QUESTION
You asked whether the Twelfth Restatement of the Community Fund Management Foundation
Pooled Medicaid Payback Trust is in compliance with the procedures governing the Agency’s
trust policy.
SHORT ANSWER
We conclude that the Trust does not meet the pooled trust exception for self-settled
trusts under 42 U.S.C. § 1396p(d)(4)(C). Specifically, sub-accounts are not established
for the sole benefit of each beneficiary because (1) the Trust allows for the payment
of certain services on a pro-rata basis from all sub-accounts, and (2) the Trust includes
an early termination provision that does not comply with SSA policy. As such, a self-settled
sub-account in the Trust established on or after January 1, 2000, would be considered
a resource. However, a third-party sub-account in the Trust would not constitute a
resource under the Agency’s regular resource rules. In the case of a comingled sub-account,
the portion of the sub-account attributable to the assets of the beneficiary would
be considered a resource, whereas the portion attributable to the assets of a third
party would not be considered a resource. Because the Trust was previously determined
to be excepted from resource counting under the pooled trust exception, the Trust
may be given a 90-day amendment period before a self-settled sub-account is counted
as a resource.
BACKGROUND
Community Fund Management Foundation (CFMF) states that it is a nonprofit, tax-exempt
foundation established in 1993 to administer trusts for disabled Ohio residents. See Community Fund Management Foundation, https://cfmf.org (last visited Apr. 16, 2020). On June 17, 1996, CFMF established the Community Fund
Management Foundation Pooled Medicaid Payback Trust (Trust), retaining the role of
Trust Advisor. See Twelfth Restatement of The Community Fund Management Foundation Pooled Medicaid Payback
Trust Agreement (Trust Agreement or TA) Introduction. The Trust has been restated
multiple times since it was established, most recently in October 2019. See id. ; see also CFMF, All Forms , https://cfmf.org/all-forms/ (last visited Mar. 9, 2020). Your office submitted the Trust Agreement, as well as
a Joinder Agreement and Application for Admission to Establish Pooled Medicaid Payback
Trust Sub-Account (Joinder Agreement or JA), for our review.
The Trust is intended to be administered as a pooled trust pursuant to 42 U.S.C. §§
1382b(e), 1396p(d)(4)(C); Ohio Rev. Code § 5163.21(F)(3)(a); the Omnibus Budget Reconciliation
Act of 1993, Pub. L. No. 103–66, 107 Stat. 312 (1993); and 12 C.F.R. § 9.18(c)(4).
TA § I.A; JA at 1. Specifically, the purpose of the Trust is to “provide for the beneficiary’s
supplemental needs in addition to, and not in lieu of, the benefits such beneficiary
otherwise receives” from any governmental, public, or private agency. TA § III.B.
As noted above, CFMF serves as Trust Advisor of all Trust sub-accounts. TA Introduction,
Art. IX. The powers of the Trust Advisor are listed in Article IX of the Trust Agreement,
including the power to direct the Trustee to issue distributions from principal or
income for the benefit of any beneficiary. TA § IX.A.ii. The Trust Advisor may also
resign and appoint a successor nonprofit trust advisor or request a court to do so.
TA § IX.C.
The Huntington National Bank is the current Trustee. TA Introduction. The powers of
the Trustee are listed in Article VI of the Trust Agreement. The Trustee may resign
after sending written notice to the Trust Advisor. TA § VIII.A. The Trust Advisor
also has authority to remove the Trustee and appoint a successor trustee. TA §§ VIII.B,
IX.A.i. The successor trustee must be a corporate trustee. TA § VIII.E.
A Trust sub-account is created when a “disabled person” (as defined by 42 U.S.C. §
1382c(a)(3)), or his or her parent, grandparent, legal guardian, or a court acting
on behalf of the disabled person submits a Joinder Agreement to the Trust Advisor.
