This Regional Chief Counsel (RCC) opinion discusses whether the Future Care Community Pooled Trust (Trust), as amended, meets the requirements for the pooled trust exception, in accordance with Section 1917(d)(4)(C) of the Social Security Act (Act), 42 U.S.C. § 1396p(d)(4)(C), and does not constitute a resource for a Supplemental Security Income (SSI) recipient or applicant. It was concluded that the Trust Agreement meets the requirements of the pooled trust exception and the trust accounts thereunder would not be a resource for SSI purposes. Amendments to the Trust Agreement are effective as of the date signed, and not earlier.

QUESTION PRESENTED

You asked whether the Future Care Community Pooled Trust (Trust), as amended, meets the requirements for the pooled trust exception, in accordance with Section 1917(d)(4)(C) of the Social Security Act (Act), 42 U.S.C. § 1396p(d)(4)(C), and does not constitute a resource for a Supplemental Security Income (SSI) recipient or applicant.

OPINION

For the reasons set forth below, the Trust qualifies for the pooled trust exception and the trust accounts thereunder are exempted from resource counting under Section 1917(d)(4)(C) of the Act. However, the amendments to the Trust are effective as of the date of adoption, and are not retroactive to the Trust’s inception.

BACKGROUND

Al Sigl Center for Rehabilitation Agencies, Inc. (Grantor) established the Trust as an irrevocable pooled trust intended to provide supplemental goods and services for disabled individuals. Grantor provided a copy of the amended agreement governing the original Master Trust (Original Trust), the amended Master Trust (Trust Agreement), the Adoption and Ratification of Amendments to Master Trust, and the Amended Sponsor Agreement for our review.

RELEVANT TRUST PROVISIONS

Section 1.3 (Trust Purpose) provides that the Trust is an irrevocable pooled trust established for the sole benefit of individual beneficiaries who are defined as disabled pursuant to Section 1614(a)(3) of the Act, codified at 42 U.S.C. § 1382c(a)(3). Individual trust accounts are maintained for each beneficiary, but are pooled and managed collectively for investment and management purposes.

Section 2.1 (Establishment of Trust Accounts) states that a trust account for the sole benefit of a beneficiary shall be established by the beneficiary, the beneficiary’s parent, grandparent, legal guardian, or by a court.

Section 2.2 (Funding of Trust Accounts) states that trust accounts are intended to be funded with assets owned by a beneficiary, which would otherwise be considered available to the beneficiary for purposes of determining eligibility for government benefits.

Section 2.3 (Sponsor Agreement) provides that the person who establishes a trust account, referred to as a “Sponsor,” must execute a “Sponsor Agreement” adopting and incorporating by reference the terms of the Trust.

Section 2.5 (Trust Account Beneficiaries) requires that the Sponsor Agreement designate the beneficiary of the trust account and provide for distribution of the balance upon the beneficiary’s death in accordance with Section 8 of the Trust Agreement.

Section 3.2 (Sources of Additions to a Trust Account) provides that additions to a trust account may be made by the beneficiary, or on the beneficiary’s behalf by the Sponsor or other person or entity described in Section 2.1.

Section 4.3 (Irrevocable Transfer and Limited Power to Amend) provides that a Sponsor cannot revoke a Sponsor Agreement, withdraw any funds, or amend the Sponsor Agreement except to change the identity of any designated remainder beneficiary or their shares not retained by the Trust or paid to the State.

Section 5.1 (Administration for Sole Benefit of Beneficiary) provides that each trust account is held for the sole benefit of the designated beneficiary during his/her lifetime. During the beneficiary’s lifetime, the trustee may not use the assets for other beneficiaries or for any purpose not authorized by the Trust Agreement.

Section 5.2 (Management of Trust Accounts) authorizes the trustee to pool, commingle, and jointly manage the assets of the trust accounts.

Section 5.4 (Accounting) requires the trustee to submit to Sponsors an annual accounting of the transactions for their trust account, or to an alternate designated individual after the Sponsor’s death. Books and records are to be audited at least annually by a certified public accounting firm and, if required, copies of the annual audited account shall be sent to agencies entitled to receive such accounting.

Section 6.1 (Distributions for a Beneficiary) provides that, during the beneficiary’s lifetime, the trustee shall use as much of the principal and income of the trust account for the benefit of the beneficiary as the trustee, in its sole and absolute discretion, deems appropriate. It further provides that the income and principal be used to provide goods and services that enhance a beneficiary’s quality of life, and which are not otherwise provided by any government benefit program.

Section 6.3 (Expenditure of Funds) authorizes the trustee to expend funds for the supplemental needs of the beneficiary not provided through government benefits, which are reasonable and necessary for the support, care and well-being of the beneficiary. It also prohibits the trustee from making expenditures that will impair or diminish the beneficiary’s receipt of, or eligibility for, government benefits, except under the limited discretionary authority of section 6.4.

Section 6.4 (Discretionary Authority of Trustee) permits the trustee to make distributions to meet the beneficiary’s need for food, clothing, shelter, health care, or other personal needs, even if those distributions will impair or diminish the beneficiary’s receipt of, or eligibility for, government benefits or assistance, but only if the trustee determines that the distributions will better meet the beneficiary’s needs, and it is in the beneficiary’s best interests, notwithstanding the consequent effect on the beneficiary’s eligibility for, or receipt of, government benefits. The section will be null and void if its existence will result in a reduction or loss of a beneficiary’s entitlement to government benefit programs.

Section 6.5 (Prohibition Against Court Order to Invade Principal) prohibits any interest in the trust assets from being anticipated, assigned or encumbered pursuant to the authority of Section 7-1.6 of New York’s Estates, Powers and Trusts Law or any other comparable state or federal law.

Section 6.6 (Spendthrift Provision) prohibits any beneficiary’s interest in the trust assets from being transferable by voluntary or involuntary assignment or operation of law prior to actual payment or delivery by the trustee. It further states that the beneficiary does not have the power to assign, encumber, direct, distribute or authorize distributions from the Trust.

Section 8.1

(Amounts to Remain in the Trust) provides that after the payment of any taxes due from the Trust to the state and the United States because of the death of the beneficiary and the payment of reasonable fees of administration, termination and wrapping up of the trust estate, the trustee shall retain in the Trust the amounts specified by the Sponsor in the Sponsor Agreement from the remaining balance in the beneficiary’s account.

(Distribution as Repayment to the State(s)) provides that, to the extent any remaining balance in a trust account upon the beneficiary’s death is not retained by the Trust, the Trust shall pay to the State(s) any sums up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the State(s) Medicaid plan(s). To the extent that the Trust does not retain funds in the account, the State(s) must be listed as first payee(s) and shall have priority over payment of other debts and administrative expenses, except taxes due because of the beneficiary’s death and reasonable fees for the administration of the trust estate. The payback of medical assistance is not limited to any particular State(s) or period of time.

Section 8.2 (Election to Distribute Amounts to Others) permits the Sponsor Agreement to require that a minimum percentage of the balance remaining in the beneficiary’s account upon his/her death be retained by the Trust. Any balance not so retained shall be applied to payments to the State as required by applicable law, pursuant to Section 8.2, and then distributed as provided in the Sponsor Agreement.

Section 11.4 (Payment for Services) authorizes the trustee to compensate agents, accountants, custodians, legal and investment counsel, and advisors for their services and reasonable expenses; these payments, along with other expenses attributable to the administration of the Trust, will be charged against the Trust property.

Section 12.3 (Compensation of Trustee) authorizes the trustee to charge reasonable and necessary fees and expenses incurred in the administration of the Trust.

Section 16 (Limited Power to Amend Trust) provides that the Trust Agreement may only be amended for the purpose of conforming the Trust with any applicable law, statute or regulation or for the purpose of changing the required minimum contribution or required minimum remainder interest to the Trust. No amendment may adversely affect the exempt status of the funds under Federal and State law, or alter or amend the identity of the beneficiaries, or alter the beneficiaries’ interest in the Trust. Any amendment shall become effective immediately upon approval by Grantor or its successor in interest.

Section 17 (Governing Law) provides that the Trust is governed by the laws of New York, except that applicable federal law will govern any matter related to the relationship between the Trust and government benefits for which the beneficiary may be eligible.

The Adoption and Ratification of Amendments to Master Trust was signed on August 27, 2015 by the Grantor, ratifying the Trust Agreement amendments and indicating the intent to make the amendments to the Trust Agreement retroactive to May 5, 2009.

ANALYSIS

Trusts created on or after January 1, 2000 using an individual’s own assets are generally counted as a resource when considering the individual’s eligibility for SSI. Act §1613(e), 42 U.S.C. § 1382b(e); Program Operations Manual System (POMS) SI 01120.201.A.1. However, certain exceptions are provided for trusts that are established in accordance with Section 1917(d)(4) of the Act. 42 U.S.C. § 1396p(d)(4); see Act § 1613(e)(5). Pooled trusts are one such exception. Act § 1917(d)(4)(C); see POMS SI 01120.203B.2 (describing an exception in accordance with Section 1917(d)(4)(C) as a “pooled trust”). A trust established with the assets of a disabled individual that is part of a pooled trust may be exempted and not counted as a resource if it meets the following conditions: (1) the trust must be managed by a non-profit association; (2) a separate account must be maintained for each beneficiary of the trust; (3) accounts in the trust must be established for the sole benefit of the beneficiaries by a parent, grandparent, legal guardian, by the beneficiaries themselves, or by a court; and (4) to the extent any amounts remaining in the beneficiary’s account upon the beneficiary’s death are not retained by the trust, the trust must pay the State(s) from any remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State Medicaid plan(s). Act § 1917(d)(4)(C); POMS SI 01120.203B.2.a.

In this case, the terms of the Trust Agreement, as amended, meet the requirements of the pooled trust exception as set forth below:

This Regional Chief Counsel (RCC) opinion discusses whether the Future Care Community Pooled Trust (Trust) meets the requirements for the pooled trust exception, in accordance with Section 1917(d)(4)(C) of the Social Security Act (Act), 42 U.S.C. § 1396p(d)(4)(C), and does not constitute a resource for a Supplemental Security Income (SSI) recipient or applicant. It was concluded that the Trust Agreement meets the requirements of the pooled trust exception and the trust accounts thereunder would not be a resource for SSI purposes.

QUESTION PRESENTED

You asked whether the Future Care Community Pooled Trust (Trust), as amended, meets the requirements for the pooled trust exception, in accordance with Section 1917(d)(4)(C) of the Social Security Act (Act), 42 U.S.C. § 1396p(d)(4)(C), and does not constitute a resource for a Supplemental Security Income (SSI) recipient or applicant.

OPINION

For the reasons set forth below, the Trust qualifies for the pooled trust exception and the trust accounts thereunder are exempted from resource counting under Section 1917(d)(4)(C) of the Act. However, the amendments to the Trust are effective as of the date of adoption, and are not retroactive to the Trust’s inception.

