PS: Title XVI Regional Chief Counsel Precedents

Effective Dates: 08/14/2018 - Present

TN 124 (08-18)

A. PS 18-082 Resource Status of a Trust Governed by Florida Law – Supplemental Opinion

Date: May 23, 2018

1. Syllabus

This Regional Chief Counsel (RCC) opinion examines whether the proposed amendment to a Master Pooled Trust and the Joinder Agreement, as amended, still comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act). (The amended Joinder Agreement contains a new provision regarding the termination of the sub-account upon the beneficiary’s death that differs from the provision in the Master Trust.) The RCC concludes that because the amended Joinder Agreement meets all the requirements for exception, and the proposed amendment to the Master Trust would establish that the amended Joinder Agreement supersedes contrary provisions in the Master Trust, that the trust still complies with the requirements for a pooled trust under the Act.

2. Opinion

QUESTION

Whether the Settlement Solutions National Pooled Trust Second Restatement (Master Trust) with the proposed amendment and the amended Joinder Agreement still comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS).

SHORT OPINION

The amended Master Trust and Joinder Agreement comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS.

BACKGROUND

In a memorandum dated January 11, 2017, our office advised that the December 2016 Master Trust and Joinder Agreement complied with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS. See POMS PS 01825.011 (PS 17-033).¹

On March 23, 2018, the Foundation For Those With Special Needs, Inc. (Foundation), a non-profit organization and the successor trustee, noted that some states’ Medicaid agencies have unique requirements that may be inconsistent with the terms of the Master Trust. The Foundation proposed addressing state Medicaid requirements in the Joinder Agreement. The Foundation proposed an amendment to add Section 10.27 to the Master Trust as follows:

The terms of the Joinder Agreement (as defined in Section 11.06) shall supersede and control in the event of any conflicts with the provisions of this Master Trust to the extent necessary to ensure compliance with the subaccount beneficiary’s state Medicaid agency’s eligibility and/or trust requirements, so long as such provisions do not violate federal law or the POMS.

The Foundation also submitted a new Joinder Agreement. The Joinder Agreement contains a new provision regarding the termination of the sub-account upon the beneficiary’s death. The Joinder Agreement states that, upon a beneficiary’s death, any amounts remaining in his or her trust sub-account will be deemed surplus trust property. See Joinder Agreement. The grantor may elect to have all surplus funds retained by the Master Trust or to have the funds disbursed according to state payback option outlined in Section 6.04 of the Master Trust. See Trust Decl., Art. 6, § 6.04; Joinder Agreement, Sch. C.

DISCUSSION

Supplemental Security Income (SSI) is a general public assistance program for aged, blind, or disabled individuals who meet certain income and resource restrictions and other eligibility requirements. See Act §§ 1602, 1611(a); 20 C.F.R. §§ 416.110, 416.202 (2018).² “Resources” include cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for his or her support and maintenance. See Act § 1613; 20 C.F.R. § 416.1201(a). “If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . .” 20 C.F.R. § 416.1201(a)(1); see POMS SI 01120.010.B.

Generally, the agency must consider the principal or corpus of a trust established with the assets of an individual to be a resource of the individual. See Act § 1613(e)(1)-(3); POMS SI 01120.201.A.1. However, the rules in section 1613(e) of the Act do not apply to trusts described in section 1917(d)(4) of the Act. See Act § 1613(e)(5); POMS SI 01120.201.A.1; POMS SI 01120.203.A. Trusts created in accordance with paragraphs (A) and (C) of section 1917(d)(4) are commonly known as Medicaid trust exceptions and consist of two types: Special Needs Trusts (paragraph (A)) and Pooled Trusts (paragraph (C)). See POMS SI 01120.203.A. To satisfy the exception for pooled trusts under section 1917(d)(4)(C), a trust must contain the assets of an individual who is disabled (as defined in section 1614(a)(3)) and meet the following conditions:

(i) “The trust is established and managed by a nonprofit association.

(ii) “A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.

(iii) “Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1614(a)(3)) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.

(iv) “To the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this subchapter.

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

The proposed amendment to the Master Trust would establish that the amended Joinder Agreement supersedes contrary provisions in the Master Trust. The proposed amendment also includes a severability clause for severing invalid or unenforceable provisions of the Joinder Agreement. For SSI purposes, a null and void clause or savings clause does not cure an otherwise defective trust instrument. See POMS SI 01120.227.D. Thus, the proposed severability clause would not nullify or sever any provisions in the Joinder Agreement that would not satisfy requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS. See POMS SI 01120.227.D.

Because, under the proposed amendment, the Joinder Agreement would be controlling, to qualify for the pooled trust exception, all provisions of any Joinder Agreement would need to meet the criteria in section 1917(d)(4)(C) without regard to the proposed severability clause. See POMS SI 01120.227.D.1.

The amended Joinder Agreement contains a new provision regarding the termination of the sub-account upon the beneficiary’s death that differs from the provision in the Master Trust. The additional language in Schedule C of the Joinder Agreement permits the Master Trust to retain all funds in the sub-account upon the beneficiary’s death even if there are sufficient funds to repay the state. See Trust Decl., Art. 6, § 6.04; Joinder Agreement, Sch. C. This provision still complies with section 1917(d)(4)(C) because the Act only requires repayment of state Medicaid assistance with funds from the sub-account that are not retained by the Master Trust. See Act § 1917(d)(4)(C); POMS SI 01120.203.B.2.g.

The amended Joinder Agreement does not alter any other provisions of the Master Trust and Joinder Agreement. As discussed in our January 11, 2017, memorandum, the other provisions of the Master Trust comply with the remaining requirements in section 1917(d)(4)(C) of the Act and the POMS provisions implementing those requirements.

CONCLUSION

The proposed amendment to the Master Trust and the Joinder Agreement, as amended, comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the implementing POMS provisions.

B. PS 17-121 Validity of Purported Pooled Trusts (FL, KY, MS)

Date: July 19, 2017

1. Syllabus

The Regional Chief Counsel (RCC) Opinion examined whether the trusts established by the National Foundation for Special Needs Integrity, Inc. (NFSNI), in Florida, Kentucky, and Mississippi comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS). The RCC concluded that the Master Trusts do not comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS.

2. Opinion

QUESTION

You asked whether the trusts established by the National Foundation for Special Needs Integrity, Inc. (NFSNI), in Florida, Kentucky, and Mississippi comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS).

OPINION

The Master Trusts do not comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS.

BACKGROUND

According to the information provided, the Social Security Administration (SSA) determined M~ (FL Recipient), W~ (KY Recipient), and M~ (MS Recipient) (collectively, Recipients) were entitled to Supplemental Security Income (SSI) based on disability. SSA has since determined MS Recipient’s disability ceased.³

Each of the Recipients has established a sub-account in master trusts that NFSNI created. NFSNI provided a July XX, 2007, letter from the Internal Revenue Service (IRS) stating that NFSNI is an exempt organization under section 501(c)(3) of the Internal Revenue Code. NFSNI established a master trust in Florida on May 15, 2008 (Florida Master Trust); in Kentucky on October 17, 2008 (Kentucky Master Trust); and in Mississippi on February 24, 2009 (MS Master Trust) (collectively, Master Trusts). See Master Trusts, Recitals and Signatures. Each of the Master Trusts purports to be a “pooled trust” for purposes of the Act. Master Trusts, Art. 2.

FL Recipient created a sub-account in the FL Master Trust by execution of a joinder agreement dated March XX, 2009 (FL Joinder). Assets of the “M~ Trust” funded FL Recipient’s sub-account. FL Joinder, § II.A. Based on the information provided, this was a testamentary trust that failed as a special needs trust and was subsequently used to create FL Recipient’s sub-account in the FL Master Trust. KY Recipient created a sub-account in the KY Master Trust by execution of a joinder agreement dated August XX, 2013 (KY Joinder). Assets from the “V~ Trust UAD” funded KY Recipient’s sub-account. KY Joinder, § II.A. MS Recipient created a sub-account in the MS Master Trust by execution of a joinder agreement dated January XX, 2014 (MS Joinder) (collectively, Joinder Agreements). MS Recipient’s own assets funded his sub-account. MS Joinder, § II.A.

The Master Trusts are intended to be administered for the sole benefit of qualified individual “Beneficiaries.” MS Trust, Art. 1, 2, 13.4; KY and FL Trusts, Art. 1, 2, 13.3. A Beneficiary is defined as a person with a disability as determined by the respective state law of the Master Trusts “and/or as qualified under § 1614(a)(3) of the Social Security Act and/or as determined by 42 U.S.C. § 1382c(a)(3). . . .” FL and MS Master Trusts, Art. 5.D.; KY Master Trust, Art. 5.D., and KY Joinder, § I.D. A “Grantor” of the FL and MS Master Trusts may be the Beneficiary or his or her guardian, parent, or grandparent, or a court order funding a sub-account. FL and MS Master Trusts, Art. 5.C. The KY Master Trust uses similar language, see KY Master Trust Art. 5.C., but the Kentucky joinder agreement states that a “Donor” funds a sub-account using funds that “shall not be assets to which Beneficiary had legal ownership, an interest in ownership, or any other legally colorable claim in law or equity,” KY Joinder, § I.C.

The property of each Master Trust is considered “one entity” for investment purposes, but each sub-account is administered for the sole benefit of individual Beneficiaries. See Master Trusts, Art. 2. A Beneficiary of one of the Master Trusts is entitled to an annual accounting. See Master Trusts, Art. 10.2.

The Trustee for each trust is NFSNI and may include its successors in interest and appointed co-Trustees. See Master Trusts, Art. 5.B. A Trustee may exercise powers provided under applicable state law trust codes, including designating a co-Trustee and making distributions for a Beneficiary’s supplemental needs during his or her lifetime. See Master Trusts, Art. 11, 13.2. The Master Trusts define “supplemental” to include payments made to a Beneficiary and payments to third parties during a Beneficiary’s lifetime for goods or services he or she receives. See FL Master Trust, Art. 5.J., 13.5; KY Master Trust, Art. 5.J., 13.5 and KY Joinder, § I.K.; MS Master Trust, Art. 5.J., 13.6. The MS Master Trust may purchase real property for a Beneficiary so long as the owner is the MS Master Trust. See MS Master Trust, Art. 13.3.5. The MS Master Trust may also purchase a vehicle for a Beneficiary so long as the vehicle owner is not the MS Master Trust. See MS Master Trust, Art. 13.3.7.

The Master Trusts allow the Trustee to charge pro-rata to all sub-accounts “extraordinary administrative expenses or for the legal defense of the Trust Pool.” Master Trusts, Art. 10.4. Extraordinary administrative expenses or legal challenges incurred by specific sub-accounts will only be charged to the affected sub-accounts, unless the issue “may materially affect the integrity or administration of other sub-accounts.” Id. The Master Trusts also allow for reasonable compensation for Trustees. See Master Trusts, Art. 15.8. The Master Trusts also charge Beneficiaries an annual fee of 1.5% of the sub-account balance to pay for “day-to-day administration” of the sub-account. Joinder Agreements, § III. In addition, the Master Trusts provide that the trust will indemnify Trustees and their agents for “any and all claims, actions, suits, liabilities, fines or penalties. . . .” Master Trusts, Art. 15.10.

A Trustee may terminate a Beneficiary’s sub-account. See Master Trusts, Art. 16.1. In doing so, the Trustee may “transfer the assets in the Beneficiary’s [sub-account] . . . to a qualified private or geographically appropriate and qualified not-for-profit pooled special needs trust.” Id.

The Trusts define “Remainder” as the amount of money remaining in a Beneficiary’s sub-account after death and after payment of reasonable and allowable administrative expenses of the estate. FL and MS Master Trusts, Art. 5.K; KY Master Trust, Art. 5.L. To the extent that the Trusts do not retain this Remainder, the respective state Medicaid agencies “shall be first payee and have priority of payment over any other debts and administrative expenses” except those permitted by SSA policy. FL and KY Master Trusts, Art. 14.1; MS Master Trust, Art. 14. If a Beneficiary has received Medicaid benefits in more than one state, each state that has provided benefits will be repaid a proportionate share of the amount remaining in the Beneficiary’s sub-account. See FL and KY Master Trusts, Art. 14.2; MS Master Trust, Art. 14.

DISCUSSION

Generally, SSA must consider the principal or corpus of a trust established with the assets of an individual to be a resource of the individual. See Act § 1613(e)(1)-(3); POMS SI 01120.201.A.1. However, certain exceptions are provided for trusts established in accordance with section 1917(d)(4) of the Act. See Act § 1613(e)(5); POMS SI 01120.201.A.1; POMS SI 01120.203.A. Pooled trusts are one such exception. See Act § 1917(d)(4)(C); POMS SI 01120.203.B.2 (describing an exception in accordance with § 1917(d)(4)(C) as a “pooled trust”). To satisfy the pooled trust exception, a trust must contain the assets of an individual who is disabled (as defined in section 1614(a)(3)) and meet the following requirements:

The trust is established and managed by a nonprofit association.

A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.

Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1614(a)(3)) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.

To the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this title.

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

Assets of the Disabled Individual

Initially, we note that the KY and MS Master Trusts do not satisfy the threshold requirement of containing the assets of a disabled individual. See Act § 1917(d)(4)(C); POMS SI 01120.203.B.2.a. Based on the information provided, SSA has found MS Recipient’s disability ceased, and MS Recipient has not filed an appeal. Thus, the MS Master Trust does not involve a “disabled” individual to the extent it applies to MS Recipient.

Although SSA has found KY Recipient disabled, the KY Master Trust does not contain “the assets of” KY Recipient. The joinder agreement states a “Donor” has been funding KY Recipient’s sub-account using assets that “shall not be assets to which Beneficiary had legal ownership, an interest in ownership, or any other legally colorable claim in law or equity.” KY Joinder, § I.C. Consistent with these definitions, assets from the “V~ Trust UAD” funded KY Recipient’s sub-account. KY Joinder, § II.A. Although neither the Act nor the POMS defines the term “assets of,” its plain meaning indicates the assets in a valid pooled trust should belong to the SSI beneficiary claiming the benefit of the pooled trust exception. The Act’s plain meaning is conclusive where, as here, it would not lead to lead to an unintended result. See United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 242 (1989). Both the source of the funds and the definitions of the KY Master Trust indicate KY Recipient’s sub-account was not funded with assets belonging to KY Recipient, so the KY Master Trust does not involve “assets of” a disabled individual.

Although we conclude the KY and MS Master Trusts do not involve valid pool trusts based on the limited circumstances presented, we nonetheless address their provisions below as many of them overlap with the FL Master Trust provisions.

Established and Managed by a Non-Profit

To meet the first numbered requirement, the trust must be established and maintained by an organization that has been established and certified under a state nonprofit statute. See Act § 1917(d)(4)(C)(i); POMS SI 01120.203.B.2.c. NFSNI established each of the Master Trusts and manages them as Trustee. See Master Trusts, Recitals and Signature, Art. 5.B. The documents provided include a July XX, 2007, letter from the Internal Revenue Service (IRS) stating that NFSNI is an exempt organization under section 501(c)(3) of the Internal Revenue Code, and the IRS lists NFSNI as a tax-exempt organization on its website.⁵ Thus, it appears the Master Trusts are established and maintained by a nonprofit entity. See POMS SI 01120.203.F (referring to the procedures in POMS SI 01130.689.E for determining if an organization is a nonprofit or tax-exempt organization); POMS SI 01130.689.E.2 (indicating SSA considers an organization to be a non-profit organization if it can verify it is a tax-exempt organization with the IRS).

However, the Master Trusts create a possibility of management by a for-profit entity. The Trustee for each trust is NFSNI and may include its successors in interest and any appointed co-Trustees. See Master Trusts, Art. 5.B. The Master Trusts contain no restriction that successors in interest or co-Trustees must only be nonprofit entities. For pooled trusts, a nonprofit management entity like NFSNI may employ the services of a for-profit entity so long as the nonprofit retains ultimate managerial control. See POMS SI 01120.225.B, D. However, such a for-profit entity employed by a nonprofit pooled trust management entity cannot make discretionary disbursements. See POMS SI 01120.225.E. Here, the potential exists that for-profit successors in interest or co-Trustees could exercise all the powers of the Trustee, including making discretionary disbursements for a Beneficiary’s supplemental needs. See Master Trusts, Art. 5.B., 11, 13.2. We have not received any material indicating NFSNI has actually appointed a for-profit successor in interest or co-Trustee for any of the Master Trusts involved in this opinion. Thus, we conclude the Master Trusts meet the first numbered requirement of the pooled trust exception. However, because other revisions to the Master Trusts are required as discussed below, NFSNI should consider redefining “Trustee” or the powers to be exercised by a co-Trustee to ensure a nonprofit entity retains ultimate managerial control of the Master Trusts at all times.

Separate Accounts and Pooled Investment

To satisfy the second numbered requirement, the trust must maintain a separate account for each trust beneficiary, although the funds may be pooled for investment and management purposes. See Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.B.2.d. The trust must also be able to provide an accounting for each beneficiary’s individual account. See POMS SI 01120.203.B.2.d. The property of each Master Trust is considered “one entity” for investment purposes, but each sub-account is administered for the sole benefit of individual Beneficiaries. See Master Trusts, Art. 2. A Beneficiary of one of the Master Trusts is entitled to an annual accounting. See Master Trusts, Art. 10.2. Our review confirms that the Master Trusts meet the second numbered requirement of the pooled trust exception.

Established for the Sole Benefit of Disabled Individuals

The third numbered requirement mandates that the accounts in the trust are established for the sole benefit of individuals who are disabled within the meaning of the Act. See Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.e. SSA considers a trust to be for the sole benefit of an individual “if the trust benefits no one but that individual, whether at the time the trust is established or at any time for the remainder of the individual’s life.” POMS SI 001120.201.F.2.a. More specifically, aside from payments for goods or services for the trust beneficiary and reasonable administrative expenses, the trust must not:

(1) provide a benefit to any other individual or entity during the disabled individual’s lifetime; or

(2) allow for termination of a trust account prior to the individual’s death and payment of the assets to another individual or entity. See POMS SI 001120.201.F.2; POMS SI 01120.203.B.2.e.