TA § I.B; JA at 1; see also TA § XIII.B (defining such a person or entity as a “Grantor”). If approved, the Joinder
Agreement becomes part of the Trust Agreement and is incorporated therein, with the
sub-account receiving an individualized agreement number. TA §§ I.C, I.D. The Joinder
Agreement is irrevocable. TA § XII.B; JA at 6.
Once a Trust sub-account is created, the Trustee maintains separate sub-accounts for
each beneficiary, but pools the sub-accounts for purposes of investment and management
of funds. TA §§ II.A, II.B; JA at 6. The Trustee may accept or reject for any reason
interest in any property attempted to be transferred to the Trust by a grantor or
any other party. TA § II.C.
Under the Trust Agreement, the Trustee will distribute the principal and income of
each sub-account, at the sole discretion of the Trust Advisor, for the benefit of
the beneficiary during his or her lifetime or until the sub-account is terminated,
whichever occurs sooner. TA §§ III.A, III.D, III.H; JA at 4. A “Designated Advocate”
makes requests for distributions on behalf of the beneficiary by submitting a distribution
request form to the Trust Advisor. TA § III.C; JA at 3; see
also https://cfmf.org/files/2018/10/2018-DR-w-fields.pdf (distribution request form). The Trust Advisor has the sole authority to approve
or deny the requested distribution. TA §§ III.C, IX.A.ii.
The Trust states that the no part of the principal or income of a sub-account is to
be considered available to the beneficiary, and the beneficiary does not have any
vested property interest in the Trust. TA §§ III.E, X.D [p. 13][8] ; JA at 1. The Trust Agreement also contains spendthrift provisions which state that
no interest in any sub-account shall be anticipated, encumbered, assigned, or “subject
to a beneficiary’s liabilities or creditor claims.” TA §§ X.E, X.D [p. 13].
The Trust Agreement contains a defense clause pertaining to any challenge of the Trust
Advisor’s denial of a distribution request from a sub-account that results in court
or administrative litigation. TA § III.G. In that case, the Trust Advisor will generally
defend its decision in such action or other challenge of any nature, at the expense
of the sub-account at issue. TA § III.G.
The Trust Advisor may employ any individual, corporation, or organization that will
provide necessary advice for any reason it deems necessary. TA §§ VI.N, IX.F. The
Trust Advisor has sole discretion to charge for such services on a pro-rata basis
to all sub-accounts or from one or more specific sub-accounts. TA §§ VI.N, IX.F. Similarly,
the Trustee may employ agents, accountants, investment counsels, attorneys, and others
who the Trustee determines are necessary to fulfill the Trustee’s duties in administering
the Trust. TA § VI.J.
The Trust Agreement contains two early termination provisions. First, if there is
reasonable cause to believe that the principal or income of a sub-account will become
liable for the beneficiary’s maintenance, support, or care, the Trust Advisor may
direct the Trustee to either:
-
1.
Terminate the sub-account, pay to the state(s) all remaining amounts up to an amount
equal to the total amount of medical assistance paid on behalf of the beneficiary
under the state Medicaid plan(s), and distribute all remaining funds to the beneficiary;
or
-
2.
Transfer the assets remaining in the sub-account to another pooled Medicaid payback
trust as further established for the beneficiary under 42 U.S.C. § 1396p(d)(4)(C).
TA §§ III.I, VI.M. Second, if a sub-account is counted as a resource, the Trustee
will terminate the sub-account and administer and distribute the funds in the sub-account
according to the provisions for termination upon death. TA § III.F.
Each sub-account will terminate upon the beneficiary’s death. TA Art. IV; JA at 5.
The Trust Agreement provides that, to the extent the funds are not retained by the
Trust, the Trustee, at the direction of the Trust Advisor, will first pay from the
sub-account attorney fees and other properly allowable costs incurred in administering
and wrapping up the sub-account, as well as any taxes due to the death of the beneficiary.
