pool the resources of all subaccounts for investment and administration. See Tresco Pooled Trust Art. IV, § 4.2. The Tresco Pooled Trust also states that the Trustee must provide periodic reports to each beneficiary of all the receipts, disbursements, and distributions from the beneficiary’s subaccount. See Tresco Pooled Trust Art. IV, § 4.4. These provisions satisfy the second condition for the pooled trust exception.

C. Condition Three: Account must be established solely for the benefit of the disabled individuals.

The Tresco Pooled Trust does not satisfy the third condition for the pooled trust exception, which requires that accounts in a trust solely benefit disabled individuals. See 42 U.S.C. § 1396p(d)(4)(C)(iii); POMS SI 01120.203(B)(2). The Tresco Pooled Trust contains two early termination provisions, which potentially permit the Trustee to terminate an individual’s subaccount or the Tresco Pooled Trust as a whole. Early termination clauses, however, are only acceptable under the pooled trust exception under narrowly defined circumstances. Specifically, a pooled trust with an early termination clause will not be excepted from the resources counting rules unless:

1. States 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 by the State Medicaid plans;

2. With limited exceptions, no entity other than the trust beneficiary could benefit from the early termination; and

3. The early termination clause gives the power to terminate to someone other than the trust beneficiary.

POMS SI 01120.199(F)(1). Article VI, §§ 6.5 and 6.6 of the Tresco Pooled Trust provide for early termination that requires the Trustee to petition a court for “further instructions.” See Tresco Pooled Trust Art. VI, § 6.5 (if the Trustee has reasonable cause to believe that a beneficiary will become liable for basic maintenance, support, or care that has otherwise been provided by a government agency or private program, the Trustee will petition the court for further instructions); Art. VI, § 6.6 (the Trustee will petition the court for instructions if carrying out the Tresco Pooled Trust’s purpose becomes impossible or impracticable with respect to all beneficiaries). As such, although the court might ultimately undertake actions compliant with the POMS, the Tresco Pooled Trust itself does not facially guarantee States Medicaid Plan reimbursement or that no one other than the trust beneficiary could benefit from the early termination. Thus, the Tresco Pooled Trust does not satisfy the third condition for the pooled trust exception.

D. Condition Four: Accounts established by the individual, parent, grandparent, legal guardian, or court.

The Tresco Pooled Trust satisfies the fourth condition that accounts in the trust are established by the individual, a parent, grandparent, legal guardian, or the court. See 42 U.S.C. § 1396p(d)(4)(C)(iii); POMS SI 01120.203(D)(6) A trust beneficiary joins the Tresco Pooled Trust when a sponsor signs a joinder agreement. See Tresco Pooled Trust Art. III, § 3.1. As defined in the Tresco Pooled Trust, a sponsor is the trust beneficiary, parent, grandparent, legal guardian, legal representative, or court. See Tresco Pooled Trust Art. 2, § 2.7. Although we have concerns that permitting a “legal representative” to establish a subaccount could run afoul of the fourth condition, we need not address that concern under the facts of the present opinion because the NH established her account in the Tresco Pooled Trust when she signed the Joinder Agreement and funded her subaccount—making it self-settled. See Joinder Agreement. Because the NH established her trust account through her own actions, the Tresco Pooled Trust and the NH’s Joinder Agreement satisfy the fourth condition for the pooled trust exception.

E. Condition Five: State reimbursed for medical expenses upon death of beneficiary.

The Tresco Pooled Trust satisfies the fifth condition, which requires that upon a beneficiary’s death, a trust reimburse the States for medical expenses paid on behalf of the disabled beneficiary under the State’s Medicaid plans, to the extent the trust does not retain the funds. See 42 U.S.C. § 1396p(d)(4)(C)(iv); POMS SI 01120.203(D)(8).

The Tresco Pooled Trust provides that upon the trust beneficiary’s death, the remaining assets will be allocated as follows: 1) pay taxes due to the State or Federal government because of the beneficiary’s death, 2) pay reasonable fees for administration of the beneficiary’s subaccount, and 3) retain remaining amounts by the trust. See Tresco Pooled Trust Art. VI, §§ 6.1-6.3. To the extent that any amount remains in the beneficiary’s subaccount that the trust does not retain, the Trustee will pay to the State(s) Medicaid program up to an amount equal to the total amount of Medicaid assistance paid on behalf of the beneficiary. See Tresco Pooled Trust Art. VI, § 6.4.

The Tresco Pooled Trust separates expenses that the POMS permits the Trustee to pay before paying back the states for medical expenses. See POMS SI 00120.203(E). The Tresco Pooled Trust allows the Trustee to pay certain administrative expenses, like taxes due from the trust because of the beneficiary’s death and reasonable fees and costs, to be paid before paying the states for medical assistance. See Tresco Pooled Trust Art. VI, § 6.2. Thus, the Tresco Pooled Trust satisfies the fifth condition for the pooled trust exception.

