PS: Title XVI Regional Chief Counsel Precedents
TN 118 (07-18)
A. PS 18-076 Is the Assignment of Private Disability Insurance Benefits Legal and Irrevocable in Oregon
Date: April 12, 2018
1. Syllabus
This Regional Chief Counsel (RCC) opinion examines whether the assignment of a Number Holder’s (NH’s) private disability insurance benefits to his special needs trust is valid under Oregon law; and if so, whether the assignment is irrevocable. (If the assignment is both legally valid and irrevocable, the agency does not count the benefits as income to the NH, per POMS SI 01120.200G.1.d.) The RCC concludes that the assignment is valid under Oregon law, and if the NH can show that the assignment instrument was delivered to the insurance company, then the assignment will also be irrevocable.
2. Opinion
Question Presented
M~ (NH) assigned the benefits of his private disability insurance policy to his special needs trust. Is the assignment valid under Oregon law, and, if so, is the assignment irrevocable?
Brief Answer
The assignment here is valid. If the NH can show delivery of the assignment instrument to the insurance company, then the assignment will also be irrevocable. Under these circumstances, we understand that the agency would not count the benefits as income under POMS SI 01120.200G.1.d.
Summary of Facts
The NH receives private disability insurance benefits. He is also the beneficiary of a valid special needs trust.1 The NH has provided a document purporting to assign the benefits from his disability insurance policy to the trust to be added to the principal. The assignment instrument provides the following:
The undersigned hereby transfers and assigns to S~, Trustee, M~ Special Needs Trust dated May XX, 2016, all rights, title and interest in the following long term care and disability insurance policy:
Life Insurance Company of North America
Group Policy No. LK-96xxxx
Plan No. xxx
Plan Administrator: Western Michigan University School of Medicine
(WMed)
1000 Oakland Drive
Kalamazoo, MI 49008
The NH signed this assignment instrument on June 23, 2016.
The NH also provided a copy of the insurance policy. The policy provides for the payment of benefits to classes of eligible individuals who, due to sickness or injury, are no longer capable of performing the material duties of their regular occupation. See generally, Policy, pp. 4–15. On June 15, 2016, the insurance company approved the NH’s claim for long-term disability benefits as of November 5, 2015, and deemed him entitled to benefits as of May 3, 2016. See Award Letter, p. 1.
Analysis
Benefits from a disability insurance policy constitute unearned income that can affect eligibility for Supplemental Security Income (SSI). 42 U.S.C. § 1382a(a)(2)(B); 20 C.F.R. § 416.1121(a). Under contract law, however, a party receiving benefits under an insurance policy may assign these benefits to a third party, thus divesting himself of any right to this income. Restatement (Second) of Contracts, § 317(1). If a claimant assigns these benefits to a “special needs trust,” which the Social Security Act excludes from countable resources affecting SSI eligibility, 42 U.S.C. § 1382b(e)(5), we understand that the agency would not count the benefits as income if the assignment is both valid and irrevocable. See POMS SI 01120.200G.1.d.
In this case, the NH provided an assignment of his disability insurance benefits to the M~ Special Needs Trust (the trust), of which he is the beneficiary. Because the NH lives in Oregon, we look to Oregon law to determine the validity and revocability of his assignment.2
Oregon allows assignment of insurance benefits if the insurance policy does not have an anti-assignment clause. Or. Rev. Stat. §§ 743.043, 743.345.3 This is consistent with common-law principles recognizing assignment of the rights under an insurance policy. 29 Williston on Contracts § 74:66 (4th ed. May 2017 update). In this case, the insurance policy provides that the insurance company will honor a beneficiary’s assignment of rights under the policy. See Policy, p. 26. The only limitation of the assignment is that it may not be “levied on, attached, garnished, or otherwise taken for a person’s debts.” Policy, p. 26. The assignment clearly manifests the intent of the NH to assign his rights under the insurance policy to the trust. Since Oregon law and the insurance policy both allow this, the assignment appears to be valid.
Turning to revocability, the assignment here is a gratuitous assignment—that is, it was made for nothing in return. Oregon’s statutory law is silent as to whether such an assignment is irrevocable, and case law itself does not directly address the point. Common-law principles of contracts provide that, unless a contrary intention is manifested, a gratuitous assignment is irrevocable if “the assignment is in a writing signed or under seal that is delivered by the assignor” or “the assignment is accompanied by delivery of a writing of a type customarily accepted as a symbol or as evidence of the right assigned.” Restatement (Second) of Contracts, § 332(1). Irrevocability can be established by evidence of the assignee’s assent, or by delivery of the writing to a third person. Restatement (Second) of Contracts, § 327(1).