TA § IV.B. Next, the state(s) will receive all remaining amounts up to the total amount
of medical assistance paid on behalf of the beneficiary under the state Medicaid plan(s).
Id. Finally, any remaining balance will be distributed to the individuals or entities
identified in the Joinder Agreement as “remainder distributees.” TA § IV.B; see also TA § XIII.F (definition of remainder distributee). Under the Joinder Agreement, the
beneficiary may choose between two options for distribution upon his or her death:
(1) allow the Trust to retain all funds; or (2) reimburse the state(s) for medical
assistance paid on behalf of the beneficiary, and distribute any remaining funds to
any individuals or entities listed as remainder distributees. JA at 5. If the remainder
distributees do not survive the beneficiary or are not in existence, the remaining
funds are retained by the Trust. Id.
The trust is governed by Ohio law. TA §§ X.A, X.F [p. 13].
DISCUSSION
The Trust is generally intended to establish sub-accounts funded with the beneficiary’s
own money. See CFMF, Types of
Trusts , https://cfmf.org/types-of-trust/ (last visited March 24, 2020). However, the Trust Agreement also allows the Trustee to accept property that is transferred
by any party . See TA § II.C. T he Joinder Agreement also anticipates that funds may be contributed
to the trust account that are not owned by or available to the beneficiary. JA at
10. Consequently, we believe that three possible types of sub-accounts may exist within
the Trust: (1) a sub-account that is funded solely by assets belonging to the beneficiary
(i.e. , a self-settled sub-account); (2) a sub-account that is funded solely by third-party
assets; and (3) a comingled sub-account containing assets from both the beneficiary
and third parties. The following discussion addresses each type separately.
-
A, Statutory Resource Rules
Under the Social Security Act (Act), a trust created on or after January 1, 2000,
from the assets of an individual generally will be considered a resource for SSI purposes
to that individual to the extent that the trust is revocable or, in the case of an
irrevocable trust, to the extent that any payments could be made from the trust to
or for the benefit of the individual.[9] See 42 U.S.C. § 1382b(e); POMS SI 01120.201D. However, an exception to this rule exists for certain trusts that meet the criteria
of 42 U.S.C. § 1396p(d)(4)(C), commonly known as the pooled trust exception.
In order to qualify for the pooled trust exception, the trust must contain assets
belonging to a disabled individual and satisfy the following conditions:
-
1.
The trust is established and managed by a nonprofit association;
-
2.
The trust maintains a separate account for each beneficiary, but pools the assets
for purposes of investment and management;
-
3.
Accounts in the trust are established solely for the benefit of the disabled individual;
-
4.
The account is established through the actions of the individual, a parent, a grandparent,
a legal guardian, or a court; and
-
5.
The trust provides that, to the extent that any amounts remaining in the beneficiary’s
account upon the death of the beneficiary are not retained by the trust, the trust
will pay to the state(s) from the account an amount equal to the total amount of medical
assistance paid on behalf of the beneficiary under the state Medicaid plan(s).
See 42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203D.
Here, a Trust sub-account is intended to be irrevocable. TA § XII.B; JA at 6. However,
a self-settled sub-account would be a resource under the statutory provisions, since
payments could be made from the sub-account for the individual’s benefit. TA Art.
III; JA at 4. Accordingly, we consider whether the Trust qualifies for the pooled
trust exception.
The Agency previously determined in 2003 that this Trust did not meet the pooled trust
exception. See POMS PS 10825.039 (PS 04-003). However, the Trust has been amended since that time, and we were advised
that as of March 2015, it was found to be in compliance with SSA’s trust policy. Although
we do not have a copy of the 2015 iteration of the Trust, it appears that the restatement
of the Trust in 2019 was for the purpose of entering into an agreement with a new
corporate trustee, rather than changing any substantive provisions of the Trust. See
https://cfmf.org/files/2019/08/2019-08-19-Attorney-Announcement-final.pdf (notice to attorneys announcing change in trust in 2019); TA Introduction. Nevertheless,
we do not believe that the Trust Agreement restated in October 2019 and accompanying
Joinder Agreement meet the pooled trust exception. In particular, as we explain below,
it does not appear that the Trust sub-accounts are established solely for the benefit
of the disabled individual.