In sum, the Tresco Pooled Trust does not qualify as a valid, pooled trust under 42 U.S.C. § 1396p(d)(4)(C) as it does not satisfy all five conditions for the pooled trust exception. We next consider whether the Tresco Pooled Trust savings clause could cure the identified infirmities to allow the trust to qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C).

 

III. The Tresco Pooled Trust Savings Clause Cannot Cure the Infirmities Identified Above

The Tresco Pooled Trust contains a savings clause, providing that if a trust provision is found to be invalid or unenforceable the remaining provisions of the trust will continue to be fully effective. See Tresco Pooled Trust Art. XII, § 12.3. The Joinder Agreement also contains a savings clause, stating that the Tresco Pooled Trust is meant to conform with 42 U.S.C. § 1396p as a pooled trust, and that to the extent there is conflict between the terms of the trust and the governing law, the law and regulations will control. See Joinder Agreement, section G(4). New Mexico generally enforces savings clauses in trusts and similar instruments. See Bolton v. Bd. Of Cty. Comm’rs of Valencia County, 890 P.2d 808, 818 (N.M. App. 1994) (citing City of Santa Fe v. First Nat’l Bank, 65 P.2d 857, 862-63 (1937)). Nevertheless, the agency has determined that a savings clause does not cure an otherwise defective trust instrument. POMS SI 01120.227(D). Rather, the agency evaluates trust provisions as written. Id. Thus, neither Article 12.3 of the Tresco Pooled Trust nor section G(4) of the Joinder Agreement cures the infirmities identified above.

CONCLUSION

We believe that the agency may reasonably conclude that the Tresco Pooled Trust does not qualify as a valid, pooled trust under 42 U.S.C. § 1396p(d)(4)(c) because its provisions do not comply with two of the five statutory conditions for determining whether a trust qualifies for the pooled trust exception for counting resources for SSI purposes. Specifically, (a) the Tresco Pooled Trust permits the Trustee to delegate core responsibilities to for-profit entities without sufficient oversight, and b) the Tresco Pooled Trust contains improper early termination provisions. Therefore, the agency cannot consider the NH’s subaccount as a pooled trust exception, and it is not exempt from the agency’s resource counting rules.

This Regional Chief Counsel (RCC) opinion discusses whether the Ayudando Alpha, Inc., Pooled Charitable Trust (Ayudando Trust) meets the pooled trust exception under section 1917(d)(4)(c) of the Social Security Act (Act). The RCC concluded that the Ayudando Trust does not meet two of the five requirements for pooled trust exception in SI 01120.203. Specifically, the Ayudando Trust does not comply with the first requirement: trust established and managed by a non-profit association, and the third requirement: trust must be established solely for the benefit of disabled individuals. Consequently, the Ayudando Trust is a countable resource for SSI purposes.

QUESTION PRESENTED

You asked whether the Ayudando Alpha, Inc., Pooled Charitable Trust (Ayudando Trust) and the accompanying Joinder Agreement for the subaccount P~ (NH) qualify as a pooled trust under section 1917(d)(4)(c) of the Social Security Act (Act), as codified at 42 U.S.C. § 1396p(d)(4)(C). If the Ayudando Trust qualifies as a pooled trust, you also inquired whether the NH’s subaccount, established with his own funds after January 1, 2000, would be exempt from the agency’s resource counting rules for Supplemental Security Income (SSI) purposes.

ANSWER

The Ayudando Trust, along with the NH’s subaccount, does not qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(c) because its provisions do not comply with two of the five statutory criteria for determining whether a trust qualifies for the pooled trust exception for counting resources for SSI purposes. Consequently, the NH’s subaccount in the Ayudando Trust established with the NH’s own funds after January 1, 2000, would not be exempt from the agency’s resource counting rules.

BACKGROUND

Ayudando Alpha, Inc. (Ayudando Alpha) is a New Mexico non-profit corporation. Ayudando Alpha established the Ayudando Trust on October 3, 2008, “to provide for the collective management and distribution of the Trust Estate on behalf of [SSI recipients] for whom Trust sub-accounts are established” pursuant to 42 U.S.C. § 1396p(d)(4)(C). Trust, art 1.3. Article 1.3 also states that the Trustee retained the “sole and absolute discretion” to provide “extra and supplemental services and benefits for the care, support, comfort, education[,] and training of the Beneficiaries.” Trust, art. 1.3. The Trust contains a choice-of-law provision indicating that it should be interpreted pursuant to the laws of New Mexico. See Trust, art. 12.2. Ayudando Guardians, a court-appointed guardian, opened a subaccount in the Ayudando Trust on the NH’s behalf on July XX, 2016, via the Joinder Agreement.

