PS: Title XVI Regional Chief Counsel Precedents
TN 90 (01-18)
A. PS 17-057 Ayudando Alpha, Inc., Pooled Charitable Trust (also called Master Trust I)
Date: March 3, 2017
1. Syllabus
This Regional Chief Counsel (RCC) opinion discusses whether the Ayudando Alpha, Inc., Pooled Charitable Trust (Ayudando Trust) meets the pooled trust exception under section 1917(d)(4)(c) of the Social Security Act (Act). The RCC concluded that the Ayudando Trust does not meet two of the five requirements for pooled trust exception in SI 01120.203. Specifically, the Ayudando Trust does not comply with the first requirement: trust established and managed by a non-profit association, and the third requirement: trust must be established solely for the benefit of disabled individuals. Consequently, the Ayudando Trust is a countable resource for SSI purposes.
2. Opinion
QUESTION PRESENTED
You asked whether the Ayudando Alpha, Inc., Pooled Charitable Trust (Ayudando Trust) and the accompanying Joinder Agreement for the subaccount P~ (NH) qualify as a pooled trust under section 1917(d)(4)(c) of the Social Security Act (Act), as codified at 42 U.S.C. § 1396p(d)(4)(C). If the Ayudando Trust qualifies as a pooled trust, you also inquired whether the NH’s subaccount, established with his own funds after January 1, 2000, would be exempt from the agency’s resource counting rules for Supplemental Security Income (SSI) purposes.
ANSWER
The Ayudando Trust, along with the NH’s subaccount, does not qualify as a pooled trust under 42 U.S.C. § 1396p(d)(4)(c) because its provisions do not comply with two of the five statutory criteria for determining whether a trust qualifies for the pooled trust exception for counting resources for SSI purposes. Consequently, the NH’s subaccount in the Ayudando Trust established with the NH’s own funds after January 1, 2000, would not be exempt from the agency’s resource counting rules.
BACKGROUND
Ayudando Alpha, Inc. (Ayudando Alpha) is a New Mexico non-profit corporation. Ayudando Alpha established the Ayudando Trust on October 3, 2008, “to provide for the collective management and distribution of the Trust Estate on behalf of [SSI recipients] for whom Trust sub-accounts are established” pursuant to 42 U.S.C. § 1396p(d)(4)(C). Trust, art 1.3. Article 1.3 also states that the Trustee retained the “sole and absolute discretion” to provide “extra and supplemental services and benefits for the care, support, comfort, education[,] and training of the Beneficiaries.” Trust, art. 1.3. The Trust contains a choice-of-law provision indicating that it should be interpreted pursuant to the laws of New Mexico. See Trust, art. 12.2. Ayudando Guardians, a court-appointed guardian, opened a subaccount in the Ayudando Trust on the NH’s behalf on July XX, 2016, via the Joinder Agreement.
ANALYSIS
The agency considers trusts created on or after January 1, 2000, from a disabled beneficiary’s assets to be a resource to the extent that the trust is revocable, or, in the case of an irrevocable trust, to the extent that any payments can be made from the trust for the benefit of the disabled beneficiary. See 42 U.S.C. § 1382b(e)(3); POMS SI 01120.201. A pooled trust is a trust that contains many different individuals’ assets, segregated into separate subaccounts. POMS SI 01120.203(B)(2)(a). A pooled trust that qualifies as a Medicaid payback trust under section 1917(d)(4)(C) of the Act is exempt from the Act’s normal rules for counting trust assets as a resource. See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(C); POMS SI 01120.203(B)(2). To qualify for the pooled trust exception under the Act, a trust must contain assets belonging to a disabled beneficiary and must satisfy all of the following conditions:
1. The trust must be established and managed by a non-profit association;
2. A separate account must be maintained for each disabled beneficiary of the trust; but, for purposes of investment and management of funds, the trust may pool these accounts;
3. Accounts in the trust must be established solely for the benefit of disabled individuals (as defined in section 1382c(a)(3) of the Act);
4. Accounts in the trust must be established by the parent, grandparent, or legal guardian of such disabled beneficiaries, by such disabled beneficiaries, or by a court; and
5. The trust must provide that to the extent that any amounts are remaining in the disabled beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust must pay to the State the amount remaining up to an amount equal to the total amount of medical assistance paid on behalf of the disabled beneficiary under the State Medicaid plan.