However, since the Trust was previously determined to be excepted from resource counting
under the pooled trust exception, it appears that CFMF may be given an opportunity
to amend the Trust to conform with SSA’s policy requirements within 90 days from when
the beneficiary is informed of the problematic language in the Trust. See POMS SI 01120.199A.2, SI 01120.201K.2. During this time, the beneficiary’s sub-account would not be counted as a resource.
See
POMS SI 01120.199A.2, SI 01120.201K.2.
1. Established and Managed by a Nonprofit
Association
To satisfy the first requirement of the pooled trust exception, the trust must be
established and managed by a nonprofit association. 42 U.S.C. § 1396p(d)(4)(C)(i);
POMS SI 01120.203D.3. A nonprofit association may employ the services of a for-profit entity, but the nonprofit
association must maintain ultimate managerial control over the trust. POMS SI 01120.225D. For example, the nonprofit association must be responsible for determining the amount
of the trust corpus to invest, removing or replacing the trustee, and making day-to-day
decisions regarding the health and well-being of the beneficiaries. Id. Also, a for-profit entity must not be allowed to determine whether to make discretionary
disbursements from the trust. POMS SI 01120.225E.
Here, CFMF, a nonprofit association, established and manages the Trust as the Trust
Advisor of all sub-accounts created within the Trust. TA Introduction, Art. IX; Community Fund Management Foundation, https://cfmf.org. If the Trust Advisor resigns, either it or a court may appoint a successor nonprofit
trust advisor so that at all times there is an acting nonprofit trust advisor. TA
§ IX.C. These provisions comport with the first requirement of the pooled trust exception.
The Trust has named a for-profit entity—The Huntington Bank—as the Trustee. TA Introduction,
§ VIII.E (successor trustee must be a corporate trustee). The Trustee holds important
powers, but the Trust Agreement makes clear that the Trustee only performs key managerial
functions at the direction of the Trust Advisor. See, e.g. , TA §§ III.A, III.D, III.H, III.I, IV.B. In addition, the Trust Advisor has authority
to remove the Trustee and appoint a successor trustee. TA §§ VIII.B, IX.A.i. As such,
it appears that the Trustee is subordinate to the Trust Advisor, and thus CFMF maintains
sufficient control over the management of the Trust, in accordance with POMS SI 01120.225.
The Trust Agreement also allows the Trust Advisor, in its sole, absolute, and uncontrolled
discretion, to employ any individual, corporation, or organization that will provide
necessary advice for any reason it deems necessary. TA §§ VI.N, IX.F. Although the
language of these provisions is somewhat confusing, it appears that the role of such
employees is limited to providing advice to the Trust Advisor, and that they do not
actually make any decisions or take action with respect to the Trust. TA §§ VI.N,
IX.F.[10] Thus, in the event that the Trust Advisor employs a for-profit entity, we believe
the Trust complies with Agency policy regarding the management of pooled trusts. POMS
SI 01120.225.[11]
Accordingly, the Trust appears to satisfy the first requirement of 42 U.S.C. § 1396p(d)(4)(C)
and POMS SI 01120.203D.
2. Maintenance of Separate Accounts for Each Trust
Beneficiary
To satisfy the second requirement of the pooled trust exception, the trust must maintain
a separate account for each trust beneficiary, although it is acceptable to pool the
funds in the individual accounts for investment and management purposes. 42 U.S.C.
§ 1396p(d)(4)(C)(ii); POMS SI 01120.203D.4. In addition, the trust must be able to provide an individual accounting for each
individual. POMS SI 01120.203D.4.