Our review of the Master Trusts confirms that they limit lifetime distributions to a Beneficiary or to a third-party for the benefit of the Beneficiary. See FL Master Trust, Art. 5.J., 13.5; KY Master Trust, Art. 5.J., 13.5 and KY Joinder, § I.K.; MS Master Trust, Art. 5.J., 13.6. The Master Trusts allow for reasonable compensation for Trustees. See Master Trusts, Art. 15.8. The Master Trusts also charge Beneficiaries an annual fee of 1.5% of the sub-account balance to pay for “day-to-day administration” of the sub-account. Joinder Agreements, § III. These provisions generally comply with the “sole benefit” requirement. See POMS SI 01120.201.F.1, F.2.b.-c.

However, certain provisions of the Master Trusts could be read to allow a benefit to third parties during a Beneficiary’s lifetime. The Master Trusts allow the Trustee to charge “extraordinary administrative expenses or for the legal defense of the Trust Pool” pro-rata to all sub-accounts. Master Trusts, Art. 10.4. Extraordinary administrative expenses or legal challenges incurred by specific sub-accounts will only be charged to the affected sub-accounts, unless the issue “may materially affect the integrity or administration of other sub-accounts.” Id. In addition, the Master Trusts provide that the trust will indemnify Trustees and their agents for “any and all claims, actions, suits, liabilities, fines or penalties.” Master Trusts, Art. 15.10.⁶ The relevant POMS provision provides that only payments of legal costs or services rendered “on behalf of the individual with regard to the trust” do not violate the sole benefit rule. POMS SI 01120.201.F.2.c. Here, the Master Trusts’ provisions contemplate potentially using sub-account assets to pay for administrative or legal expenses without requiring that a Beneficiary had actually incurred those expenses. The provisions therefore contemplate the potential use of assets in a Beneficiary’s sub-account for the benefit of others besides the Beneficiary, and thus the sub-accounts are not established for the “sole benefit” of any sub-account holder.

The Master Trusts also contain early termination provisions that allow for the termination of a trust sub-account before the death of the Beneficiary. See Master Trusts, Art. 16.1. Early termination provisions generally violate the third statutory element required for valid pooled trusts. See POMS SI 01120.203.B.2.e. Such provisions may be acceptable if they otherwise comply with all the requirements for pooled trusts and provide for Medicaid payback, disallow third parties to benefit except for payment of certain approved expenses, and give termination power to someone other than the trust beneficiary. See POMS SI 01120.199.F. However, the Master Trusts’ early termination provisions here do not satisfy any of these requirements. See Master Trusts, Art. 16.1. Where an early termination provision does not satisfy the above requirements, it may still be acceptable if it “contain[s] specific language” that limits distribution only to another valid pooled trust and it disallows other expenses. POMS SI 01120.199.F.2. Here, NFSNI may terminate a Beneficiary’s sub-account and “transfer the assets in the Beneficiary’s [sub-account] . . . to a qualified private or geographically appropriate and qualified not-for-profit pooled special needs trust.” Master Trusts, Art. 16.1. The term “pooled special needs trust” is not sufficiently specific to limit transfer of a sub-account’s funds to another valid pooled trust. See POMS SI 01120.199.F.2. Therefore, the early termination provision violates the “sole benefit” requirement for pooled trusts.

We also note that the MS Master Trust may purchase a vehicle for a Beneficiary provided the owner of the vehicle is not the MS Master Trust. See MS Master Trust, Art. 13.3.7. If funds from a trust that is a resource are used to purchase a vehicle, the individual (or the trust) must be shown as its owner. See POMS SI 01120.201.F.1. The documents provided do not indicate that a vehicle was purchased for MS Recipient or that the owner was listed as someone other than MS Recipient. Thus, this provision does not violate the “sole benefit” requirement based on the information presented. However, because other revisions to the MS Master Trust are required, NFSNI should consider modifying the vehicle-purchase provision to clarify who will be listed as the owner of a vehicle purchased for a Beneficiary of the MS Master Trust.

Medicaid Reimbursement

To meet the fourth numbered requirement, the trust instrument must contain specific language providing that, to the extent that amounts remaining in an individual’s account upon his or her death are not retained by the trust, the trust will pay the remaining amount to the state(s) up to the total amount of medical assistance state Medicaid plan(s) paid on behalf of the individual. See Act § 1917(d)(4)(C)(iv); POMS SI 01120.203.B.2.g. The trust must contain language “substantially similar” to the language in the Act and POMS. POMS SI 01120.203.B.2.g. Further, the trust “must provide payback for any State(s) that may have provided medical assistance under the State Medicaid plan(s) and not be limited to any particular State(s).” Id.

The Master Trusts provide that, to the extent any amounts remain in a sub-account after payment of reasonable and allowable administrative expenses and amounts retained by the Master Trusts, the respective state Medicaid agencies “shall be first payee and have priority of payment over any other debts and administrative expenses” except those permitted by SSA policy. FL and KY Master Trusts, Art. 14.1; MS Master Trust, Art. 14. If a Beneficiary has received Medicaid benefits in more than one state, each state that has provided benefits will be repaid a proportionate share of the amount remaining in the Beneficiary’s sub-account. See FL and KY Master Trusts, Art. 14.2; MS Master Trust, Art. 14.

This language is insufficient to meet the fourth numbered requirement because the language is not substantially similar to that required by the POMS. The Medicaid payback provisions at issue limit the payback to either the state in which the respective trust is established or to multiple states. For example, a Beneficiary participating in the MS Master Trust could receive Medicaid assistance only from Alabama and, upon death, his or her sub-account would not be required to repay Alabama for any Medicaid assistance. This language is therefore insufficient to satisfy the fourth numbered requirement for pooled trusts.⁷

Severability Clauses

The Master Trusts state that, if any provision of the trust is deemed invalid, that provision is invalidated. See Master Trusts, Art. 15.4, Joinder Agreements, § IX.C. According to the Master Trusts, the invalidated provision will not invalidate the remaining provisions of the trust. See id. However, for SSI purposes, a null and void clause or savings clause does not cure an otherwise defective trust instrument. See POMS SI 01120.227.D. To qualify for the pooled trust exception, a trust must meet the criteria in section 1917(d)(4)(C) without regard to its severability clause. See POMS SI 01120.227.D.1. Thus, the Master Trusts’ severability clause does not nullify or sever the provisions discussed above that do not satisfy the pooled trust requirements. See POMS SI 01120.227.D.

CONCLUSION

For the reasons discussed above, the Master Trusts do not meet all the requirements of the pooled trust exception under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS.

C. PS 17-033 Resource Status of a Trust Governed by Florida Law – Supplemental Option

Date: January 11, 2017

1. Syllabus

The Regional Chief Counsel (RCC) opinion examines whether the Settlement Solutions National Pooled Trust Second Restatement (Master Trust) complies with the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS). It was concluded that the amended Master Trust complies with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS.

2. Opinion

QUESTION

Whether the Settlement Solutions National Pooled Trust Second Restatement (Master Trust) complies with the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS).

OPINION

The amended Master Trust complies with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS.

BACKGROUND

In a memorandum dated April 27, 2016, our office advised that the August 2009 Master Trust for the Settlement Solutions National Pooled Trust did not comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS. See POMS PS 01825.011 (PS 16-125). On March 16, 2016, the Foundation For Those With Special Needs, Inc. (Foundation), the successor trustee, amended the Master Trust. In a memorandum dated October 17, 2016, our office advised that the March 2016 Master Trust did not comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS.*⁸ We explained that, as written, the trust sub-accounts were not established for the sole benefit of each beneficiary. In particular, Article 7, section 7.01, of the March 2016 Master Trust allowed the Trustee to apportion the costs and expenses of managing the Master Trust on a pro rata basis to all trust sub-accounts or to charge only the affected sub-account.

On December 9, 2016, the Foundation amended Article 7, section 7.01, to read:

General administrative costs and expenses of the Trust shall be a proper expense of the Trust overall. Associated costs, if any, pertaining to a particular sub-account shall be a proper expense of the Trust but shall be charged only against the Trust sub-account about which the Trustee seeks such advice or assistance.

Settlement Solutions National Pooled Trust Second Restatement (Trust. Decl.).

DISCUSSION

As discussed in our October 17, 2016 memorandum, to establish a pooled trust under section 1917(d)(4)(C) of the Act, the accounts in the trust must be “established solely for the benefit of individuals who are disabled (as defined in section 1614(a)(3)).” Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.a. A trust is established for the sole benefit of the individual if the trust benefits no one but the individual, whether at the time the trust is established or at any time during the individual’s lifetime. See POMS SI 01120.201.F.2.a. Generally, a trust is not for the sole benefit of an individual if the trust account: (a) provides a benefit to another individual or entity during the individual’s lifetime; or (b) allows for termination of the trust account prior to the individual’s death and payment of the corpus to another individual or entity. See POMS SI 01120.203.B.2.e. The trust, however, can provide for reasonable compensation to manage the trust, as well as reasonable legal costs rendered on behalf of the individual with regard to the trust. See POMS SI 01120.201.F.2.c.

The amended Master Trust complies with the remaining requirements in 1917(d)(4)(C) of the Act and the POMS provisions implementing those requirements, as discussed in our October 17, 2016 memorandum.

CONCLUSION

The Master Trust, as amended, complies with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the implementing POMS provisions.

D. PS 17-026 Resource Status of a Trust Governed by Florida Law – Supplemental Opinion

Date: December 16, 2016

1. Syllabus

The Regional Chief Counsel (RCC) opinion examines whether the Florida Public Guardianship Pooled Special Needs Trust (Amended Master Trust) meets the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS). It was concluded that the Amended Master Trust complies with all the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant POMS provisions.

2. Opinion

QUESTION

Whether the Florida Public Guardianship Pooled Special Needs Trust (Amended Master Trust) meets the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS).

OPINION

The Amended Master Trust complies with all the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant POMS provisions.

BACKGROUND

In a memorandum dated August 5, 2016, we advised that the Foundation for Indigent Guardianship, Inc., for the State of Florida Public Guardianship Pooled Special Needs Trust (Master Trust) did not meet the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant POMS provisions. We explained that the Master Trust Declaration of the Foundation for Indigent Guardianship, Inc., for the State of Florida Public Guardianship Pooled Special Needs Trust (Declaration) did not definitively show that the Master Trust was established and managed by a nonprofit association and that it did not show that trust sub-accounts were established solely for the benefit of each beneficiary.

In particular, the Declaration, at Article 9, §§ 9.6, 9.10, allowed for a Trust Protector to appoint a Successor Trustee and the Master Trust did not explicitly limit the Trust Protector’s authority to appoint only a nonprofit association to such role. Article 11, § 11.8, of the Declaration also allowed the Trust Protector and Trustees to delegate any rights or duties to service providers without an explicit requirement for such providers to be nonprofit associations. Under Article 9, § 9.9, of the Declaration, the Trust Protector was also entitled to compensation and reimbursement for costs and expenses incurred in the management and administration of the Master Trust, which suggested that the Trust Protector, which was not a nonprofit association, might take actions that would be considered management of the Master Trust. The Declaration further contained provisions that resulted in a finding that the Trust sub-accounts were not established for the sole benefit of each beneficiary. Article 7, § 7.1, contained provisions that could have allowed the Administrative Trustee to refund property to a grantor other than the trust sub-account beneficiary during the beneficiary’s lifetime. Article 8, § 8.5, also allowed any costs of defending the Master Trust or any sub-accounts in litigation or dispute resolution to be apportioned on a pro rata basis to all sub-accounts.

On November 28, 2016, the Foundation for Indigent Guardianship, Inc. (FIG), a nonprofit association,⁹ amended the Master Trust. See Amended and Restated Master Trust Declaration of the Florida Public Guardianship Pooled Special Needs Trust (Amended Declaration). The Amended Declaration provides that the Amended Master Trust was established by FIG and the Administrative Trustee, the Advocates & Guardians for the Elderly & Disabled, Inc. (AGED), a nonprofit organization,¹⁰ as a pooled special needs trust pursuant 42 U.S.C. § 1396p (section 1917 of the Act) for the sole benefit of Trust beneficiaries under the Amended Master Trust. See Amended Declaration, Art. 1, §§ 1.1, 1.4, Art. 2, § 2.1. Trust beneficiaries must be individuals considered disabled as defined in section 1614(a)(3) of the Act. See Amended Declaration, Art. 1, § 1.16. The Amended Declaration also provides that a Trust Beneficiary Advocate may, but is not required to be, appointed and that such person or entity assists a grantor or beneficiary in working with the Administrative Trustee to accomplish the intent and purpose of a particular joinder agreement. See Amended Declaration, Art. 1, § 1.17, Art. 4, § 4.2(E).

The Administrative Trustee manages and administers the Trust sub-accounts, including determining the amount of each sub-account to invest and making decisions regarding the use of funds for each beneficiary. See Amended Declaration, Art. 2, § 2.6. FIG has the sole authority to remove the Administrative Trustee and appoint a Successor Administrative Trustee, which must also be a nonprofit entity. See Amended Declaration, Art. 2, §§ 2.1 (stating that the Amended Master Trust “is and shall” be managed by a nonprofit corporation), 2.7. Although the Amended Master Trust allows for delegation of investment decision-making authority to an investment agent as provided by Florida State law, such investment agent remains subordinate to the Administrative Trustee as the Administrative Trustee and FIG can change the investment agent on 30 days’ notice. See Amended Declaration, Art. 9, § 9.3.

A separate Trust sub-account is established and maintained for the sole benefit of each beneficiary and such sub-accounts are pooled for investment and management purposes. See Amended Declaration, Art. 1, § 1.18, Art. 6, §§ 6.1, 6.2. A grantor for the trust sub-accounts can be a parent, grandparent, legal guardian, the beneficiary, or any person or entity acting pursuant to a court order who contributes money or property to the trust sub-account, including any person or entity that contributes his, her, or its own property for the sole benefit of a beneficiary, whether by gift, will, contract, or agreement. See Amended Declaration, Art. 1, § 1.7. The Amended Master Trust maintains records for each sub-account, provides an accounting for each beneficiary to FIG monthly, and allows inspection at all reasonable times of all records by beneficiaries or their Trust Beneficiary Advocate. See Amended Declaration, Art. 6, §§ 6.6, 6.7.

The assets in the Amended Master Trust or held in any sub-account for a beneficiary are not intended for the primary support of the beneficiaries. See Amended Declaration, Art. 3, § 3.1, Art. 5, § 5.1. Distributions should not be made to or for the benefit of a beneficiary if the effect of such distribution would be to disqualify or prevent a beneficiary from becoming eligible for any means-tested government assistance program. See Amended Declaration, Art. 1, § 1.11, Art. 5, § 5.2. The Administrative Trustee, in its sole discretion, can make a distribution for food or shelter even though such distribution may reduce or eliminate for a period of time Supplemental Security Income or other means-tested government assistance. See Amended Declaration, Art. 5, § 5.2. The trustees and grantors do not owe any obligation of support to any of the beneficiaries and no beneficiaries have any right of entitlement to trust corpus or income, except as the Administrative Trustee elects to disburse the same in its sole discretion. See Amended Declaration, Art. 3, § 3.1, Art. 5, §§ 5.1, 5.3. No part of the Master Trust or a trust sub-account can be subject to anticipation or assignment by a beneficiary, and cannot be subject to attachment or control by any public or private creditor of the beneficiary or be taken by any legal or equitable process by any voluntary or involuntary creditor, including those providing support and maintenance to a beneficiary. See Amended Declaration, Art. 3, § 3.2. A beneficiary cannot compel a distribution from the Amended Master Trust or a trust sub-account maintained for that beneficiary under any circumstances. See Amended Declaration, Art. 3, § 3.1. All distributions are made in the sole discretion of the Administrative Trustee. See Amended Declaration, Art. 5, § 5.1.

Upon the death of a beneficiary, any amounts remaining in that beneficiary’s trust sub-account are surplus and retained and administered according to 42 U.S.C. § 1396p(d)(4)(C). See Amended Declaration, Art. 7, § 7.2. All property not retained by the Amended Master Trust after a beneficiary’s death is first used to pay administrative expenses as authorized under POMS SI 01120.203, then distributed to each state in which the beneficiary received government assistance up to the amount of that assistance. See Amended Declaration, Art. 7, § 7.3. A trust sub-account may only be terminated upon the death of the beneficiary or the depletion of all funds in the account. See Amended Declaration, Art. 8.

The Declaration provides that the costs, fees, and expenses of defending the Amended Master Trust or any sub-accounts¹¹ in litigation or dispute resolution may be charged against the sub-account affected by the action defended against. See Amended Declaration, Art. 6, § 6.9.

DISCUSSION

Supplemental Security Income (SSI) is a general public assistance program for aged, blind, or disabled individuals who meet certain income and resource restrictions and other eligibility requirements. See Act §§ 1602, 1611(a); 20 C.F.R. §§ 416.110, 416.202 (2016).¹² “Resources” include cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for his or her support and maintenance. See Act § 1613; 20 C.F.R. § 416.1201(a). “If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . .” 20 C.F.R. § 416.1201(a)(1); see POMS SI 01120.010.B.

Generally, SSA must consider the principal or corpus of a trust established with the assets of an individual to be a resource of the individual. See Act § 1613(e)(1)-(3); POMS SI 01120.201.A.1. However, the rules in section 1613(e) of the Act do not apply to trusts described in section 1917(d)(4) of the Act. See Act § 1613(e)(5); POMS SI 01120.201.A.1; POMS SI 01120.203.A. Trusts created in accordance with paragraphs (A) and (C) of section 1917(d)(4) are commonly known as Medicaid trust exceptions and consist of two types: Special Needs Trusts (paragraph (A)) and Pooled Trusts (paragraph (C)). See POMS SI 01120.203.A. To satisfy the exception for pooled trusts under section 1917(d)(4)(C), a trust must contain the assets of an individual who is disabled (as defined in section 1614(a)(3)) and meet the following conditions:

The trust is established and managed by a nonprofit association;

A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts;

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

The Amended Master Trust complies with all the requirements for a pooled trust under section 1917(d)(4)(C) of Act and the implementing POMS provisions. Unlike the prior Master Trust, the Amended Declaration shows that the Amended Master Trust was established by and is managed by nonprofit associations and the sub-accounts are established for the sole benefit of each beneficiary.