42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203(B)(2).
If a trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C), we also consider whether the sub-account is excluded under the regular resource counting rules. Under the regular resource rules, a trust will be a resource if it (1) is unilaterally revocable or (2) if the disabled beneficiary can direct the use of the trust principal for his or her support. See 20 C.F.R. § 416.1201(a).
A. The Ayudando Trust Does Not Satisfy the First and Third Conditions and Thus Does Not Qualify as a Pooled Trust
1. Condition One: Trust established and managed by a non-profit association
The Ayudando Trust does not satisfy the first condition that the trust be established and managed by a non-profit association. See 42 U.S.C. § 1396p(d)(4)(C)(i); POMS SI 01120.203(B)(2). Ayudando Alpha established the Ayudando Trust. As stated above, Ayudando Alpha is a non-profit corporation. Consequently, the Ayudando Trust was established by a non-profit association, as required by the first condition.
However, the Ayudando Trust is silent as to the type of association that can manage it. While Article 2.10 permits the Trustee to appoint a co-trustee “to assist with the management, administration, allocation, and disbursement of Trust assets and property,” the Trust does not specify whether a co-trustee could include a for-profit entity. Articles 9.1 and 9.2 permit the Trustee to hire a corporate custodian and investment counsel, and Article 9.2 permits the Trustee to delegate to investment counsel the ability to “make investments [on the Trust’s behalf] without requiring prior approval from the Trustee.” Granted, a pooled trust may qualify for an exception from normal resource counting rules despite employing for-profit entities to effectuate trust functions. POMS SI 01120.225. Thus, the Trustee’s ability to hire private entities is not inherently fatal to the Ayudando Trust’s status as a valid pooled trust. Nevertheless, the non-profit entity must retain the ultimate authority over the trust. POMS SI 01120.225(D). For example, the non-profit entity must be responsible for determining the amount of trust corpus to invest, removing or replacing the trustee, and making day-to-day decisions regarding the health and well-being of the beneficiaries. Id. Here, we believe that the Ayudando Trust permits the Trustee to delegate core responsibilities to private entities without sufficient oversight to comply with the POMS authority. This is detailed further below.
POMS SI 01120.225(E) states that the agency will not routinely question the relationship between a non-profit entity and contracted, for-profit entities. POMS 01120.225(D), however, establishes that any for-profit entity must always be subordinate to the non-profit managers of a pooled trust. Under these circumstances, we think the Trustee’s power to appoint a co-trustee, without any apparent limitation on its authority, is inconsistent with POMS SI 01120.225(D), and thus disqualifies the Ayudando Trust from the pooled trust exception. Similarly, the Trustee’s ability to delegate the authorization to make investments, without prior approval, to a for-profit entity likewise shows that the Ayudando Trust does not make certain that the Trustee will retain sufficient authority as is required by POMS SI 01120.225(D). Indeed, POMS SI 01120.225(D) specifically lists a for-profit entity’s ability to determine the amount of trust corpus to invest as an example of a prohibited practice. Yet, as written, the Ayudando Trust seemingly permits the Trustee to permit a for-profit enterprise to make virtually unfettered investment decisions. See Trust, arts. 2.10, 9.1, 9.2. Accordingly, the Ayudando Trust does not satisfy the first condition of 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203(B)(2).
2. Condition Three: Trust must be established solely for the benefit of disabled individuals
We also find that the Ayudando Trust does not satisfy the third condition, which requires that accounts in a trust solely benefit disabled individuals. See 42 U.S.C. § 1396p(d)(4)(C)(iii); POMS SI 01120.203(B)(2). The Ayudando Trust contains two early termination provisions, which potentially permit the Trustee to terminate an individual’s subaccount or the Ayudando Trust as a whole. Article 6.2 explains that, if the Trustee has reasonable cause to believe that a beneficiary will become liable for basic maintenance, support, or care that has otherwise been provided by a government agency or private program, the Trustee may petition the court for further instructions. Furthermore, Article 6.3 states that the Trustee may petition the court for instructions if carrying out the Ayudando Trust’s purpose becomes impossible or impracticable with respect to all beneficiaries.