The Trust satisfies this requirement, as it maintains a separate sub-account for each
beneficiary, but for purposes of investments and management of funds, the Trustee
pools the sub-accounts. TA §§ I.D, II.B; JA at 6. The Trustee also maintains records
for each sub-account. TA § II.B.
3. Established for the Sole Benefit of the
Individual
To satisfy the third requirement of the pooled trust exception, the trust account
must be established for the sole benefit of the disabled individual. 42 U.S.C. § 1396p(d)(4)(C)(iii);
POMS SI 01120.203D.5. A trust is considered to be established for the sole benefit of an individual if
the trust benefits no one but that individual, either at the time the trust is established
or at any time for the remainder of the individual’s life. POMS SI 01120.201F.1. Conversely, a trust account is not established for the sole benefit of the disabled
individual if it: (1) provides a benefit to any other individual or entity during
the disabled individual’s lifetime; or (2) allows for termination of the trust account
prior to the individual’s death and payment of the corpus to another individual or
entity. POMS SI 01120.203D.5.
Benefit to Another Individual or Entity During the Disabled
Individual’s Lifetime
Here, the Trust Agreement contains a defense clause describing the Trust Advisor’s
defense against any challenge to its denial of a distribution request from a sub-account,
either in court or before an administrative agency. TA § III.G. This clause states
that the cost of such defense shall be “at the expense of the Sub-Account,” and that
if the projected cost exceeds the amount held in the sub-account, the Trust Advisor
may elect to pay the cost or take no further defensive action. Id. Since this provision does not appear to contemplate the use of a beneficiary’s assets
for the benefit of another beneficiary, we believe it satisfies the sole benefit requirement.
In addition, the Trust Agreement states that the Trust Advisor may employ an individual,
corporation, or organization to provide advice, as discussed above, and compensate
them for their services. TA §§ VI.N, IX.F. Specifically, the Trust Advisor has sole,
absolute, and uncontrolled discretion as to whether to pay for such services on a
pro-rata basis from all sub-accounts or only from one or more specific sub-accounts.
TA §§ VI.N, IX.F. The Trust Agreement does not set forth any factors or criteria the
Trust Advisor would use in determining how to apportion such costs. This is problematic
because it could allow the Trust Advisor to use the assets from a beneficiary’s sub-account
to pay for advice that only affects other beneficiaries. Thus, as written, this is
inconsistent with Agency policy that accounts must be established for the sole benefit
of the disabled individual. Accordingly, the relevant provisions should be modified
or clarified in order for the Trust to meet the sole benefit requirement.
Termination of the Trust Account Prior to the Individual’s Death and
Payment of the Corpus to Another Individual or Entity
As noted above, the Trust Agreement contains two different early termination provisions.
The POMS states that an early termination clause is acceptable only if all of the
following criteria are met: (1) the state(s) receives all amounts remaining in the
trust up to an amount equal to the amount of medical assistance paid on behalf of
the individual under the state Medicaid plan(s); (2) after payment of allowable administrative
expenses,[12] all remaining funds are distributed to the trust beneficiary; and (3) the power to
terminate is given to someone other than the trust beneficiary. See POMS SI 01120.199F.1. However, an early termination clause that solely allows for a transfer of the beneficiary’s
assets from one 42 U.S.C. § 1396p(d)(4)(C) pooled trust to another 42 U.S.C. § 1396p(d)(4)(C)
pooled trust complies with SSA’s rules governing pooled trusts. See POMS SI 01120.199F.2. In that case, the early termination clause must contain specific limiting language
that precludes the early termination from resulting in disbursements other than to
the secondary 42 U.S.C. § 1396p(d)(4)(C) trust or to pay for allowable administrative
expenses listed in POMS SI 01120.199F.3 and SI 01120.201F.4. See id.