The entities that established the Amended Master Trust, FIG and AGED, are nonprofit associations as shown by the IRS inquiries cited above. See Amended Declaration, Art. 1, §§ 1.1, 1.4. The Amended Declaration also shows that AGED, as the Administrative Trustee, manages the Amended Master Trust. See Amended Declaration, Art., 2 § 2.6, Art. 5, §§ 5.1-5.6. Even if the Administrative Trustee is changed, the Amended Declaration provides that any successor trustee managing the Amended Master Trust “shall” be a non-profit association. See Amended Declaration, Art. 2, §§ 2.1, 2.7. The Amended Declaration removed the position of a Trust Protector that the original Master Trust contemplated and which had been granted contingent authorities that could have resulted in trust management by an entity other than a nonprofit association. Although there is a new Trust Beneficiary Advocate position allowed in the Amended Master Trust, there is no indication that such individual or entity has any ability to control or manage the Amended Master Trust or the trust sub-accounts. See Amended Declaration, Art. 1, § 1.17. Additionally, the Amended Master Trust allows for delegation of investment decision-making authority to an investment agent but such investment agent remains subordinate to the Administrative Trustee and FIG at all times. See Amended Declaration, Art. 9, § 9.3.

Next, the trust sub-accounts are established solely for the benefit of each beneficiary. See Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.B.2.a. A trust is established for the sole benefit of the individual if the trust benefits no one but the individual, whether at the time the trust is established or at any time during the individual’s lifetime. See POMS SI 01120.201.F.2.a. Generally, a trust is not for the sole benefit of an individual if the trust account: (a) provides a benefit to another individual or entity during the individual’s lifetime; or (b) allows for termination of the trust account prior to the individual’s death and payment of the corpus to another individual or entity. See POMS SI 01120.203.B.2.e.

The Amended Declaration represents that the trust sub-accounts are established for the sole benefit of each beneficiary and we found no provisions creating contingent interests that could benefit other parties during the beneficiary’s lifetime. The trust sub-accounts cannot be terminated by anything other than the death of the beneficiary or the depletion of the funds in the trust-sub account. See Amended Declaration, Art. 8. The Amended Declaration permits the costs, fees, and expenses of defending the Amended Master Trust or any sub-accounts in litigation or dispute resolution to be levied only against trust sub-accounts affected by the action defended against. See Amended Declaration, Art. 6, § 6.9; POMS SI 01120.201.F.2.c. Therefore, the Amended Declaration does not contemplate the potential use of a beneficiary’s assets in a sub-account for the benefit of others besides the beneficiary, as had the original Master Trust.

The Amended Master Trust complies with the remaining requirements in 1917(d)(4)(C) of Act and the implementing POMS provisions. The Amended Master Trust consists of separate trust sub-accounts for each beneficiary that are pooled together for investment and management purposes. See Amended Declaration, Art. 1, § 1.18, Art. 6, §§ 6.1, 6.2; Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.B.2.a.¹³ The Administrative Trustee maintains records for each sub-account and provides an accounting for each beneficiary to FIG monthly and allows inspection at all reasonable times of all records by beneficiaries or their Trust Beneficiary Advocate. See Amended Declaration, Art. 6, §§ 6.6, 6.7; POMS SI 01120.203.B.2.d (providing the trust must be able to provide an accounting for each individual). The Amended Master Trust requires that the grantor establishing a trust sub-account be the beneficiary’s parent, grandparent, legal guardian, the beneficiary himself or herself, or a person acting at the direction of a court order to execute a Joinder Agreement. See Amended Declaration, Art. 1, § 1.7; Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.a, B.2.f. The Amended Master Trust also requires that the beneficiary for each trust sub-account be disabled as defined in section 1614(a)(3) of the Act. See Amended Declaration, Art. 1, § 1.16; Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.a. Finally, the Amended Declaration contains language stating that, to the extent property is not retained by the Amended Master Trust, the property in a beneficiary’s sub-account shall be distributed to each state in which the beneficiary received government assistance based on each state’s proportionate share and gives the states priority as first payee after expenses allowed by the POMS. See Amended Declaration, Art. 7, § 7.3; Act § 1917(d)(4)(C)(iv); POMS SI 01120.203.B.2.g.

CONCLUSION

The Amended Master Trust complies with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the implementing POMS provisions.

E. PS 16-184 State Law for Empty and Dry Trusts in Atlanta Region

Date: April 25, 2016

1. Syllabus

This Regional Chief Counsel opinion provides the State law related to trusts established with no funds (i.e., dry or empty trusts), for the States in Region IV to assist field offices in addressing questions regarding how such purported trusts should be considered under the Social Security Administration’s (agency) Supplemental Security Income (SSI) resource rules.

2. Opinion

QUESTION

You asked us to provide the State law related to trusts established with no funds (i.e., dry or empty trusts), for the States in Region IV to assist field offices in addressing questions regarding how such purported trusts should be considered under the Social Security Administration’s (agency) Supplemental Security Income (SSI) resource rules.

BACKGROUND

SSI is a general public assistance program for aged, blind, or disabled individuals who meet certain income and resource restrictions and other eligibility requirements. See Social Security Act (Act) §§ 1602, 1611(a); 20 C.F.R. §§ 416.110, 416.202 (2015). *¹⁴ “Resources” include cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to use for his or her support and maintenance. See Act § 1613; 20 C.F.R. § 416.1201(a). “If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . .” 20 C.F.R. § 416.1201(a)(1); see Program Operations Manual System (POMS) SI 01120.010.B. Even if property has no current market value, it may still be considered a resource if it is property that an individual owns and has the right to convert to cash, and the individual is not legally restricted from using the property for his or her support and maintenance. See POMS SI 01110.100.B.2, B.3.

Property held in a trust may or may not be considered a resource for SSI purposes. See POMS SI 01120.200.A.1. Generally, the agency must consider the principal or corpus of a trust established with the assets of an individual to be a resource of the individual. See Act § 1613(e)(1)-(3); POMS SI 01120.201.A.1. Trust principal is a countable resource if the individual (claimant, recipient, deemer) has legal authority to revoke or terminate the trust and use the funds to meet his or her food or shelter needs, or if the individual can direct the use of the trust principal for his or her support and maintenance under the terms of the trust. See POMS SI 01120.200.D.1.a. Also, if an individual can sell his or her beneficial interest in the trust, that interest is a resource. See POMS SI 01120.200.D.1.a. Conversely, if an individual does not have legal authority to revoke or terminate the trust or to direct the use of the trust assets for his own her own support and maintenance, the trust principal is not a resource for SSI purposes. See POMS SI 01120.200.D.2. The revocability of a trust and the ability to direct the use of trust principal depends on the terms in the trust agreement and on State law. See POMS SI 01120.200.D.2.

DISCUSSION

Alabama:

Alabama statutory law indicates a trust may be established through the conveyance of property but does not otherwise explain the property requirements to establish a trust. See Ala. Code § 19-3B-401, comment (2016). Alabama case law, however, has clarified that the existence of property held by a trustee for the benefit of a trust as an essential element of a trust. See Corretti v. First Nat’l Bank of Birmingham, 276 So. 2d 141, 147 (Ala. 1973); Gordon v. Central Park Little Boys League, 119 So. 2d 23, 27 (Ala. 1960). Thus, Alabama law does not appear to recognize a trust that is established with no funds.

Florida:

Florida statutory law indicates a trust may be created when property or a property interest is transferred to a trustee, but does not further explain the property requirements to establish a trust. See Fla. Stat. Ann. § 736.0401 (West 2016). Florida case law, however, indicates an express trust is not created until property is conveyed for the purpose of the trust. See McLemore v. McLemore, 675 So. 2d 202, 205 (Fla. Dist. Ct. App. 1996); In re Herskowitz’s Estate, 338 So. 2d 210, 212 (Fla. Dist. Ct. App. 1976). Thus, Florida law does not appear to recognize a trust that is established with no funds.

Georgia:

Georgia statutory law requires express trusts to include trust property. See Ga. Code Ann. § 53-12-20 (West 2016). Georgia case law also holds that an essential element of an express trust is the existence of trust property. See Hayes v. Clark, 530 S.E.2d 38, 39 (Ga. Ct. App. 2000); Lummus Supply Co. v. Fidelity Fed. Sav. & Loan Ass’n, 234 S.E.2d 671, 672 (Ga. Ct. App. 1977). Thus, Georgia law does not appear to recognize a trust that is established with no funds.

Kentucky:

Kentucky statutory law indicates a trust may be created through the transfer of property to a trustee or by a declaration that an owner of property has made that the owner holds identifiable property as trustee, but does not further explain the property requirements to establish a trust. See Ky. Rev. Stat. Ann. § 386B.4-010 (West 2016). Kentucky case law clarifies that a fundamental element of a trust is the devotion of trust property to the benefit of the trust beneficiaries. See Siter v. Hall, 294 S.W. 767, 770 (Ky. Ct. App. 1927). Such property must be in existence and identified to establish the trust. See DeLeuil’s Ex’rs v. DeLeuil, 74 S.W.2d 474, 477 (Ky. Ct. App. 1934). Thus, Kentucky law does not appear to recognize a trust that is established with no funds.

Mississippi:

Under the Family Trust Preservation Act of 1998, Mississippi statutory law defines trusts to mean an express trust, private or charitable, or a trust created or determined by a judgment or decree under which the trust is to be administered in the manner of an express trust. See Miss. Code Ann. § 91-9-501(a) (West 2016). Mississippi excludes from this definition of a trust the following: constructive trusts, other than those created by a judgment or decree under which the trust is to be administered in the manner of an express trust, and resulting trusts; guardianships and conservatorships; executors and administrators of decedent's estates; totten trust accounts; custodial arrangements pursuant to the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act of any state; business trusts that are taxed as partnerships or corporations; investment trusts subject to regulation under the laws of this state or any other jurisdiction; common trust funds; voting trusts; security arrangements; transfers in trust for purpose of suit or enforcement of a claim of right; liquidation trusts; or any arrangement under which a person is nominee or escrowee for another. See Miss. Code Ann. § 91-9-501(b). Missisippi statutory law does not appear to contain any additional definition of a trust or further explanation regarding any property requirements to establish a trust.

Mississippi case law also does not appear to address whether there are property requirements to establish a trust. Cases that describe the essentials of an express trust do not address this question. See, e.g., Smiley v. Yllander, 105 So. 3d 1171, 1175 (Miss. Ct. App. 2012) (identifying two types of trusts, express and implied, and noting express trusts or any trust holding real property must be written, while implied may either be constructive or resulting, without addressing whether property is a prerequisite to establishing any type of trust); Sligh v. First Nat’l Bank of Holmes Cty., 735 So. 2d 963, 974 (Miss. 1999) (describing a trustee’s duties and noting guarantorships and conservatorships are not trusts); Ogle v. Durley, 77 So. 2d 688, 691-92 (Miss. 1955) (explaining that real property that was devised to a survivor in a will with condition of splitting the income of said property with another survivor did not create trust, but instead created an equitable charge). Thus, we found no Mississippi statute or case law authorizing the establishment of a trust with no funds.

North Carolina:

North Carolina statutory law indicates a trust may be established when property is transferred to or held by a trustee, but does not further describe the property requirements to establish a trust. See N.C. Gen Stat. Ann. § 36C-4-401 (West 2016). North Carolina case law, however, requires the conveyance of property in order for a trust to be created. See Bissette v. Harrod, 738 S.E.2d 792, 799 (N.C. Ct. App. 2013). Thus, North Carolina law does not appear to recognize a trust that is established with no funds.

South Carolina:

South Carolina statutory law indicates a trust may be established when property is transferred to a trustee or through a written, signed declaration from an owner of property that the owner is holding the property as a trustee, but does not further explain the property requirements to establish a trust. See S.C. Code Ann. § 62-7-401 (2016). South Carolina case law, however, indicates that a trust generally can exist only if it is funded. See Foster v. Foster, 682 S.E.2d 312, 314 (S.C. Ct. App. 2009) (listing trust res as a necessary element to establish a trust); Mayer v. M.S. Bailey & Son, 555 S.E.2d 406, 410 (S.C. Ct. App. 2001) (noting a trust generally can exist only if it is funded). Thus, South Carolina law does not appear to recognize a trust that is established with no funds.

Tennessee:

Tennessee’s Uniform Trust Code includes a provision identifying the requirements for creating a trust particularly with respect to identifying a settlor with the requisite capacity and intention, a trustee with duties to perform, and a definite beneficiary. See Tenn. Code Ann. § 35-15-402 (West 2016). However, neither this provision nor other provisions of Tennessee statutory law appear to discuss whether the trust must contain property. Under Tennessee case law, however, for an express trust to exist, the trust must contain a corpus, or property. See Myers v. Myers, 891 S.W.2d 216, 218 (Tenn. Ct. App. 1994). Thus, Tennessee law does not appear to recognize a trust that is established with no funds.

CONCLUSION

If you have any questions regarding this memorandum, please contact the undersigned.

F. PS 16-172 Resource Status of a Trust Governed by Florida Law

Date: August 5, 2016

1. Syllabus

This Regional Chief Counsel (RCC) opinion discusses whether the Foundation for Indigent Guardianship, Inc. for the State of Florida Public Guardianship Pooled Special Needs Trust (Master Trust) meets all of the requirements for a pooled trust exception under section 1917(d)(4)(C) of the Social Security Act (Act). The RCC determined the Master Trust does not meet all the requirements for the pooled trust exception as the trust does not definitively show that it was established by and is managed by a nonprofit association. Furthermore, the trust sub-accounts are not established solely for the benefit of each beneficiary.

2. Opinion

QUESTION

You asked whether the Foundation for Indigent Guardianship, Inc. for the State of Florida Public Guardianship Pooled Special Needs Trust (Master Trust) meets the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS).

OPINION

The Master Trust does not comply with all the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant POMS provisions. As written, the Master Trust does not definitively show that it was established by and is managed by a nonprofit association and does not show that trust sub-accounts are established solely for the benefit of each beneficiary. The Master Trust meets the other requirements of section 1917(d)(4)(C) and the relevant POMS provisions.

BACKGROUND

The Foundation for Indigent Guardianship, Inc., (FIG) and The Center for Special Needs Trust Administration, Inc., (Administrative Trustee) established the Master Trust as a pooled “special needs” trust pursuant to 42 U.S.C. § 1396p (section 1917 of the Act) for the benefit of disabled persons who become beneficiaries of the Master Trust. See Master Trust Declaration of the Foundation for Indigent Guardianship, Inc., for the State of Florida Public Guardianship Pooled Special Needs Trust (Declaration), Art. 1, § 1.1. The Declaration identifies FIG and Administrative Trustee as nonprofit organizations, and the Internal Revenue Service (IRS) lists FIG as a tax-exempt organization. See Declaration, pmbl., Art. 1, §§ 1.6, 1.7; Exempt Organizations Select Check, https://apps.irs.gov/app/eos/pub78Search.do?ein1=&names=%22foundation+for+indigent+guardianship%22&city=&state=FL&country=US&deductibility=all&dispatchMethod=searchCharities&submitName=Search (last visited July 22, 2016). The Declaration provides for a “Trust Protector,” which is identified as Berkshire Trust Advisory Services Corporation (Berkshire) or any successor in interest to Berkshire, which is identified as a Florida corporation. See Declaration, Art. 2, § 2.10. Unlike FIG, Berkshire is not listed on the IRS tax-exempt list. The Declaration provides that no trust protector shall ever be responsible for investing or managing the Master Trust’s assets or serve as custodian of them and that the Administrative Trustee is responsible for the financial management of the trust assets. See Declaration, Art. 9, § 9.5. The Trust Protector is authorized to appoint a Successor Administrative Trustee, which can be a bank, trust company, or attorney, which has experience in administration of special needs trusts. See Declaration, Art. 9, §§ 9.6, 9.10. Additionally, the Declaration allows the Trust Protector or Trustees to delegate any rights or duties to service providers to the extent permitted by law. See Declaration, Art. 11, § 11.8. The Declaration also entitles the Trust Protector to compensation and to be reimbursed for any costs and expenses incurred “in the management and administration” of the Master Trust. See Declaration, Art. 9, § 9.9.

The Declaration provides that a separate Master Trust sub-account is established and maintained for the sole benefit of each beneficiary and such sub-accounts are pooled for investment and management purposes. See Declaration, Art. 2, § 2.11, Art. 8, § 8.1. A grantor for the trust sub-accounts can be a parent, grandparent, legal guardian, the beneficiary, or any person or entity acting pursuant to a court order who contributes money or property to the Master Trust, including any person or entity that contributes his, her, or its own property for the sole benefit of a beneficiary, whether by gift, will, contract, or agreement. See Declaration, Art. 2, § 2.2. The Master Trust maintains records for each sub-account and provides an accounting for each beneficiary upon reasonable request, but no more often than annually. See Declaration, Art. 8, §§ 8.1, 8.3.

The Declaration states that beneficiaries of the Master Trust are disabled persons as defined by section 1614(a)(3) of the Act. See Declaration, Art. 2, § 2.1. The assets in the Master Trust or held in any sub-account for a beneficiary are not intended for the primary support of the beneficiaries and can be used only for their supplemental care and/or supplemental needs. See Declaration, Art. 3, § 3.1, Art. 5, § 5.1. The trustees and grantors do not owe any obligation of support to any of the beneficiaries and no beneficiaries have any right of entitlement to trust corpus or income, except as the Administrative Trustee elects to disburse the same in its sole, complete, absolute, and unfettered discretion. See Declaration, Art. 3, § 3.1. No part of the Master Trust or a trust sub-account can be subject to anticipation or assignment by a beneficiary, and cannot be subject to attachment or control by any public or private creditor of the beneficiary or be taken by any legal or equitable process by any voluntary or involuntary creditor, including those providing support and maintenance to a beneficiary. See Declaration, Art. 3, § 3.2. The beneficiary cannot compel a distribution from the Master Trust or a trust sub-account maintained for that beneficiary under any circumstances. See Declaration, Art. 3, § 3.2. All distributions are made in the sole and absolute discretion of the Administrative Trustee. See Declaration, Art. 5, § 5.1.