Early termination clauses, however, are only acceptable under the pooled trust exception under narrowly defined circumstances. Specifically, a pooled trust with an early termination clause will not be excepted from the resources counting rules unless:
1. States would receive all amounts remaining in the trust at the time of termination up to an amount equal to the total amount of medical assistance paid by the State Medicaid plans;
2. With limited exceptions, no entity other than the trust beneficiary could benefit from the early termination; and
3. The early termination clause gives the power to terminate to someone other than the trust beneficiary.
POMS SI 01120.199(F)(1). Articles 6.2 and 6.3 of the Ayudando Trust provide for early termination that allows the Trustee to petition a court for “further instructions.” Although the court might ultimately undertake actions compliant with the POMS, the Ayudando Trust itself does not facially guarantee State Medicaid Plan reimbursement or that no one other than the trust beneficiary could benefit from the early termination. Thus, the Ayudando Trust cannot be excepted from the resource counting rules.
The Ayudando Trust also violates the third condition because it permits third-party travel expenses in bringing a beneficiary’s siblings and others to visit without qualification. See Trust, art. 2.9. The agency permits a trust to pay third-party travel expenses that are necessary in order for the beneficiary to obtain medical treatment or for an individual to visit a beneficiary in an institution, nursing home, or other long-term care facility (e.g., group homes and assisted living facilities) or other supported living arrangement in which a non-family member or entity is being paid to provide or oversee the individual’s living arrangement if the travel is for the purpose of ensuring the beneficiary’s safety or medical well-being. POMS SI 01120.201(F)(2)(b). Because the Ayudando Trust permits third-party expenses—without qualification—it has the potential to exceed the scope of allowable expenses set forth in the POMS. We note, however, that the agency should grant the Trustee 90 days to correct this particular error. See POMS SI 01120.201(F)(2)(d).
B. The Ayudando Trust Satisfies the Second, Fourth, and Fifth Conditions for a Pooled Trust
1. Condition Two: Separate accounts maintained for each beneficiary
The Ayudando Trust satisfies the second condition, which requires that separate accounts be maintained for each beneficiary, even though funds may be pooled for investment and management purposes. See 42 U.S.C. § 1396p(d)(4)(C)(ii); POMS SI 01120.203(B)(2). Articles 2.8, 4.1, 4.2, and 5.1 establish that the Trustee must maintain separate accounts, which the Ayudando Trust may pool solely for investment and management purposes, for each beneficiary. Accordingly, this condition is satisfied.
2. Condition Four: Accounts established by the individual, parent, grandparent, legal guardian, or court
The Ayudando Trust satisfies the fourth condition that accounts in the trust are established by the individual, a parent, grandparent, legal guardian, or the court. See 42 U.S.C. § 1396p(d)(4)(C)(iii); POMS SI 01120.203(B)(2). The Ayudando Trust only permits parents, grandparents, legal guardians, beneficiaries themselves, and courts to “sponsor” a beneficiary’s enrollment. See Trust, arts. 2.7, 3.1.
3. Condition Five: State reimbursed for medical expenses upon death of beneficiary
The fifth condition requires that upon the death of a beneficiary, the trust reimburse the State for medical expenses paid on behalf of the disabled beneficiary under the State Medicaid plan, to the extent the funds are not retained by the trust. See 42 U.S.C. § 1396p(d)(4)(C)(iv); POMS SI 01120.203(B)(2). Article 6.1.2 dictates that funds remaining in a beneficiary’s subaccount after his or her death are deemed trust property to be retained by the trust. The Trustee may then use the retained funds to (a) benefit the other beneficiaries, (b) add indigent disabled persons to the trust, and (c) provide indigent disabled persons with equipment, medication, and services. A pooled trust is generally entitled to retain funds following a beneficiary’s death. See Memorandum From Associate General Counsel of OPL to Team Leader of OISP, Use of Retained Funds in Section 1917(d)(4)(C) Trusts (Apr. 15, 2010). We caution, however, that the use of retained funds to establish accounts for new beneficiaries or benefit individuals who are not trust beneficiaries would result in the creation of subaccounts that are not eligible for the pooled-trust exception. Id. Thus, the Ayudando Trust satisfies the fifth condition, subject to this caveat.