BACKGROUND

Al Sigl Center for Rehabilitation Agencies, Inc. (Grantor) established the Trust as an irrevocable pooled trust intended to provide supplemental goods and services for disabled individuals. Grantor provided a copy of the amended agreement governing the original Master Trust (Original Trust), the amended Master Trust (Trust Agreement), the Adoption and Ratification of Amendments to Master Trust, and the Amended Sponsor Agreement for our review.

RELEVANT TRUST PROVISIONS

Section 1.3 (Trust Purpose) provides that the Trust is an irrevocable pooled trust established for the sole benefit of individual beneficiaries who are defined as disabled pursuant to Section 1614(a)(3) of the Act, codified at 42 U.S.C. § 1382c(a)(3). Individual trust accounts are maintained for each beneficiary, but are pooled and managed collectively for investment and management purposes.

Section 2.1 (Establishment of Trust Accounts) states that a trust account for the sole benefit of a beneficiary shall be established by the beneficiary, the beneficiary’s parent, grandparent, legal guardian, or by a court.

Section 2.2 (Funding of Trust Accounts) states that trust accounts are intended to be funded with assets owned by a beneficiary, which would otherwise be considered available to the beneficiary for purposes of determining eligibility for government benefits.

Section 2.3 (Sponsor Agreement) provides that the person who establishes a trust account, referred to as a “Sponsor,” must execute a “Sponsor Agreement” adopting and incorporating by reference the terms of the Trust.

Section 2.5 (Trust Account Beneficiaries) requires that the Sponsor Agreement designate the beneficiary of the trust account and provide for distribution of the balance upon the beneficiary’s death in accordance with Section 8 of the Trust Agreement.

Section 3.2 (Sources of Additions to a Trust Account) provides that additions to a trust account may be made by the beneficiary, or on the beneficiary’s behalf by the Sponsor or other person or entity described in Section 2.1.

Section 4.3 (Irrevocable Transfer and Limited Power to Amend) provides that a Sponsor cannot revoke a Sponsor Agreement, withdraw any funds, or amend the Sponsor Agreement except to change the identity of any designated remainder beneficiary or their shares not retained by the Trust or paid to the State.

Section 5.1 (Administration for Sole Benefit of Beneficiary) provides that each trust account is held for the sole benefit of the designated beneficiary during his/her lifetime. During the beneficiary’s lifetime, the trustee may not use the assets for other beneficiaries or for any purpose not authorized by the Trust Agreement.

Section 5.2 (Management of Trust Accounts) authorizes the trustee to pool, commingle, and jointly manage the assets of the trust accounts.

Section 5.4 (Accounting) requires the trustee to submit to Sponsors an annual accounting of the transactions for their trust account, or to an alternate designated individual after the Sponsor’s death. Books and records are to be audited at least annually by a certified public accounting firm and, if required, copies of the annual audited account shall be sent to agencies entitled to receive such accounting.

Section 6.1 (Distributions for a Beneficiary) provides that, during the beneficiary’s lifetime, the trustee shall use as much of the principal and income of the trust account for the benefit of the beneficiary as the trustee, in its sole and absolute discretion, deems appropriate. It further provides that the income and principal be used to provide goods and services that enhance a beneficiary’s quality of life, and which are not otherwise provided by any government benefit program.

Section 6.3 (Expenditure of Funds) authorizes the trustee to expend funds for the supplemental needs of the beneficiary not provided through government benefits, which are reasonable and necessary for the support, care and well-being of the beneficiary. It also prohibits the trustee from making expenditures that will impair or diminish the beneficiary’s receipt of, or eligibility for, government benefits, except under the limited discretionary authority of section 6.4.

Section 6.4 (Discretionary Authority of Trustee) permits the trustee to make distributions to meet the beneficiary’s need for food, clothing, shelter, health care, or other personal needs, even if those distributions will impair or diminish the beneficiary’s receipt of, or eligibility for, government benefits or assistance, but only if the trustee determines that the distributions will better meet the beneficiary’s needs, and it is in the beneficiary’s best interests, notwithstanding the consequent effect on the beneficiary’s eligibility for, or receipt of, government benefits. The section will be null and void if its existence will result in a reduction or loss of a beneficiary’s entitlement to government benefit programs.

Section 6.5 (Prohibition Against Court Order to Invade Principal) prohibits any interest in the trust assets from being anticipated, assigned or encumbered pursuant to the authority of Section 7-1.6 of New York’s Estates, Powers and Trusts Law or any other comparable state or federal law.

Section 6.6 (Spendthrift Provision) prohibits any beneficiary’s interest in the trust assets from being transferable by voluntary or involuntary assignment or operation of law prior to actual payment or delivery by the trustee. It further states that the beneficiary does not have the power to assign, encumber, direct, distribute or authorize distributions from the Trust.

Section 8.1

(Amounts to Remain in the Trust) provides that after the payment of any taxes due from the Trust to the state and the United States because of the death of the beneficiary and the payment of reasonable fees of administration, termination and wrapping up of the trust estate, the trustee shall retain in the Trust the amounts specified by the Sponsor in the Sponsor Agreement from the remaining balance in the beneficiary’s account.

(Distribution as Repayment to the State(s)) provides that, to the extent any remaining balance in a trust account upon the beneficiary’s death is not retained by the Trust, the Trust shall pay to the State(s) any sums up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the State(s) Medicaid plan(s). To the extent that the Trust does not retain funds in the account, the State(s) must be listed as first payee(s) and shall have priority over payment of other debts and administrative expenses, except taxes due because of the beneficiary’s death and reasonable fees for the administration of the trust estate. The payback of medical assistance is not limited to any particular State(s) or period of time.

Section 8.2 (Election to Distribute Amounts to Others) permits the Sponsor Agreement to require that a minimum percentage of the balance remaining in the beneficiary’s account upon his/her death be retained by the Trust. Any balance not so retained shall be applied to payments to the State as required by applicable law, pursuant to Section 8.2, and then distributed as provided in the Sponsor Agreement.

Section 11.4 (Payment for Services) authorizes the trustee to compensate agents, accountants, custodians, legal and investment counsel, and advisors for their services and reasonable expenses; these payments, along with other expenses attributable to the administration of the Trust, will be charged against the Trust property.

Section 12.3 (Compensation of Trustee) authorizes the trustee to charge reasonable and necessary fees and expenses incurred in the administration of the Trust.

Section 16 (Limited Power to Amend Trust) provides that the Trust Agreement may only be amended for the purpose of conforming the Trust with any applicable law, statute or regulation or for the purpose of changing the required minimum contribution or required minimum remainder interest to the Trust. No amendment may adversely affect the exempt status of the funds under Federal and State law, or alter or amend the identity of the beneficiaries, or alter the beneficiaries’ interest in the Trust. Any amendment shall become effective immediately upon approval by Grantor or its successor in interest.

Section 17 (Governing Law) provides that the Trust is governed by the laws of New York, except that applicable federal law will govern any matter related to the relationship between the Trust and government benefits for which the beneficiary may be eligible.

The Adoption and Ratification of Amendments to Master Trust was signed on August 27, 2015 by the Grantor, ratifying the Trust Agreement amendments and indicating the intent to make the amendments to the Trust Agreement retroactive to May 5, 2009.

ANALYSIS

Trusts created on or after January 1, 2000 using an individual’s own assets are generally counted as a resource when considering the individual’s eligibility for SSI. Act §1613(e), 42 U.S.C. § 1382b(e); Program Operations Manual System (POMS) SI 01120.201.A.1. However, certain exceptions are provided for trusts that are established in accordance with Section 1917(d)(4) of the Act. 42 U.S.C. § 1396p(d)(4); see Act § 1613(e)(5). Pooled trusts are one such exception. Act § 1917(d)(4)(C); see POMS SI 01120.203B.2 (describing an exception in accordance with Section 1917(d)(4)(C) as a “pooled trust”). A trust established with the assets of a disabled individual that is part of a pooled trust may be exempted and not counted as a resource if it meets the following conditions: (1) the trust must be managed by a non-profit association; (2) a separate account must be maintained for each beneficiary of the trust; (3) accounts in the trust must be established for the sole benefit of the beneficiaries by a parent, grandparent, legal guardian, by the beneficiaries themselves, or by a court; and (4) to the extent any amounts remaining in the beneficiary’s account upon the beneficiary’s death are not retained by the trust, the trust must pay the State(s) from any remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State Medicaid plan(s). Act § 1917(d)(4)(C); POMS SI 01120.203B.2.a.

In this case, the terms of the Trust Agreement, as amended, meet the requirements of the pooled trust exception as set forth below:

This Regional Chief Counsel (RCC) examines whether the Lifetime Care Foundation for the Jewish Disabled Community Trust II (Trust) meets the requirements for the pooled trust exception of Section 1917(d)(4)(C) of the Social Security Act (the Act). The Trust does not qualify for the pooled trust exception and the trust accounts thereunder are not exempted from resource counting under Section 1917(d)(4)(C) of the Act. Specifically, the Trust does not meet the requirement that it be for the sole benefit of the disabled individual.

QUESTION PRESENTED

You asked whether the Lifetime Care Foundation for the Jewish Disabled Community Trust II (Trust) meets the requirements for the pooled trust exception, in accordance with Section 1917(d)(4)(C) of the Social Security Act (the Act), 42 U.S.C. § 1396p(d)(4)(C) and does not constitute a resource for a Supplemental Security Income (SSI) recipient or applicant.

OPINION

For the reasons set forth below, the Trust does not qualify for the pooled trust exception and the Trust Accounts thereunder are not exempted from resource counting under Section 1917(d)(4)(C) of the Act. In particular, the Trust does not meet the requirement that it be for the sole benefit of the disabled individual.

BACKGROUND

The Lifetime Care Foundation for the Jewish Disabled, Inc. (Lifetime) established the Trust as an irrevocable pooled trust intended to provide supplemental services and benefits for disabled individuals. We have reviewed a copy of the signed Trust Agreement as well as a 2006 Amendment.

RELEVANT TRUST PROVISIONS

Section 2.B (Trust Purpose) states that the purpose of the Trust is to provide for the collective management and distribution of the Trust Estate on behalf of eligible disabled beneficiaries with the intent of providing extra and supplemental services and benefits for the care, support, comfort, education, rehabilitation, and training of the beneficiaries.

Section 3.B (Establishment of Trust Account) states that Trust Accounts for eligible beneficiaries shall be established with the assets of the individual by the parent, grandparent, legal guardian, or by the individual or a court.

Section 4.A (Administration for Exclusive Benefit of Designated Beneficiary) provides that each Trust Account shall be held for the exclusive benefit of the designated beneficiary during his or her lifetime and that the Trustees will not use assets in a beneficiary’s Trust Account for the benefit of other Trust beneficiaries during a beneficiary’s lifetime, or at any time for purposes not set forth in the Trust Agreement.

Section 4.B (Joint Management of Trust Accounts) states that the Trustees will pool resources of the Trust Accounts and commingle the assets for purposes of investment and asset management. Each Trust Account is credited with its proportionate share of the net income from the Trust estate, and each account will be charged separately with disbursements and distributions made on behalf of the beneficiary or directly attributable to that account.