ANALYSIS

The agency considers trusts created on or after January 1, 2000, from a disabled beneficiary’s assets to be a resource to the extent that the trust is revocable, or, in the case of an irrevocable trust, to the extent that any payments can be made from the trust for the benefit of the disabled beneficiary. See 42 U.S.C. § 1382b(e)(3); POMS SI 01120.201. A pooled trust is a trust that contains many different individuals’ assets, segregated into separate subaccounts. POMS SI 01120.203(B)(2)(a). A pooled trust that qualifies as a Medicaid payback trust under section 1917(d)(4)(C) of the Act is exempt from the Act’s normal rules for counting trust assets as a resource. See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(C); POMS SI 01120.203(B)(2). To qualify for the pooled trust exception under the Act, a trust must contain assets belonging to a disabled beneficiary and must satisfy all of the following conditions:

1. The trust must be established and managed by a non-profit association;

2. A separate account must be maintained for each disabled beneficiary of the trust; but, for purposes of investment and management of funds, the trust may pool these accounts;

3. Accounts in the trust must be established solely for the benefit of disabled individuals (as defined in section 1382c(a)(3) of the Act);

4. Accounts in the trust must be established by the parent, grandparent, or legal guardian of such disabled beneficiaries, by such disabled beneficiaries, or by a court; and

5. The trust must provide that to the extent that any amounts are remaining in the disabled beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust must pay to the State the amount remaining up to an amount equal to the total amount of medical assistance paid on behalf of the disabled beneficiary under the State Medicaid plan.

42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203(B)(2).

If a trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C), we also consider whether the sub-account is excluded under the regular resource counting rules. Under the regular resource rules, a trust will be a resource if it (1) is unilaterally revocable or (2) if the disabled beneficiary can direct the use of the trust principal for his or her support. See 20 C.F.R. § 416.1201(a).

A. The Ayudando Trust Does Not Satisfy the First and Third Conditions and Thus Does Not Qualify as a Pooled Trust

1. Condition One: Trust established and managed by a non-profit association

The Ayudando Trust does not satisfy the first condition that the trust be established and managed by a non-profit association. See 42 U.S.C. § 1396p(d)(4)(C)(i); POMS SI 01120.203(B)(2). Ayudando Alpha established the Ayudando Trust. As stated above, Ayudando Alpha is a non-profit corporation. Consequently, the Ayudando Trust was established by a non-profit association, as required by the first condition.

However, the Ayudando Trust is silent as to the type of association that can manage it. While Article 2.10 permits the Trustee to appoint a co-trustee “to assist with the management, administration, allocation, and disbursement of Trust assets and property,” the Trust does not specify whether a co-trustee could include a for-profit entity. Articles 9.1 and 9.2 permit the Trustee to hire a corporate custodian and investment counsel, and Article 9.2 permits the Trustee to delegate to investment counsel the ability to “make investments [on the Trust’s behalf] without requiring prior approval from the Trustee.” Granted, a pooled trust may qualify for an exception from normal resource counting rules despite employing for-profit entities to effectuate trust functions. POMS SI 01120.225. Thus, the Trustee’s ability to hire private entities is not inherently fatal to the Ayudando Trust’s status as a valid pooled trust. Nevertheless, the non-profit entity must retain the ultimate authority over the trust. POMS SI 01120.225(D). For example, the non-profit entity must be responsible for determining the amount of trust corpus to invest, removing or replacing the trustee, and making day-to-day decisions regarding the health and well-being of the beneficiaries. Id. Here, we believe that the Ayudando Trust permits the Trustee to delegate core responsibilities to private entities without sufficient oversight to comply with the POMS authority. This is detailed further below.

POMS SI 01120.225(E) states that the agency will not routinely question the relationship between a non-profit entity and contracted, for-profit entities. POMS 01120.225(D), however, establishes that any for-profit entity must always be subordinate to the non-profit managers of a pooled trust. Under these circumstances, we think the Trustee’s power to appoint a co-trustee, without any apparent limitation on its authority, is inconsistent with POMS SI 01120.225(D), and thus disqualifies the Ayudando Trust from the pooled trust exception. Similarly, the Trustee’s ability to delegate the authorization to make investments, without prior approval, to a for-profit entity likewise shows that the Ayudando Trust does not make certain that the Trustee will retain sufficient authority as is required by POMS SI 01120.225(D). Indeed, POMS SI 01120.225(D) specifically lists a for-profit entity’s ability to determine the amount of trust corpus to invest as an example of a prohibited practice. Yet, as written, the Ayudando Trust seemingly permits the Trustee to permit a for-profit enterprise to make virtually unfettered investment decisions. See Trust, arts. 2.10, 9.1, 9.2. Accordingly, the Ayudando Trust does not satisfy the first condition of 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203(B)(2).