Upon the death of a beneficiary, any amounts remaining in that beneficiary’s Master Trust sub-account are retained by the Master Trust as surplus Master Trust property. See Declaration, Art. 6, § 6.1. All property not retained by the Master Trust after a beneficiary’s death is distributed to each state in which the beneficiary received government assistance up to the amount of that assistance. See Declaration, Art. 6, § 6.2. The Master Trust intends to and anticipates donating all retained surplus funds after payment of operating expenses to the Florida Statewide Public Guardianship Office or a successor agency. See Declaration, Art. 1, § 1.8, Art. 6, § 6.2.

In some circumstances where the Administrative Trustee believes that the principal or income in a Master Trust sub-account will be required to be used for the care of a beneficiary that has been or would be provided by a government, agency, or department thereof, the Administrative Trustee can exercise its discretion to, among other options, determine the Master Trust has become impossible to implement for the beneficiary and refund the property to a grantor. See Declaration, Art. 7, § 7.1(b). The Administrative Trustee is supposed to consider the consequences of any such distribution on a beneficiary’s public benefit to be consistent with the purpose of the Master Trust. See Declaration, Art. 7, § 7.1. Additionally, the Administrative Trustee may refund all or any portion of the property in a Master Trust sub-account to a grantor if it becomes impossible to fulfill the conditions of the Master Trust with regard to a beneficiary for reasons other than the death of the beneficiary. See Declaration, Art. 7, § 7.2.

The Declaration provides that the costs of defending the Master Trust or any Master Trust sub-accounts in litigation or dispute resolution may in the sole discretion of the Trust Protector be: a) apportioned on a pro rata basis to all Master Trust sub-accounts; or b) charged against the Master Trust sub-account affected by the action defended against. See Declaration, Art. 8, § 8.5. The Declaration also contains a severability clause providing that any provision of the Master Trust “adjudged invalid or unenforceable” under the laws of any place where the terms of the Master Trust are to be performed or sought to be enforced is deemed inoperative without invalidating such provision elsewhere or any of the other provisions of the Master Trust. See Declaration, Art. 11, § 11.6.

DISCUSSION

Supplemental Security Income (SSI) is a general public assistance program for aged, blind, or disabled individuals who meet certain income and resource restrictions and other eligibility requirements. See Act §§ 1602, 1611(a); 20 C.F.R. §§ 416.110, 416.202 (2016). “Resources” include cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for his or her support and maintenance. See Act § 1613; 20 C.F.R. § 416.1201(a). “If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . .” 20 C.F.R. § 416.1201(a)(1); see POMS SI 01120.010.B.

Generally, SSA must consider the principal or corpus of a trust established with the assets of an individual to be a resource of the individual. See Act § 1613(e)(1)-(3); POMS SI 01120.201.A.1. However, the rules in section 1613(e) of the Act do not apply to trusts described in section 1917(d)(4) of the Act. See Act § 1613(e)(5); POMS SI 01120.201.A.1; POMS SI 01120.203.A. Trusts created in accordance with paragraphs (A) and (C) of section 1917(d)(4) are commonly known as Medicaid trust exceptions and consist of two types: Special Needs Trusts (paragraph (A)) and Pooled Trusts (paragraph (C)). See POMS SI 01120.203.A. To satisfy the exception for pooled trusts under section 1917(d)(4)(C), a trust must contain the assets of an individual who is disabled (as defined in section 1614(a)(3)) and meet the following conditions:

(i) The trust is established and managed by a nonprofit association;

(ii) A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts;

(iii) Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1614(a)(3)) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court; and

(iv) To the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this title.

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

As written, the Master Trust does not comply with all the requirements for a pooled trust under section 1917(d)(4)(C) of Act and the implementing POMS provisions. Specifically, the Declaration does not definitively show that the Master Trust was established by and is managed by a nonprofit association and the sub-accounts are not established for the sole benefit of each beneficiary.

While at least one nonprofit association, FIG, established the Master Trust, it is not clear that a nonprofit association manages the Master Trust. The Trust Protector is not listed on the IRS tax-exempt list cited above. While the Declaration states no trust protector shall ever be responsible for investing or managing the Master Trust’s assets or serve as custodian and that the Administrative Trustee is responsible for the financial management of the trust assets, See Declaration, Art. 9, § 9.5, the Trust Protector is authorized to appoint a Successor Administrative Trustee. See Declaration, Art. 9, §§ 9.6, 9.10. Although the Declaration identifies a “Successor Trustee” as a person or entity meeting the nonprofit association requirement, see Declaration, Art. 2, § 2.8, the Trust Protector’s powers of appointment are not so narrowly defined and contemplate appointing entities that are not typically nonprofit associations, such as a bank, trust company, or attorney. See Declaration, Art. 9, § 9.10. These provisions call into question whether a Successor Trustee would be a nonprofit association as required. Additionally, the Declaration allows the Trust Protector or Trustees to delegate any rights or duties to service providers to the extent permitted by law and there is no explicit requirement for such providers to be nonprofit associations. See Declaration, Art. 11, § 11.8. Finally, the Trust Protector is entitled to compensation and to be reimbursed for any costs and expenses incurred “in the management and administration” of the Master Trust. See Declaration, Art. 9, § 9.9. This language suggests that the Trust Protector could take some actions that would be considered as management of the Master Trust.

Next, we find that the trust sub-accounts are not established solely for the benefit of each beneficiary. See Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.B.2.a. A trust is established for the sole benefit of the individual if the trust benefits no one but the individual, whether at the time the trust is established or at any time during the individual’s lifetime. See POMS SI 01120.201.F.2.a.

Generally, a trust is not for the sole benefit of an individual if the trust account:

(a) provides a benefit to another individual or entity during the individual’s lifetime; or

(b) allows for termination of the trust account prior to the individual’s death and payment of the corpus to another individual or entity. See POMS SI 01120.203.B.2.e.

Although the Declaration represents that the Trust sub-accounts are established for the sole benefit of each beneficiary, there are provisions in the Declaration creating contingent interests that could benefit other parties during the individual’s lifetime. If the Administrative Trustee believes that the principal or income in a Trust sub-account for a beneficiary will be required to be used for the care of a beneficiary that has been or would be provided by a government, agency, the Administrative Trustee could refund the property to a grantor. See Declaration Art. 7, § 7.1(b). Although the Administrative Trustee is supposed to consider the consequences of any such distribution on a beneficiary’s public benefit to be consistent with the purpose of the Master Trust, the Administrative Trustee is not expressly required to act in such a manner to avoid distributing Trust sub-account principal or income to someone other than the beneficiary. See Declaration, Art. 7, § 7.1. This results in the possibility that other individuals would benefit from the Trust sub-account during the beneficiary’s lifetime. See POMS SI 01120.203.B.2.e.

The Declaration also permits the costs of defending the Master Trust or any sub-accounts in litigation or dispute resolution to potentially be apportioned on a pro ata basis to all sub-accounts in the discretion of the Trust Protector. See Declaration, Art. 8, § 8.5. The relevant POMS section provides that only legal costs or services rendered “on behalf of the individual with regard to the trust” do not violate the sole benefit rule. POMS SI 01120.201.F.2.c. Therefore, this section of the Declaration contemplates the potential use of a beneficiary’s assets in a sub-account for the benefit of others besides the beneficiary.

The Declaration contains a severability clause providing that any provision of the Master Trust “adjudged invalid or unenforceable” is deemed inoperative without invalidating such provision elsewhere or any of the other provisions of the Master Trust. See Declaration § 11.6. However, a null and void clause or savings clause does not cure an otherwise defective trust instrument for SSI purposes or overcome missing or conflicting trust provisions. See POMS SI 01120.227.D. To qualify for the pooled trust exception, the Master Trust must meet the criteria in section 1917(d)(4)(C) without regard to its severability clause and trust provisions that fail to meet any of the required criteria must be amended or removed to except the trust. See POMS SI 01120.227D.1. Thus, the Master Trust’s severability clause does not nullify or sever the provisions discussed above that do not comply with the pooled trust requirements of the Act and POMS.

The Master Trust complies with the remaining requirements in 1917(d)(4)(C) of Act and the implementing POMS provisions. FIG identifies itself as a nonprofit organization and the Internal Revenue Service (IRS) lists it as a tax-exempt organization on its website. See supra; Declaration § 1.6; Act § 1917(d)(4)(C)(i); POMS SI 01120.203.B.2.a; see also POMS SI 01130.689.E.2 (indicating SSA considers an organization to be a nonprofit organization if it can verify it is a tax-exempt organization with the IRS); POMS SI 01120.203.F (referring to the procedures in POMS SI 01130.689.E for determining if an organization is not for profit). The Master Trust consists of separate trust sub-accounts for each beneficiary that are pooled together for investment and management purposes. See Declaration, Art. 8, § 8.1; Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.B.2.a. The Master Trust maintains records for each sub-account and provides an accounting for each beneficiary upon reasonable request. See Declaration, Art. 8, §§ 8.1, 8.3; POMS SI 01120.203.B.2.d (providing the trust must be able to provide an accounting for each individual). The Master Trust requires that the grantor establishing a trust sub-account be the beneficiary’s parent, grandparent, legal guardian, the beneficiary himself or herself, or a person acting at the direction of a court order to execute a Joinder Agreement. See Declaration, Art. 2, § 2.2, Art. 4, § 4.2; Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.a, B.2.f. The Master Trust also requires that the beneficiary for each trust sub-account be disabled as defined in section 1614(a)(3) of the Act. See Declaration, Art. 2, § 2.1; Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.a. Finally, the Declaration contains language stating that, to the extent property is not retained by the Master Trust, the property in a beneficiary’s sub-account shall be distributed to each state in which the beneficiary received government assistance based on each state’s proportionate share and gives the states priority as first payee. See Declaration, Art. 6, § 6.2; Act § 1917(d)(4)(C)(iv); POMS SI 01120.203.B.2.g.

CONCLUSION

The Master Trust does not comply with all the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the implementing POMS provisions. As written, the Master Trust does not definitively show that it was established by and is managed by a nonprofit association and does not show that trust sub-accounts are established solely for the benefit of each beneficiary. The Declaration contains provisions sufficient to satisfy the other requirements under section 1917(d)(4)(C).

G. PS 16-156 Resource Status of a Trust Governed by Florida Law, Amended

Date: July 1, 2016

1. Syllabus

The Family Network on Disabilities National Pooled Trust (Master Trust), as amended on May 5, 2016, complies with the requirements for exception under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS).

2. Opinion

QUESTION

You have asked whether the amended Family Network on Disabilities National Pooled Trust (Master Trust) complies with the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS).

OPINION

The amended Master Trust complies with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS.

BACKGROUND

In a memorandum dated March 7, 2016, our office advised that the Master Trust established by the Family Network on Disabilities of Florida, Inc. (FND) did not comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS. See POMS PS 01825.011 (PS 16-091)1 . We explained that, as written, the trust sub-accounts were not established for the sole benefit of each beneficiary. See id. In particular, Article VII allowed the Trustee, under certain conditions, to terminate a beneficiary’s trust sub-account prior to the beneficiary’s death and use the sub-account trust property to benefit other individuals during the beneficiary’s lifetime. See id. Also, Article VIII, section 8.4, contemplated potential use of sub-account trust property for the benefit of others because it permitted the Trustee to charge on a pro rata basis to trust sub-accounts legal costs associated with defending “any” trust sub-account. See id.

On May 5, 2016, FND amended the Master Trust to delete Article VII in its entirety. See Third Amendment to Declaration of Trust (Trust. Decl.). FND also amended Article VII, section 8.4, to read:

Costs and expenses of defending the Trust, or any Trust sub-account, including attorneys’ fees incurred prior to, during, or after trial, and on appeal, against any claim, demand, legal action, equitable action, suit, or proceeding may, in the sole discretion of the Trustee, be charged against the Trust sub-account established on behalf of the individual beneficiary that is affected by the action defended against. Any such costs, expenses, and fees shall not be apportioned on a pro rata basis to all Trust sub-accounts unless all sub-accounts are affected by the action defended against.

Third Amendment to Trust. Decl.

DISCUSSION

As discussed in the March 7, 2016 memorandum, to establish a pooled trust under section 1917(d)(4)(C), the accounts in the trust must be “established solely for the benefit of individuals who are disabled (as defined in section 1614(a)(3)).”2 Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.a. A trust is established for the sole benefit of the individual if the trust benefits no one but the individual, whether at the time the trust is established or at any time during the individual’s lifetime. See POMS SI 01120.201.F.2.a. Generally, a trust is not for the sole benefit of an individual if the trust account: (a) provides a benefit to another individual or entity during the individual’s lifetime; or (b) allows for termination of the trust account prior to the individual’s death and payment of the corpus to another individual or entity. See POMS SI 01120.203.B.2.e. The trust, however, can provide for reasonable compensation to manage the trust, as well as reasonable legal costs rendered on behalf of the individual with regard to the trust. See POMS SI 01120.201.F.2.c.

The amended Master Trust complies with the requirement that the trust sub-accounts be established for the sole-benefit of the beneficiary. The Master Trust provides that separate trust sub-accounts shall be established and maintained for the sole benefit of each beneficiary. See Trust Decl., Art. VIII, § 8.1. Distributions of income or principal from a beneficiary’s trust sub-account shall be for supplemental care or the supplemental needs of the beneficiary. See Trust Decl., Art. V, § 5.1. Although Article VII previously allowed the Trustee under certain circumstances to terminate a beneficiary’s trust sub-account while the beneficiary was still living and use it to benefit other beneficiaries or disabled persons, see Second Amendment to Trust Decl.; Trust Decl., Art. VII; POMS PS 01825.011 (PS 16-091), the new amendment has deleted Article VII in its entirety. Similarly, amended Article VIII, section 8.4, no longer allows the Trustee to charge on a pro rata basis legal fees to all trust sub-accounts regardless of whether all trust sub-accounts are affected by the action defended against. Rather, the amendment only allows legal fees to be charged to a trust sub-account if the sub-account is affected by the action defended against. See Third Amendment to Trust Decl; POMS SI 01120.201.F.2.c (limiting legal costs to those rendered on behalf of the individual with regard to the trust).

CONCLUSION

The Master Trust, as amended, complies with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the implementing POMS provisions.

H. PS 16-125 Does Settlement Solutions National Pooled Trust (Master Trust) comply with requirements for a pooled trust?

DATE: April 27, 2016

1. Syllabus

This Regional Chief Counsel opinion discusses whether the Settlement Solutions National Pooled Trust (Master Trust) established on August 12, 2009, complies with all the requirements for a pooled trust exception under section 1917(d)(4)(C) of the Social Security Act (Act). The RCC determined the Master Trust does not meet all the requirements for the pooled trust exception because the trust sub-accounts are not established for the sole benefit of each beneficiary.

2. Opinion

QUESTION

Whether the Settlement Solutions National Pooled Trust (Master Trust) complies with the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS).

OPINION

The Master Trust does not comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the relevant provisions of the POMS. As written, the trust sub-accounts are not established for the sole benefit of each beneficiary. The Master Trust contains proper language for the others requirements under section 1917(d)(4)(C).

BACKGROUND

On August 12, 2009, the National Non-Profit for Americans with Disabilities, Inc. (NAD), a non-profit corporation, established the Master Trust, a pooled trust pursuant to 42 U.S.C. § 1396p (section 1917 of the Act) for the benefit of beneficiaries under the Master Trust. See Declaration of Trust of NAD (Trust Decl.), preamble, Art. 2, § 2.1. The Master Trust provides that separate trust sub-accounts shall be established and maintained for the sole benefit of each beneficiary, but the Master Trust shall pool the trust sub-accounts for investment and management purposes. See Trust Decl., Art. 1, §§ 1.4, 1.5, 1.6, Art. 8, § 8.1. NAD is the “Trustee.” See Trust Decl., Art. 1, § 1.1, Art. 2, § 2.1. The Master Trust provides that the beneficiaries are disabled persons as defined in § 1614(a)(3) of the Act. See Trust Decl., Art. 1, § 1.4, Art. 9, § 9.5. A grantor establishes a trust sub-account for the sole benefit of a beneficiary with the assets of the beneficiary. See Trust Decl., Art. 1, §§ 1.3, 1.4, 1.5, 1.6; Joinder Agreement, Art. 2, § 2.01. The grantor establishing a trust sub-account on behalf of a beneficiary must be the beneficiary’s parents, grandparents, legal guardian, the beneficiary himself or herself, or someone acting on behalf of a court order. See Trust Decl., Art. 1, § 1.3.

The Master Trust provides that trust assets are not for the primary support of the beneficiaries and shall only be used for their supplemental care and/or supplemental needs. See Trust Decl., Art. 1, § 1.10, Art. 4, § 4.1, Art. 5, § 5.1, 5.2. The Trustee does not owe an obligation of support to any beneficiary; and beneficiaries do not have any right of entitlement to the trust corpus or income, except as the Trustee elects to disburse in its sole, complete, absolute, and unfettered discretion. See Trust Decl., Art. 5, § 5.1. The Master Trust also provides that no part of the Master Trust, neither principal nor income, can be anticipated, assigned, encumbered, or subject to attachment or control by any public or private creditor of any beneficiary. See Trust Decl., Art. 3. Distributions of income or principal from a beneficiary’s trust sub-account are within the sole and absolute discretion of the Trustee and shall be for supplemental care or the supplemental needs of the beneficiaries. See Trust Decl., Art. 3, Art. 5, § 5.1. The Master Trust states that it is irrevocable by grantors and beneficiaries. See Trust Decl., Art. 2, § 2.3, Art. 4, § 4.2.