C. The Ayudando Trust’s Savings Clause Cannot Cure the Infirmities Identified Above
The Ayudando Trust contains a savings clause, also known as a null and void clause, that advises that invalid provisions should be severed from the whole and the remaining provisions enforced. See Trust, art. 12.3. The Joinder Agreement goes further, stating explicitly that the Ayudando Trust is meant to conform with 42 U.S.C. § 1396p as a pooled trust, and that any conflicts between the Trust provisions and the governing law should be resolved in favor of the law and regulations. Joinder Agreement, section G(4). New Mexico generally enforces savings clauses in trusts and similar instruments. See Bolton v. Bd. Of Cty. Comm’rs of Valencia County, 890 P.2d 808, 818 (N.M. App. 1994) (citing City of Santa Fe v. First Nat’l Bank, 65 P.2d 857, 862-63 (1937)). Nevertheless, the agency has determined that a null and void clause does not cure an otherwise defective trust instrument. POMS SI 01120.227(D). Rather, the agency evaluates trust provisions as written. Id. Thus, neither Article 12.3 of the Ayudando Trust nor section G(4) of the Joinder Agreement cures the infirmities identified above.
CONCLUSION
The Ayudando Trust does not qualify as a valid, pooled trust under 42 U.S.C. § 1396p(d)(4)(c) because its provisions do not comply with two of the five statutory conditions for determining whether a trust qualifies for the pooled trust exception for counting resources for SSI purposes. Specifically, (a) the Ayudando Trust permits the Trustee to delegate core responsibilities to for-profit entities without sufficient oversight, and b) the Ayudando Trust contains improper early termination provisions and allows for potentially impermissible third-party travel expenses. Therefore, the NH’s subaccount cannot be considered for the pooled trust exception and is not exempt from the agency’s ordinary resource counting rules.
Traci B. Davis
Acting Regional Chief Counsel
By: Mark J. Mendola
Assistant Regional Counsel
B. PS 17-030 ARCA Foundation Grantor Pooled Trust Restatement
Date: December 19, 2016
1. Syllabus
The Regional Chief Counsel (RCC) opinion examines whether revisions the ARCA Foundation made to the ARCA Foundation Grantor Pooled Trust Restatement (ARCA Trust Restatement) qualify the trust as a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act). It was concluded that the ARCA Trust Restatement qualifies as a pooled trust under 1917(d)(4)(C) because the revisions correct the inadequacies identified in the previous opinion and brings the trust into compliance with the agency’s five enumerated criteria for determining whether a trust qualifies for the pooled trust exception. In addition, the NH’s subaccount is exempt as a resource under the agency’s resource counting rules for SSI purposes.
2. Opinion
QUESTION PRESENTED
You asked whether revisions the ARCA Foundation made to the ARCA Foundation Grantor Pooled Trust Restatement (ARCA Trust Restatement) qualify the trust as a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act), as codified at 42 U.S.C. § 1396p(d)(4)(C). In a September 2015 opinion, we previously concluded the original ARCA Foundation Grantor Pooled Trust (ARCA Trust) did not qualify as a pooled trust. See ARCA Foundation Grantor Pooled Trust (NH M~), Opinion from Office of the Regional Chief Counsel, Dallas Region to K~, Director Center for Program Support (Sept. 22, 2015). In response, the ARCA Foundation amended the trust, and you asked for an opinion addressing the ARCA Trust Restatement. If the ARCA Trust Restatement now qualifies as a pooled trust, you also inquired whether the number holder’s (NH’s) subaccount, established with her own funds after January 1, 2000, would be exempt as a resource under the agency’s resource counting rules for Supplemental Security Income (SSI) purposes.