Both Oregon law and the policy reflect the need to deliver to a third party, here the insurer. Under Or. Rev. Stat. § 743.043, an insurance policy “may be assigned . . . by an assignment executed by the insured or owner alone and delivered to the insurer.” The policy notes that “the original assignment or a certified copy of the assignment” must be “filed with the Insurance Company” in order to effect assignment. See Policy, p. 26. If these conditions are not satisfied, the assignment will remain effective, though revocable under three contingencies: (a) the death of the assignor; (b) a subsequent assignment by the assignor; or (c) notification of revocation received by either the assignee or the obligor. Restatement (Second) of Contracts, § 332(2); see also 29 Williston on Contracts § 74:63 (4th ed. May 2017 update).4 In this case, the assignment instrument manifests an intention to transfer “all rights, title and interest” in the insurance policy and does not indicate that the NH would retain the power to revoke the assignment. Moreover, the instrument is in writing and signed by the NH. But we cannot determine from the evidence provided whether the NH has delivered the assignment instrument to the insurance company. If the NH has delivered the instrument to the insurance company, the assignment is irrevocable. If, however, the NH has not delivered the assignment instrument, the assignment remains revocable.
Conclusion
The assignment is valid. If the NH can show delivery of the assignment instrument to the insurance company, then the assignment will also be irrevocable. Under these circumstances, we understand that the agency would not count the benefits as income under POMS SI 01120.200G.1.d.
B. PS 17-137 Does the Siletz Tribe IGRA Trust Meet Requirements for Exclusions
Date: August 14, 2017
1. Syllabus
This Regional Chief Counsel (RCC) opinion examines whether the trust accounts of the Confederate Tribes of Siletz Indians of Oregon (the Tribe), established pursuant to the Indian Gaming Regulatory Act (IGRA), meet the requirements described in POMS SI 01120.195F for evaluating whether the trust accounts are resources for Supplemental Security Income (SSI) purposes. The RCC concludes that the trust documentation does not meet all nine requirements of that section. Therefore, the Tribe should not be treated as the grantor of the trust accounts, and POMS SI 01120.201 should be used to determine whether the trust accounts are resources for SSI purposes.
2. Opinion
QUESTION PRESENTED
Whether trust accounts established pursuant to the Indian Gaming Regulatory Act benefitting minors and legally incompetent adults of the Confederated Tribes of Siletz Indians of Oregon (the Tribe) meet the requirements described in POMS SI 01120.195.F for evaluating whether the trust accounts are resources for Supplemental Security Income (SSI) purposes.
BRIEF ANSWER
No. Accordingly, the Tribe is not treated as the grantor of the trust accounts, and POMS SI 01120.201 should be used to determine whether the trust accounts are a resource for SSI purposes.
SUMMARY OF FACTS
The Tribe operates a gaming facility. A portion of the Tribe’s share of the net revenues of the gaming enterprise is distributed on a per capita basis to tribal members. Distributions to certain tribal members, including minors and adults under a legal disability, are deposited into a trust account.
ANALYSIS
Relevant Authority
Indian tribes may distribute gaming revenues to tribal members if they comply with the Indian Gaming Regulatory Act (IGRA). IGRA requires tribes to prepare a revenue allocation plan. 25 U.S.C. § 2710(b)(3)(A). The revenue allocation plan must provide that gaming revenues will be used only for certain purposes, including providing “for the general welfare of the Indian tribe and its members.” 25 U.S.C. § 2710(b)(2)(B)(ii). As part of providing for its members, tribes are required to ensure that “the interests of minors and other legally incompetent persons who are entitled to receive any of the per capita payments are protected and preserved” and funds are available “in such amounts as may be necessary for the health, education, or welfare of the minor or other legally incompetent person.” 25 U.S.C. § 2710(b)(3)(C). To comply with this provision of IGRA, some Indian tribes create a trust that holds distributions to minors and legally incompetent adults (referred to herein as an IGRA trust).
The Internal Revenue Service’s Revenue Procedure 2011-56 provides a safe harbor under which beneficiaries of an IGRA trust are not required to include amounts in gross income when transferred to, or earned by, the IGRA trust, but must include trust distributions in income when actually or constructively received by the beneficiary. Revenue Procedure 2011-56 establishes nine requirements that, when met, permit a beneficiary to exclude IGRA trust assets from gross income until it is actually or constructively received.
SSA previously treated beneficiaries of IGRA trusts as the grantor of the trust. Following the issuance of and in partial reliance on Revenue Procedure 2011-56, SSA issued POMS SI 01120.195, changing its position for evaluation of IGRA trusts effective November 14, 2014. Under the new POMS, a tribe will be treated as the grantor of an IGRA trust if the trust meets nine specific requirements. If the tribe is found to be the grantor, SSA uses the policy in POMS SI 01120.200 to determine if the IGRA trust is a resource. If the tribe is not the grantor of the IGRA trust, the policy in POMS SI 01120.201 is used to determine if the IGRA trust is a resource.