Section 4.D (Accounting) states that upon request, the Trustees will provide the sponsor with an annual accounting of transactions for the Trust Account and that a copy of an annual accounting shall be available to government agencies requiring such an accounting in accordance with applicable law, or to other such persons to whom an annual audited account must be furnished pursuant to court order.

Section 5.A (Distributions on Behalf of a Designated Beneficiary) provides that, during the life of a designated beneficiary, the Trustees shall apply Trust funds for the benefit of the beneficiary; and shall add any income not so applied to the principal of the Trust Account. Permissible disbursement includes payments for services or benefits provided for the beneficiary’s support and maintenance, including those provided by Lifetime, as well as payment of the beneficiary’s own tax liability or for prepaid funeral services for the beneficiary.

Section 6.A (Payment of Designated Beneficiary’s Trust and Estate Administration Expenses) states that the Trustees may pay for administration expenses, including taxes and attorneys’ fees, after the death of the beneficiary, except that reimbursement may not be made for other expenses prior to reimbursement of the State(s) for medical assistance (as provided in Section 7, below) for designated beneficiaries who received SSI.

Section 6.B (Reimbursement of Certain Income Taxes) permits Trustees to reimburse the parent(s) of a designated beneficiary out of Trust funds for federal, state, and municipal income taxes that the parent(s) may be required to pay because of payments of Trust income to or on behalf of a designated beneficiary which are treated as income to the parent(s) because the payments are deemed to be in discharge of the parents’ legal obligation to support the designated beneficiary.

Section 7 (Dispositive Provisions After Death of Designated Beneficiary) states that after payment of a designated beneficiary’s administration expenses and other allowable payments (if any), the Trustees will retain in the Trust the balance remaining in the designated beneficiary’s account upon death of the designated beneficiary, and the balance will be available solely for the benefit of other individuals who are disabled. To the extent any amount remaining in an individual’s account is not retained by the Trust, the Trustees shall pay the State that provided medical assistance benefits, if any, from such remaining amounts in the account in an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan.

Section 12.A (Irrevocable Transfer) provides that a sponsor or other contributor to the Trust cannot revoke a sponsor agreement or withdraw any funds contributed to the Trust Estate.

ANALYSIS

Trusts created on or after January 1, 2000 using an individual’s own assets are generally counted as a resource when considering the individual’s eligibility for SSI. Act § 1613(e), 42 U.S.C. § 1382b(e); Program Operations Manual System (POMS) SI 01120.201.A.1. However, certain exceptions are provided for trusts that are established in accordance with Section 1917(d)(4) of the Act. 42 U.S.C. § 1396p(d)(4); see Act § 1613(e)(5). Pooled trusts are one such exception. Act § 1917(d)(4)(C); see POMS SI 01120.203B.2 (describing an exception in accordance with Section 1917(d)(4)(C) as a “pooled trust”).

A trust established with the assets of a disabled individual that is part of a pooled trust may be exempted and not counted as a resource if it meets the following conditions: (1) the trust must be managed by a non-profit association; (2) a separate account must be maintained for each beneficiary of the trust; (3) accounts in the trust must be established for the sole benefit of the beneficiaries by a parent, grandparent, legal guardian, by the beneficiaries themselves, or by a court; and (4) to the extent any amounts remaining in the beneficiary’s account upon the beneficiary’s death are not retained by the trust, the trust must pay the State(s) from any remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State Medicaid plan(s). Act § 1917(d)(4)(C); POMS SI 01120.203B.2.a. In this case, the terms of the Trust Agreement does not meet all of the requirements of the pooled trust exception, as set forth below:

a. Assets of a Disabled Individual. POMS provides that the individuals whose assets are used to establish the trust account must meet the definition of disabled for purposes of the SSI program. POMS SI 01120.203.B.2.b. The Trust Agreement states that the Trust Accounts are established for the sole benefit of individual beneficiaries who are defined as disabled pursuant to Section 1614(a) (3) of the Act, codified at 42 U.S.C. § 1382c(a)(3). Trust Agreement, Sections 2.B, 3.B. The Trust Accounts are intended to be funded with assets of the disabled individual. Trust Agreement, Section 3.B.

b. Nonprofit Association. The Trust must be established and maintained by an organization that has been established and certified under a State nonprofit statute in order to meet the pooled trust exception. Act § 1917(d)(4)(C)(i) (providing that “[t]he trust is established and managed by a nonprofit association”); POMS SI 01120.203.B.2.c. The Trust was established and is managed by the Lifetime Care Foundation for the Jewish Disabled, Inc., a non-profit corporation incorporated under the laws of the State of New York on June 12, 1996, according to the NYS Department of State Division of Corporations online database.^[2]

c. Separate Accounts. The pooled trust exception requires that the Trust must maintain a separate account for each Trust beneficiary, although the funds may be pooled for investment and management purposes. Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.B.2.d. Furthermore, the Trust must be able to provide an individual accounting for the individual. POMS SI 01120.203.B.2.d. The Trust Agreement requires that individual Trust Accounts be maintained for each beneficiary and authorizes the trustee to commingle and jointly manage the assets of the Trust Accounts. Trust Agreement, Sections 3.B, 4.A, 4.B. In addition, the trustee of the Trust is required to submit, upon request, an annual accounting of the transactions in a Trust Account to its Sponsor; and a copy of an annual accounting shall be available for any government agency requiring such accounting. Trust Agreement, Section 4.D.

d. Sole Benefit of the Beneficiary. POMS state that a trust is considered to be for the sole benefit of an individual “if the trust benefits no one but that individual, whether at the time the trust is established or at any time for the remainder of the individual’s life.” POMS SI 001120.201.F.2.a. See Act § 1917(d)(4)(C)(iii) (providing that accounts “are established solely for the benefit of individuals who are disabled”). Therefore, aside from payments for goods or services for the trust beneficiary, certain specified third party travel expenses, and reasonable administrative expenses, the trust must not (1) provide a benefit to any other individual or entity during the disabled individual’s lifetime, or (2) allow for termination of a trust account prior to the individual’s death and payment of the assets to another individual or entity. POMS SI 001120.201.F.2, 01120.203.B.2.e.

The Trust Agreement provides that that each Trust Account be held for the sole benefit of the designated beneficiary during his/her lifetime. Trust Agreement, Sections 3.B, 4.A; see Trust Agreement Section 5.A. The Trust Agreement prohibits a Sponsor from revoking a Sponsor Agreement or withdrawing any funds. Trust Agreement, Section 12.A. There are no early termination clauses in the Trust Agreement. The Trust Agreement also properly permits payment for services provided to the beneficiary, as well as payment for administrative expenses. Trust Agreement, Section 5.A.

However, the Trust Agreement also provides that the trustees may reimburse the parents of the beneficiaries out of Trust funds for federal, state, and municipal income taxes that such parents may be required to pay because of payments of Trust income to or on behalf of beneficiaries that are treated as income to the parents. Trust Agreement, Section 6.B. Because the Trust provides for Trust funds to be paid to someone other than the SSI applicant, the Trust is not for the “sole benefit” of the individual. POMS SI 001120.201.F.2.a, 01120.203.B.2.e. Additionally, the payment of Trust funds to a beneficiary’s parents as reimbursement for income taxes does not meet one of the exceptions to the sole benefit rule for third party payments. See POMS SI 01120.201.F.2.b, 01120.201.F.2.c. Accordingly, the Trust does not meet the requirement that it be for the sole benefit of the disabled individual.

e. Establishing Person or Entity. The Trust Agreement provides that a Trust Account be established by the beneficiary, the beneficiary’s parent, grandparent, legal guardian, or by a court. Trust Agreement, Section 3.B. This meets the requirements of the pooled trust exception. See Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.f.

f. Disposition upon Death of Beneficiary. POMS explains that the trust must contain specific language that provides that, to the extent that amounts remaining in the individual’s account upon the death of the individual are not retained by the trust, the trust pays to the State(s) from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan(s).

POMS SI 01120.203.B.2.g; see Act § 1917(d)(4)(C)(iv). The Trust must provide reimbursement to any State(s) that may have provided medical assistance under the State Medicaid plan(s) and payback may not be limited to any particular State(s) or period of time, such as after establishment of the Trust. POMS SI 01120.203.B.2. Furthermore, POMS also state that to the extent the Trust does not retain funds in the account, States must be listed as first payee with priority except over (1) taxes due from the Trust to the State(s) or Federal government because of the death of the beneficiary and (2) reasonable fees for administration of the Trust estate or required actions associated with termination and wrapping up of the Trust. POMS SI 01120.203.B.2.g, 01120.203.B.3.a. The Trust Agreement states that any funds remaining in an individual’s account upon death, following the payment of taxes and administration fees, shall be paid to the State that provided medical assistance benefits, if any, in an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan. Trust Agreement, Section 7; see Trust Agreement, Section 6A. We do note that the Trust Agreement describes “the State that provided medical assistance benefits, if any” as singular rather than plural. Trust Agreement, Section 7. However, the Trust does not name any particular state, and essentially mirrors the language of the Act insofar as it provides that the Trustees will pay “an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan.” Id,: see Act § 1917(d)(4)(C)(iv) (providing that a trust must pay “to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan”).

Because the Trust Agreement does not require the Trust funds be used for the sole benefit of the beneficiary, the provisions of the Trust Agreement do not meet the requirements of the pooled trust exception.

CONCLUSION

For the reasons discussed above, the Trust Agreement does not meet the requirements of the pooled trust exception and the Trust Accounts thereunder would be a resource for SSI purposes.

The United Cerebral Palsy Association of New York State, Inc., Community Trust II (July 22, 2014) qualifies for the pooled trust exception and the trust accounts thereunder do not count as a resource for SSI purposes.

QUESTION PRESENTED

You asked whether the United Cerebral Palsy Association of New York State, Inc., Community Trust II, as amended (Community Trust 2014), meets the requirements for the pooled trust exception, in accordance with Section 1917(d)(4)(C) of the Social Security Act (Act), 42 U.S.C. § 1396p(d)(4)(C), and whether accounts thereunder would constitute a resource for a Supplemental Security Income (SSI) recipient or applicant.

OPINION

For the reasons set forth below, Community Trust 2014 qualifies for the pooled trust exception and the trust accounts thereunder can be excluded for resource counting purposes.

Although not relevant to whether the Community Trust 2014 is an exempt resource, we note that the trust provides that the beneficiary, his or her parents, grandparents, or legal guardian can add property to a trust account on behalf of the beneficiary, with any of the beneficiary’s resources or assets, including income. However, unless the person transferring the beneficiary’s resources has the legal authority to transfer the resources (or is the beneficiary himself), the transfer may not be legally valid. In reviewing any transfers of the beneficiary’s assets into the trust by individuals other than the beneficiary, the agency should confirm that the transferor has the legal authority to make the transfer.

KEY TRUST PROVISIONS

Preamble:

“This agreement of Trust, executed this 22 day of July 2014, by and between United Cerebral Palsy Associations of New York State, Inc., also known as Cerebral Palsy Associations of New York State, a New York not-for-profit corporation, … (hereinafter called the Settlor” or “Cerebral Palsy Associations of New York”) as Settlor and Establisher, and T~, S~, T2~, S2~, J~, S3~, J~ (hereinafter collectively called the “Trustees”), as Trustees.”