2. Condition Three: Trust must be established solely for the benefit of disabled individuals

We also find that the Ayudando Trust does not satisfy the third condition, which requires that accounts in a trust solely benefit disabled individuals. See 42 U.S.C. § 1396p(d)(4)(C)(iii); POMS SI 01120.203(B)(2). The Ayudando Trust contains two early termination provisions, which potentially permit the Trustee to terminate an individual’s subaccount or the Ayudando Trust as a whole. Article 6.2 explains that, if the Trustee has reasonable cause to believe that a beneficiary will become liable for basic maintenance, support, or care that has otherwise been provided by a government agency or private program, the Trustee may petition the court for further instructions. Furthermore, Article 6.3 states that the Trustee may petition the court for instructions if carrying out the Ayudando Trust’s purpose becomes impossible or impracticable with respect to all beneficiaries.

Early termination clauses, however, are only acceptable under the pooled trust exception under narrowly defined circumstances. Specifically, a pooled trust with an early termination clause will not be excepted from the resources counting rules unless:

1. States 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 by the State Medicaid plans;

2. With limited exceptions, no entity other than the trust beneficiary could benefit from the early termination; and

3. The early termination clause gives the power to terminate to someone other than the trust beneficiary.

POMS SI 01120.199(F)(1). Articles 6.2 and 6.3 of the Ayudando Trust provide for early termination that allows the Trustee to petition a court for “further instructions.” Although the court might ultimately undertake actions compliant with the POMS, the Ayudando Trust itself does not facially guarantee State Medicaid Plan reimbursement or that no one other than the trust beneficiary could benefit from the early termination. Thus, the Ayudando Trust cannot be excepted from the resource counting rules.

The Ayudando Trust also violates the third condition because it permits third-party travel expenses in bringing a beneficiary’s siblings and others to visit without qualification. See Trust, art. 2.9. The agency permits a trust to pay third-party travel expenses that are necessary in order for the beneficiary to obtain medical treatment or for an individual to visit a beneficiary in an institution, nursing home, or other long-term care facility (e.g., group homes and assisted living facilities) or other supported living arrangement in which a non-family member or entity is being paid to provide or oversee the individual’s living arrangement if the travel is for the purpose of ensuring the beneficiary’s safety or medical well-being. POMS SI 01120.201(F)(2)(b). Because the Ayudando Trust permits third-party expenses—without qualification—it has the potential to exceed the scope of allowable expenses set forth in the POMS. We note, however, that the agency should grant the Trustee 90 days to correct this particular error. See POMS SI 01120.201(F)(2)(d).

B. The Ayudando Trust Satisfies the Second, Fourth, and Fifth Conditions for a Pooled Trust

1. Condition Two: Separate accounts maintained for each beneficiary

The Ayudando Trust satisfies the second condition, which requires that separate accounts be maintained for each beneficiary, even though funds may be pooled for investment and management purposes. See 42 U.S.C. § 1396p(d)(4)(C)(ii); POMS SI 01120.203(B)(2). Articles 2.8, 4.1, 4.2, and 5.1 establish that the Trustee must maintain separate accounts, which the Ayudando Trust may pool solely for investment and management purposes, for each beneficiary. Accordingly, this condition is satisfied.

2. Condition Four: Accounts established by the individual, parent, grandparent, legal guardian, or court

The Ayudando Trust satisfies the fourth condition that accounts in the trust are established by the individual, a parent, grandparent, legal guardian, or the court. See 42 U.S.C. § 1396p(d)(4)(C)(iii); POMS SI 01120.203(B)(2). The Ayudando Trust only permits parents, grandparents, legal guardians, beneficiaries themselves, and courts to “sponsor” a beneficiary’s enrollment. See Trust, arts. 2.7, 3.1.

3. Condition Five: State reimbursed for medical expenses upon death of beneficiary

The fifth condition requires that upon the death of a beneficiary, the trust reimburse the State for medical expenses paid on behalf of the disabled beneficiary under the State Medicaid plan, to the extent the funds are not retained by the trust. See 42 U.S.C. § 1396p(d)(4)(C)(iv); POMS SI 01120.203(B)(2). Article 6.1.2 dictates that funds remaining in a beneficiary’s subaccount after his or her death are deemed trust property to be retained by the trust. The Trustee may then use the retained funds to (a) benefit the other beneficiaries, (b) add indigent disabled persons to the trust, and (c) provide indigent disabled persons with equipment, medication, and services. A pooled trust is generally entitled to retain funds following a beneficiary’s death. See Memorandum From Associate General Counsel of OPL to Team Leader of OISP, Use of Retained Funds in Section 1917(d)(4)(C) Trusts (Apr. 15, 2010). We caution, however, that the use of retained funds to establish accounts for new beneficiaries or benefit individuals who are not trust beneficiaries would result in the creation of subaccounts that are not eligible for the pooled-trust exception. Id. Thus, the Ayudando Trust satisfies the fifth condition, subject to this caveat.