Here, the first early termination provision appears to comply with SSA’s policy regarding
early termination. Under this provision, if there is reasonable cause to believe that
a sub-account will become liable for the beneficiary’s maintenance, support, or care,
the Trust Advisor may direct the Trustee to either:
-
1.
Terminate the sub-account, pay to the state(s) all remaining amounts up to an amount
equal to the total amount of medical assistance paid on behalf of the beneficiary
under the state Medicaid plan(s), and distribute all remaining funds to the beneficiary;
or
-
2.
Transfer the assets remaining in the sub-account to another pooled Medicaid payback
trust as further established for the beneficiary under 42 U.S.C. § 1396p(d)(4)(C).
TA §§ III.I, VI.M. With respect to the first option, the Trust does not give the beneficiary
the power to terminate his or her sub-account. Thus, the requirements of POMS SI 01120.199F.1 are met. As for the second option, no disbursements may be made other than to the
secondary 42 U.S.C. § 1396p(d)(4)(C) trust, or as payment of reasonable fees and administrative
expenses, including payment of any taxes due to the state(s) or Federal government
associated with the termination of the sub-account. TA § VI.M. This meets the requirements
of POMS SI 01120.199F.2.
However, the second termination provision does not appear to be in compliance with
SSA policy. This provision states that if a sub-account is counted as a resource,
the Trustee will terminate the sub-account and administer and distribute the funds
in the sub-account according to the provisions for termination upon death. TA § III.F.
The termination upon death provisions, in turn, allow the beneficiary to choose between
two options for distribution: (1) allow the Trust to retain all funds; or (2) pay
allowable administrative expenses and reimburse the state(s) for medical assistance
paid on behalf of the beneficiary, then distribute any remaining funds to any individuals
or entities listed as remainder distributees. TA § IV.B; JA at 5. If the remainder
distributees do not survive the beneficiary or are not in existence, the remaining
funds are retained by the Trust. JA at 5. Thus, the second early termination provision
appears to violate POMS SI 01120.199F.1 because it allows payment of the corpus to another individual or entity (i.e., remainder distributees or the Trust), and in some cases it would not require Medicaid
payback.
Accordingly, the Trust does not meet the third requirement of 42 U.S.C. § 1396p(d)(4)(C)
and POMS SI 01120.203D.
4. Established Through the Actions of the
Beneficiary, a Parent, Grandparent, Legal Guardian, or a
Court
The fourth requirement of the pooled trust exception requires that the trust account
be established through the actions of the account beneficiary or the beneficiary’s
parent, grandparent, legal guardian, or a court. 42 U.S.C. § 1396p(d)(4)(C)(iii);
POMS SI 01120.203D.6. Here, the Trust Agreement provides that a disabled individual, or that individual’s
parent, grandparent, or legal guardian, or a court acting on behalf of that individual
may establish a Trust sub-account by submitting a completed Joinder Agreement. TA
§ I.B; JA at 1. The Trust Agreement also defines a grantor as “the person or entity
who established and executed the Joinder Agreement,” and explains that “the grantor
is required to be the individual who is disabled as defined by 42 U.S.C. §1382c(a)(3),
or that individual’s parent, grandparent, or legal guardian, or a court acting on
behalf of that individual.” TA § XIII.B. Thus, the Trust satisfies this requirement.
5. Reimbursement to the State(s) Upon the Beneficiary’s
Death
To satisfy the fifth requirement of the pooled trust exception, the trust must contain
“specific language” that provides that upon a beneficiary’s death, to the extent amounts
remaining in the beneficiary’s account are not retained by the trust, the trust will
pay to the state(s) an amount equal to the total amount of medical assistance paid
on behalf of the beneficiary under the state Medicaid plan(s). 42 U.S.C. § 1396p(d)(4)(C)(iv);
POMS SI 01120.203D.8. This is known as the Medicaid payback requirement of the pooled trust exception.