2B – Trust Purpose

“The express purpose of this Trust is to provide for the collective management and distribution of the Trust Estate on behalf of eligible beneficiaries (hereinafter called “Designated Beneficiaries”) who are disabled as defined in Soc. Sec. Law Section 1614(a)(3) [42 USC 1382c(a)(3)] for whom trust accounts (hereinafter called “Trust Accounts”) are established.

3B – Establishment of Trust Accounts:

“A Trust Account for an eligible disabled beneficiary shall be established with the resources or assets (including. without limitation, income) of an eligible disabled beneficiary, such accounts to be established solely for the benefit of such individuals by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court...” An individual desiring to establish a Trust Account for an eligible beneficiary or the eligible beneficiary himself or herself (hereinafter called “Sponsor”) shall execute an agreement adopting the terms of this Trust (hereinafter called “Sponsor Agreement”).”

3D – Funding

“(1) Additions to a Trust Account. [T]he Sponsor, or any other person desiring to make a contribution to a Trust Account, shall have the right at any time to add property acceptable in the absolute discretion of the Trustees to a Trust Account on behalf of a Designated Beneficiary with any of the Designated Beneficiary’s resources or assets, including, without limitation, income.”

3E – Minimum Funding:

“...In the event that a Sponsor has not met the minimum contribution over the three (3) years, the Trustees, in their sole discretion, shall have the right to terminate the Trust Account and the Trustees of the Trust shall pay to the States from the Designated Beneficiary’s account any remaining amounts equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plans pursuant to 42 USCS § 1396 et seq before returning any remaining balance in the Trust Account to the trust beneficiary.”

4A – Administration for the Exclusive Benefit of Designated Beneficiary:

“Each Trust Account shall be held for the exclusive benefit of the Designated Beneficiary of that Trust Account during his or her lifetime, and during his or her lifetime, the Trustees shall not use assets in a Trust Account for the benefit of other trust beneficiaries or at any time for any purposes not set forth in this Trust Agreement.”

5B – Statement of Intent

“It is the intent of this Trust Agreement to create a supplemental needs trust which conforms to the provisions of 42 U.S.C. 1396p(d)(4)(C) …. Accordingly, any authorization, direction or other provision contained in this Trust Agreement which would prevent the Designated Beneficiary from being eligible for or result in the loss of government benefits or assistance shall be void to the extent that such authorization, direction or other provision would have such an adverse result.”

7 – Dispositive Provisions After Death of a Designated Beneficiary:

“...Anything contained herein to the contrary notwithstanding, if for any reason, an amount is not being retained in the Trust (other than for the payment of administration expenses as described above), to the extent that amounts remaining in the individual’s account upon the death of the individual are not retained by the Trust, the Trustees of the Trust shall pay to the State(s) from such deceased beneficiary’s account any remaining amounts equal to the total amount of medical assistance paid on behalf of the beneficiary under the State Medicaid plan(s) pursuant to 42 USCS § 1396 et seq.”

ANALYSIS

To satisfy the “pooled trust exception,” such that the trust funds do not constitute resources for the purposes of SSI, a trust must meet the following criteria:

• •

  The pooled trust is established and maintained by a nonprofit association;

• •

  Separate accounts are maintained for each beneficiary, but assets are pooled for investing and management purposes;

• •

  Accounts are established solely for the benefit of the disabled individuals;

• •

  The account in the trust is established through the actions of the individual, a parent, grandparent, legal guardian, or a court; and

• •

  The trust provides that to the extent 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) the amount remaining up to an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under State Medicaid plan(s).

POMS SI 01120.203B.2; see Act § 1917(d)(4)(C).

Community Trust 2014 satisfies the requirements. First, it satisfies the non-profit requirement. It was established by, and exists pursuant to, an agreement between United Cerebral Palsy Association of New York State, Inc. and the named trustees. Community Trust 2014 § Pmbl. United Cerebral Palsy Association of New York State, Inc. is a domestic not-for-profit corporation registered with the State of New York. Id. Second, it satisfies the separate accounts requirements, calling for separate accounts for each beneficiary, as well as individual accounting. Id. at § 3.B. Third, the Community Trust 2014 satisfies the sole benefit requirement. It states that the trust is established for the benefit of a disabled individual, Id. at § 2.B, will not provide benefit to any other individual or entity, id at §§ 3B, 4.A, and does not include any problematic early termination clauses. Fourth, it satisfies the requirements for establishing a pooled trust account, providing that only the above-enumerated individuals (parents, etc.) can establish trust accounts on behalf of the individual. Id. at § 3.B. And finally, the Community Trust 2014 satisfies the Medicaid repayment requirement, providing that upon termination of the trust or death of the trustees, it will repay the State Medicaid plan(s) amounts paid on the beneficiary’s behalf. Id. at §§ 3.E, 7. Our review found no provisions contradicting these requirements.

Although not relevant to whether the Community Trust 2014 is an exempt resource, we note the following regarding two of the trust’s provisions.

First, the Community Trust 2014 provides that any provision which prevents the beneficiary from being eligible for or would result in the loss of government benefits or assistance shall be void to the extent that such provision would have such an adverse result. Id. at § 5.B. As noted in POMS, for SSI resource counting purposes, a null and void clause, such as the one above, does not cure an otherwise defective trust instrument. POMS SI 011720.227D. However, the clause has no relevance here, since the Community Trust 2014 meets the requirements for a section 1917(d)(4)(A) trust without relying on the null and void clause. POMS SI 011720.227E, Example 2.

Second, the Community Trust 2014 provides that the Sponsor (defined to include the individual, his or her parents, grandparents, or legal guardian) can add property to a Trust Account on behalf of a Designated Beneficiary, with any of the beneficiary’s resources or assets, including income. Community Trust 2014 §§ 3.B, 3.D. However, unless the Sponsor is the beneficiary or the Sponsor has the legal authority to transfer the beneficiary’s assets, the transfer may not be legally valid. In reviewing any transfers of the beneficiary’s assets into the trust by individuals other than the beneficiary, the agency should confirm that the transferor has the legal authority to make the transfer.

CONCLUSION

For the reasons discussed above, Community Trust 2014 meets the requirements of the pooled trust exception and the trust accounts thereunder would not be a resource for SSI purposes.

This Regional Chief Counsel (RCC) opinion examines whether the assignment of a one-time payment of $7,000.00 and monthly payments of $815.00 into a sub-account of the “NYSARC, Inc. Community Trust I” pooled trust constitute income to the trust beneficiary for Supplemental Security Income (SSI) purposes. The one-time payment of $7,000.00 was an addition to the trust principal made directly to a trust that is not a resource. Additionally, the assignment of the monthly future payments to the trust sub-account was irrevocable. Accordingly, the RCC determined the $7,000.00 and the monthly payments to the trust sub-account do not constitute income to the trust beneficiary for purposes of determining his eligibility and payment for SSI benefits.

QUESTION PRESENTED

You asked us to determine whether, for Supplemental Security Income (SSI) eligibility purposes, the assignment of a one-time payment of $7,000.00 and monthly payments of $815.00 into a sub-account of NYSARC, Inc. Community Trust I for the benefit of N~ (Claimant) constitutes income to him.

OPINION

The one-time payment of $7,000.00 was an addition to the trust principal made directly to a trust that is not a resource. Additionally, the assignment of the monthly future payments to the trust sub-account was irrevocable. Accordingly, the $7,000.00 and the monthly payments to the trust sub-account do not constitute income to Claimant for purposes of determining his eligibility for SSI benefits.

BACKGROUND ^[3]

On July XX, 2013, Claimant signed a Joinder Agreement (Joinder Agreement or JA) with the NYSARC Inc. Community Trust I, in which he agreed to enroll in and establish a trust sub-account under the NYSARC, Inc. Community Trust I. Claimant was named as the donor and beneficiary of the sub-trust account, and the account was initially funded with $300. The NYSARC, Inc. Community Trust I Master Trust (Master Trust or MT) provides that funds received by the trust are retained by the trust and administered by the Trustee at the sole discretion of the Trustee, and that the trust is irrevocable. (MT §§ 2.1; 2.2(b); 3.1).

Claimant was awarded a structured settlement in a personal injury case, Allen, et. al. v. Ciannamea, et. al, in the New York State Supreme Court, Rensselaer County in August 2013. The parties to the litigation entered in a settlement agreement (Settlement Agreement or SA), in which they agreed that the defendant’s insurers, New York Mutual Underwriters, Hartford Fire Insurance Company, and General Accident/Insurance Co. (Insurers), would provide a one-time, up-front payment of $7,000.00 to N~, and make future periodic payments for the benefit of the Claimant. (SA at ¶¶ B1-B2).

The parties agreed that the on-time, up-front payment of $7,000.00 would be held in escrow by the defendants’ attorneys, Harris Beach, PLLC, to satisfy any remaining Medicare liens on Claimant’s record that arose from or were related to the incident at issue in the litigation. Upon resolution of any such claims, the remainder would be paid to NYSARC, Inc. Community Trust I f/b/o N~.^[4]

The parties also determined that a structured settlement was in the best interest of the Claimant, and therefore agreed that the Insurers would provide future periodic payments, and that “[n]o part of the sum being paid by said Insurers to provide future periodic payments . . . may be paid directly to the Plaintiff.” (SA at ¶ B(2)). The parties further agreed that the Insurers would assign their obligation to make future periodic payments to BHG Structured Settlements, Inc., (Assignee), in a qualified assignment agreement, and would fund their obligation to make future periodic payments through the purchase of annuities from Berkshire Hathaway Life Insurance Company (Annuity Issuer). (SA at ¶¶ D, E). The Insurers and Assignee executed a qualified assignment agreement effective September XX, 20XX, (Qualified Assignment or QA), in which the Assignee agreed to make monthly payments for life in the amount of $815.00 to NYSARC, Inc. Community Trust I f/b/o N~ beginning September XX, 20XX. (QA Addendum No. 1).

The Settlement Agreement provides that the annuity policies are to be owned exclusively by the Assignees, and that Claimant will not have any right of or incidence of ownership whatsoever in the annuity policies, any right to accelerate or defer payments due from Insurers/Assignees, or any other right of dominion or control over the annuity policies. (SA at ¶ E). It further states that Claimant shall not “have the power to sell, assign, pledge, hypothecate, mortgage, or otherwise encumber [the future periodic payments] or any part thereof . . . unless such sale, assignment, pledge, hypothecation or other transfer or encumbrance has been approved in advance in a “Qualified Order” as defined in § 5891(b)(2) of the Internal Revenue Code and otherwise complies with applicable state law.” (SA at ¶ C).