C. The Ayudando Trust’s Savings Clause Cannot Cure the Infirmities Identified Above

The Ayudando Trust contains a savings clause, also known as a null and void clause, that advises that invalid provisions should be severed from the whole and the remaining provisions enforced. See Trust, art. 12.3. The Joinder Agreement goes further, stating explicitly that the Ayudando Trust is meant to conform with 42 U.S.C. § 1396p as a pooled trust, and that any conflicts between the Trust provisions and the governing law should be resolved in favor of the law and regulations. Joinder Agreement, section G(4). New Mexico generally enforces savings clauses in trusts and similar instruments. See Bolton v. Bd. Of Cty. Comm’rs of Valencia County, 890 P.2d 808, 818 (N.M. App. 1994) (citing City of Santa Fe v. First Nat’l Bank, 65 P.2d 857, 862-63 (1937)). Nevertheless, the agency has determined that a null and void clause does not cure an otherwise defective trust instrument. POMS SI 01120.227(D). Rather, the agency evaluates trust provisions as written. Id. Thus, neither Article 12.3 of the Ayudando Trust nor section G(4) of the Joinder Agreement cures the infirmities identified above.

CONCLUSION

The Ayudando Trust does not qualify as a valid, pooled trust under 42 U.S.C. § 1396p(d)(4)(c) because its provisions do not comply with two of the five statutory conditions for determining whether a trust qualifies for the pooled trust exception for counting resources for SSI purposes. Specifically, (a) the Ayudando Trust permits the Trustee to delegate core responsibilities to for-profit entities without sufficient oversight, and b) the Ayudando Trust contains improper early termination provisions and allows for potentially impermissible third-party travel expenses. Therefore, the NH’s subaccount cannot be considered for the pooled trust exception and is not exempt from the agency’s ordinary resource counting rules.

Traci B. Davis

Acting Regional Chief Counsel

By: Mark J. Mendola

Assistant Regional Counsel

The Regional Chief Counsel (RCC) opinion examines whether revisions the ARCA Foundation made to the ARCA Foundation Grantor Pooled Trust Restatement (ARCA Trust Restatement) qualify the trust as a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act). It was concluded that the ARCA Trust Restatement qualifies as a pooled trust under 1917(d)(4)(C) because the revisions correct the inadequacies identified in the previous opinion and brings the trust into compliance with the agency’s five enumerated criteria for determining whether a trust qualifies for the pooled trust exception. In addition, the NH’s subaccount is exempt as a resource under the agency’s resource counting rules for SSI purposes.

QUESTION PRESENTED

You asked whether revisions the ARCA Foundation made to the ARCA Foundation Grantor Pooled Trust Restatement (ARCA Trust Restatement) qualify the trust as a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act), as codified at 42 U.S.C. § 1396p(d)(4)(C). In a September 2015 opinion, we previously concluded the original ARCA Foundation Grantor Pooled Trust (ARCA Trust) did not qualify as a pooled trust. See ARCA Foundation Grantor Pooled Trust (NH M~), Opinion from Office of the Regional Chief Counsel, Dallas Region to K~, Director Center for Program Support (Sept. 22, 2015). In response, the ARCA Foundation amended the trust, and you asked for an opinion addressing the ARCA Trust Restatement. If the ARCA Trust Restatement now qualifies as a pooled trust, you also inquired whether the number holder’s (NH’s) subaccount, established with her own funds after January 1, 2000, would be exempt as a resource under the agency’s resource counting rules for Supplemental Security Income (SSI) purposes.

ANSWER

The ARCA Trust Restatement qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) because the revisions correct the inadequacies we identified in our previous opinion and brings the trust into compliance with the agency’s five enumerated criteria for determining whether a trust qualifies for the pooled trust exception. In addition, the NH’s subaccount is exempt as a resource under the agency’s resource counting rules for SSI purposes.^[3]

BACKGROUND

The ARCA Foundation is a New Mexico non-profit corporation. The ARCA Foundation established the ARCA Trust on March 9, 1999, “for the purpose of providing services and benefits for the care, support, comfort, education and training of its beneficiaries in addition to and over above public and/or private benefits they already received as a result of their present or future mental or physical disability from any federal, state or local government or private program, agency or department.” ARCA Trust, art 1.3. In our September 2015 opinion addressing whether the trust qualified as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C), we concluded four provisions, consisting of six Articles, in the ARCA Trust conflicted with the first and third criteria for a pooled trust. The first criterion for a pooled trust requires the trust to be established and managed by a non-profit corporation, and the third criterion mandates the trust be established solely for the benefit of disabled individuals. See 42 U.S.C. § 1396p(d)(4)(C).