Here, the Trust Agreement provides that, following the death of the disabled individual,
to the extent the funds in his or her sub-account are not retained by the Trust, attorney
fees and other allowable costs and taxes due from the Trust because of the death of
the beneficiary may be paid. See TA § IV.B.i-ii. Such administrative expenses are allowed under POMS SI 01120.203E.1. Next, the state(s) will receive all amounts remaining in the sub-account, up to the
total amount of medical assistance paid on behalf of the beneficiary under the state
Medicaid plan(s). TA § IV.B.iii. The Joinder Agreement also contains the required
Medicaid payback language. JA at 5. Accordingly, the Trust satisfies the fifth requirement
of 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203D.
In sum, we believe that a self-settled sub-account in the Trust established on or
after January 1, 2000, would be considered a resource for SSI purposes because the
Trust does not meet the third requirement of the pooled trust exception.
B. Regular Resource Rules
If CFMF is able to cure the above defects and qualify for the pooled trust exception,
a self-funded sub-account in the Trust established on or after January 1, 2000, must
still be evaluated under the regular resource rules in POMS SI 01120.200 to determine if it is countable resource.[13] See POMS SI 01120.200A.1, SI 01120.203D.1. Pursuant to POMS SI 01120.200D.1.a, trust principal is a resource if: (1) the beneficiary has the legal authority to
revoke or terminate the trust and then use the funds to meet his or her food or shelter
needs, or (2) the beneficiary can direct the use of the trust principal for his or
her support and maintenance under the terms of the trust. In addition, if the beneficiary
can sell his or her beneficial interest in the trust, that interest is a resource.
Id.
First, we determine whether a self-settled sub-account in the Trust can be revoked.
This depends on the terms of the trust and applicable state law—here, Ohio. See POMS SI 01120.200D.2. Both the Trust Agreement and Joinder Agreement state that the Joinder Agreement is
irrevocable. TA § XII.B; JA at 6. We note that, as a general principle of trust law,
when a grantor is also the sole beneficiary of a trust, the trust is revocable even
if the trust document states that the trust is irrevocable. See Restatement (Third) of Trusts § 65 Reporter’s Notes (2003); see also POMS SI 01120.200D.3, SI CHI01120.200C. However, under Ohio law, if a trust described in 42 U.S.C. § 1396p(d)(4) explicitly
states that it is irrevocable, then the trust should be considered irrevocable even
if the grantor is the sole beneficiary. See
Ohio Rev. Code § 5804.18; see also POMS SI CHI01120.200D.5. Here, the Trust is intended to be administered pursuant to 42 U.S.C. § 1396p(d)(4)(C),
and it explicitly states that it is irrevocable. TA §§ I.A.i, XII.B; JA at 6. Thus,
a Trust sub-account would be considered irrevocable.
Nor can the beneficiary direct the use of the Trust principal for his or her support
or maintenance. The Trust Agreement provides that the distributions are made by the
Trustee at the sole direction, and in the sole discretion, of the Trust Advisor. TA
§§ III.A-III.D; JA at 4-5. Neither the Trust Agreement nor the Joinder Agreement provides
for mandatory disbursements to the beneficiary. Moreover, the beneficiary does not
have any vested property interest in the Trust, and no part of the sub-account assets
is available to the beneficiary. TA §§ III.E, X.D [p. 13]; JA at 1.
With respect to the beneficiary’s ability to sell his or her beneficial interest in
a self-settled sub-account, the Trust Agreement contains spendthrift provisions which
provide that no interest in any sub-account shall be anticipated, encumbered, assigned,
or “subject to a beneficiary’s liabilities or creditor claims.” TA §§ X.E, X.D [p.