DISCUSSION AND ANALYSIS

The Sub-Trust Account is not a Resource to N~

Trusts established with the assets of an individual after January XX, 20XX are generally subject to the statutory provisions of Section 1613(e) of the Social Security Act (Act). See 42 USC § 1382b(e); POMS SI 01120.201C.2. Generally, under these provisions, trusts established with the assets of the individual are considered resources for SSI purposes, even if they are irrevocable. POMS SI 01120.201. However, there is an exception for the assets of an individual held in certain pooled trusts that are established under the provisions of Section 1917(d)(4)(C) of the Act, commonly known as a Medicaid payback trust exception. 42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203A, B.2. It had previously been determined that NYSARC, INC. Community Trust I meets all of the requirements to qualify for a pooled trust under Section 1917(d)(4)(C) of the Act. See POMS SI 01120.203B.2.a-g.^[5] Further, the Claimant, who meets the definition of disabled for purposes of the SSI program, established the sub-account and funded the sub-account with his assets. See POMS SI 01120.203B.2a, b and f. Accordingly, the sub-trust account should not be considered a resource under the statutory rules of the Act.

The One-Time Payment of $7,000.00 Does Not Constitute Income to N~

Under the income rules, additions to the trust principal made directly to a trust that is not a resource are not considered income to the grantor or beneficiary. POMS SI 01120.201J.1.b. Pursuant to the Settlement Agreement, the one-time $7,000.00 payment was held in escrow by the defendants’ attorneys, and then paid directly to NYSARC, Inc. Community Trust I f/b/o N~. Thus, the $7,000 payment was not a future payment, but was an up-front payment that was paid directly from the defendants to the trust once it was confirmed that there were no outstanding Medicare liens on Claimant’s record. The $7,000.00 payment is therefore an addition to the trust principal made directly to the trust, and is not considered income to Claimant for SSI eligibility purposes. POMS SI 01120.201J.1.b.

The Assignment of Periodic Payments to the Trust Do Not Constitute Income to N~

Under the income rules, a legally assignable payment that is assigned to a trust that is not a resource is considered income for SSI eligibility purposes, unless the assignment is irrevocable. POMS SI 01120.201J.1.d. The monthly annuity payments were assigned to the trust under the Settlement Agreement, and therefore must be considered income to Claimant, unless the assignment was irrevocable.

Claimant’s structured settlement agreement^[6] is subject to the provisions of the New York Structured Settlement Protection Act (SSPA). N.Y. Gen. Oblig. Law §§ 5-1701-09 (McKinney 2011). The SSPA provides that in negotiating a structured settlement, the defendants shall disclose a) the amounts and due dates of the periodic payments to be made under the structured settlement agreement; b) the amount of the premium payable to the annuity issuer; c) the nature and amount of any cost that may be deducted from any of the periodic payments; d) where applicable, that any transfer of the periodic payments is prohibited by the terms of the structured settlement and may otherwise be restricted or prohibited under applicable law; and e) a statement that the claimant is advised to obtain independent professional advice relating to the legal tax and financial implications of the settlement. Id. at § 5-1702. Notably, the SSPA does not require that a structured settlement agreement be approved or ordered by the court. Id.

Here, the Settlement Agreement complied with the requirements of the SSPA. Exhibit B to the Agreement provides that beginning October XX, 20XX, a monthly payment of $815.00 would be made to the trust. (See SA, Exhibit B). Additionally, the Settlement Agreement details the amount of the premium payable to the annuity insurer. (see SA ¶ B(2)). Finally, the Settlement Agreement contains a statement that any transfer of the periodic payments is prohibited by the terms of the structured settlement and may otherwise be restricted or prohibited under applicable law, and notice that the claimant is advised to obtain independent professional advice relating to the legal tax and financial implications of the settlement. (See SA ¶¶ C; N). Thus, the Agreement complies with the requirements of the SSPA, and the assignment of the periodic payments to the trust sub-account in the structured settlement agreement was valid under New York State Law.

Further, the periodic payments were irrevocably assigned to the trust, because Claimant does not have the right to anticipate or to sell, transfer, or assign his rights to the monthly payments. The Settlement Agreement provides that the annuity policies are to be owned exclusively by the Assignees, and that Claimant will not have any right of or incidence of ownership whatsoever in the annuity policies, any right to accelerate or defer payments due from Insurers/Assignees, or any other right of dominion or control over the annuity policies. (SA at ¶ E). The Settlement Agreement further provides that Claimant shall not “have the power to sell, assign, pledge, hypothecate, mortgage, or otherwise encumber [the future periodic payments] or any part thereof . . . unless such sale, assignment, pledge, hypothecation or other transfer or encumbrance has been approved in advance in a “Qualified Order” as defined in § 5891(b)(2) of the Internal Revenue Code and otherwise complies with applicable state law.” (SA at ¶ C). Section 5891(b)(2) of the Internal Revenue Code defines a “Qualified Order” as a final order, judgment or decree which finds that the transfer of structured settlement payment rights does not contravene any Federal or State statute, and is in the best interest of the payee. 26 U.S.C. § 5891(b)(2)(A). Under the SSPA, the governing New York State statute, no direct or indirect transfer of the structured settlement payment rights shall be effective “unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction. N.Y. Gen. Oblig. Law §§ 5-1705, 5-1706. The court may only approve the transfer upon express findings that: a) the transfer complies with the SSPA; b) the transfer is in the best interest of the payee; c) the payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer, and has either received such advice or knowingly waived such advice in writing, d) the transfer does not contravene any applicable statute, court order, or other government authority, e) is written in plain language and complies with the SSPA’s provisions regarding the disclosure of structured settlement terms. N.Y. Gen. Oblig. Law § 5-1706(a) – (e).

Thus, Claimant cannot unilaterally sell, transfer, or assign his rights to the monthly annuity payments without a court finding that the transfer is in his best interest. 26 U.S.C. § 5891(b)(2)(A)(ii); N.Y. Gen. Oblig. Law § 5-1706(b). Claimant therefore does not have the right to anticipate, sell, transfer, or assign his annuity payments, and the assignment of the annuity payments to the trust is irrevocable.

Because Claimant has established that the payments from the annuity have been validly and irrevocably assigned to the trust in accordance with New York State law, they are not considered income to Claimant. See POMS SI 01120.201J.1.d.

CONCLUSION

The one-time payment of $7,000.00 and the future monthly payments do not constitute income to Claimant for purposes of determining his eligibility for SSI benefits.

The Wolf Foundation, Inc. Amended and Restated First Party Pooled Trust Funded by People with Developmental Disabilities qualifies for the pooled trust exception and the trust accounts thereunder are exempted from resource counting under Section 1917(d)(4)(C) of the Social Security Act.

QUESTION PRESENTED

You asked whether The Wolf Foundation, Inc. Amended and Restated First Party Pooled Trust Funded by People with Developmental Disabilities (the Trust) meets the requirements for the pooled trust exception, in accordance with Section 1917(d)(4)(C) of the Social Security Act (the Act), 42 U.S.C. § 1396p(d)(4)(C), and does not constitute a resource for a Supplemental Security Income (SSI) recipient or applicant?

SHORT ANSWER

For the reasons set forth below, the Trust qualifies for the pooled trust exception and the trust accounts thereunder are exempted from resource counting under Section 1917(d)(4)(C) of the Act.

BACKGROUND

The Wolf Foundation, Inc. established the Trust as an irrevocable pooled trust intended to provide supplemental goods and services for disabled individuals. The Wolf Foundation, Inc. provided an unsigned copy of the agreement governing the Trust (the Trust Agreement) for our review.

RELEVANT TRUST PROVISIONS

Section 1.3 (Trust Purpose) provides that the Trust is an irrevocable pooled trust established for the sole benefit of individual beneficiaries who are defined as disabled pursuant to Section 1614(a) (3) of the Act, codified at 42 U.S.C. § 1382c(a)(3). Individual trust accounts are maintained for each beneficiary, but are pooled and managed collectively for investment and management purposes.

Section 2.1 (Establishment of Trust Accounts) states that a trust account for the sole benefit of a beneficiary shall be established by the beneficiary, the beneficiary's parent, grandparent, legal guardian, or by a court.

Section 2.2 (Funding of Trust Accounts) states that the trust accounts are intended to be funded with assets owned by a beneficiary which would otherwise be considered available to the beneficiary for purposes of determining eligibility for government benefits.

Section 2.3 (Sponsor Agreement) provides that the person who establishes a trust account (a “Sponsor”) must execute a an agreement adopting and incorporating by reference the terms of the Trust (a “Sponsor Agreement”).

Section 2.5 (Trust Account Beneficiaries) requires that the Sponsor Agreement designate the beneficiary of the trust account and provide for distribution of the balance upon the beneficiary’s death in accordance with Section 8 of the Trust Agreement.

Section 4.3 (Irrevocable Transfer and Limited Power to Amend) provides that a Sponsor cannot revoke a Sponsor Agreement, withdraw any funds or amend the Sponsor Agreement except to change the identity of any designated remainder beneficiary or their shares not retained by the Trust or paid to the State.

Section 5.1 (Administration for Sole Benefit of Beneficiary) provides that each trust account is held for the sole benefit of the designated beneficiary during his/her lifetime and that the trustee may not use the assets for any beneficiary or purpose not authorized by the Trust Agreement during the beneficiary’s lifetime.

Section 5.2 (Management of Trust Accounts) authorizes the trustee to commingle and jointly manage the assets of the trust accounts.

Section 5.4 (Accounting) requires the trustee to submit to Sponsors an annual accounting of the transactions for their trust account.

Section 6.1 (Distributions for a Beneficiary) provides that the trustee shall use as much of the principal and income of the trust account for the benefit of the beneficiary as the trustee, in its sole and absolute discretion, deems appropriate. It further provides that the income and principal be used to provide goods and services that enhance a beneficiary's quality of life, and which are not otherwise provided by any government benefit program.

Section 6.3 (Expenditure of Funds) authorizes the trustee to expend funds for the supplemental needs of the beneficiary not provided through government benefits, which are reasonable and necessary for the support, care and well-being of the beneficiary. It also prohibits the trustee from making expenditures that will impair or diminish the beneficiary's receipt of, or eligibility for, government benefits, except under the limited discretionary authority of section 6.4.

Section 6.4 (Discretionary Authority of Trustee) permits the trustee to make distributions to meet the beneficiary's need for food, clothing, shelter, health care, or other personal needs, even if those distributions will impair or diminish the beneficiary's receipt of, or eligibility for, government benefits or assistance but only if the trustee determines that the distributions will better meet the beneficiary's needs, and it is in the beneficiary's best interests, notwithstanding the consequent effect on the beneficiary's eligibility for, or receipt of, government benefits. The section will be null and void if its existence will result in a reduction or loss of a beneficiary’s entitlement to government benefit programs.

Section 6.5 (Prohibition Against Court Order to Invade Principal) prohibits any interest in the trust assets from being anticipated, assigned or encumbered pursuant to the authority of Section 7-1.6 of New York’s Estates, Powers and Trusts Law or any other comparable state or federal law.

Section 6.6 (Spendthrift Provision) prohibits any interest in the trust assets from being transferable by voluntary or involuntary assignment or operation of law prior to actual payment or delivery by the trustee. It further states that the beneficiary does not have the power to assign, encumber, direct, distribute or authorize distributions from the Trust.