ANSWER
The ARCA Trust Restatement qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) because the revisions correct the inadequacies we identified in our previous opinion and brings the trust into compliance with the agency’s five enumerated criteria for determining whether a trust qualifies for the pooled trust exception. In addition, the NH’s subaccount is exempt as a resource under the agency’s resource counting rules for SSI purposes.1
BACKGROUND
The ARCA Foundation is a New Mexico non-profit corporation. The ARCA Foundation established the ARCA Trust on March 9, 1999, “for the purpose of providing services and benefits for the care, support, comfort, education and training of its beneficiaries in addition to and over above public and/or private benefits they already received as a result of their present or future mental or physical disability from any federal, state or local government or private program, agency or department.” ARCA Trust, art 1.3. In our September 2015 opinion addressing whether the trust qualified as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C), we concluded four provisions, consisting of six Articles, in the ARCA Trust conflicted with the first and third criteria for a pooled trust. The first criterion for a pooled trust requires the trust to be established and managed by a non-profit corporation, and the third criterion mandates the trust be established solely for the benefit of disabled individuals. See 42 U.S.C. § 1396p(d)(4)(C).
1. Article 2.10 in the ARCA Trust permitted the trustee to appoint a co-trustee “to assist with the management, administration, allocation, and disbursement of Trust assets and property.”
We previously concluded Article 2.10 violated the first criterion for a pooled trust because the article did not exclude appointment of a for-profit entity as co-trustee. See Program Operations Manual Systems (POMS) SI 01120.203 and SI 01120.225(D). In response, the ARCA Trust Restatement Article 2.10 has been revised to state, “‘Trustee’ shall mean the ARCA Foundation, or its successor or successors, and shall include any Co-Trustee or Co-Trustees, all of which shall be not-for-profit entities.”
2. Articles 9.1 and 9.2 of the ARCA Trust permitted the trustee to hire a corporate custodian and investment counsel who could make investments without trustee approval.
We concluded Articles 9.1 and 9.2 also violated the first criterion of a pooled trust because the articles delegated core management responsibilities to private entities without sufficient trustee oversight. See POMS SI 01120.225(D). In response, Articles 9.1 and 9.2 have been removed from the ARCA Trust Restatement.
3. Articles 6.2 and 6.3 of the ARCA Trust permitted the trustee to petition the court for instructions if the trustee was unable to effectuate the purpose of the trust sub-account or the trust, respectively.
We concluded the articles were early termination provisions that violated the third criterion because early termination provisions must comply with POMS 001120.199(F) to ensure the trust will solely benefit the beneficiary. In response, the ARCA Trust Restatement includes an additional article 6.4 that allows the trustee to transfer the assets of the trust fund or a sub-account to another pooled trust authorized under 42 U.S.C. § 1396(d)(4)(C), as permitted under POMS SI 01120.199(F)(2).
4. Article 2.9 of the ARCA Trust contained a third-party travel reimbursement provision that permitted “[e]xpenditures for travel, companionship, cultural experiences, and expenses in bringing a Beneficiary’s siblings and others for visitation with him or her. . . .”
We concluded the article also violated the third criterion because it did not limit expenditures for third-party travel expenses to visits to a trust beneficiary in a supported living arrangement only for the purpose of ensuring the safety or medical well-being of the beneficiary. POMS 01120.201(F)(2)(b). In response, Article 2.9 was amended to provide the trustee may provide third-party travel expenses solely to visit a beneficiary in assisted living for the purpose of ensuring the safety and/or medical well-being of the beneficiary.