13]. Ohio generally recognizes the validity of spendthrift clauses in trusts. Ohio
Rev. Code § 5805.01. However, under Ohio law, even if an irrevocable trust contains
a spendthrift provision, “a creditor or assignee of the settlor may reach the maximum
amount that can be distributed to or for the settlor’s benefit.” Ohio Rev. Code §
5805.06(A)(2). That said, the Office of the General Counsel has previously determined
that this provision is best read to apply only to assignees who are creditors of secured
interests in the property, rather than to purchasers for value. [14] See POMS PS 01825.039 (PS 09-104) (six-state legal opinion on spendthrift clauses). We believe that Ohio
would likely follow the Restatement (Third) of Trusts, which provides that in the
case of a self-settled discretionary trust, this rule generally applies only to the
settlor-beneficiary’s creditors and not to transferees (i.e. , purchasers). See
Restatement (Third) of Trusts § 60, cmt. f; Ohio Rev. Code § 5801.05 (common law of
trusts continues to apply in Ohio). Therefore , the spendthrift provisions should
be considered valid and effective to prevent settlor-beneficiaries from selling their
beneficial interests in the Trust.
In sum, if CFMF can cure the above-discussed defects and satisfy all of the requirements
of the pooled trust exception, a self-settled sub-account in the Trust would not be
a resource under the regular resource rules.
II. Third-Party Sub-Account
As noted above, it appears that the Trust permits third parties to fund or contribute
their assets to a Trust sub-account. TA § II.C; JA at 10. In the case of a sub-account
established solely with the assets of a third party, the regular resource rules set
forth in POMS SI 01120.200 apply to determine whether the assets in the sub-account are a resource.
Here, a third-party sub-account would not be a resource under the regular resource
rules. First, the Trust does not give the beneficiary the power to terminate his or
her sub-account. See POMS SI 01120.200D.1.b.2 (beneficiary generally does not have power to terminate a trust). Rather, that
power lies with the Trust Advisor and Trustee. TA §§ III.F, III.I, IV.A. Second, as
discussed above, the Trust contains no provision allowing the beneficiary to direct
the use of the Trust principal for his or her support or maintenance. Finally, with
respect to a beneficiary’s power to otherwise sell his or her beneficial interest
in the Trust, as noted above, the Trust contains spendthrift provisions, § TA §§ X.E,
X.D [p. 13], which Ohio fully recognizes in third-party trusts. Ohio Rev. Code § 5805.01.
Accordingly, neither the principal nor the beneficial interest in a third-party sub-account
would be considered a resource to the beneficiary.
III. Comingled Sub-Account
It is possible for a sub-account in the Trust to contain assets attributable to both
the beneficiary and one or more third parties. Agency policy provides that, in the
case of a comingled trust established on or after January 1, 2000, with the assets
of both an SSI claimant (or spouse) and third parties, the regular resource rules
apply to the portion of the comingled trust attributable to the assets of third parties,
and the statutory resource rules apply to the portion attributable to the assets of
the SSI claimant (or spouse). See POMS SI 01120.200A.1.b, SI 01120.201C.2.c.
Here, in the event that a sub-account in the Trust established on or after January
1, 2000, receives any contributions from a third party, the portion of the sub-account
attributable to the assets of the third party would not be a resource under the regular
resource rules, as discussed in Section II above. However, with respect to the portion
of the sub-account attributable to the assets of the beneficiary, that portion would
be considered a resource under the Act based on the defects discussed in Section I.A
above.[15]
CONCLUSION
For the reasons discussed above, we conclude that a self-settled sub-account in the
Twelfth Restatement of the Community Fund Management Foundation Pooled Medicaid Payback
Trust established on or after January 1, 2000, does not meet all of the requirements
to be excepted from resource counting under 42 U.S.C. § 1396p(d)(4)(C). However, if
the defects identified above can be cured, then a self-settled sub-account would not
be a resource under the regular resource rules. In addition, a third-party sub-account
would not be a resource under the regular resource rules, nor would third-party assets
in a comingled sub-account. The Trust may be given a 90-day amendment period to conform
with SSA’s policy requirements before a self-settled sub-account is counted as a resource.