Tribal Documents
The Tribe’s revenue allocation plan is explained in the Tribe’s Distribution of Net Revenues Ordinance, Siletz Tribal Code (STC) § 4.200 (the Plan). The Plan states it has been approved by the Bureau of Indian Affairs. STC 4.200(a). The Plan provides that per capita distributions shall be made to enrolled members of the Tribe pursuant to the Tribal Member Distribution Ordinance. STC § 4.208.
The Tribal Member Distribution Ordinance (TMDO), STC § 4.100, governs the distribution of monies to enrolled members of the Tribe. The TMDO provides that distributions to minors and adults under a legal disability will generally be deposited into a trust account by a Trust Officer. STC § 4.103(b), (c), (e).
Finally, the Trust Officer has developed regulations, approved by the Tribal Council (the Regulations), pursuant to STC § 4.103(b)(3) & (e) and § 4.208, setting out the process by which and purposes for which funds may be disbursed to minors.5
Application of Authority to Tribal Documents
Under POMS SI 01120.195, an analysis of whether an IGRA trust is a resource begins with a determination of whether the IGRA trust meets the nine requirements of Section F of the provision. Here, the Tribe’s documentation of the trust accounts do not meet all nine requirements. Each of the nine requirements is recited and discussed below:
1. The Indian tribe establishes the trust for the benefit of tribal members who are minors and legally incompetent adults and it funds the trust using only per capita payments from gaming revenues.
The Tribe establishes trust accounts for the benefit of tribal members who are minors or adults under a legal disability. STC § 4.103(b)(2), 4.103(c). However, the TMDO anticipates that money other than per capita payments from gaming revenues will fund the trust. In fact, the TMDO specifically acknowledges that money distributed to members “may derive from a variety of sources of funds,” including the sale of timber harvested from reservation trust lands. STC §§ 4.100, 4.105. Accordingly, the trust accounts do not satisfy this requirement.
2. The trust beneficiary is a minor or legally incompetent adult at the time the trust (or trust account) is established.
Trust accounts established pursuant to the Plan and TMDO satisfy this requirement. The Trust Officer is responsible for setting up and managing trusts accounts to maintain distribution funds for minors and adults with a legal disability. STC § 4.103(b)(2).
3. The trust only allows contributions while the beneficiary is still a minor or legally incompetent.
Trust accounts established pursuant to the Plan and TMDO satisfy this requirement. In the event a court determines that an adult is no longer subject to a legal disability and releases the adult from the custody of a guardian, conservator, or institution, the Trust Officer must disburse all distribution funds held in trust for the benefit of that member. STC § 4.103(g)(2). Likewise, when a minor reaches the age of majority, the newly adult tribal member may request distribution of any and all amounts. STC § 4.103(g)(1). The Plan and TMDO do not provide for contributions into the trust beyond the age of majority for a minor not subject to a legal disability or beyond determination that an adult is no longer subject to a legal disability.
4. The trust instrument states that it is a grantor trust and the Indian tribe is the grantor of the trust, and grants to the Indian tribe a power or interest in the trust assets, such as the ability to vote any shares held in trust.
The tribal documentation does not satisfy this requirement as it does not state that trust accounts are grantor trusts or that the Indian tribe is the grantor of such trust accounts.
5. The Indian tribe is the owner of the trust for tax purposes and all the trust assets and the trust principal and income are subject to claims of general creditors of the Indian tribe under applicable federal, state, local, and tribal law.
The tribal documentation does not satisfy this requirement as it does not state that the Tribe is the owner of the trust or that trust assets, principal, and income are subject to the claims of general creditors of the Indian tribe.
6. At all times while the trust is in effect, the principal and income of the trust must be subject to claims of general creditors under applicable law.
In addition, the trust documents must require the trustee to cease payments to or for the benefit of the beneficiary, and must require that the trustee hold trust assets for the benefit of the Indian tribe’s general creditors throughout any period during which the trustee believes or has reason to believe that the Indian tribe is unable to pay its debts as they become due, or is subject to a pending insolvency or bankruptcy proceeding.
The tribal documentation does not satisfy this requirement. The Plan and TMDO do not state that trust principal and income are subject to the claims of general creditors nor identify any circumstance under which the trustee must cease distribution and hold trust assets for the benefit of general creditors.
7. The trust beneficiary does not have any preferred claim or beneficial ownership interest in any assets of the trust, and any rights created under the trust documents must be unsecured rights. In addition, amounts payable to, or for his or her benefit, cannot be anticipated, assigned (either at law or at equity), alienated, pledged, encumbered or subjected to garnishment, levy, or other legal or equitable process.
The tribal documentation does not satisfy this requirement. Attachment of distribution monies is permitted under certain circumstances. STC § 4.104.