ANALYSIS
The agency considers trusts created on or after January 1, 2000, from a disabled beneficiary’s assets to be a resource to the extent that the trust is revocable, or, in the case of an irrevocable trust, to the extent that any payments can be made from the trust for the benefit of the disabled beneficiary. See 42 U.S.C. § 1382b(e)(3); POMS SI 01120.201.2 A pooled trust is a trust that contains many different individuals’ assets, segregated into separate subaccounts. POMS SI 01120.203(B)(2)(a). A pooled trust that qualifies as a Medicaid payback trust under section 1917(d)(4)(C) of the Act is exempt from the Act’s normal rules for counting trust assets as a resource. See 42 U.S.C. §§ 1382b(e)(5), 1396p(d)(4)(C); POMS SI 01120.203(B)(2). To qualify for the pooled trust exception under the Act, a trust must contain assets belonging to a disabled beneficiary and must satisfy all of the following conditions:
The trust must be established and managed by a non-profit corporation;
A separate account must be maintained for each disabled beneficiary of the trust; but, for purposes of investment and management of funds, the trust may pool these accounts;
Accounts in the trust must be established solely for the benefit of disabled individuals (as defined in section 1382c(a)(3) of the Act);
Accounts in the trust must be established by the parent, grandparent, or legal guardian of such disabled beneficiaries, by such disabled beneficiaries, or by a court; and
The trust must provide that to the extent that any amounts are remaining in the disabled beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust must pay to the State the amount remaining up to an amount equal to the total amount of medical assistance paid on behalf of the disabled beneficiary under the State Medicaid plan.
See 42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203(B)(2).
If a trust qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C), we also consider whether the sub-account is excluded under the regular resource counting rules. Under the regular resource rules, a trust will be a resource if it (1) is unilaterally revocable or (2) if the disabled beneficiary can direct the use of the trust principal for his or her support. See 20 C.F.R. § 416.1201(a).
A. The ARCA Trust Restatement Satisfies All Five Criteria and Qualifies as a Pooled Trust
In our previous opinion, we concluded the ARCA Trust satisfied the second, fourth, and fifth criteria for a pooled trust. There has been no interim change in agency policy or amendment to the ARCA Trust Restatement that would change our opinion for these criteria. Thus, this opinion will address only the first and third criteria for a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203(B)(2).
1. The ARCA Trust Restatement Satisfies the First Criterion for a Pooled Trust Because the Trust Is Established and Managed by a Non-Profit Corporation
The ARCA Foundation, a New Mexico non-profit corporation, established the ARCA Trust Restatement.3 We previously concluded the ARCA Trust did not satisfy the first criterion because it permitted appointment of a for-profit co-trustee and did not ensure sufficient management oversight of the trust from the non-profit trustee. Article 2.10 in the ARCA Trust Restatement still permits appointment of a co-trustee, but now specifies the appointed co-trustee must also be a non-profit corporation. Thus, as amended, Article 2.10 of the ARCA Trust Restatement ensures the trust will remain managed by a non-profit corporation, as required under 42 U.S.C. § 1396p(d)(4)(C) and POMS SI 01120.203(B)(2).
Further, the ARCA Foundation deleted Articles 9.1 and 9.2 in the ARCA Trust that gave unfettered authorization to make investments to a for-profit corporate custodian and investment counsel. The ARCA Foundation indicated it has never used a corporate custodian or investment counsel and thus did not require the provision in the ARCA Trust Restatement. Although POMS SI 01120.225(D) states that a pooled trust may qualify for an exception from normal resource counting rules despite employing for-profit entities to effectuate trust functions, the non-profit entity must retain the ultimate authority over the trust. Because the ARCA Trust Restatement deleted the trustee’s authority to retain a corporate custodian and investment counsel, it is clear the non-profit ARCA Foundation retains the ultimate authority in managing the trust. Thus, the ARCA Trust Restatement satisfies the first criterion for a pooled trust.
2. The ARCA Trust Restatement Satisfies the Third Criterion for a Pooled Trust Because the Trust Is Solely for the Benefit of the Beneficiary
We also considered whether the ARCA Trust Restatement satisfies the third condition, which requires that accounts in a pooled trust solely benefit disabled individuals. See 42 U.S.C. § 1396p(d)(4)(C); POMS SI 01120.203(B)(2). In the previous opinion, we concluded the ARCA Trust contained an early termination provision that violated POMS SI 01120.199(F) and a third-party travel expense provision that violated POMS SI 01120.201(F)(2)(b). Each of those provisions conflicted with the sole benefit rule. As explained below, the ARCA Trust Restatement adequately addresses those conflicts.