The Trustee is entitled to reasonable compensation and to reimbursement of costs and expenses incurred in the management and/or administration of the Master Trust, including defending the Master Trust or any trust sub-account. See Trust Decl., Art. 8, § 8.4, Art. 9, §§ 9.1, 9.7. The costs and expenses may be apportioned on a pro rata basis to all sub-accounts or charged against only the affected sub-account. See Trust Decl., Art. 8, § 8.4, Art. 9, § 9.1; Joinder Agreement, Art. 2, § 2.06. The Trustee must maintain records on each trust sub-account and provide annual reports and financial statements to each beneficiary or his/her legal representative. See Trust Decl., Art. 8, §§ 8.1, 8.2.

Upon a beneficiary’s death, any amounts remaining in his or her trust sub-account will be deemed surplus trust property and the lesser of 5% or $5,000 will be retained by the Master Trust. See Trust Decl., Art. 6, § 6.1; Joinder Agreement, Art. 3; Addendum to Joinder Agreement. To the extent surplus trust property is not retained by the Master Trust, “such property must be distributed to each and every state in which the [b]eneficiary received government assistance in the form of Medicaid, to the extent of the total medical assistance paid by all of the states on the [b]eneficiary’s behalf during the [b]eneficiary’s lifetime.” Trust Decl., Art. 6, § 6.2; see Addendum to Joinder Agreement. Once the Medicaid programs are reimbursed, any balance greater than $1,000 will be distributed to the beneficiary’s estate. See Addendum to Joinder Agreement.

NAD’s main office is in Florida. The Master Trust provides that it shall be governed exclusively by, and interpreted exclusively in accordance with, the laws of the United States and the State of Florida. See Trust Decl., Art. 10, § 10.3; see also Joinder Agreement, Art. 5, § 5.05 (stating Joinder Agreement also is governed by the law of Florida and the United States). Also, any provision that “disqualifies a [b]eneficiary for government assistance” or any language that “causes this Trust to not qualify as a Trust under 42 U.S.C. 1396 p (d)(4)(C)” shall be considered void and the remainder of the Trust would continue undisturbed. Trust, Art. 10, § 10.4; see also Joinder Agreement, Art. 5, § 5.10 (stating invalidity or unenforceability to any provision of agreement shall not impair remainder of agreement).

DISCUSSION

Supplemental Security Income (SSI) is a general public assistance program for aged, blind, or disabled individuals who meet certain income and resource restrictions and other eligibility requirements. See Act §§ 1602, 1611(a); 20 C.F.R. §§ 416.110, 416.202 (2015).¹⁵ “Resources” include cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for his or her support and maintenance. See Act § 1613; 20 C.F.R. § 416.1201(a). “If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . .” 20 C.F.R. § 416.1201(a)(1); see POMS SI 01120.010.B.

Generally, SSA must consider the principal or corpus of a trust established with the assets of an individual to be a resource of the individual. See Act § 1613(e)(1)-(3); POMS SI 01120.201.A.1. However, the rules in section 1613(e) of the Act do not apply to trusts described in section 1917(d)(4) of the Act. See Act § 1613(e)(5); POMS SI 01120.201.A.1; POMS SI 01120.203.A. Trusts created in accordance with paragraphs (A) and (C) of section 1917(d)(4) are commonly known as Medicaid trust exceptions and consist of two types: Special Needs Trusts (paragraph (A)) and Pooled Trusts (paragraph (C)). See POMS SI 01120.203.A. To satisfy the exception

for pooled trusts under section 1917(d)(4)(C), a trust must contain the assets of an individual who is disabled (as defined in section 1614(a)(3)) and meet the following conditions:

The trust is established and managed by a nonprofit association.
A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.
Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1614(a)(3)) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.
To the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this subchapter.

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

Generally, a trust is not for the sole benefit of an individual if the trust account:

(a) provides a benefit to another individual or entity during the individual’s lifetime; or

(b) allows for termination of the trust account prior to the individual’s death and payment of the corpus to another individual or entity. See POMS SI 01120.203.B.2.e.

Although the Master Trust represents that the beneficiary sub-accounts are established for the sole benefit of each beneficiary, a close reading of the Master Trust reveals that certain provisions create contingent interests that could benefit third parties during the individual’s lifetime. The Master Trust permits the Trustee to charge the trust sub-accounts on a pro rata basis for legal costs and other expenses associated with defending “any” trust sub-account. See Trust. Decl., Art. 8, § 8.4, Art. 9, § 9.1; Joinder Agreement, Art. 2, § 2.06. The relevant POMS section, however, provides that only legal costs or services rendered “on behalf of the individual with regard to the trust” do not violate the sole benefit rule. See POMS SI 01120.201.F.2.c. Therefore, this provision contemplates the potential use of assets in a beneficiary’s sub-account for the benefit of others besides the beneficiary.

The Master Trust contains a severability clause for severing invalid or unenforceable provisions without invalidating the entire Master Trust; however, for SSI purposes, a null and void clause or savings clause does not cure an otherwise defective trust instrument. See POMS SI 01120.227.D. To qualify for the pooled trust exception, the Master Trust must meet the criteria in 1917(d)(4)(C) without regard to its severability clause. See POMS SI 01120.227.D.1. Thus, the Master Trust severability clause does not nullify or sever the provisions discussed above that could benefit third parties. See POMS SI 01120.227.D.

The Master Trust complies with the remaining requirements in 1917(d)(4)(C) of Act and the POMS provisions implementing those requirements. First, NAD identifies itself as a non-profit organization and the Internal Revenue Service (IRS) lists it as a tax-exempt organization on its website.¹⁶ See Trust Decl., Art. 2, § 2.1; Act § 1917(d)(4)(C)(i); POMS SI 01120.203.B.2.c; see also POMS SI 01120.203.F (referring to the procedures in POMS SI 01130.689.E for determining if an organization is not for profit); POMS SI 01130.689.E.2 (indicating SSA considers an organization to be a non-profit organization if it can verify it is a tax-exempt organization with the IRS).

Second, the Master Trust consists of separate trust sub-accounts for each beneficiary that are pooled together for investment and management purposes. See Trust Decl., Art. 1, §§ 1.3, 1.4, 1.5, 1.6, Art. 8, § 8.1; Joinder Agreement, Art. 2, § 2.01; Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.B.2.d. The Master Trust also maintains records for each sub-account and provides an accounting for each beneficiary annually. See Trust Decl., Art. 8, §§ 8.1, 8.2; POMS SI 01120.203.B.2.d (providing the trust must be able to provide an accounting for each individual).

Third, the Master Trust requires that the grantor establishing a trust sub-account be the beneficiary’s parents, grandparents, legal guardian, the beneficiary himself or herself, or a person acting at the direction of a court order to execute a Joinder Agreement. See Trust Decl., Art. 1, § 1.3; Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.a, B.2.f. The Master Trust also requires that the beneficiary for each trust sub-account be disabled as defined in section 1614(a)(3) of the Act. See Trust Decl., Art. 1, § 1.4, Art. 9, § 9.5; Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.b.

Finally, the Master Trust contains language stating that, to the extent property is not retained by the Master Trust, the property in a beneficiary’s sub-account shall be distributed to each state in which the beneficiary received Medicaid assistance based on each state’s proportionate share and gives the states priority as first payee. See Trust Decl., Art. 6, § 6.2; Addendum to Joinder Agreement; Act § 1917(d)(4)(C)(iv); POMS SI 01120.203.B.2.g.

CONCLUSION

The Master Trust does not comply with the requirements for a pooled trust under section 1917(d)(4)(C) of the Act and the implementing POMS provisions. As written, the trust sub-accounts are not established for the sole benefit of each beneficiary. The Master Trust contains acceptable language to satisfy the other requirements under section 1917(d)(4)(C).

I. PS 16-091 Resource Status of a Trust Governed by Florida Law

Date: March 7, 2016

1. Syllabus

In this opinion, the Regional Chief Counsel determined that the Family Network on Disabilities National Pooled Trust (Master Trust) does not comply with all the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act). Specifically, the Master Trust violates the sole benefit requirement. The early termination of sub-accounts under the fiction “as though that beneficiary had died” creates the possibility that other individuals would benefit from the Master Trust during the beneficiary’s lifetime. Also, the Master Trust permits the Trustee to charge on a pro rata basis to trust sub-accounts legal costs associated with defending “any” trust sub-account. Although the Master Trust contains a severability clause for severing invalid or unenforceable provisions without invalidating the entire Master Trust, for SSI purposes a null and void clause or savings clause does not cure an otherwise defective trust instrument.

2. Opinion

QUESTION

Whether the Family Network on Disabilities National Pooled Trust (Master Trust) complies with the requirements for a pooled trust under section 1917(d)(4)(C) of the Social Security Act (Act) and the relevant provisions of the Program Operations Manual System (POMS).

OPINION

BACKGROUND

On January 26, 1999, the Family Network on Disabilities of Florida, Inc. (FND), a non-profit corporation, established the Master Trust, a pooled trust pursuant to 42 U.S.C. § 1396p (section 1917 of the Act) for the benefit of beneficiaries under the Master Trust. See Declaration of Trust of FND (Trust Decl.), Art. 1, § 1.1. The Master Trust provides that separate trust sub-accounts shall be established and maintained for the sole benefit of each beneficiary, but the Master Trust shall pool the trust sub-accounts for investment and management purposes. See Trust Decl., Art. VIII, § 8.1. FND is the “Trustee.” See Trust Decl., Art. II, § 2.1. A grantor is any person or entity who contributes money and/or property to the Master Trust. See Trust Decl., Art. II, § 2.3. The grantor establishing a trust sub-account on behalf of a beneficiary must be the beneficiary’s parents, grandparents, legal guardian, the beneficiary himself or herself, or someone acting on behalf of a court order directing the individual to execute a Joinder Agreement on behalf of the beneficiary. See Trust Decl., Art. II, § 2.3, Ex. C.

The Master Trust provides that trust assets are not for the primary support of the beneficiary and shall only be used for their supplemental care and/or supplemental needs. See Trust Decl., Art. III, § 3.1. The Trustee does not owe an obligation of support to any beneficiary and beneficiaries do not have any right of entitlement to the trust corpus or income, except as the Trustee elects to disburse in its sole, complete, absolute, and unfettered discretion. See Trust Decl., Art. III, § 3.1. The Master Trust also provides that no part of the Master Trust or any trust sub-account, neither principal nor income, can be subject to anticipation or assignment by any beneficiary or subject to attachment or control by any public or private creditor of any beneficiary. See Trust Decl., Art. III, § 3.2. Distributions of income or principal from a beneficiary’s trust sub-account are within the sole and absolute discretion of the Trustee and shall be for supplemental care or the supplemental needs of the beneficiary. See Trust Decl., Art. II, § 5.1. The Master Trust states that it is irrevocable by grantors and beneficiaries.¹⁷ See Trust Decl., Art. IV, § 4.2.

Upon a beneficiary’s death, any amounts remaining in his or her trust sub-account will be deemed surplus trust property and will be maintained by the Master Trust. See Trust Decl., Art. VI. Surplus trust property can be used: (a) for the direct or indirect benefit of other beneficiaries; (b) to add disabled persons who are indigent to the Master Trust as beneficiaries; or (c) to provide disabled persons with equipment, medication, or services. See Trust Decl., Art. VI. To the extent surplus trust property is not retained by the Master Trust, “such property shall be distributed to each state in which the [b]eneficiary received Medicaid assistance, based on each state’s proportionate share of the total Medicaid assistance paid by all the states on the [b]eneficiary’s behalf.” See Trust Decl., Art. VI; Amendment to Trust Decl.

The Master Trust also states that the Trustee cannot be expected to know how future developments in the law, including agency and judicial decisions, may affect the Master Trust or its sub-accounts. Thus, the Master Trust provides:

If the Trustee has reasonable cause to believe that the income or principal in any [t]rust sub-account maintained for any [b]eneficiary will be required to be used for the care of a [b]eneficiary that has been, or would otherwise be provided by a local, state, or the federal government, or an agency or department thereof, the Trustee may, in its sole and absolute discretion, terminate the affected [b]eneficiary’s [t]rust sub-account as though that [b]eneficiary had died and treat the property in the [t]rust sub-account according to the provisions above in Article VI.

Second Amendment to Trust Decl.

FND’s main office is in Florida. The Master Trust provides that it shall be governed exclusively by, and interpreted exclusively in accordance with, the laws of the United States and the State of Florida. See Trust Decl., Art. X, 10.3. Also, any provision that is “adjudged invalid or unenforceable under the laws of any place where the terms of the Declaration are to be performed or are sought to be enforced, shall be deemed inoperative without invalidating such provision elsewhere or any other provisions” of the Master Trust. See Trust, Art. X, 10.4.

DISCUSSION

Supplemental Security Income (SSI) is a general public assistance program for aged, blind, or disabled individuals who meet certain income and resource restrictions and other eligibility requirements. See Act §§ 1602, 1611(a); 20 C.F.R. §§ 416.110, 416.202 (2015).¹⁸ “Resources” include cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for his or her support and maintenance. See Act § 1613; 20 C.F.R. § 416.1201(a). “If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . .” 20 C.F.R. § 416.1201(a)(1); see POMS SI 01120.010.B.

Generally, SSA must consider the principal or corpus of a trust established with the assets of an individual to be a resource of the individual. See Act § 1613(e)(1)-(3); POMS SI 01120.201.A.1. However, the rules in section 1613(e) of the Act do not apply to trusts described in section 1917(d)(4) of the Act. See Act § 1613(e)(5); POMS SI 01120.201.A.1; POMS SI 01120.203.A. Trusts created in accordance with paragraphs (A) and (C) of section 1917(d)(4) are commonly known as Medicaid trust exceptions and consist of two types: Special Needs Trusts (paragraph (A)) and Pooled Trusts (paragraph (C)). See POMS SI 01120.203.A. To satisfy the exception for pooled trusts under section 1917(d)(4)(C), a trust must contain the assets of an individual who is disabled (as defined in section 1614(a)(3)) and meet the following conditions:

The trust is established and managed by a nonprofit association.

A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.

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

Even if a trust meets the requirements of a pooled trust under section 1917(d)(4)(C), SSA still must evaluate the trust under the instructions in POMS SI 01120.200 to determine if the trust is a countable resource. See POMS SI 01120.203.B.2.a, D.2. Trust principal is a countable resource if the individual (claimant, recipient, deemor) has legal authority to revoke or terminate the trust and use the funds to meet his or her food or shelter needs, or if the individual can direct the use of the trust principal for his or her support and maintenance under the terms of the trust. See POMS SI 01120.200.D.1.a. Also, if an individual can sell his or her beneficial interest in the trust, that interest is a resource. See POMS SI 01120.200.D.1.a. Conversely, if an individual does not have legal authority to revoke or terminate the trust or to direct the use of the trust assets for his or her own support and maintenance, the trust principal is not a resource for SSI purposes. See POMS SI 01120.200.D.2. The revocability of a trust and the ability to direct the use of trust principal depends on the terms in the trust agreement and on State law. See POMS SI 01120.200.D.2.

As written, the Master Trust does not comply with the requirements for a pooled trust under section 1917(d)(4)(C) of Act and the implementing POMS provisions because the trust sub-accounts are not established solely for the benefit of each beneficiary. See Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.B.2.a. A trust is established for the sole benefit of the individual if the trust benefits no one but the individual whether at the time the trust is established or at any time during the individual’s lifetime. See POMS SI 01120.201.F.2.a. Generally, a trust is not for the sole benefit of an individual if the trust account: (a) provides a benefit to another individual or entity during the individual’s lifetime; or (b) allows for termination of the trust account prior to the individual’s death and payment of the corpus to another individual or entity. See POMS SI 01120.203.B.2.e.

Although the Master Trust represents that the beneficiary sub-accounts are established for the sole benefit of each beneficiary, a close reading of the Master Trust reveals that certain provisions create contingent interests that could benefit third parties during the individual’s lifetime. Specifically, the Master Trust permits the Trustee to terminate a beneficiary’s trust sub-account “as though that [b]eneficiary had died” if the Trustee has reasonable cause to believe that the income or principal in the trust sub-account will be required to be used for the care of a beneficiary that has been, or would otherwise be provided by a local, state, or the federal government. See Second Amendment to Trust Decl. The Master Trust provides that trust property retained by the Master Trust following a beneficiary’s death could be used to benefit other beneficiaries or disabled persons. See Trust Decl., Art. VI. Thus, terminating a beneficiary’s trust sub-account under the fiction “as though that [b]eneficiary had died” would create the possibility that other individuals would benefit from the Master Trust during the beneficiary’s lifetime. See POMS SI 01120.203.B.2.e.

The Master Trust also permits the Trustee to charge on a pro rata basis to trust sub-accounts legal costs associated with defending “any” trust sub-account. See Trust. Decl., Art. VIII, § 8.4. The relevant POMS section, however, provides that only legal costs or services rendered “on behalf of the individual with regard to the trust” do not violate the sole benefit rule. See POMS SI 01120.201.F.2.c. Therefore, this provision also contemplates potential use of the trust for the benefit of others besides the beneficiary.

Although the Master Trust contains a severability clause for severing invalid or unenforceable provisions without invalidating the entire Master Trust, for SSI purposes a null and void clause or savings clause does not cure an otherwise defective trust instrument. See POMS SI 01120.227.D. To qualify for the pooled trust exception, the Master Trust must meet the criteria in 1917(d)(4)(C) without regard to its severability clause. See POMS SI 01120.227.D.1. Thus, the Master Trust severability clause does not nullify or severe the provisions discussed above that could benefit third parties. See POMS SI 01120.227.D.