Section 8.1 (Amounts to Remain in the Trust) provides that after the payment of any taxes due from the Trust to the state and the United States because of the death of the beneficiary and the payment of reasonable fees of administration, termination and wrapping up of the trust estate, the trustee shall retain in the Trust the amounts specified by the Sponsor in the Sponsor Agreement from the remaining balance in the beneficiary's account.

Section 8.2 (Distribution as Repayment to the state(s)) provides that to the extent any remaining balance in a trust account is not retained by the Trust, any sums up to an amount equal to the total amount of medical assistance paid on behalf of the individual under the state(s) Medicaid plan(s) is paid and a release or certificate obtained from the state(s) before the trustees make a distribution of the remainder balance as provided in the Sponsor Agreement.

Section 8.3 (Election to Distribute Amounts to Others) permits the Sponsor Agreement to require that a minimum percentage of the balance remaining in the beneficiary's account upon his/her death be retained by the trust and any balance not so retained be applied to payments to the states pursuant to Section 8.2 and any balance applied as provided in the Sponsor Agreement.

Section 11.4 (Payment for Services) authorizes the trustee to compensate agents, accountants, custodians, legal and investment counsel and advisors for their services and reasonable expenses, which along with other expenses attributable to the administration of the Trust will be charged against the trust property.

Section 16 (Limited Power to Amend Trust) provides that the Trust Agreement may only be amended for the purpose of conforming the Trust with any applicable law, statute or regulation or for the purpose of changing the required minimum contribution or required minimum remainder interest to The Wolf Foundation, Inc. No amendment may adversely affect the exempt status of the funds under Federal and State law.

Section 17 (Governing Law) provides that the Trust is governed by the laws of New York.

ANALYSIS

Trusts created on or after January 1, 2000 using an individual’s own assets are generally counted as a resource when considering the individual’s eligibility for SSI. Act §1613(e); 42 U.S.C. § 1382b(e); Program Operations Manual System (POMS) SI 01120.201.A.1. However, certain exceptions are provided for trusts that are established in accordance with Section 1917(d)(4) of the Act. 42 U.S.C. § 1396p(d)(4). Pooled trusts are one such exception. Act § 1917(d)(4)(C) see POMS SI 01120.203B.2 (describing an exception in accordance with Section 1917(d)(4)(C) as a “pooled trust”). A trust established with the assets of a disabled individual that is part of a pooled trust may be exempted and not counted as a resource if it meets the following conditions: (1) the trust must be managed by a non-profit association; (2) a separate account must be maintained for each beneficiary of the trust; (3) accounts in the trust must be established for the sole benefit of the beneficiaries by a parent, grandparent, legal guardian, by the beneficiaries themselves, or by a court; and (4) to the extent any amounts remaining in the beneficiary’s account upon the beneficiary’s death are not retained by the trust, the trust must pay the State(s) from any remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State Medicaid plan(s). Act § 1917(d)(4)(C); POMS SI 01120.203B.2.a. The terms of the Trust Agreement meet the requirements of the pooled trust exception as set forth below:

This opinion discusses whether two trusts in New York containing the language “New York State Department of Social Services or other appropriate Medicaid entity” and “the State of New York or such other applicable jurisdiction” satisfy the Medicaid payback requirement of Section 1917 (d)(4)(A) of the Social Security Act. To qualify for the “special needs trust” exception under Section 1917(d)(4)(A), a trust must meet the Medicaid payback requirement by containing language that provides that upon the death of the beneficiary, any amount remaining in the trust will be used to reimburse State(s) that provided the beneficiary with medical assistance under a State Medicaid plan. The Regional Chief Counsel determined that the language in the first trust (“New York State Department of Social Services or other appropriate Medicaid entity”) is not clear on whether “other appropriate Medicaid entity” refers to another agency within the state of New York or to another state. Therefore, it does not meet the Medicaid payback requirement because it does not clearly provide for reimbursement to any State(s). However, the language in the second trust (“the State of New York or such other applicable jurisdiction”) would be permissible because the “other applicable jurisdiction” seems to refer to an equivalent jurisdiction of the state of New York, meaning another state. Therefore, it meets the Medicaid payback requirement.

QUESTION PRESENTED

You asked whether the following language in two trusts meets the requirements for a special needs trust exception, in accordance with Section 1917(d)(4)(A) of the Social Security Act (Act), 42 U.S.C. § 1396p(d)(4)(A):

1. 1. 

   The trust established for beneficiary T~ (Theresa Trust) provides that, upon the beneficiary’s death, the remaining trust principal and income shall be distributed to “the New York State Department of Social Services or other appropriate Medicaid entity.” Theresa Trust, Art. D(7).

2. 2. 

   The trust established for beneficiary G~ (Garrett Trust) provides that on the death of the beneficiary, the trust shall terminate and the balance of the trust fund, if any, shall be paid to “the State of New York or such other applicable jurisdiction.” Garrett Trust, First Art. (G).

OPINION

Trusts created on or after January 1, 2000 using an individual’s own assets are generally considered to be a resource for Supplemental Security Income (SSI) eligibility purposes. To qualify for an exception to this rule as a “special needs trust” under Section 1917(d)(4)(A), a trust must contain specific language providing that, upon the death of the beneficiary, any amount remaining in the trust will be used to reimburse State(s) that provided the beneficiary with medical assistance under a State Medicaid plan. As currently written, the language in the Theresa Trust is ambiguous and does not clearly provide for reimbursement to States other than New York State, so does not meet the requirements for this exception. Although the Garrett Trust provision also differs from the preferred language set forth in agency policy, the surrounding text of the Garrett Trust clarifies sufficiently that we believe it would be permissible for the agency to accept the Trust provision.

BACKGROUND

The Theresa Trust was signed on September XX, 2003 in New York State, where all parties appear to reside. Although we were not able to review full documentation regarding the initial source of funding, we understand that the trust contained the beneficiary’s own assets. The trust itself states that the intent was to create a supplemental needs trust in accordance with Section 13611 of the Omnibus Budget Reconciliation Act of 1993 (OBRA), as well as applicable New York law. Theresa Trust, Art. D(2); see also Theresa Trust Preamble (providing that the trust was established pursuant to Section 13611 of the OBRA). ^[7] The trust provides that, upon the beneficiary’s death, the remaining trust principal and income shall be distributed to “the New York State Department of Social Services or other appropriate Medicaid entity.” Theresa Trust, Art. D(7).

The Garrett Trust was signed on April XX, 2012 in New York State, which is again where all parties appear to reside. The trust was established for “certain of [the b]eneficiary’s assets,” and was intended to qualify as an exempt trust under 42 U.S.C. § 1396p(d)(4)(A), as well as related New York Social Services Law and regulations. Garrett Trust, Preamble; see also Garrett Trust, First Art. (B) (providing that the intent was to create a supplemental needs trust in accordance with applicable law). The trust further provides that on the death of the beneficiary, the trust shall terminate and the balance of the trust fund, if any, shall be paid to “the State of New York or such other applicable jurisdiction.” Garrett Trust, First Art. (G).

ANALYSIS

Trusts created on or after January 1, 2000 using an individual’s own assets are generally counted as a resource when considering the individual’s eligibility for SSI. See 42 U.S.C. § 1382b(e); POMS SI 01120.201. However, certain exceptions are provided for trusts that are established in accordance with Sections 1917(d)(4)(A) and 1917(d)(4)(C) of the Act. See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(A), 1917(d)(4)(A)(C); see also POMS SI 01120.203 (describing an exception in accordance with Section 1917(d)(4)(A) as a “special needs trust exception”).

Among other requirements, a special needs trust established in accordance with Section 1917(d)(4)(A) must contain specific language providing that “the State(s) will receive all amounts remaining in the trust upon the death of the individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State Medicaid plan.” POMS SI 01120.203.B.1.a, SI 01120.203.B.1.h; see also 42 U.S.C. § 1396p(d)(4)(A). The trust must list the “State(s)” as the first payee, having priority over other payments of debts and most administrative expenses. POMS SI 01120.203.B.1.h. ^[8] Here, neither the Theresa Trust nor the Garrett Trust includes language that directly corresponds to the language set forth in agency policy. See POMS SI 01120.203.B.1.a, 01120.203.B.1.h. However, a trust need only “contain language substantially similar to the language” set forth in the POMS; if the trust contains “specific language that provides” for the State(s) to receive reimbursement upon the individual’s death, this will be sufficient. POMS SI 01120.203.B.1.h. We are not aware of any formal policy that defines “substantially similar” in this context but, to comply with 42 U.S.C. § 1396p(d)(4)(A), the language must effectively ensure that the State (or States) “will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan.” 42 U.S.C. § 1396p(d)(4)(A); see 42 U.S.C. § 1382b(e); see also POMS PS 01825.026.C (PS 09-021 SSI - Minnesota - Review of the Request for Reconsideration on the Judith Trust) (describing the “substantially similar” requirement as one that “only allows for slightly dissimilar language which still meets the substantive provisions of the exception”).

The Theresa Trust, however, refers only to a New York State agency, i.e. the Department of Social Services. As such, it is not clear whether “other appropriate Medicaid entity” is intended to refer to another agency within New York State (for example, if a different agency were designated to administer the Medicaid program) or to a state other than New York that provided Medicaid services. See POMS PS 01825.016.F (PS 07-153 SSI - Illinois - review of the David Supplemental Care and Needs Trust) (advising, based on a statement of policy from the Office of Income Security Programs, that a trust did not meet the applicable requirements where it provided for reimbursement only to a particular state “or its successor government agency”).

The Garrett Trust, in turn, refers not to the “State(s),” but to “the State of New York or such other applicable jurisdiction.” In this case, however, the reference to “the State of New York” (together with the surrounding language of the Trust) tends to suggest that an analogous “jurisdiction” would be another state that had provided “up to the total amount of Medical Assistance paid on behalf of the [b]eneficiary.” Garrett Trust, First Art. (G) (also referring, for example, to “any similar statute of another jurisdiction”). To the extent that the Trust would be enforced in New York State, we also note that under New York law, a trust is to be interpreted in favor of effecting the purpose of the grantor. See, e.g., Matter of Chase Manhattan Bank, 6 N.Y.3d 456, 460 (N.Y. 2006) (noting that the grantor’s intent is controlling); see also Matter of A~ XX, 11 N.Y.3d 429 (N.Y. 2008). As such, although we are mindful that labeling a trust as a Medicaid trust “is not sufficient to meet the requirements for this exception,” the Trust’s clear intent to meet the requirements of the statute would tend to weigh in favor of accepting the Garrett Trust language. POMS SI 01120.203.B.1.h.

CONCLUSION

As currently written, the Theresa Trust does not include language that clearly provides for reimbursement to any State(s) that may have paid for medical assistance on behalf of the beneficiary, and so does not qualify for the special needs trust exception under agency policy. The Garrett Trust language, however, is sufficiently clear when read in context that we believe it would be permissible for the agency to accept the Trust provision.