1. Article 2.10 in the ARCA Trust permitted the trustee to appoint a co-trustee “to assist with the management, administration, allocation, and disbursement of Trust assets and property.”

We previously concluded Article 2.10 violated the first criterion for a pooled trust because the article did not exclude appointment of a for-profit entity as co-trustee. See Program Operations Manual Systems (POMS) SI 01120.203 and SI 01120.225(D). In response, the ARCA Trust Restatement Article 2.10 has been revised to state, “‘Trustee’ shall mean the ARCA Foundation, or its successor or successors, and shall include any Co-Trustee or Co-Trustees, all of which shall be not-for-profit entities.”

2. Articles 9.1 and 9.2 of the ARCA Trust permitted the trustee to hire a corporate custodian and investment counsel who could make investments without trustee approval.

We concluded Articles 9.1 and 9.2 also violated the first criterion of a pooled trust because the articles delegated core management responsibilities to private entities without sufficient trustee oversight. See POMS SI 01120.225(D). In response, Articles 9.1 and 9.2 have been removed from the ARCA Trust Restatement.

3. Articles 6.2 and 6.3 of the ARCA Trust permitted the trustee to petition the court for instructions if the trustee was unable to effectuate the purpose of the trust sub-account or the trust, respectively.

We concluded the articles were early termination provisions that violated the third criterion because early termination provisions must comply with POMS 001120.199(F) to ensure the trust will solely benefit the beneficiary. In response, the ARCA Trust Restatement includes an additional article 6.4 that allows the trustee to transfer the assets of the trust fund or a sub-account to another pooled trust authorized under 42 U.S.C. § 1396(d)(4)(C), as permitted under POMS SI 01120.199(F)(2).

4. Article 2.9 of the ARCA Trust contained a third-party travel reimbursement provision that permitted “[e]xpenditures for travel, companionship, cultural experiences, and expenses in bringing a Beneficiary’s siblings and others for visitation with him or her. . . .”

We concluded the article also violated the third criterion because it did not limit expenditures for third-party travel expenses to visits to a trust beneficiary in a supported living arrangement only for the purpose of ensuring the safety or medical well-being of the beneficiary. POMS 01120.201(F)(2)(b). In response, Article 2.9 was amended to provide the trustee may provide third-party travel expenses solely to visit a beneficiary in assisted living for the purpose of ensuring the safety and/or medical well-being of the beneficiary.

ANALYSIS

The agency considers trusts created on or after January 1, 2000, from a disabled beneficiary’s assets to be a resource to the extent that the trust is revocable, or, in the case of an irrevocable trust, to the extent that any payments can be made from the trust for the benefit of the disabled beneficiary. See 42 U.S.C. § 1382b(e)(3); POMS SI 01120.201.^[4] A pooled trust is a trust that contains many different individuals’ assets, segregated into separate subaccounts. POMS SI 01120.203(B)(2)(a). A pooled trust that qualifies as a Medicaid payback trust under section 1917(d)(4)(C) of the Act is exempt from the Act’s normal rules for counting trust assets as a resource. See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(C); POMS SI 01120.203(B)(2). To qualify for the pooled trust exception under the Act, a trust must contain assets belonging to a disabled beneficiary and must satisfy all of the following conditions:

1. 1. 

   The trust must be established and managed by a non-profit corporation;

2. 2. 

   A separate account must be maintained for each disabled beneficiary of the trust; but, for purposes of investment and management of funds, the trust may pool these accounts;

3. 3. 

   Accounts in the trust must be established solely for the benefit of disabled individuals (as defined in section 1382c(a)(3) of the Act);

4. 4. 

   Accounts in the trust must be established by the parent, grandparent, or legal guardian of such disabled beneficiaries, by such disabled beneficiaries, or by a court; and

5. 5. 

   The trust must provide that to the extent that any amounts are remaining in the disabled beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust must pay to the State the amount remaining up to an amount equal to the total amount of medical assistance paid on behalf of the disabled beneficiary under the State Medicaid plan.

See 42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203(B)(2).

If a trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C), we also consider whether the sub-account is excluded under the regular resource counting rules. Under the regular resource rules, a trust will be a resource if it (1) is unilaterally revocable or (2) if the disabled beneficiary can direct the use of the trust principal for his or her support. See 20 C.F.R. § 416.1201(a).