The Master Trust complies with the remaining requirements in 1917(d)(4)(C) of Act and the POMS provisions implementing those requirements. FND identifies itself as a non-profit organization and the Internal Revenue Service (IRS) lists it as a tax-exempt organization on its website.¹⁹ See Act § 1917(d)(4)(C)(i); POMS SI 01120.203.B.2.a; see also POMS SI 01130.689.E.2 (indicating SSA considers an organization to be a non-profit organization if it can verify it is a tax-exempt organization with the IRS); POMS SI 01120.203.F (referring to the procedures in POMS SI 01130.689.E for determining if an organization is not for profit). The Master Trust consists of separate trust sub-accounts for each beneficiary that are pooled together for investment and management purposes. See Trust Decl., Art. VIII, § 8.1; Act § 1917(d)(4)(C)(ii); POMS SI 01120.203.B.2.a. The Master Trust maintains records for each sub-account and provides an accounting for each beneficiary annually. See POMS SI 01120.203.B.2.d (providing the trust must be able to provide an accounting for each individual). The Master Trust requires proof that the grantor establishing a trust sub-account be the beneficiary’s parents, grandparents, legal guardian, the beneficiary himself or herself, or a person acting at the direction of a court order to execute a Joinder Agreement. See Trust Decl., Ex. C; Act § 1917(d)(4)(C)(iii); POMS SI 01120.203.B.2.a, B.2.f. The Master Trust also requires that the beneficiary for each trust sub-account be disabled as defined in section 1614(a)(3) of the Act. See Trust Decl., Art. II, § 2.4; Act § 1917(d)(4)(C)(iii). The Master Trust contains language stating that, to the extent property is not retained by the Master Trust, the property “shall be distributed to each state in which the [b]eneficiary received Medicaid assistance” based on each State’s proportionate share. See Trust Decl., Art. VII, Amendment to Trust Decl.; Act § 1917(d)(4)(C)(iv); POMS SI 01120.203.B.2.g.

CONCLUSION

J. PS 12-011 Interest Held in a Florida Trust by a Supplemental Security Income Applicant and Effect of a Florida State Court Order Entered Nunc Pro Tunc and Purporting to Modify the Trust

DATE: November 3, 2011

1. SYLLABUS

This decision centers on the issue of the State approving modifications to an otherwise SSI countable trust that allowed the trust to meet the Federal SSI exceptions for trusts. The Regional Chief Counsel determined that the State court correctly modified the trust allowing it to meet Federal trust exceptions, but the State court had no authority under State law to issue a nunc pro tunc order. The trust only qualifies for exception retroactively from the date the court amended the trust language.

2. OPINION

QUESTION

You asked whether a Supplemental Security Income (SSI) applicant’s trust is irrevocable for SSI purposes. You also asked whether a Florida state court order binds the Social Security Administration (SSA), where the order purportedly modified the trust and operated nunc pro tunc, that is, effective as of the date the trust was created.

BACKGROUND

SSA found Joan (Applicant) entitled to SSI beginning in May 1986. In December 2007, SSA notified Applicant it was stopping her payments because it needed correct information about her name, address, and/or bank account.

Applicant’s father, James (Grantor), a resident of B~ County, Florida, executed his Last Will and Testament (Will) in January 1991. In his Will, Grantor devised one share of his estate to a trust for the benefit of Applicant (Will, Art. 2 ¶ E). Grantor designated Richard (Grantor’s son and Applicant’s brother) as the trustee. Grantor also directed the trustee to use the income and principal of the trust for Applicant’s “support and maintenance” (Will, Art. 2 ¶ E(1)). The Will did not expressly prohibit judicial modification (Order Granting Verified Petition to Reform Irrevocable Testamentary Trust (Order), ¶ K).

Grantor died in October 2004 (Order, ¶ A). Richard, as trustee, subsequently petitioned the Circuit Court for Broward County, Florida, to reform the trust (Order, Preamble). In support of his petition, Richard stated Applicant had been diagnosed with schizophrenia (Order, ¶ D). Richard also said Applicant received government assistance in the past, including SSI and Medicaid benefits; however, she was not receiving any government assistance at the time of the petition and would not qualify for government assistance if the trust remained as drafted (Order, ¶¶ E-F). Richard also submitted an affidavit from the drafter of the Will, who stated he was unaware that Applicant was disabled and had been receiving government assistance (Order, ¶ H). According to the drafter, if he had been aware of these facts, he would have recommended a special needs trust and drafted the Will to avoid interference with Applicant’s continued eligibility for government assistance (Order, ¶ H). Richard proposed to reform the trust as a “special needs trust” that would “[m]aintain the intention of the Grantor as to the disposition of the remaining trust assets.” (Order, ¶ I).

In an order dated May 18, 2011, the court found Richard, as trustee, was entitled to judicial modification of the trust under Florida law (Order, ¶ 1). The court replaced the provisions of Article 2, paragraph E, of the Will regarding the distributions of Applicant’s trust share with the modifications Richard had proposed in his petition (Reformed Trust, Preamble). The court modified the trust nunc pro tunc “as of [Grantor’s] date of death in October 2004” (Order, ¶ 3).

As modified by the court, the Will established a trust “to supplement [Applicant’s] needs only” (Reformed Trust, ¶ A). The modified trust is “not intended for [Applicant’s] primary support” (Reformed Trust, ¶ A). According to the terms of the trust, Applicant “has no entitlement to the income or corpus of this trust, except as my Trustee, in his complete, sole, absolute and unfettered discretion elects to disburse” (Reformed Trust, ¶ B). The trust also directs that “under no circumstances may [Applicant] compel distributions from this trust” (Reformed Trust, ¶ E). Additionally, “[d]istribution to or for the benefit of [Applicant] shall be limited so that [she] is not disqualified from receiving public benefits to which [she] is otherwise entitled” (Reformed Trust, ¶ D). Section L of the trust, titled “Trustee’s Authority to Terminate Trust,” provides that upon the death of Applicant or the trust’s earlier termination, the trust “shall be distributed in equal shares to [several remainder beneficiaries]” (Reformed Trust, ¶ L). The terms of the trust provide that it will be administered under Florida law (Reformed Trust, ¶ N).

Applicant’s brother and legal guardian, Jameson, applied on Applicant’s behalf for SSI on July 22, 2011. In the application, Jameson stated Applicant’s resources included a checking account containing $44,972.15. Jameson described this account as a “special needs trust account.” SSA denied Applicant’s application on July 29, 2011, because her resources were worth more than $2,000.00. On September 14, 2011, Applicant requested reconsideration.

DISCUSSION

SSI is a general public assistance program for aged, blind, or disabled individuals who meet certain eligibility requirements, including income and resource restrictions. See Act §§ 1602, 1611(a); 20 C.F.R. §§ 416.110, 416.202 (2011). ²⁰ “Resources” include cash, other liquid assets, or any real or personal property that an individual owns and could convert to cash to be used for his or her support and maintenance. See Act § 1613; 20 C.F.R. § 416.1201(a). “If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual . . . .” 20 C.F.R. § 416.1201(a)(1).

Trusts may be countable as an individual’s resource for SSI purposes. See Act, § 1613(e). Even if a trust is established with the assets only of a third-party, the trust will be countable as an individual’s resource if he or she “has legal authority to revoke or terminate the trust and then use the funds to meet his food or shelter needs, or if the individual can direct the use of the trust principal for his/her support and maintenance under the terms of the trust.” Program Operations Manual System (POMS) SI 01120.200.D.1.a. ²¹ “Additionally, if the individual can sell his or her beneficial interest in the trust, that interest is a resource.” Id.

Conversely, “[i]f an individual does not have the legal authority to revoke or terminate the trust or to direct the use of the trust assets for his/her own support and maintenance, the trust principal is not the individual’s resource for SSI purposes.” ²² See POMS SI 01120.200.D.2 (emphasis in the original). Generally, one determining whether a beneficiary can revoke, terminate, or direct the use of a trust should not impute to the beneficiary a trustee’s discretion to use or direct the use of the trust. See POMS SI 01120.200.D.1.b (“While a trustee may have discretion to use the trust principal for the benefit of the beneficiary, the trustee should be considered a third party and not an agent of the beneficiary, i.e., the actions of the trustee are not the actions of the beneficiary, unless the trust specifically states otherwise.”). “If a trust is irrevocable by its terms and under State law and cannot be used by an individual for support and maintenance . . . it is not a resource.” Id. (emphasis in the original).

You asked whether the trust is an irrevocable trust for the purposes of SSI. To answer this question, we first address whether Florida law permitted the court to modify the trust in 2011. Then, we address whether Applicant can revoke the modified trust.

The governing law section of Florida’s Trust Code states in pertinent part: The meaning and effect of the terms of a trust are determined by: (1) The law of the jurisdiction designated in the terms of the trust, provided there is a sufficient nexus to the designated jurisdiction at the time of the creation of the trust or during the trust administration, including, but not limited to, the location of real property held by the trust or the residence or location of an office of the settlor, trustee, or any beneficiary. . . . (2) In the absence of a controlling designation in the terms of the trust, the law of the jurisdiction where the settlor resides at the time the trust is first created. Fla. Stat. Ann. § 736.0107 (West 2011); ²³ see also Fla. Stat. Ann. § 736.0202 (stating Florida courts have jurisdiction over trustees and beneficiaries of a trust having its principal place of administration in Florida). Grantor resided in Florida when he executed the Will that contained the original terms of the trust (Will, Preamble). Applicant, the beneficiary of the trust, resides in Florida (Order, ¶ D), thereby creating a sufficient nexus to Florida. Therefore, we look to Florida law to determine whether the circuit court had the authority to modify the trust and whether the trust as modified by the court, is revocable.

The court found the trustee was entitled to judicial modification of the trust under Florida Statute §§ 736.04113 or 736.04115 (Order, ¶ 1). These sections permit a court to modify a trust created by a deceased settlor when it meets certain conditions. See Fla. Stat. Ann. §§ 736.0103(15)-(16), 736.04113(1), 736.04115(1), 736.0601; Robinson v. Robinson, 805 So. 2d 94, 95 (Fla. Dist. Ct. App. 2002).

Under Florida Statute § 736.04113, a court may modify the terms of a trust created by a deceased settlor upon the application of a trustee or any qualified beneficiary where, “[b]ecause of circumstances not anticipated by the settler, compliance with the terms of the trust would defeat or substantially impair accomplishing the material purpose of the trust.” See Fla. Stat. Ann. § 736.04113(1)(b). A court modifying a trust under this section must consider the terms and purposes of the trust, the facts and circumstances surrounding the creation of the trust, and any extrinsic evidence relevant to the proposed modification. See Fla. Stat. Ann. § 736.04113(3)(a).

We believe the court properly complied with Fla. Stat. Ann. § 736.04113 in granting Richard’s petition to modify the trust. Richard was the trustee, and the court modified the trust upon his petition (Order, Preamble) because compliance with the terms of the trust would defeat or substantially impair accomplishing the material purpose of the trust (Order, ¶ 1).

The material purpose of the trust “generally requires some showing of a particular concern or objective on the part of the settlor, such as concern with regard to a beneficiary’s management skills, judgment, or level of maturity.” Restatement (Third) of Trusts, § 35 (2003). “Sometimes . . . the very nature or design of a trust suggests its protective nature . . . .” Id. The Will directed the trustee to use the trust “for the support and maintenance of [Applicant] . . . taking into consideration her standard of living at the time of my death and any other sources of income of [Applicant]” (Will, Art. 2 ¶ E). See Fla. Stat. Ann. § 736.0404 (“A trust and its terms must be for the benefit of its beneficiaries.”). Applicant has been diagnosed with schizophrenia (Order, ¶ D). Given the terms of the trust and Applicant’s schizophrenia, we believe the court could properly find the trust’s material purpose was to protect and maximize Applicant’s means of support, including her eligibility for government assistance.

The available information does not indicate Grantor anticipated the trust would affect Applicant’s eligibility for SSI. Richard submitted an affidavit from the drafter of the Will showing he had been unaware that Applicant received government assistance and, if he had been aware, he would have drafted the Will to avoid jeopardizing Applicant’s continued eligibility for government assistance (Order, ¶ H).

We believe the court could reasonably have found that compliance with the original terms of this trust would defeat or substantially impair the material purpose of the trust. Richard stated Applicant used to receive government assistance, including SSI and Medicaid benefits; however, she was not receiving any government assistance at the time of the petition and would not qualify for government assistance if the trust remained as it was drafted (Order, ¶¶ E-F). Therefore, the court could find that compliance with the original trust would diminish Applicant’s means of support, substantially impairing the material purpose of the trust. We believe the court properly elected to modify the terms of the trust under Florida Statute § 736.04113.

Because we believe the court could properly modify the trust under Florida Statute § 736.04113, we believe its ability to modify the trust under Florida Statute § 736.04115 is immaterial. Nevertheless, we believe the court could modify the trust also under Florida Statute § 736.04115. ²⁴ A court may modify a trust under this section “if compliance with the terms of a trust is not in the best interests of the beneficiaries.” Fla. Stat. Ann. § 736.04115(1). We believe the court could properly determine that compliance with the terms of the trust was not in Applicant’s best interests because it would jeopardize her eligibility for government assistance (Order, ¶ F). Therefore, we believe the court could properly modify the trust under this section.

We also believe the modified trust is irrevocable with respect to Applicant. “The revocability of a trust and the ability to direct the use of the trust principal depend on the terms of the trust agreement and/or on State law.” POMS SI 01120.200.D.2. “[A] valid trust cannot be altered, amended, or revoked except by the exercise of a power identified in the trust.” Roberts v. Sarros, 920 So. 2d 193, 195 (Fla. Dist. Ct. App. 2006) (quoting L’Argent v. Barnett Bank, 730 So. 2d 395, 397 (Fla. Dist. Ct. App. 1999)). In determining whether the trust identifies a power to alter, amend, or revoke the trust, “[t]he polestar of trust . . . interpretation is the settlor’s intent.” Bryan v. Dethlefs, 959 So. 2d 314, 317 (Fla. Dist. Ct. App 2007); accord Fla. Stat. Ann. § 736.1101(1) (“The intent of the settlor as expressed in the terms of the trust controls the legal effect of the dispositions made in the trust.”). “In determining the settlors’ intent, the court should not resort to isolated words and phrases; instead, the court should construe the instrument as a whole, taking into account the general dispositional scheme.” R~, 920 So. 2d at 195 (internal quotation marks omitted); see Littell v. Law Firm of Trinkle, Moody, Swanson, Byrd & Colton, 345 F. App’x 415, 419 (11th Cir. 2009); B~, 959 So. 2d at 317; L~, 730 So. 2d at 397. When the terms of a trust are clear and unambiguous, “the settlors’ intent as expressed in the trust controls and the court cannot resort to extrinsic evidence.” ²⁵ L~, 345 F. App’x at 419; see B~, 959 So. 2d at 317 n.2; L~, 730 So. 2d at 397. If a provision of a trust is unenforceable, a court may sever the unenforceable provision and preserve the trust as a whole, provided the severance is compatible with the settler’s intent. See McLemore v. McLemore, 675 So. 2d 202, 205 (Fla. Dist. Ct. App. 1996).

We believe that the terms of the modified trust, when construed as a whole, show that Applicant could not revoke it. See R~, 920 So. 2d at 195. First, the trust does not appear to grant Applicant any power to amend, modify, or revoke the trust. See id. (“‘[A] valid trust cannot be altered, amended, or revoked except by the exercise of a power identified in the trust.’” (quoting L~, 730 So. 2d at 397)). Rather, the trust states that Applicant, as beneficiary of the trust, “has no entitlement to the income or corpus of this trust, except as my Trustee in his complete, sole, absolute and unfettered discretion elects to disburse” (Reformed Trust, ¶ B). In this regard, the trust permits the trustee to “act unreasonably and arbitrarily as [Grantor] could do [him]self if living and in control of these funds” (Reformed Trust, ¶ B). One should not impute to Applicant the trustee’s ability to use or direct the use of the trust because the trustee, Richard, is not Applicant’s agent. See POMS SI 01120.200.D.1.

The trust also contains a spendthrift provision that states “under no circumstances may [Applicant] compel distributions from this trust” (Reformed Trust, ¶ E). Further, the modified trust does not direct any mandatory periodic payments and states Applicant has no right to direct the distribution of any part of the Trust (Reformed Trust, ¶¶ B, E). See POMS SI 01120.200.D, E.1. Nothing in the modified trust grants Applicant the ability to control her trust share, revoke her trust share, or sell her income from her trust share (Reformed Trust). See Fla. Stat. Ann. § 736.0103(15); L~, 730 So. 2d at 397; Fla. Nat’l Bank of Palm Beach Cty. v. Genova, 460 So. 2d 895, 897 (Fla. 1984).

Because the trust instrument after the 2011 modification confirms Grantor’s intent to make the trust irrevocable by Applicant, we believe the modified trust is irrevocable with respect to Applicant. See L~, 345 F. App’x at 419; B~, 959 So. 2d at 317 n.2; R~, 920 So. 2d at 195; L~, 730 So. 2d at 397.

Although the modified trust is irrevocable, the court’s order that modified the trust did not have a retroactive effect. The court stated the modified trust was effective nunc pro tunc, meaning the court intended to modify the trust effective from the date of Grantor’s death, October XX, 2004 (Order, ¶ 3). Although we believe the court's order modified the trust as of the date of the court order, we do not believe the court had the authority under Florida law to issue an order modifying the trust effective as of the date the trust was originally created.

Nunc pro tunc is a Latin term meaning “now for then.” Becker v. King, 307 So. 2d 855, 859 (Fla. Dist. Ct. App. 1975). “When applied to the entry of a legal order, nunc [pro tunc] normally refers, not to a new . . . decision, but to the trial judge’s previous action of which there is not a sufficient record.” Whack v. Seminole Memorial Hosp., 456 So. 2d 561, 563-64 (Fla. Dist. Ct. App. 1984). For example, an order may be entered nunc pro tunc to correct clerical errors. See Wells v. State, 796 So. 2d 1276, 1277 (Fla. Dist. Ct. App. 2001) (permitting a nunc pro tunc order to add “Jr.” to a name recorded on an earlier judgment). “A nunc pro tunc order is also used to supply an omission in the record of an action previously done but omitted through inadvertence or mistake.” Luhrs v. State, 394 So. 2d 137, 138 (Fla. Dist. Ct. App. 1981). In such a case, “[t]he later [nunc pro tunc] record-making act constitutes but later evidence of the earlier effectual act.” Briseno v. Perry, 417 So. 2d 813, 814 (Fla. Dist. Ct. App. 1982).