In Articles 6.2 and 6.3, the ARCA Trust permitted the trustee to petition the court for instructions if the trustee was unable to effectuate the purpose of the trust sub-account or the trust, respectively. We concluded the articles were early termination provisions that violated POMS 001120.199(F), which requires that:
States would receive all amounts remaining in the trust at the time of termination up to an amount equal to the total amount of medical assistance paid by the State Medicaid plans;
With limited exceptions, no entity other than the trust beneficiary could benefit from the early termination; and
The early termination clause gives the power to terminate to someone other than the trust beneficiary.
POMS SI 01120.199(F)(1).
Articles 6.2 and 6.3 remain in the ARCA Trust Restatement, but the ARCA Foundation added Article 6.4 to the ARCA Trust Restatement. Article 6.4 provides:
6.4 Transfers to Another Pooled Trust. If it becomes impossible, or impracticable, to carry out the Trust’s purposes with respect to all Beneficiaries, or if the Trustee determines that it is in the best interest of any one of the Beneficiaries, the Trustee may transfer the assets of the trust fund, or a single Sub-account of a Beneficiary, to another pooled trust authorized under 42 U.S.C. Section 1396p(d)(4)(C).
Although the ARCA Trust Restatement early termination provisions in Article 6.2 and 6.3 still do not comply with the requirements of POMS SI 01120.199(F)(1), the addition of Article 6.4 complies with a pooled trust exception contained in POMS SI 01120.199(F)(2). For pooled trusts established under 42 U.S.C. § 1396p(d)(4)(C), an early termination provision does not need to satisfy the requirements of POMS SI 01120.199(F)(1) if the clause allows for transfer of the beneficiary’s assets from one pooled trust to another. POMS SI 01120.199(F)(2). Because the ARCA Trust Restatement simply permits transfer of assets for one pooled trust to another, it now satisfies the early termination provisions in POMS SI 01120.199(F).
The ARCA Trust Restatement also properly limits reimbursement of third-party travel expenses. Article 2.9 of the ARCA Trust permitted without qualification payment of third-party travel expenses in bringing a beneficiary’s siblings and others to visit. However, the agency permits only third-party travel expenses that are necessary in order for the beneficiary to obtain medical treatment or for an individual to visit a beneficiary in an institution, nursing home, or other long-term care facility (e.g., group homes and assisted living facilities) or other supported living arrangement in which a non-family member or entity is being paid to provide or oversee the individual’s living arrangement if the travel is for the purpose of ensuring the beneficiary’s safety or medical well-being. POMS SI 01120.201(F)(2)(b). Thus, the ARCA Trust permitted the trustee to reimburse third-party travel expenses in excess of those allowed by the agency.
To correct this conflict with agency policy, the ARCA Foundation amended the third-party travel expense provision in the ARCA Trust Restatement to read as follows:
The Trustee may provide expenditures for travel of the Beneficiary and any required companion, for cultural or entertainment experiences. The Trustee may provide payment of travel expenses for any third-party to visit a Beneficiary who is a recipient of ARCA’s group home, long term care, assisted living or supported living services or living arrangements, which ARCA is providing. The travel must be for the purpose of ensuring the safety and/or medical well-being of the Beneficiary.
Thus, the ARCA Trust Restatement complies with POMS SI 01120.201(F)(2)(b) because payment of third-party travel expenses to visit a beneficiary is limited to visiting a beneficiary in assisted living for the purpose of ensuring the safety and/or medical well-being of the beneficiary.