A. The ARCA Trust Restatement Satisfies All Five Criteria and Qualifies as a Pooled Trust

In our previous opinion, we concluded the ARCA Trust satisfied the second, fourth, and fifth criteria for a pooled trust. There has been no interim change in agency policy or amendment to the ARCA Trust Restatement that would change our opinion for these criteria. Thus, this opinion will address only the first and third criteria for a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203(B)(2).

1. The ARCA Trust Restatement Satisfies the First Criterion for a Pooled Trust Because the Trust Is Established and Managed by a Non-Profit Corporation

The ARCA Foundation, a New Mexico non-profit corporation, established the ARCA Trust Restatement.^[5] We previously concluded the ARCA Trust did not satisfy the first criterion because it permitted appointment of a for-profit co-trustee and did not ensure sufficient management oversight of the trust from the non-profit trustee. Article 2.10 in the ARCA Trust Restatement still permits appointment of a co-trustee, but now specifies the appointed co-trustee must also be a non-profit corporation. Thus, as amended, Article 2.10 of the ARCA Trust Restatement ensures the trust will remain managed by a non-profit corporation, as required under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203(B)(2).

Further, the ARCA Foundation deleted Articles 9.1 and 9.2 in the ARCA Trust that gave unfettered authorization to make investments to a for-profit corporate custodian and investment counsel. The ARCA Foundation indicated it has never used a corporate custodian or investment counsel and thus did not require the provision in the ARCA Trust Restatement. Although POMS SI 01120.225(D) states that a pooled trust may qualify for an exception from normal resource counting rules despite employing for-profit entities to effectuate trust functions, the non-profit entity must retain the ultimate authority over the trust. Because the ARCA Trust Restatement deleted the trustee’s authority to retain a corporate custodian and investment counsel, it is clear the non-profit ARCA Foundation retains the ultimate authority in managing the trust. Thus, the ARCA Trust Restatement satisfies the first criterion for a pooled trust.

2. The ARCA Trust Restatement Satisfies the Third Criterion for a Pooled Trust Because the Trust Is Solely for the Benefit of the Beneficiary

We also considered whether the ARCA Trust Restatement satisfies the third condition, which requires that accounts in a pooled trust solely benefit disabled individuals. See 42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203(B)(2). In the previous opinion, we concluded the ARCA Trust contained an early termination provision that violated POMS SI 01120.199(F) and a third-party travel expense provision that violated POMS SI 01120.201(F)(2)(b). Each of those provisions conflicted with the sole benefit rule. As explained below, the ARCA Trust Restatement adequately addresses those conflicts.

In Articles 6.2 and 6.3, the ARCA Trust permitted the trustee to petition the court for instructions if the trustee was unable to effectuate the purpose of the trust sub-account or the trust, respectively. We concluded the articles were early termination provisions that violated POMS 001120.199(F), which requires that:

1. 1. 

   States 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 by the State Medicaid plans;

2. 2. 

   With limited exceptions, no entity other than the trust beneficiary could benefit from the early termination; and

3. 3. 

   The early termination clause gives the power to terminate to someone other than the trust beneficiary.

POMS SI 01120.199(F)(1).

Articles 6.2 and 6.3 remain in the ARCA Trust Restatement, but the ARCA Foundation added Article 6.4 to the ARCA Trust Restatement. Article 6.4 provides:

6.4 Transfers to Another Pooled Trust. If it becomes impossible, or impracticable, to carry out the Trust’s purposes with respect to all Beneficiaries, or if the Trustee determines that it is in the best interest of any one of the Beneficiaries, the Trustee may transfer the assets of the trust fund, or a single Sub-account of a Beneficiary, to another pooled trust authorized under 42 U.S.C. Section 1396p(d)(4)(C).

Although the ARCA Trust Restatement early termination provisions in Article 6.2 and 6.3 still do not comply with the requirements of POMS SI 01120.199(F)(1), the addition of Article 6.4 complies with a pooled trust exception contained in POMS SI 01120.199(F)(2). For pooled trusts established under 42 U.S.C. § 1396p(d)(4)(C), an early termination provision does not need to satisfy the requirements of POMS SI 01120.199(F)(1) if the clause allows for transfer of the beneficiary’s assets from one pooled trust to another. POMS SI 01120.199(F)(2). Because the ARCA Trust Restatement simply permits transfer of assets for one pooled trust to another, it now satisfies the early termination provisions in POMS SI 01120.199(F).

The ARCA Trust Restatement also properly limits reimbursement of third-party travel expenses. Article 2.9 of the ARCA Trust permitted without qualification payment of third-party travel expenses in bringing a beneficiary’s siblings and others to visit. However, the agency permits only third-party travel expenses that are necessary in order for the beneficiary to obtain medical treatment or for an individual to visit a beneficiary in an institution, nursing home, or other long-term care facility (e.g., group homes and assisted living facilities) or other supported living arrangement in which a non-family member or entity is being paid to provide or oversee the individual’s living arrangement if the travel is for the purpose of ensuring the beneficiary’s safety or medical well-being. POMS SI 01120.201(F)(2)(b). Thus, the ARCA Trust permitted the trustee to reimburse third-party travel expenses in excess of those allowed by the agency.