8. Trust assets are not available to or for the benefit of the beneficiary until the beneficiary ceases to be a minor or legal incompetent, except for the distributions for the beneficiary’s health, education, or welfare made at the discretion of the trustee and pursuant to the trust instrument.
The tribal documentation, including Regulations § II(b) and STC § 4.103(b)(1) and (e), satisfies this requirement.
9. Upon the beneficiary’s death, the beneficiary’s share must be paid to the Indian tribe, unless the trust document provides for payment either:
to persons who may inherit from the beneficiary under applicable state or tribal inheritance laws; or
based on the terms of a valid will or trust of the beneficiary.
The tribal documentation does not anticipate what will be done with the beneficiary’s share upon his or her death. Instead, the tribal documentation only addresses distribution when an eligible enrolled tribal member dies between the distribution cut-off date (the date by which an individual must be an enrolled Tribal member to be entitled to a distribution) and the date the distribution funds are to be disbursed. STC § 4.103(d). Accordingly, this section is not satisfied.
CONCLUSION
The Tribe should not be treated as the trust grantor under POMS SI 01120.195.F because the tribal documentation does not satisfy all nine requirements of that section. Accordingly, POMS SI 01120.201 should be used to determine whether trust accounts established pursuant to the trust documentation are a resource for SSI purposes.
C. PS 17-128 Does Amendment to Grand Ronde Tribe Minor Trust Change Prior Opinion That Trust Did Not Meet Requirements For Exclusion
Date: August 2, 2017
1. Syllabus
This Regional Chief Counsel (RCC) Opinion examines whether the trust accounts established, pursuant to the Indian Gaming Regulatory Act, benefitting minors and incompetent adults of the Confederated Tribes of the Grand Ronde Community of Oregon (the Tribe), as amended by the First Amendment to the Trust Agreement, dated February 22, 2017, meet the requirements described in POMS SI 01120.195 for evaluating whether the trust accounts are resources for Supplemental Security Income (SSI) purposes. The RCC determined that the answer depends on whom the trust account benefits; if the relevant trust account benefits a minor or legally incompetent adult, the trust meets the requirements described in POMS SI 01120.195. In such cases, the Tribe is treated as the grantor of the trust, and POMS SI 01120.200 should be used to determine whether the trust is a resource for SSI purposes. The RRC concluded that if the relevant trust account benefits a person between the ages of 18 and 21 who does not meet the education requirements set by Tribal Council Resolution and who is not a legally incompetent adult, per capita distributions into the trust account between the ages of 18 and 21 would not satisfy the requirements described in POMS SI 01120.195. The RCC also concluded that the Tribe is not treated as the grantor of the portion of the trust account attributable to such distributions, and POMS SI 01120.201 should be used to determine whether that portion of the trust is a resource for SSI purposes.
2. Opinion
QUESTION PRESENTED
Whether trust accounts established pursuant to the Indian Gaming Regulatory Act benefitting minors and incompetent adults of the Confederated Tribes of the Grand Ronde Community of Oregon (the Tribe), as amended by the First Amendment to the Trust Agreement, dated February 22, 2017, meet the requirements described in POMS SI 01120.195 for evaluating whether the trust accounts are resources for Supplemental Security Income (SSI) purposes.
BRIEF ANSWER
The answer depends on whom the trust account benefits. If the relevant trust account benefits a minor or legally incompetent adult, the trust meets the requirements described in POMS SI 01120.195. In such cases, the Tribe is treated as the grantor of the trust, and POMS SI 01120.200 should be used to determine whether the trust is a resource for SSI purposes.
However, if the relevant trust account benefits a person between the ages of 18 and 21 who does not meet the education requirements set by Tribal Council Resolution and who is not a legally incompetent adult, per capita distributions into the trust account between the ages of 18 and 21 would not satisfy the requirements described in POMS SI 01120.195. In such cases, the Tribe is not treated as the grantor of the portion of the trust account attributable to such distributions, and POMS SI 01120.201 should be used to determine whether that portion of the trust is a resource for SSI purposes.
SUMMARY OF FACTS
The Tribe operates a gaming facility. The Tribe distributes a portion of the net revenues of the gaming enterprise on a per capita basis to tribal members. Distributions to certain tribal members, including minors and legally incompetent adults, are deposited into trust accounts.
ANALYSIS
A. Relevant Authority
Indian tribes may distribute gaming revenues to tribal members if they comply with the Indian Gaming Regulatory Act (IGRA). IGRA requires tribes to prepare a revenue allocation plan. 25 U.S.C. § 2710(b)(3)(A). The revenue allocation plan must provide that gaming revenues will be used only for certain purposes, including providing “for the general welfare of the Indian tribe and its members.” 25 U.S.C. § 2710(b)(2)(B)(ii). As part of providing for its members, tribes are required to ensure that “the interests of minors and other legally incompetent persons who are entitled to receive any of the per capita payments are protected and preserved” and funds are available “in such amounts as may be necessary for the health, education, or welfare of the minor or other legally incompetent person.” 25 U.S.C. § 2710(b)(3)(C). To comply with this provision of IGRA, some Indian tribes create a trust that holds distributions to minors and legally incompetent adults (referred to herein as an IGRA trust).