This opinion addresses whether spendthrift clauses are recognized in New York and New Jersey and whether these states presume the existence of a spendthrift clause if a trust is silent as to whether it is a spendthrift trust. A spendthrift clause prohibits both involuntary and voluntary transfers of the beneficiary's interest in the trust income or principle. New York and New Jersey both enforce spendthrift clauses in trusts, except when the beneficiary of the trust is also the trust’s grantor. In New York, a trust is presumed to be a spendthrift trust with respect to an income interest in the trust but not for other interests. In New Jersey, a trust can be presumed to be a spendthrift trust based on evidence about the intent of the grantor.

QUESTION PRESENTED

Whether New York and New Jersey recognize the validity of spendthrift clauses in trusts, and whether these states will presume the existence of a spendthrift clause if a trust is silent as to whether it is a spendthrift trust.

OPINION

Both New York and New Jersey recognize the validity of spendthrift clauses in trusts, except when the beneficiary of the trust is also the trust’s grantor. In New York, a trust is presumed to be a spendthrift trust with respect to an income interest in the trust but not for other interests. In New Jersey, a trust can be presumed to be a spendthrift trust based on evidence about the intent of the grantor.

BACKGROUND

A spendthrift clause or trust prohibits both voluntary and involuntary transfers of a beneficiary’s interest in trust income or principal. See, e.g., Program Operations Manual System (POMS) SI 01120.200(B)(16). This protects the interest from creditors, and also prevents the beneficiary from selling her interest to a third party; for example, a beneficiary who is entitled to $100 per month from a spendthrift trust is not permitted to sell her right to receive monthly payments for one lump sum. Id. If a trust contains a valid spendthrift clause, so that the beneficiary cannot sell her interest, the trust will not be counted as a resource for the purposes of SSI eligibility. POMS SI 01120.200(D)(1)(a).

ANALYSIS

A. New York

1. Spendthrift Trusts Are Valid Under New York Law, Except When the Grantor Is Also the Beneficiary.

Spendthrift clauses are recognized as valid by New York law. See In re V~ Estate, 250 N.E.2d 343, 349 (N.Y. 1969) (“[T]he will of the testator should be given effect, and the interest of the assignor [is] deemed unassignable during the life of the trust.”); In re Estate of M~, 723 N.Y.S.2d 349, 350 (Sur. Ct. 2001); see also N.Y. Est. Powers & Trusts Law § 7-1.5(a)(1). (McKinney 2013).

A spendthrift clause is not valid under New York law, however, when the beneficiary of the trust was also the trust’s grantor; a beneficiary of a spendthrift trust who was also the trust’s grantor will be permitted by the New York courts to sell her interest in the trust despite the spendthrift clause. See In re Mordecai’s Trust, 201 N.Y.S.2d 899, 901-02 (Sup. Ct. 1960); City Bank Farmers Trust Co. v. Kennard, 1 N.Y.S.2d 369, 370-71 (Sup. Ct. 1937); In re Blake’s Will, 235 N.Y.S. 324, 327 (App. Div. 1929); see also N.Y. Est. Powers & Trusts Law § 7-3.1(a) (McKinney 2013) (“A disposition in trust for the use of the creator is void as against the existing or subsequent creditors of the creator.”). ^[9]

2. New York Law Presumes a Spendthrift Clause for Income Interests in a Trust, But Not for Other Interests.

When a trust neither prohibits nor expressly grants the beneficiary the right to sell her interest in the trust, New York law presumes a spendthrift clause with respect to any income interest in the trust. N.Y. Est. Powers & Trusts Law § 7-1.5(a)(1) (McKinney 2013); see also In re Estate of S~, 602 N.Y.S.2d 742 (Sur. 1991) (“The income interest of a beneficiary of a testamentary trust is inalienable in this state unless the instrument creating the trust provides otherwise.”) ^[10] For interests in a trust other than income interests (e.g., a remainder interest), New York law presumes that there is no spendthrift clause unless the trust expressly includes such a provision. N.Y. Est. Powers & Trusts Law § 7-1.5(a) (McKinney 2013); see also In re N~ Estate, 389 N.Y.S.2d 420, 421 (App. Div. 1976) (presuming a trust includes no spendthrift clause with regard to a remainder interest).

B. New Jersey

1. Spendthrift Trusts Are Valid Under New Jersey Law, Except When the Grantor Is Also the Beneficiary.

New Jersey courts recognize spendthrift clauses as legally binding. See In re Estate of B~, 871 A.2d 103, 108 (N.J. Super. Ct. App. Div. 2005); Moore v. Moore, 44 A.2d 639, 646 (N.J. Ch. 1945) (“[T]he several attempted alienations or assignments by beneficiaries of anticipated income payments . . . are invalid and ineffectual as such, because [they are] contrary to the [spendthrift] restrictions attached by the trustor to his gifts.”).

However, where the beneficiary of a spendthrift trust was also the grantor of that trust, the spendthrift clause is unenforceable under New Jersey law. N.J. Stat. Ann. § 3B:11-1(a) (West 2013) (“The right of any creator of a trust to receive either the income or the principal of the trust . . . shall be freely alienable and shall be subject to the claims of his creditors, not-withstanding any provision to the contrary in the terms of the trust.”). ^[11]

2. New Jersey Law Presumes a Spendthrift Clause Where Evidence Suggests the Grantor Intended to Restrict the Beneficiary’s Ability to Sell Her Interest in the Trust. Where a trust neither prohibits nor expressly permits a beneficiary to sell her interest in a trust, New Jersey law will presume a spendthrift clause where this appears to have been the grantor’s intent. See, e.g., Heritage Bank-North, N.A. v. Hunterdon Med. Ctr., 395 A.2d 552, 554 (N.J. Super. Ct. App. Div. 1978); see also B~, 871 A.2d at 108. Evidence of the grantor’s intent to create a spendthrift trust can include the grantor’s attempt to “make the trust immune from attachment by creditors” and the grantor’s intent that “the beneficiary was to be protected against acts of his own improvidence.” Ampere Bank & Trust Co. v. Esterly, 49 A.2d 769, 772 (N.J. Ch. 1946).

CONCLUSION

New York and New Jersey both enforce spendthrift clauses in trusts, except when the beneficiary of the trust is also the trust’s grantor. In New York, a trust is presumed to be a spendthrift trust with respect to an income interest in the trust but not for other interests in trusts. In New Jersey, a trust can be presumed to be a spendthrift trust based on evidence about the intent of the grantor.

In New York State, a trust is irrevocable and not a resource if the SSI claimant/beneficiary cannot revoke the trust or direct the use of the trust assets for his/her support and maintenance. Because of a change in the Social Security Act, this precedent may only be applicable to a trust established by an individual before 1/1/00.

Subject:

You have requested our opinion as to whether the trust established for G~ (the "Trust") is a countable resource for the purposes of G~'s Supplemental Security Income ("SSI") eligibility. We conclude that the Trust is not a countable resource.

Terms of the Trust

The Trust was established on December XX, 1997, by the Supreme Court, County of E~, State of New York, as Grantor (the "Grantor") and Marine Midland Bank, as Trustee (the "Trustee"), for the benefit of G~ (the "Beneficiary). The Trust was to be funded with the proceeds of the settlement of a lawsuit.

The Grantor intended to create a supplemental needs trust which conforms to the provisions of New York Estates, Powers, and Trusts Law ("EPTL") Section 7-1.12. Under the provisions of the Trust, the Trustees may pay to or apply for the Beneficiary's benefit, all or part of the income or the principal of the Trust, provided however, that the Trust assets are to be used only to supplement, not supplant, impair, or diminish, the Beneficiary's governmental benefits. Some of the Trust principal was to be used to make renovations to the Beneficiary's home and to purchase a wheelchair van for the Beneficiary.

The Beneficiary has no power to control distributions from the Trust. The Trust terminates at the death of the Beneficiary. Upon such termination, any remaining income or principal will be paid to New York State up to the total value of all medical assistance paid on behalf of the Beneficiary by New York State. Any remaining principal or income will be distributed to the Beneficiary's parents, siblings and issue. The Trust is irrevocable and may not be amended, except to ensure that the trust continues to qualify as a supplemental needs trust. The Trust provides that it shall be governed by the laws of New York.

Discussion

A trust is a countable resource for SSI purposes if an individual has the authority to revoke the trust or direct the use of its principal for his support and maintenance. POMS SI 01120.200D.1.b. The revocability of the trust and the ability to direct the use of the principal depend on the terms of the trust and/or on state law. POMS SI 01120.200D.2.

Under the terms of the Trust, the Beneficiary holds no power to revoke the Trust or to direct the use of the principal of the Trust.

Under New York law, the Beneficiary holds no power to revoke the Trust. The creator of a trust may revoke an otherwise irrevocable trust if he obtains the consent of all persons having a beneficial interest in the trust property. EPTL § 7-1.9. Here, however, the Grantor is a third party and not an agent of the Beneficiary. And, even if the Beneficiary was deemed to be the actual Grantor, the Beneficiary is not the sole entity with a beneficial interest in the Trust, since the State also retains a beneficial interest in the Trust. Thus, the Beneficiary cannot terminate the Trust at will.

In summary, the Beneficiary has no authority to revoke the Trust or direct the use of its principal for his support and maintenance. POMS SI 01120.200D.1.b. Therefore, the Trust is not a countable resource for SSI purposes.

Claimant's mother created a testamentary trust for the benefit of her son. The trust provides that the trustee shall apply the monthly net income derived from the trust for the benefit of the beneficiary. The trustee has absolute discretion as to whether any distributions should be made and had chosen not to make any distributions. The trust is not a resource and monthly net income is not subject to income counting rules unless actually paid to or for the benefit of the beneficiary.

You have asked whether a trust which directs the trustee to use monthly net income from the trust for claimant's benefit, can be considered as a resource to claimant even though the claimant cannot access the trust directly. For the reasons set forth below, any cash distributions of monthly trust earnings or income which if paid to F~, would be considered as unearned income to F~ in the month when paid. Any accumulated and undistributed trust earnings or income added to the trust principal, cannot be considered a resource of F~'s for SSI purposes.

Facts

We understand the relevant facts to be as follows: The deceased mother of claimant F~ , created by last will and testament, a trust which directed the trustee in pertinent part:

[to] pay or apply the net income derived therefrom in monthly or other convenient installments to or for the benefit of my son, F~ , during his lifetime. I empower the Trustee in its sole and absolute discretion at any time and from time to time to pay or apply for the benefit of my said son such portion of the principal as it may deem advisable for the proper care, support and maintenance of my son, and the Trustee's discretion in this regard shall be conclusive and shall not be subject to judicial review.

F~'s application for SSI benefits was denied because of excess resources due in part, to the District Office's belief that since the trust "implored" the trustee to use the monthly net trust income for F~'s benefit, such income was a resource to claimant.

Relevant Statutory and Regulatory Provisions

As defined in Social Security Program Operations Manual Systems ("POMS") SI 01120.200, "trust" is a property interest involving property held by an individual (trustee) subject to a fiduciary duty to use the property for the benefit of another (the beneficiary). In this instance, F~ is the trust beneficiary.

The grantor, or person who created the trust was F~'s deceased mother, L~. As trust beneficiary, F~ does not hold legal title to the trust property but does have an equitable ownership interest in the property.