Thus, “[a] nunc pro tunc order can relate back only to supply a record of something actually done or determined at the earlier time.” Wally v. Fla. Game & Fresh Water Fish Comm’n, 501 So. 2d 671, 673 (Fla. Dist. Ct. App. 1987) (citing Riha v. Harding, 369 So. 2d 404 (Fla. Dist. Ct. App. 1979)). “[W]here the court has wholly omitted an order, which it might or ought to have made, it cannot afterward be entered nunc pro tunc.” Nichols v. Walton, 90 So. 157, 386 (Fla. 1921). Accordingly, “where an order does not merely correct clerical errors or omissions, but actually modifies the substance of a prior ruling or of itself constitutes a ruling not previously made in fact, it should not be given retrospective effect.” De Baun v. Michael, 333 So. 2d 106, 108 (Fla. Dist. Ct. App. 1976).

In this case, we do not believe the court had the authority to enter its order nunc pro tunc. The court did not issue its order to correct a clerical error. See W~, 796 So. 2d at 1277. The court also did not issue its order to “supply a record of something actually done or determined.” W~, 501 So. 2d at 673. Rather, the court attempted to retroactively structure the trust so that compliance with it would be in Applicant’s best interests or as the drafter “would have drafted the trust,” if he had been aware of Applicant’s government assistance (Order, ¶ H). The drafter’s affidavit that he would have drafted the trust differently further shows that the court’s modification of the trust was not “suppl[ing] a record of something actually done or determined.” W~, 501 So. 2d at 673. Moreover, the information provided does not show any previously entered judgments regarding the Will, further suggesting that the court’s order “itself constitutes a ruling not previously made in fact.” D~, 333 So. 2d at 108. Therefore, the court could not enter the order nunc pro tunc, and SSA should not give the order retroactive effect. See id.

We also believe the relevant sections of the Florida Trust Code do not permit the court to modify the trust retroactively. The court determined Richard, as trustee, was entitled to “judicial modification of a trust under Florida Statute 736.04113 or 736.04115.” Unlike other sections of the Florida Trust Code, the sections cited by the court do not contain any provisions authorizing it to modify the trust retroactively. Compare Fla. Stat. Ann. §§ 736.04113(2), 736.04113(5), with Fla. Stat. Ann. § 736.0416 (permitting court modifying trust to achieve settlor’s tax objectives to give the modification “retroactive effect”).

CONCLUSION

The trust is a third-party irrevocable trust since its modification in May 2011. Additionally, we believe the State court did not have the authority under Florida law to enter its order nunc pro tunc. Therefore, SSA is not bound by the court's order to the extent the order attempted to modify the trust retroactively, and SSA should consider the trust modified only as of the date the court entered its order, May 18, 2011.

K. PS 07-087 Effect of Trust as Resource for SSI Eligibility Purposes - Florida Number Holder - Mary , SSN ~

DATE: March 12, 2007

1. SYLLABUS

Note: This opinion is only valid for trusts created prior to 1/1/00.

This opinion discusses a trust agreement executed in 1966, and an Amendment executed in 1974, that established a trust for an individual SSI beneficiary. The Amendment directed the trustees (the beneficiary's parents) to purchase a $100,000 annuity contract to provide monthly payments during the beneficiary's life. While a declaration of trust annuity was executed in 1981, an annuity has not been purchased as directed in the trust. The trust provides that the trustees retain sole judgment over disbursements and names contingent beneficiaries. Under Florida law, the beneficiary does not have the legal authority to revoke the trust or direct the trustees to use the principal for her support. Since the trust is irrevocable and the beneficiary cannot direct the use of its contents, the trust is not a resource. Moreover, since the trustees never carried out the provision of the trust to establish an annuity, the beneficiary cannot anticipate, assign, or sell the right to future payments. Until some action is taken to provide for regular, anticipated payments, the prospective future payments are not a resource to the beneficiary.

2. OPINION

QUESTION

You asked whether a trust annuity arrangement is a countable resource for Supplemental Security Income (SSI) purposes.

ANSWER

For the reasons stated below, we believe that the trust annuity arrangement in question is not a resource for SSI purposes.

BACKGROUND

Nathanial (Nathaniel) and Grace (Grace) were the grandparents of number holder Mary (NH). On October 16, 1966, and November 16, 1966, Nathaniel and Grace, respectively, created separate trust agreements. Neither of the original trust agreements is available. However, the file does contain a document entitled "First Amendment to Trust Agreement" (Amendment), dated March 12, 1974, and executed by Nathaniel. For the most part, this document allocated the trust principal to pay the legal obligations of Nathaniel's estate following his death and to provide for Grace, should she survive him. With respect to NH, the Amendment directed the trustees, William and Dorothy, NH's parents, to purchase a $100,000.00 annuity contract for NH's benefit to provide monthly payments during NH's life. The Amendment states that the trust shall be governed by the laws of the State of Florida.

Subsequently, NH's parents executed a "Declaration of Trust Annuity, Annuity for [NH]" (Trust Annuity Arrangement) dated December 7, 1981. This document states:

The assets comprising the corpus of this Trust shall be held for the benefit of [NH] under the described annuity arrangement. Annuity payments shall become payable to and for her benefit on a deferred basis commencing on the 15th day of January 1989. Prior to that date income earned on the Trust assets shall be accumulated and reinvested, subject to the authority of the Trustees, however, in the event of demonstrated need or emergency, in their sole judgment and discretion, to pay funds to or for the benefit of [NH]. Such payments may be made as the Trustees determine are necessary and proper for her care, maintenance and support.

The Trust Annuity Arrangement states the trust and the rights of the parties to the trust are governed by laws of the State of Florida. The document also named contingent beneficiaries, NH's two sisters - Nancy and Susan, who were to be paid the remaining balance of the trust fund in the event of NH's death. It does not appear that the trustees ever actually purchased the annuity contract and at any rate, NH never received the monthly annuity payments that were to commence in January 1989.

During 2005, NH received $1,023.31 in payments from the trust for automobile insurance premiums, renter's and property insurance premiums, automobile brake repair, and other automobile related expenses. NH has never received any annuity payments from the trust. The trust's investment account is held at Wachovia Securities, and a statement for the period ending July 31, 2006, shows the value of the trust's Wachovia Securities account to be $132,073.70.

DISCUSSION

The Social Security Act provides SSI eligibility for aged, blind, or disabled individuals who meet certain income and resource limitations. See Social Security Act (Act) '1611(a), 42 U.S.C. '1382(a). A resource is cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for her support or maintenance. 20 C.F.R. ' 416.1201(a) (2006). If the individual has the right, authority or power to liquidate property or her share in the property, it is considered a resource. 20 C.F.R. ' 416.1201(a)(1). Liquid resources are resources in the form of cash or other property that can be converted to cash within 20 days. 20 C.F.R. ' 416.1201(b). If a property right cannot be liquidated, the property will not be considered a resource of the individual. 20 C.F.R. ' 416.1201(a)(1).

Generally, if trust principal is available to the trust beneficiary, it will be considered a resource to her for purposes of determining her SSI eligibility. See Act, ' 1613(e), 42 U.S.C. ' 1382b; 20 C.F.R. ' 416.1201. Interpretive guidelines in the Programs Operations Manual System (POMS) further discuss the meaning of resource. With respect to trust instruments established prior to the year 2000, the POMS provides that if the individual has the legal authority to revoke the trust and use the funds to meet her food, clothing or shelter needs, or if the individual can direct the use of the trust principal for her support and maintenance under the terms of the trust, then the trust principal is a resource for SSI purposes. POMS SI 01120.200D.1.a. However, if the individual does not have the legal authority to revoke the trust or direct the use of the trust assets for her own support and maintenance, then the trust principal is not the individual's resource for SSI purposes. POMS SI 01120.200D.2. The revocability of a trust and the ability to use the trust principal is determined by the terms of the trust and/or by State law. POMS SI 01120.200D.2.

In the present case, the Amendment and the Trust Annuity Arrangement state that the trust and the rights of the parties to the trust are governed by Florida law. Under Florida law, NH does not have the legal authority to revoke the trust and use the trust principal for her support; nor does she have the right to direct the use of the trust principal. Neither the trust annuity instrument itself (Amendment or Trust Annuity Arrangement), nor Florida law provides her with this option. See L'Argent v. Barnett Bank, N.A., 730 So.2d 395, 396 (Fla. Dist. Ct. App. 1999) (once created, valid trust cannot be altered, amended, or revoked except by exercise of power identified in trust); Watson v. St. Petersburg Bank & Trust Co., 146 So.2d 383, 386 (Fla. Dist. Ct. App. 1962) (in absence of express directions to contrary, power to revoke is personal to trustor when reserved by him); Siegel v. Novak, 920 So.2d 89, 94 (Fla. Dist. Ct. App. 2006) (central characteristic of a "revocable trust" is that the settlor has the right to recall or end the trust at any time, and thereby regain absolute ownership of the trust property); see also FLA. STAT. ' 733.707(3)(e) (2006) ("right of revocation" defined).

Here, it appears that the settlor, Nathaniel, retained the right of revocation of the trust. This is evidenced in his March 12, 1974, Amendment, in which he directed that the trust principal be used to pay the legal obligations of his estate and to care for Grace should she survive him. See FLA. STAT. ' 733.817(5)(h)(2), (3) (2006) (discussing right of revocation held by decedent settlor to allocate revocable trust to pay death taxes); Bank of Palm Beach County v. Genova, 460 So. 2d 895, 897 (Fla. 1984) ("If the settlor reserves the power to revoke the trust but does not specify any mode of revocation, the power can be exercised in any manner which sufficiently manifests the intention of the settlor to revoke the trust. Any definitive manifestation by the settlor of his intention that the trust should be forthwith revoked is sufficient"). In the Amendment, Nathaniel provided for NH by instructing the trustees to purchase a $100,000.00 trust annuity contract on her behalf. At no time did NH have any right to revoke the trust, nor any right to the principal in the trust account. Evidence of NH's inability to revoke the trust and use the principal for her benefit is further emphasized by the Trust Annuity Arrangement's provision that "[i]n the event of the death of [NH] before the Trust fund is totally distributed, the remaining balance of the Trust Fund shall be distributed in equal shares to Nancy . . . and Susan ." Thus, the Amendment and the Trust Annuity Arrangement make it clear that NH would have no right to the trust principal beyond receiving monthly annuity payments. Her sisters' interest in receiving the balance of the Trust principal following NH's death precludes NH from having any authority to revoke the trust and use the principal for her benefit.

The POMS further states that if a trust provides for mandatory disbursements to the beneficiary and the beneficiary is not prohibited from anticipating, assigning, or selling the right to future payments, the current value of these payments may be a resource to the beneficiary. POMS SI 01120.200D.1.a. In the present case, the Trust Annuity Arrangement did provide that "Annuity payments shall become payable to or for [NH's] benefit on a deferred basis commencing on the 15th day of January 1989." However, the trustees never carried out this provision of the Trust Annuity Arrangement, and thus NH has never received monthly annuity payments. Until the trustees take the affirmative step of purchasing an annuity contract as they were directed to do under Nathaniel's 1974 Amendment, NH cannot anticipate, assign, or sell the right to any such future payments, and there is no current value of any such payments to count as a resource to NH. See POMS SI 01120.200D.1.a. Although it seems likely that NH could sue to have this provision of the Trust Annuity Arrangement enforced, see Davis v. Rex, 876 So. 2d 609, 613 (Fla. Dist. Ct. App. 2004); Popp ex rel. Estate of Davis v. Rex, 916 So. 2d 954, 958 (Fla. App. 2005) (trial court could reform trust to carry out settlor's intent), until some action is taken to provide for regular, anticipated payments, we do not believe these prospective future payments can be counted as a resource to NH.

CONCLUSION

For the foregoing reasons, we believe that the trust in question is not a countable resource to NH for the purpose of determining eligibility for SSI.

L. PS 06-043 Effect of Null and Void Clause in Special Needs Trust, Florida Beneficiary - Austin

DATE: January 13, 2006

1. SYLLABUS

This opinion addresses whether or not the Special Needs Trust (SNT) in question is a countable resource for SSI purposes. To be excluded from resource counting, a SNT must:
1) contain the assets of a disabled individual under age 65,
2) be established for the benefit of the individual by a parent, grandparent, legal guardian or a court, and
3) provide that the State will receive all amounts remaining in the trust upon the death of the individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State Medicaid plan. In this case, the SNT appears to satisfy the criteria to meet the SNT exception, except that the trust could be terminated and the assets distributed to the remainder beneficiaries during the claimant's lifetime. This would prevent the trust from being an excludable resource; however, the trust also stipulates that any provision of the trust that prevents compliance with the SNT exception is null and void. Florida law allows the null and void clause to override the provisions that might allow disbursements to remainder beneficiaries during the claimants lifetime, thus the SNT is not a countable resource.

2. OPINION

You asked whether a Special Needs Trust (SNT) established for SSI beneficiary Austin (Claimant) would be a countable resource. You stated that the trust in question appeared to satisfy all the criteria to meet the SNT exception to resource counting, except that the trust could be terminated and the assets distributed to the remainder beneficiaries during Claimant's lifetime, which might prevent the trust from meeting the requirement that trust be for the benefit of the disabled individual. However, the trust in question also stipulated that any provision of the trust that prevented compliance with the SNT exception would be null and void. Your specific question, therefore, was whether Florida law would give this null and void clause effect, thus allowing the trust to satisfy the exception to resource counting. For the reasons explained below, we believe Claimant's SNT would not be a countable resource.

BACKGROUND

Generally, trusts established with the assets of an individual will be considered resources for Supplemental Security Income (SSI) purposes. See Section 1613(e) of the Social Security Act (the Act) (42 U.S.C. 1382b(e)). However, the statute provides certain exceptions. Section 1613(e)(5) of the Social Security Act (the Act) (42 U.S.C. 1382b(e)(5)) excludes the "Medicaid payback trusts" incorporated by reference from sections 1917(d)(4)(A) and (C) of the Social Security Act (the Act) (42 U.S.C. 1396p(d)(4)(A) and (C)), which are part of Title XIX, "Grants to States for Medical Assistance Programs." Similarly, section 1612(a)(2)(G) of the Act (42 U.S.C. 1382a(a)(2)(G)) includes income from a trust as defined in 1613(e), which in turn incorporates the Medicaid payback trust exceptions.

The first of the two Medicaid payback exceptions is the SNT, which is at issue here; and the second, the Pooled Trust. The statutory requirements for resource exemption for an SNT are that the trust must be established "for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter." 42 U.S.C. 1396p(d)(4)(A).

On July 27, 2005, an SNT was established for Claimant. The Order establishing the SNT states as its first finding, "It is in the best interests of [Claimant] to be eligible for Social Security and Medicaid benefits." The Order's first direction is as follows: "The Court hereby approves of the establishing of the attached Special Needs Trust pursuant to Florida and Federal Medicaid Law under 42 U.S.C. 1396 (p) (d) (4) (a) . . . ." The introductory paragraph of the Special Needs Trust Agreement (Trust) states, "This Trust is written pursuant to 42 U.S.C. § 1396(d)(4)(A) [sic] . . . ." The Agreement further states, "[I]t is expressly intended that this Trust will provide benefits to supplement those which may otherwise be available to [Claimant] . . . and also satisfy the requirements of Title 42 of the U.S.C. § 1396p(d)(4)(A)." Trust Article 1.2.1. The "Intention" article states, "The purpose of this Trust is to permit the use of trust assets to supplement, and not to supplant, impair or diminish any benefits or assistance of any Federal, State, or other governmental entity . . . . " This article further states, "All provisions of this Trust shall be interpreted to qualify this trust under the provisions of 42 U.S.C. § 1396p(d)(4)(A). Any provision of this Trust which may prevent this Trust from satisfying full compliance with 42 U.S.C. § 1396p(d)(4)(A) shall be null and void." Trust Article 1.2.3.

During Claimant's lifetime, the Trustee has "absolute and unfettered discretion" to distribute from the principle or income of the Trust, or both, such amounts as the Trustee deems reasonable or advisable. Trust Article 2.1. Claimant has no right to direct a distribution. Trust Article 2.2.3. The Trustee is to distribute amounts for Claimant's "Special Needs," defined as the requisites for maintaining Claimant's health, safety, and welfare when such requisites are not provided by any other sources, including government agencies. Trust Articles 2.2.1, 2.3.1. Neither the Grantor, Trustee, nor Beneficiary may revoke the Trust. Trust Article 5.1.1.

Upon Claimant's death "any assets remaining in the Trust shall first be used to reimburse the Department of Medical Assistance and Health Services of the State of Florida for medical assistance paid on behalf of [Claimant] during his lifetime, as consistent with federal and state law." Trust Article 2.6.1.1. However, the Trustee may deplete the Trust corpus prior to Claimant's death. In doing so, the Trustee is directed to give "preference to the interests of [Claimant] while simultaneously considering the interests of the Remainder Beneficiary(ies)." Trust Article 2.3.1. Furthermore, the Trustee has the option to terminate the Trust during Claimant's lifetime if the amount thereof does not warrant the cost of continuing said trust or if its administration would be otherwise impractical. Upon such termination, Trustee shall pay the principal and any accumulated or undistributed income of such trust share to the Remainder Beneficiary(ies) in the proportions to which they would be entitled to receive distributions upon the death of [Claimant] . . . ."

Trust Article 5.6.

Analysis

As explained above, the statute provides certain exceptions to the general rule that trusts created with the assets of an individual are countable as resources of the individual. Among these exceptions are the "Medicaid trusts," or "Medicaid payback trusts," so called because they are designed to give state Medicaid plans a lien on the trust as first payee upon the death of the beneficiary. The lien is not enforced during the beneficiary's lifetime. See generally POMS SI 01120.203. The SNT is such a trust and has the following requirements:

it must be established for a disabled individual under age 65;
it must be established for the benefit of the disabled individual;
it must be established by the disabled individual's parent(s), grandparent(s), legal guardian(s), or a court; and
it must contain specific language that provides for Medicaid reimbursement upon the death of the disabled individual.