The Internal Revenue Service’s Revenue Procedure 2011-56 provides a safe harbor under which beneficiaries of an IGRA trust are not required to include amounts in gross income when transferred to, or earned by, the IGRA trust, but must include trust distributions in income when actually or constructively received by the beneficiary. Revenue Procedure 2011-56 establishes nine requirements that, when met, permit a beneficiary to exclude IGRA trust assets from gross income until it is actually or constructively received.6
SSA previously treated beneficiaries of IGRA trusts as the grantor of the trust. Following the issuance of and in partial reliance on Revenue Procedure 2011-56, SSA issued POMS SI 01120.195, changing its position for evaluation of IGRA trusts effective November 14, 2014. Under the new POMS, a tribe will be treated as the grantor of an IGRA trust if the trust meets nine specific requirements that track those of Revenue Procedure 2011-56. If the tribe is found to be the grantor, SSA uses the policy in POMS SI 01120.200 to determine if the IGRA trust is a resource. If the tribe is not the grantor of the IGRA trust, the policy in POMS SI 01120.201 is used to determine if the IGRA trust is a resource.
B. Trust Documents
The Gaming Revenue Allocation Plan (the Plan), as amended through Tribal Council Resolution No. 199-06, establishes the plan by which the Tribe will distribute per capita payments.7 Pursuant to § D.6.d of the Plan, Per Capita Payments for minors and legally incompetent adults will be deposited into trust accounts. The Plan also provides for deposit of Per Capita Payments into trust accounts for tribal members who are between the ages of 18 and 21, who are not legally incompetent, and who have not completed the education requirement set by Tribal Council Resolution. Plan § D.6.c.
The Trust, comprised of the individual trust accounts, was established effective December 14, 1999, pursuant to an agreement entitled Trust for the Benefit of Minors Pursuant to 1999 Gaming Revenue Allocation Plan (Trust Agreement).
The Trust Agreement was amended on February 22, 2017, by a First Amendment to the Trust Agreement for the Trust for the Benefit of Minors Pursuant to 1999 Gaming Revenue Allocation Plan (Amendment).
C. Application of Authority to Trust Documents
Under POMS SI 01120.195, an analysis of whether an IGRA trust is a resource begins with a determination of whether the IGRA trust meets the nine requirements of Section F of the provision. Here, trust accounts benefitting certain beneficiaries meet all nine requirements of Section F of POMS SI 01120.195. Each requirement is discussed below:
1. The Indian tribe establishes the trust for the benefit of tribal members who are minors and legally incompetent adults and it funds the trust using only per capita payments from gaming revenues.
This requirement is met for trust accounts that are established for the benefit of tribal members who are minors and legally incompetent adults. As Plan § D.6.d states, per capita payments for Minors8 and Incompetents9 are made by deposit into the beneficiary’s separate trust account. Plan § D.6.d, Trust Agreement § 1(a). The recitals to the Trust Agreement also explain that the Trust will be funded with contributions of per capita payments.
Trust accounts are also established for the benefit of members between the ages of 18 and 21, who are not incompetent and who have not met the education requirements set by Tribal Council Resolution. Plan § D.6.c. This category of person is not considered a minor or legally incompetent adult within the meaning of POMS SI 01120.195.C.2-3.
2. The trust beneficiary is a minor or legally incompetent adult at the time the trust (or trust account) is established.
The Plan states that the Trust is for minor tribal members, tribal members between the ages of 18 and 21 who do not meet education requirements set by Tribal Council Resolution, and adult tribal members deemed incompetent by a court of competent jurisdiction. Plan § B.1. Accordingly, the trust documents anticipate that some but not all beneficiaries will be minors or legally incompetent adults at the time the trust is established. Satisfaction of this requirement will need to be confirmed on a claimant-by-claimant basis.
3. The trust only allows contributions while the beneficiary is still a minor or legally incompetent adult.
The Plan provides that Per Capita Payments for Minors and Incompetents are made to the respective trust accounts. Plan § D.6.d. When an Incompetent person is deemed legally competent, the trust terminates and thus no further Per Capita Payments are made into the trust. Plan § B.1.e. Although a trust established for the benefit of a Minor does not terminate until that person’s 21st birthday (or death),10 Per Capita Payments are made directly to tribal members over the age of 18 who are competent and who have completed the educational requirement set by Tribal Council Resolution. Plan §§ B.1.e, D.6.b. Thus, Per Capita Payments will not be made into the trust after a competent Minor ceases to be a Minor, provided she meets the educational requirements.