The ARCA Trust Restatement now satisfies the third criterion, as the amendments correct situations where the ARCA Trust potentially could have benefitted others. Because the ARCA Trust Restatement now satisfies each of the five criterion for a pooled trust, it qualifies as a pooled trust per 42 U.S.C. § 1396p(d)(4)(C). See POMS SI 01120.203(B)(2)
B. The NH’s Subaccount Is Exempt From the Agency’s Resource Counting Rules
Because the ARCA Trust Restatement qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C), we next consider whether the NH’s sub-account is excluded under the regular resource counting rules. Under the regular resource rules, a trust will be a resource if it (1) is unilaterally revocable or (2) if the disabled beneficiary can direct the use of the trust principal for his or her support. See 20 C.F.R. § 416.1201(a); POMS SI 01120.200(D). The NH’s sub-account could also be a resource if (3) she could sell her interest. POMS SI 01120.200(D).
1. The Trust is Irrevocable
Under New Mexico state law, a settlor may freely revoke or amend the trust unless the terms of the trust expressly provide that the trust is irrevocable. New Mex. Stat. Ann. § 46A-6-602. The ARCA Trust Restatement specifically provides that the trust is irrevocable. See ARCA Trust Restatement, Arts. 3.1, 11.1, 11.2. Thus, the NH has no power to revoke the trust under New Mexico law.
2. The NH Cannot Direct the Use of the Trust Assets for Her Own Benefit
Under the terms of the ARCA Trust Restatement, the NH cannot direct the trustee to use the assets in the sub-account for her support and maintenance. Rather, the trustee has sole discretion to disburse such funds, disbursements are to be made only for the beneficiary’s supplemental care, and the trustee’s determination to distribute or not distribute is binding. See ARCA Trust Restatement, Arts. 5.1, 5.3, 5.6. The ARCA Trust Restatement further provides “under no circumstances may any Beneficiary compel a distribution from a Beneficiary's Sub-account.” See ARCA Trust Restatement, Art. 5.5. Thus, the NH has no power to direct the trustee to make a distribution.
3. The NH Cannot Sell Her Interest in the Trust
Under New Mexico state law, a trust may contain a spendthrift provision that precludes both voluntary and involuntary transfer of a beneficial interest. New Mex. Stat. Ann. § 46A-5-502. The ARCA Trust Restatement contains such a spendthrift provision that provides:
No part of this Trust, principal or income, shall be subject to anticipation or assignment by the Beneficiaries; nor shall it be subject to attachment or control by any public or private creditor of the Beneficiaries; nor may it be taken by any legal or equitable process by any voluntary or involuntary creditor, including those that have provided for the Beneficiary's support and maintenance.
See ARCA Trust Restatement, Art. 5.5. Thus, the ARCA Trust Restatement precludes the NH from assigning or voluntarily relinquishing her interest to a creditor, and she cannot sell her interest. See POMS SI 01120.200(D)(1)(a)-(b).
Because the trust is irrevocable, the trustee has sole discretion to make a distribution, and the trust contains a spendthrift provision precluding both voluntary and involuntary transfer of the NH’s interest, it is exempt under the regular resource counting rules.
CONCLUSION
The ARCA Trust Restatement qualifies as a pooled trust under 42 U.S.C. § 1396p(d)(4)(C) because the revisions properly address the inadequacies we identified in our previous opinion and brings the trust into compliance with the agency’s five enumerated criteria for determining whether a trust qualifies for the pooled trust exception. In addition, the NH’s subaccount is exempt from the agency’s resource counting rules for SSI purposes.
Traci B. Davis
Acting Regional Chief Counsel
By: James D. Sides
Assistant Regional Counsel
Footnotes:
. OGC’s Office of Program Law agrees that the trust revisions satisfy the requirements to qualify as a pooled trust.
. Although the original version of the ARCA Trust was established in March 1999, the NH’s subaccount was not created and funded until August 2004. Therefore, the agency treats the NH’s subaccount pursuant to the rules applicable after January 1, 2000. See POMS SI 01120.202(A)(1)(b).
. Although the record does not contain documentation of ARCA’s nonprofit status, we expect such evidence could be obtained if necessary. See POMS SI 01130.689(E), 01220.201(F) (establishing process for documenting nonprofit status).