Property held in a trust may or may not be considered a resource for SSI purposes depending upon the nature of the legal instrument creating the trust. Specifically, whether a trust is an individual's resource depends on whether that individual has legal authority to revoke the trust, and then use the funds to meet his food, clothing or shelter needs, or if the individual can direct the use of the trust principal for his/her support and maintenance under the terms of the trust. If an individual does not have the legal authority to revoke the trust or direct the use of the trust assets for their own support and maintenance, the trust principal is not the individual's resource for SSI purposes. The revocability of a trust and ability to direct the use of the trust principal depends on the terms of the trust agreement and on State law. See SI 01120.200.

Two types of trust instruments are recognized in New York: 1) a lifetime trust or express trust created during the grantor's lifetime; and 2) a testamentary trust, or trust created by will. N.Y. Surr. Ct. Proc. Act § 103(31) and (48) (McKinney 1999). The trust at issue in this case is a testamentary trust which became effective upon L~'s death. The trust creator or grantor can revoke or amend their trust instrument, provided certain legal formalities are met. See N.Y. Est. Powers & Trusts Law § 7-1.9 (McKinney 1999). With respect to L~'s testamentary trust, this trust instrument was never revoked by her prior to her death; nor does the instrument contain any language allowing for revocation by any other means.

Since F~ did not have legal authority to revoke the trust, nor did the "terms of the trust" allow him to direct the use of the trust principal for his support and maintenance, the trust principal or property held in trust, cannot be considered F~'s resource for SSI purposes. Here, distributions from the trust principal for the proper care, support and maintenance of F~, were at the trustee's "sole and absolute discretion" which in this regard was conclusive discretion and not subject to judicial review. Significantly, as noted in your March XX, 1999 memorandum, the trustee had not used any of the trust principal for claimant's benefit and "apparently" had no intention of doing so.

The analysis, however, does not end here. Distributions from trust property may either be from the trust principal which is the property placed in trust plus any trust earnings paid into the trust and left to accumulate, or from trust earnings or income earned by the trust principal. The Utica District Office contends that the monthly net income derived from the trust should be considered as a resource to F~, since the trust instrument appeared to require that the trustee "pay or apply the net income" derived from the trust principal in monthly or other convenient installments to or for the benefit of F~. Trust earnings are not income to the SSI claimant or recipient who is a trust beneficiary unless the trust directs or the trustee makes payment to the beneficiary. When paid, trust earnings or income, are considered unearned income to the person legally able to use them for personal support and maintenance. Thus, any distributions of the monthly net income derived from the trust property, which if made to F~ would be considered as unearned income when paid to him. This is irrespective of whether the trust principal was or was not considered a resource. In fact, cash paid directly from the trust to an individual is always considered unearned income. Additionally, food, clothing or shelter received as a result of disbursements from the trust by the trustee to a third party are income in the form of support and maintenance and are valued under the presumed maximum value ("PMV") rule. See SI 00835.300. However, disbursements from the trust by the trustee to a third party that result in the individual receiving items that are not food, clothing or shelter, (i.e. medical care), are not income. Id.

Thus under the facts you have provided, the distribution of $417.92 made to F~ in February 1999, would be considered unearned income to F~ for that month. See Annual Accounting of the Trust of F~, attachment to March 30, 1999 Memorandum. Any similar and subsequent cash distributions would also be considered as unearned income. However, the accumulated and undistributed trust principal of $990,912.70, as of January 1998, would not be considered a resource of F~'s for SSI purposes.

The Trust discussed in this opinion was created and funded from the assets of two families to purchase a house and lease it to a non-profit agency. The Trust beneficiaries will be the initial occupants of this facility. Under the terms of the Trust and New York law, the Trust is not a countable resource as the beneficiaries of the Trust hold no power to revoke or to direct the use of the principal of the Trust.

In addition, the Trust beneficiaries will use their monthly SSI benefits to pay the full value of their care at the rate established by the placing agency. Therefore, they are not receiving in-kind support and maintenance from the Trust and the presumed maximum value does not apply.

NOTE: Because of a change in the Social Security Act, this precedent may only be applicable to trust established before 1/1/00.

You have requested our opinion as to whether a draft trust (the "Trust") would be irrevocable under New York law. In addition, you have asked whether, under the terms of the Trust, payments from the trust to vendors for mortgage, tax and maintenance payments would be in-kind support and maintenance ("ISM") to the Trust beneficiaries. We conclude that the Trust is irrevocable. In addition, we conclude that there is no ISM involved.

Terms of the Trust and of the Living Arrangements

According to OMRDD, two families are creating and funding the Trust from their own assets (the "Settlors"). The Trust will purchase a house and lease it to Spaulding P.R.A.Y. Residence Corp. ("Spaulding PRAY"), a voluntary, not-for-profit agency, at a rate equal to the monthly expense for the house (including mortgage, taxes and maintenance).

The house will be certified as a Level II Congregate Care facility. The Trust beneficiaries (the "Beneficiaries") will be the initial occupants of this facility. The Beneficiaries will live in a noninstitutional care situation, as defined in 20 C.F.R. § 416.1143(a). They receive monthly SSI payments at the Congregate Care amount. The Beneficiaries will use their SSI payment to pay the full rate ($793 per month) established by Spaulding PRAY, the placing agency. The remainder of the SSI payment will go to the Beneficiaries for use as a personal needs allowance.

The house is to be held by the Trust, for the benefit of the Beneficiaries, in a manner designed not to interfere with the Beneficiaries' receipt of any governmental benefits. After the death or removal from the property of the surviving beneficiary, the Trust's interest in the property will be transferred to Spaulding PRAY or another voluntary, not-for-profit agency, to be used as a community-based residence for mentally disabled persons. The Trust is irrevocable and may not be amended, except to ensure that the trust continues to be able to carry out its stated purposes. The Trust provides that it shall be governed by the laws of New York.

Discussion

A. The Trust is Irrevocable

A trust is a countable resource for SSI purposes if an individual has the authority to revoke the trust or direct the use of its principal for his support and maintenance. POMS SI 01120.200D.1.b. The revocability of the trust and the ability to direct the use of the principal depend on the terms of the trust and/or on state law. POMS SI 01120.200D.2.

Under the terms of the Trust, the Beneficiaries hold no power to revoke the Trust or to direct the use of the principal of the Trust.

Under New York law, the Beneficiaries hold no power to revoke the Trust. The creator of a trust may revoke an otherwise irrevocable trust if he obtains the consent of all persons having a beneficial interest in the trust property. New York Estates, Powers and Trusts law ("EPTL") § 7-1.9. Here, however, for each Beneficiary, one Settlor is an unrelated third party and cannot be deemed to be an agent of that Beneficiary. In addition, each Beneficiary is not the sole person with a beneficial interest in the Trust, because there are two unrelated Beneficiaries. Thus, the Beneficiaries cannot terminate the Trust at will.

In summary, the Beneficiaries have no authority to revoke the Trust or direct the use of its principal for his support and maintenance. POMS SI 01120.200D.1.b. Therefore, the Trust principal is not a countable resource for SSI purposes.

B. There Is No In-Kind Support and Maintenance

If a claimant lives in a noninstitutional care situation and pays the rate the placing agency establishes, the claimant is not receiving in-kind support and maintenance and the presumed value rule does not apply. 20 C.F.R. §416.1143(b); POMS SI 00835.790B. Here, the Beneficiaries will live in a noninstitutional care situation, as defined in 20 C.F.R. §416.1143(a). They will use their monthly SSI benefits to pay the full value of their care at the rate established by the placing agency. Thus, they are not receiving ISM and the presumed value rule does not apply. 20 C.F.R. § 416.1143(b); POMS SI 00835.790C.

Further, the not-for-profit agency will lease the house from the Trust at a rate equal to the monthly mortgage, tax and maintenance payments. Thus, tax and maintenance payments made by the Trust in its capacity as landlord would not be ISM, as defined in 20 C.F.R. §416.1130(b).

This opinion discusses whether payments made from a trust for the trust beneficiary's food and shelter are countable as income by the SSI program. Under SSI regulations, food and shelter provided to an SSI recipient is considered as income to the recipient if paid for by another person. This income is called in-kind support and maintenance. Since the trustee holds legal title to the trust property, the trust property is not owned by the trust beneficiary. Thus, payments made from the trust on behalf of the trust beneficiary are considered payments made by another person. Consequently, payments by the trust for food and shelter are counted as income to the trust beneficiary.

This is in response to your request for an opinion of whether disbursements for shelter and clothing costs from a Supplemental Needs Trust would constitute a charge of in-kind support and maintenance ("ISM"). A recent ALJ decision and subsequent protest by the Regional Commissioner has highlighted the confusion with respect to this issue. Based upon the Agency's policy as set forth in the Commissioner's regulations and POMS, as well as the common law and statutory requirements involving the creation of trusts, we believe that disbursements from trust principal, which is not a resource to a beneficiary, are properly considered ISM.

In his decision dated May XX, 1999, on J~ - ALJ Joseph found that payments made from a trust (which was not a countable resource), for claimant's shelter and clothing costs, did not constitute ISM. In support of this conclusion, the ALJ noted that ISM is food, clothing, or shelter which is received because someone else pays for it. 20 CFR 416.1130(b). The ALJ found that in the instant situation, because the claimant's own money was being used for food, clothing, or shelter, the disbursements were not ISM. This rationale is incorrect as a matter of law. As discussed below, the trust funds are the legal property of the trustee, not the claimant, who is the trust beneficiary. Accordingly, payments are being made by "someone else," the trustee.

Agency policy with respect to disbursements from trust principal not countable as a resource, is set forth in POMS SI 01120.200(E)(1). Specifically, subsection (E)(1)(B) states that "food, clothing, or shelter received as a result of disbursements from the trust by the trustee to a third party are income in the form of in-kind support and maintenance." This policy is supported by common law principles of trust law and statutory law.

A trust has been described as "a fiduciary relationship with respect to property, subjecting the person by whom the title to property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it." Coleman v. Golkin, Bomback & Co., Inc., 562 F.2d 166, 168-69 (2d Cir. 1977) (citing Restatement of Trusts § 2). The POMS provides a simpler definition, stating that "[a] trust is a property interest whereby property is held by an individual (trustee) subject to a fiduciary duty to use the property for the benefit of another (the beneficiary)." POMS SI 01120.200(B)(1).

The grantor, also known as a settlor or trustor, is the individual who creates the trust by transferring legal title of the trust property to the trustee. See POMS SI 01120.200(B)(2) & (B)(3); 76 Am Jur 2d Trusts § 2; II Scott on Trusts, § 3 (4th ed. l987). The trustee holds the title of the property for the benefit of the beneficiary who acquires an equitable interest in the trust property See SI 01120.200(B)(3); N.Y. Est. Powers & Trusts L. § 7-2.1. Thus, the beneficiary of a trust has no legal title to the property, but rather the trustee has title. N.Y. Est. Powers & Trusts L. § 7-2.1 (practice commentary). Accordingly, since the trustee holds legal title to the trust property, and not the claimant/beneficiary, disbursements made from the trust, are, indeed, payments made by someone other than the claimant. Accordingly, such disbursements are properly countable as ISM.