However, Per Capita Payments for individuals between the ages of 18 and 21 who are competent but have not completed the educational requirement set by Tribal Council Resolution are deposited into the person’s trust account. Plan § D.6.c. These contributions would not satisfy POMS SI 01120.195.
The trust instrument states that it is a grantor trust and the Indian tribe is the grantor of the trust, and grants to the Indian tribe a power or interest in the trust assets, such as the ability to vote any shares held in trust.
The Trust Agreement expressly states that the Trust is intended to be a grantor trust, with the Tribe as the grantor. Trust Agreement § 1(c). The Trust Agreement further provides that beneficiaries have no preferred claim on or any beneficial ownership interest in any assets of the Trust. Trust Agreement § 1(d). The Trust Agreement provides that the Tribe may remove the Trustee on 30 days’ notice (or shorter notice, if accepted by the Trustee). Trust Agreement § 10(b). The Tribe may appoint successor Trustees. Trust Agreement § 11(a). This section of POMS SI 01120.195 is satisfied.
4. The Indian tribe is the owner of the trust for tax purposes and all the trust assets and the trust principal and income are subject to claims of general creditors of the Indian tribe under applicable federal, state, local, and tribal law.
The Trust Agreement expressly states that the Trust is intended to be a grantor trust, of which the Tribe is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code, which subpart regards trust grantors treated as owners. Trust Agreement § 1(c). See, e.g., 26 U.S.C. § 671.
5. The Trust Agreement provides that the principal of the Trust, and any earnings thereon, will be used exclusively for the uses and purposes of beneficiaries and general creditors. Trust Agreement § 1(d).
Trust assets are subject to the claims of the Tribe’s general creditors under federal, tribal, and, to the extent that the tribe has agreed to be liable, state law. Trust Agreement §§ 1(d), 3(b). This requirement under POMS SI 01120.195 is satisfied.
6. At all times while the trust is in effect, the principal and income of the trust must be subject to claims of general creditors under applicable law.
In addition, the trust documents must require the trustee to cease payments to or for the benefit of the beneficiary, and must require that the trustee hold trust assets for the benefit of the Indian tribe’s general creditors throughout any period during which the trustee believes or has reason to believe that the Indian tribe is unable to pay its debts as they become due, or is subject to a pending insolvency or bankruptcy proceeding.
Trust Agreement § 3 provides that the Trustee cease payments to or for the benefit of the beneficiary and hold trust assets for the benefit of the tribe’s general creditors during any period in which the Tribe is “Insolvent.” The tribe is Insolvent when it is unable to pay its debts as they become due or when it is subject to a pending insolvency proceeding or pending proceeding as a debtor under the United States Bankruptcy Code. Trust Agreement § 3(a), Amendment. If a person claiming to be a creditor of the Tribe alleges in writing to the Trustee that the Tribe has become Insolvent, the Trustee must discontinue payment of benefits to beneficiaries pending the Trustee’s determination regarding Insolvency. Trust Agreement § 3(b)(1).
The Trust Agreement does not state that the principal and income of the trust is subject to the claims of general creditors at all times while the Trust is in effect, but rather only in the event of Insolvency. Trust Agreement §§ 1(d), 3(b). However, even if the Trust Agreement contained such language, the Tribe could still elect the source of funds from which it pays claims of general creditors. The availability of the Trust assets to pay claims of general creditors becomes important only when the Tribe does not have other sources to pay those claims – that is, when the Tribe is not paying its debts as they become due and is Insolvent. In such a case, the Trust assets are subject to the claims of general creditors. Accordingly, we deem this requirement met.
7. The trust beneficiary does not have any preferred claim or beneficial ownership interest in any assets of the trust, and any rights created under the trust documents must be unsecured rights.
In addition, amounts payable to, or for his or her benefit, cannot be anticipated, assigned (either at law or at equity), alienated, pledged, encumbered or subjected to garnishment, levy, or other legal or equitable process.
Trust Agreement § 1(d) states that beneficiaries have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. It further states that any rights are mere unsecured contractual rights. Trust Agreement § 13(b) provides that amounts payable to the beneficiary may not be anticipated, assigned, alienated, pledged, encumbered, or subject to garnishment, levy, or other legal or equitable processes. This section of POMS SI 01120.195 is satisfied.
8. Trust assets are not available to or for the benefit of the beneficiary until the beneficiary ceases to be a minor or legal incompetent, except for the distributions for the beneficiary’s health, education, or welfare made at the discretion of the trustee and pursuant to the trust instrument.
Trust Agreement § 2 provides that trust funds are be distributed to beneficiaries to the extent provided in § B.1.d and e of the Plan. Plan § B.1.d provides that distributions may be made for the education, health, or housing of the beneficiary at the sole discretion of the Tribal Council, the trustee of the Trust.