To correct this conflict with agency policy, the ARCA Foundation amended the third-party travel expense provision in the ARCA Trust Restatement to read as follows:

The Trustee may provide expenditures for travel of the Beneficiary and any required companion, for cultural or entertainment experiences. The Trustee may provide payment of travel expenses for any third-party to visit a Beneficiary who is a recipient of ARCA’s group home, long term care, assisted living or supported living services or living arrangements, which ARCA is providing. The travel must be for the purpose of ensuring the safety and/or medical well-being of the Beneficiary.

Thus, the ARCA Trust Restatement complies with POMS SI 01120.201(F)(2)(b) because payment of third-party travel expenses to visit a beneficiary is limited to visiting a beneficiary in assisted living for the purpose of ensuring the safety and/or medical well-being of the beneficiary.

The ARCA Trust Restatement now satisfies the third criterion, as the amendments correct situations where the ARCA Trust potentially could have benefitted others. Because the ARCA Trust Restatement now satisfies each of the five criterion for a pooled trust, it qualifies as a pooled trust per 42 U.S.C. § 1396p(d)(4)(C). See POMS SI 01120.203(B)(2)

B. The NH’s Subaccount Is Exempt From the Agency’s Resource Counting Rules

Because the ARCA Trust Restatement qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C), we next consider whether the NH’s sub-account is excluded under the regular resource counting rules. Under the regular resource rules, a trust will be a resource if it (1) is unilaterally revocable or (2) if the disabled beneficiary can direct the use of the trust principal for his or her support. See 20 C.F.R. § 416.1201(a); POMS SI 01120.200(D). The NH’s sub-account could also be a resource if (3) she could sell her interest. POMS SI 01120.200(D).

1. The Trust is Irrevocable

Under New Mexico state law, a settlor may freely revoke or amend the trust unless the terms of the trust expressly provide that the trust is irrevocable. New Mex. Stat. Ann. § 46A-6-602. The ARCA Trust Restatement specifically provides that the trust is irrevocable. See ARCA Trust Restatement, Arts. 3.1, 11.1, 11.2. Thus, the NH has no power to revoke the trust under New Mexico law.

2. The NH Cannot Direct the Use of the Trust Assets for Her Own Benefit

Under the terms of the ARCA Trust Restatement, the NH cannot direct the trustee to use the assets in the sub-account for her support and maintenance. Rather, the trustee has sole discretion to disburse such funds, disbursements are to be made only for the beneficiary’s supplemental care, and the trustee’s determination to distribute or not distribute is binding. See ARCA Trust Restatement, Arts. 5.1, 5.3, 5.6. The ARCA Trust Restatement further provides “under no circumstances may any Beneficiary compel a distribution from a Beneficiary's Sub-account.” See ARCA Trust Restatement, Art. 5.5. Thus, the NH has no power to direct the trustee to make a distribution.

3. The NH Cannot Sell Her Interest in the Trust

Under New Mexico state law, a trust may contain a spendthrift provision that precludes both voluntary and involuntary transfer of a beneficial interest. New Mex. Stat. Ann. § 46A-5-502. The ARCA Trust Restatement contains such a spendthrift provision that provides:

No part of this Trust, principal or income, shall be subject to anticipation or assignment by the Beneficiaries; nor shall it be subject to attachment or control by any public or private creditor of the Beneficiaries; nor may it be taken by any legal or equitable process by any voluntary or involuntary creditor, including those that have provided for the Beneficiary's support and maintenance.

See ARCA Trust Restatement, Art. 5.5. Thus, the ARCA Trust Restatement precludes the NH from assigning or voluntarily relinquishing her interest to a creditor, and she cannot sell her interest. See POMS SI 01120.200(D)(1)(a)-(b).

Because the trust is irrevocable, the trustee has sole discretion to make a distribution, and the trust contains a spendthrift provision precluding both voluntary and involuntary transfer of the NH’s interest, it is exempt under the regular resource counting rules.

CONCLUSION

The ARCA Trust Restatement qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) because the revisions properly address the inadequacies we identified in our previous opinion and brings the trust into compliance with the agency’s five enumerated criteria for determining whether a trust qualifies for the pooled trust exception. In addition, the NH’s subaccount is exempt from the agency’s resource counting rules for SSI purposes.

Traci B. Davis

Acting Regional Chief Counsel

By: James D. Sides

Assistant Regional Counsel