Plan § B.1.e.ii. provides that trust assets will be distributed upon termination of the Trust. Plan § B.1.e provides that the Trust terminates on a Minor’s 21st birthday, if not legally incompetent, or upon the death of the Minor. It also provides that, for Incompetents, the Trust terminates at such time as the beneficiary is deemed to be legally competent or upon the person’s death. This section of POMS SI 01120.195 is satisfied.
9. Upon the beneficiary’s death, the beneficiary’s share must be paid to the Indian tribe, unless the trust document provides for payment either:
to persons who may inherit from the beneficiary under applicable state or tribal inheritance laws; or
based on the terms of a valid will or trust of the beneficiary.
Upon the death of the beneficiary, the trust assets will be paid to the beneficiary’s designated successor or parents, or will be transferred in accordance with the Oregon Probate Code (except that any provision for property to revert to the state of Oregon will provide for the property to revert to the Tribe). Plan § B.1.e.ii. This section of POMS SI 01120.195 is satisfied.
CONCLUSION
If the relevant trust account benefits a minor or legally incompetent adult, the trust meets the requirements described in POMS SI 01120.195. In such cases, the Tribe is treated as the grantor of the trust, and POMS SI 01120.200 should be used to determine whether the trust is a resource for SSI purposes.
However, if the relevant trust account benefits a person between the ages of 18 and 21 who does not meet the education requirements set by Tribal Council Resolution amd who is not a legally incompetent adult, per capita distributions into the trust account between the ages of 18 and 21 would not satisfy the requirements described in POMS SI 01120.195. In such cases, the Tribe is not treated as the grantor of the portion of the trust account attributable to such distributions, and POMS SI 01120.201 should be used to determine whether that portion of the trust is a resource for SSI purposes.
In light of these distinctions, we recommend that trust accounts established for the benefit of a Minor be reevaluated once the Minor beneficiary reaches age 18. If the beneficiary is competent and has met the education requirements set by Tribal Council Resolution, no further evaluation is needed. However, if the beneficiary is competent and has not met the education requirements set by Tribal Council resolution, Per Capita Payments will be made into the trust after the Minor stops being a Minor. These contributions would not satisfy the requirements of POMS SI 01120.195. Accordingly, the Tribe should not be treated as the grantor of such trust contributions made between the ages of 18 and 21, and that portion of the trust should be evaluated under POMS SI 01120.201.
D. PS 00-340 Trust Document re: Jasen
Date: September 27, 2000
1. Syllabus
This opinion concerns an Oregon trust established in 1994. The opinion states that this trust is irrevocable.
The trust was established with the individual's funds from a damage settlement. Therefore, the individual is the grantor of the trust. The trust also states that, upon the individual's death, the trust will repay the State medical assistance agency for the care provided to the individual.
The trust further states that, upon the individual's death, remaining funds in the trust are to be distributed to Wildwood Personal Initiatives which is a nonprofit corporation. The opinion states that, under Oregon law, an entity such as a nonprofit corporation can be a beneficiary of a trust. Therefore, because the trust has a valid remainder beneficiary, the trust is irrevocable. NOTE: Because of a change in the Social Security Act, this precedent may only be applicable to trusts established before January 1, 2000.
2. Opinion
You have requested a legal opinion regarding the "Jasen R~ Irrevocable Supplemental Needs Trust" (hereafter "Supplemental Needs Trust") to determine whether this trust document is revocable. You indicated that you advised the Portland South SSA field office that it is a revocable grantor trust and should be included as a resource to Mr. R~. You specifically asked whether 42 U.S.C. § 1396d(4)(a) is determinative.
FACTUAL BACKGROUND
Candace, mother and guardian of Jasen, established the subject trust on December 29, 1994. The trust names Candace R~ as grantor and trustee. Jasen is the sole beneficiary. Ms. R~ initially funded the trust with the balance of a settlement for damages to Jasen in the amount of $7,533.28. Article 5 of the trust states the intent of the trust is to "create a supplemental and emergency fund for the benefit of the beneficiary, and not to displace any assistance which might otherwise be available to him from any public or private sources." Supplemental Needs Trust, at 1. Article 11, section 11.3 of the trust states that "[u]nder no circumstances can the beneficiary compel a distribution from the trust for any purpose." Supplemental Needs Trust, at 5.
Article 10 of the trust provides that upon the death of the beneficiary, the remaining trust property will be distributed first to any state that has provided medical assistance to the beneficiary up to the amount of monies expended on the beneficiary's behalf. Any remaining trust property will then be paid to Wildwood Personal Initiatives. Supplemental Needs Trust, at 4.
ISSUE PRESENTED
Your question is whether the Supplemental Needs Trust is revocable or irrevocable.
DISCUSSION
The Social Security Administration considers property an available resource if an individual has the right, authority or power to liquidate it. 20 C.F.R. § 416.1201(a)(1) (1997). See also POMS SI 01120.200(D)(1).
The attorney has cited 42 U.S.C. § 1396p(d)(4)(A) for the proposition that because the beneficiary's mother is named the grantor and she set up the trust, the trust is not a grantor trust. While the above statute is cited in the Social Security Act (§ 1917(d)), the agency does not extend its applicability beyond the Medicaid program. The statute is contained in Title XIX of the Social Security Act, not Title XVI which covers SSI. Because the beneficiary's mother used the beneficiary's settlement proceeds to set up the trust, it is still considered a grantor trust.
The question of whether this trust is revocable turns on the issue of its remainder beneficiary. Jasen R~ is the grantor and the sole beneficiary of the trust. Therefore, if the trust names a valid remainder beneficiary, it will be considered an irrevocable trust. Likewise, if it does not, it will be considered revocable. See Am.Jur.2d Trusts, § 96; Lucas v. Velikanje, 2 Wash.App. 888, 471 P.2d 103 (1970). The trust names Wildwood Personal Initiatives as the remainder beneficiary. Wildwood Personal Initiatives is a nonprofit corporation (Telephone call to Wildwood Personal Initiatives on October 17, 1997). A person for whose benefit property is held in trust is a beneficiary. Restatement (Second) of Trusts, § 3 (4) (1959). The term "person" includes corporations and unincorporated associations. Id., comment c. Oregon follows the Restatement of Trusts. See e.g., Jimenez v. Lee, 274 Or. 457, 547 P.2d 126 (1976). ORS 65.077(4) provides that a nonprofit corporation has the power to "take by gift, devise or bequest" ... "real or personal property or any interest in property, wherever located."
Wildwood Personal Initiatives is sufficiently definite and meets the definition of a "person" for the purposes of serving as a remainder beneficiary.
CONCLUSION
The Supplemental Needs Trust is a grantor trust. However, given that the trust does not allow the beneficiary to compel a distribution under any circumstances and that it contains a validly named remainder beneficiary, it is our opinion that the trust is irrevocable.
Footnotes:
. CDPS has already found the trust to be valid. Thus, this opinion does not address that issue.
. The insurance policy provides that Michigan law governs the terms and conditions of the policy’s coverage. See Policy, Cover Sheet. Because the validity of the assignment does not require interpretations of the policy’s terms or conditions, we do not need to apply Michigan law.
. Oregon law includes long-term disability insurance in its definition of “life insurance.” Or. Rev. Stat. § 731.70(1).
. Other factors not relevant here, such as promissory estoppel or novation, may also render a gratuitous assignment irrevocable. Restatement (Second) of Contracts, § 332(3)–(4).
. . Under Oregon law, a trust instrument means “an instrument executed by a settlor that contains terms of the trust, including any amendments to the instrument.” ORS 130.010(22).The Tribe did not provide an executed instrument, nor respond to follow-up inquiries to obtain additional trust documentation. However, the trust is evidenced by codified tribal law. Moreover, there is no requirement in Oregon that a trust be documented by any executed or even written instrument. ORS 130.180. To create a trust in Oregon, one need only show that (a) the settlor has capacity to create a trust; (b) the settlor indicates an intent to create a trust; (c) the trust has a definite beneficiary; (d) the trustee has duties to perform; and (e) the same person is not the sole trustee and sole beneficiary. ORS 130.155. All of these requirements are met. Accordingly, we evaluate the tribal documentation as a valid trust.
. . Revenue Procedure 2011-56 clarifies, modifies, and supersedes prior Revenue Procedure 2003-14, which likewise provided a safe harbor under which beneficiaries of an IGRA trust were not required to include IGRA trust assets in gross income until actually or constructively received. Revenue Procedure 2011-56 made changes to the safe harbor requirements in response to requested public comments on Revenue Procedure 2003-14.
. . The Tribe’s Plan was initially approved in November 1999 by the Department of the Interior, and the amendments made by Resolution No. 199-06 were subsequently approved by letter dated May 16, 2007, as required under IGRA. 25 U.S.C. §§ 2703 (10), 2710(b)(3)(B); 109 Department of the Interior Departmental Manual (DM) 8.1; 210 DM 8.2.
. . With some exceptions, Minor means a tribal member under the age of 18. Plan § B.2. This is consistent with the definition in the POMS. POMS SI 01120.195.C.2.
. . Incompetent means an adult tribal member who has been declared incompetent by a court of competent jurisdiction. Plan § B.12. This is consistent with the definition in the POMS. POMS SI 01120.195.C.3.
. . Pursuant to this provision, the assets of a trust account established for the benefit of a Minor will not be distributed until the beneficiary is 21. This is consistent with the POMS, which specifically notes that an IGRA trust may provide that distributions from the trust be made at a specified age or upon the occurrence of a specified event. POMS SI 01120.195.F.