See POMS SI 01120.203(B)(1)(a-f). You advised us that the Trust appeared to satisfy all these requirements, with the possible exception of (2) above, due to the power of the Trustee to terminate the Trust and distribute assets to remainder beneficiaries. Based on your question to us, we presume the facts of Claimant's situation meet the other requirements; that is, that Claimant is under age 65 and is disabled. The Trust is established by a court, therefore satisfying (3) above. We note that Keith is both the guardian and trustee, and that the grantor is Claimant himself. Trust Declaration by the Grantor & Acceptance by the Trustee. Florida law allows a guardian to act as trustee. See § Fla.Stat. §774.441(2). We do not address here the nature of the property transferred or the relationship of Mr. C~ to Claimant. Indeed, a factual analysis of Claimant's case would not address your concern, since you indicated this opinion would be applied to other similar cases of SNT's in Florida. Therefore, we only address here whether the Trust on its face meets the requirements for the SNT exception to resource and income counting.

The Trust contains the necessary specific language that provides for Medicaid reimbursement upon the death of the disabled individual. Trust Article 2.6.1.1. However, as you note, the Trust may also benefit others, thus potentially defeating requirement (2). This could have the effect of depleting the Trust, thus limiting the capacity of the Trust to pay back Medicaid fully in the event of Claimant's death. However, the Trust also contains the "null and void clause,” Trust Article 1.2.3, which, if effective, could remove the offending clauses. We first address whether the null and void clauses might be needed at all to satisfy the exemption requirements. We then address whether the null and void clause would be effective under Florida law. Finally, we address whether the Trust would remain viable if the null and void clause were invoked and the offending clauses removed.

Two articles are off concern. The Trustee has the option to terminate the Trust during Claimant's lifetime if the amount thereof does not warrant the cost of continuing said trust or if its administration would be otherwise impractical. Upon such termination, Trustee shall pay the principal and any accumulated or undistributed income of such trust share to the Remainder Beneficiary(ies) in the proportions to which they would be entitled to receive distributions upon the death of [Claimant] . . . .

Trust Article 5.6. If, for example, the trustee terminated the Trust shortly before Claimant died, the Medicaid payback provision would be defeated In addition, the Trustee may deplete the Trust corpus prior to Claimant's death. In doing so, the Trustee is directed to give "preference to the interests of CLAIMANT while simultaneously considering the interests of the Remainder Beneficiary(ies).” Trust Article 2.3.1. This language is vague because it directs the thought process of the trustee and is essentially unreviewable. The language indicates that the trustee is to consider the interests of the remainder beneficiaries in making decisions about whether to expend amounts that might deplete the Trust and thus leave nothing for the remainder beneficiaries upon Claimant's death. If the trustee were to follow the guidance of this Article, the trustee might refrain from depleting the Trust so as to preserve inheritance for the remainder beneficiaries. Oddly, the Medicaid payback might actually be preserved under such a scenario, because if and when Claimant died, Medicaid would be the first payee ahead of the remainder beneficiaries. Trust Article 2.6.1.1.

Trust Articles 5..6 and 2.3.1 are not necessarily inconsistent with the requirements for exemption. Significantly, the two types of Medicaid payback trusts differ in their requirements about exclusive benefit to the disabled individual. The statute requires that accounts in a pooled trust be “solely for the benefit of individuals who are disabled.” 42 U.S.C. § 1396p(d)(4)(C)(iii)(emphasis added). The statute requires that assets in an SNT be “for the benefit of such individual.” 42 U.S.C. § 1396p(d)(4)(A). The POMS reflect this difference. POMS SI 01120.203(B)(1), (B)(2)(a). As a matter of statutory construction, we presume that the difference is meaningful, and that SNT's therefore are not required to be “solely” for the benefit of the disabled individual. However, establishing the exact contours of the interests of remainder beneficiaries is beyond the scope of this memorandum. Therefore, we will assume conservatively that Trust Articles 5.6 and 2.3.1 could be used in a ways that would trigger the necessity for the null and void clause.

Florida law controls in this case because the Trust was established in the Circuit Court for Palm Beach County, Florida, and the Trust provides that the 15th Judicial Circuit Court for the State of Florida retains jurisdiction over the Trust. Trust Article 5.11.2. Florida law strongly emphasizes the intention of the grantor when interpreting trust agreements. “In construing the provisions of a trust, the cardinal rule is to try to give effect to the grantor's intent, if possible.” Parker v. Shullman, 906 So.2d 1236, 1237 (Fla. 4th DCA 2005), citing Vetrick v. Keating, 877 So.2d 54, 58 (Fla. 4th DCA 2004). Here, the grantor intended unambiguously to prioritize qualification of the Trust as a SSI exemption. The Order establishing the SNT states as it's first finding, “It is in the best interests of [Claimant] to be eligible for Social Security and Medicaid benefits.” The Order's first direction is as follows: “The Court hereby approves of the establishing of the attached Special Needs Trust pursuant to Florida and Federal Medicaid Law under 42 U.S.C. 1396 (p) (d) (4) (a)[sic] . . . .” The introductory paragraph of the Special Needs Trust Agreement (Trust) states, “This Trust is written pursuant to 42 U.S.C. § 1396(d)(4)(A) [sic] . . . .” The Agreement further states, “[I]t is expressly intended that this Trust will provide benefits to supplement those which may otherwise be available to CLAIMANT . . . and also satisfy the requirements of Title 42 of the U.S.C. § 1396p(d)(4)(A).” Trust Article 1.2.1.

Florida law also allows provisions of a trust to be severed from the trust, without invalidating the entire trust. See V~, 877 So.2d at 55-56. In V~, the testator attempted to distribute assets of her deceased husband's trust through a new trust for her daughter, but in doing so impermissibly expanded the class of beneficiaries to include her daughter's children. The court severed that portion of the new trust that expanded the class in order to allow the trust to stand, rather than disqualifying the new trust entirely and allowing the assets to pass from the original trust directly. See 877 So.2d at 55-56.

A problem remains with Trust Article 2.3.1 due to its vagueness. This article admonishes the trustee to consider the interests of remainder beneficiaries if depleting the Trust. If the trustee were to make a direct disbursement to a remainder beneficiary under Trust Article 5.6, the act would be apparent. However, Article 2.3.1 involves a mental process; the trustee could conceivably make decisions to disburse less to Claimant than his sole interests require in order to preserve assets for disbursement to the remainder beneficiaries after Claimant's death. As noted above, this scenario would have the odd effect of preserving assets for the Medicaid payback, but would be a use of the assets other than for the benefit of Claimant. The issue then is whether the lack of clarity and accountability renders the null and void clause ineffectual in neutralizing the offending clause.

Florida law permits severance of a trust provision that suffers from vagueness that would otherwise invalidate the trust. See Davis v. Rex, 876 So.2d 609 (Fla. 4th DCA 2004). The Court addressed the treatment of this issue under Florida law:

[W]e believe that, absent reformation, the controlling case law, which neither party has advanced, is as stated below:

If the designation of beneficiaries is deemed too indefinite for enforcement of the provisions of a trust, the usual result is that the trust is void and “the designated trustee holds the corpus under a resulting trust in favor of the estate of the settlor.” Where it is compatible with the settlor's intent, it may be possible to sever the uncertain provision from an accompanying enforceable one, “so that the remaining provision, and the trust as a whole, may be preserved.” McLemore v. McLemore, 675 So.2d 202, 205 (Fla. 1st DCA 1996)(citing Kunce v. Robinson, 469 So.2d 874, 877 (Fla. 3d DCA 1985)).

In K~,, the court stated that the provision there, which permitted the trustee to make distributions to such “others as the Trustee in his discretion may deem appropriate,” did not identify any particular entity, person or class which could enforce the trust. “It must therefore be deemed void for indefiniteness.” 469 So.2d at 877. However, because the settlor's primary intent was apparently to benefit the other named beneficiaries, the court severed this provision rather than invalidate the trust altogether.

This seems the correct result in this case if reformation fails. Scott died without issue, so there is nobody to enforce the terms of that half of the trust. That gift should be held void and held by the trustee on a resulting trust for the settlor's estate. Of course, there is no reason to invalidate Stephen's half of the trust, which can be severed and enforced.

876 So.2d at 613-14.

Florida law therefore should allow the null and void clause to be implemented against Trust Articles 5.6. and 2.3.1. The remaining issue is whether, absent these clauses, the Trust would still be viable. If the offending part of Article 5.6 were removed, the trustee would not have the option of distributing trust assets to remainder beneficiaries during Claimant's lifetime. Thus, the assets would revert to Claimant and would qualify as a changed circumstance, triggering the requirement to inform the Agency, which could then determine if Claimant continues to meet resource requirements. See POMS SI 02301.005(B)(2). Furthermore, the trustee could not carry out the intent of the Trust by terminating the Trust under circumstances that would cause Claimant to exceed resource limits. Thus, deleting the problematic portion of Article 5.6 would not appear to harm the Trust. Similarly, deleting the offending sentence in Article 2.3.1 would only require the trustee to consider Claimant's sole benefit in depleting the Trust. Such deletion would likewise not invalidate the Trust.

We agree that the Trust appears to meet the remaining requirements for SNT exemption to resource counting, as these requirements are described at POMS SI01120.203(D) “Procedure--Developing Exceptions to Resource Counting.” As noted above, we presume Claimant is under age 65 and is disabled. The trust appears to be established with Claimant's own assets, as he is the Grantor. See Declaration by the Grantor & Acceptance by the Trustee. Claimant is the beneficiary; and, with the null and void clause implemented against portions of Articles 5.6 and 2.3.1, is the sole beneficiary. A court established the Trust. The Trust provides specific language to reimburse the state for Medicaid upon the death of Claimant. Finally, the trust is irrevocable, so that consideration under SI 01120.200, “Countable Resources,” does not apply. See POMS SI 01120.203(B)(1).

CONCLUSION

We conclude that Florida law would allow the null and void clause to operate against those clauses that might allow disbursements to remainder beneficiaries during Claimant's lifetime. The Trust appears to contain the proper language for the other requirements for exemption from resource counting under 42 U.S.C. 1396p(d)(4)(A).

Footnotes:

[1]

^. We incorporate the previous memorandum by reference except for the updates specifically set forth in this Supplemental Opinion.

[2]

^. All references to the Code of Federal Regulations are to the 2018 edition.

[3]

^. ^. MS Recipient does not currently receive SSI, but we nonetheless use the identifying term “Recipient” for purposes of consistency in this opinion.

[4]

^. ^. ^. All references to the Code of Federal Regulations are to the 2017 edition.

[5]

^. ^. Specifically, the IRS’s website indicates NSFNI is a public charity to which certain contributions could be tax deductible. See Exempt Organizations Selection Check, https://apps.irs.gov/app/eos/pub78Search.do?ein1=20-8405771&names=&city=&state=All...&country=US&deductibility=all&dispatchMethod=searchCharities&submitName=Search (last visited July 10, 2017).

[6]

^. ^. Indemnity is a legal obligation to be held responsible for another’s wrongdoing despite a lack of any personal negligence or fault. See, e.g., Zeiger Crane Rentals, Inc. v. Double A Indus., Inc., 16 So. 3d 907, 911 (Fla. Dist. Ct. App. 2009); Frear v. P.T.A. Indus., Inc., 103 S.W.3d 99, 107 (Ky. 2003); Gully v. First Nat. Bank, 184 So. 615, 617 (Miss. 1938).

[7]

^. ^. We also note that the Master Trusts indicate they “shall not be used to reimburse any state . . . government for any benefits or maintenance representing basic medical care. . . .” Master Trusts, Art. 6. This prohibition is not limited to the lifetime of a Beneficiary and could conflict with the pooled trust requirement that a sub-account pay back Medicaid upon the death of a Beneficiary. NFSNI should consider clarifying this language.

[8]

^. ^. * We incorporate the previous memorandum by reference except for the updates specifically set forth in this Supplemental Opinion.

[9]

^. See Exempt Organizations Select Check, https://apps.irs.gov/app/eos/pub78Search.do?ein1=&names=%22foundation+for+indigent+guardianship%22&city=&state=FL&country=US&deductibility=all&dispatchMethod=searchCharities&submitName=Search (last visited Dec. 13, 2016).

[10]

^. See Exempt Organizations Select Check, https://apps.irs.gov/app/eos/pub78Search.do?ein1=75-3033804&names=&city=&state=FL&country=US&deductibility=all&dispatchMethod=searchCharities&submitName=Search (last visited Dec. 13, 2016).

[11]

^. The language of the Amended Declaration says that the Trust or a Trust beneficiary, but we presume the latter refers to Trust beneficiary’s sub-accounts based on the context of the provision. See Amended Declaration, Art. 6, § 6.9.

[12]

^. All references to the C.F.R. are to the 2016 edition.

[13]

^. We read the plain language of the implementing POMS to require that the individual whose assets were used to establish a trust sub-account must meet the definition of disabled for purposes of the SSI program. See POMS SI 01120.203.B.2.b. Such a reading would disqualify the Amended Master Trust from the pooled trust exemption because, here, the trust sub-accounts can be established with assets from persons who may not be disabled. See Declaration, Art. 1, § 1.7. However, the agency does not require such a strict reading of the implementing POMS provision and it is our understanding that the agency is amending the POMS provision to clarify this issue.

[14]

^. All references to Code of Federal Regulations are to the 2015 edition.

[15]

^. All references to the Code of Federal Regulations are to the 2015 edition.

[16]

^. Exempt Organizations Select Check, https://apps.irs.gov/app/eos/pub78Search.do?ein1= 043625771&names=&city=&state=All...&country=US&deductibility=all&dispatchMethod=searchCharities&submitName=Search (last visited Mar. 30, 2016); Florida Department of State, Division of Corporations, http://search.sunbiz.org/Inquiry/CorporationSearch/SearchResults? inquiryType=EntityName&searchNameOrder=guardiantrustfoundation&searchTerm=guardian%20trust%20foundation (last visited Mar. 30, 2016).

[17]

^. Prior to November 19, 2012, the Master Trust allowed the Trustee, in its discretion to refund all or any portion of a trust sub-account to a grantor, if it becomes impossible to fulfill the conditions of the Master Trust with regard to a respective beneficiary for reasons other than the beneficiary’s death. See Trust Decl., Art. VII, § 7.2. However, this provision was deleted when Article VII was amended on November 19, 2012. See Second Amendment to Trust Decl.

[18]

^. All reference to the Code of Federal Regulations is to the 2015 edition.

[19]

^. Exempt Organizations Select Check, https://apps.irs.gov/app/eos/pub78Search.do?ein1=59-2679597&names=&city=&state=All...&country=US&deductibility=all&dispatchMethod=searchCharities&submitName=Search (last visited Dec. 14, 2015).

[20]

^. . All references to the Code of Federal Regulations are to the 2011 edition.

[21]

^. ^. ^. “A third-party trust is a trust established with the assets of someone other than the beneficiary.” POMS SI 01120.200.B.17. To “revoke” a trust means to “reclaim or take back[] the assets deposited in the trust.” POMS SI 01120.200.B.19. To “terminate” a trust means to “end[] a trust and obtain the assets for [the person terminating the trust].” POMS SI 01120.200.B.20.

[22]

^. The Act also states that a trust is not an individual’s resource if the trust meets the requirements for a special needs trust in section 1917(d)(4)(A), even though payments could be made from the trust to or for the benefit of the individual. See Act §§ 1613(e)(5), 1917(d)(4). You did not ask us to provide an opinion regarding whether the trust meets the requirements of a special needs trust.

[23]

^. . All references to the Florida Statutes Annotated are to the 2011 edition.

[24]

^. . A court may not modify a trust under this section if the trust was created after December 31, 2000, and its terms require all beneficial interests in it to vest or terminate within the period prescribed by Florida’s “Uniform Statutory Rule Against Perpetuities” and “expressly prohibit judicial modification.” Fla. Stat. Ann. §§ 736.04115(3)(b)(1) (citing Fla. Stat. Ann. § 689.225(2) (requiring a nonvested property interest to vest or terminate “no later than 21 years after the death of an individual . . . alive [when the interest is created],” or “within 90 years after its creation”)), 736.04115(3)(b)(2). However, as the court noted, “[t]he Last Will and Testament does not expressly prohibit judicial modification” (Order, ¶ K). Therefore, we believe the court could modify the trust under this section, even though it was created when Grantor died in October 2004 (Order, ¶ A) and required all interests in it to vest or terminate no later than “twenty-one (21) years after the death of the survivor of those beneficiaries living at the time of my death” (Will, Art. 2, ¶ E(5)(f)). See Fla. Stat. Ann. §§ 736.0401(1) (stating a trust may be created by a “[t]ransfer of property to another person as trustee . . . by will or other disposition taking effect on the settlor’s death”), 736.04115(4) (stating that for judicial modification under this section, a revocable trust is “created” when “the right of revocation terminates”).

[25]

^. . However, Florida law states that the terms of a trust do not prevail over the “power of a court to modify . . . a trust under [Florida Statute §§ 736.04113 and 736.04115].” Fla. Stat. Ann. §§ 736.0105(2), (2)(j). A court modifying a trust under these sections may consider extrinsic evidence relevant to the proposed modification. See Fla. Stat. Ann. §§ 736.04113(3)(a), 736.04115(2)(b).

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POMS Reference

PS: Title XVI Regional Chief Counsel Precedents

A. PS 18-082 Resource Status of a Trust Governed by Florida Law – Supplemental Opinion

1. Syllabus

2. Opinion

B. PS 17-121 Validity of Purported Pooled Trusts (FL, KY, MS)

C. PS 17-033 Resource Status of a Trust Governed by Florida Law – Supplemental Option

1. Syllabus

2. Opinion

D. PS 17-026 Resource Status of a Trust Governed by Florida Law – Supplemental Opinion

1. Syllabus

2. Opinion

E. PS 16-184 State Law for Empty and Dry Trusts in Atlanta Region

1. Syllabus

2. Opinion

F. PS 16-172 Resource Status of a Trust Governed by Florida Law

1. Syllabus

2. Opinion

G. PS 16-156 Resource Status of a Trust Governed by Florida Law, Amended

1. Syllabus

2. Opinion

H. PS 16-125 Does Settlement Solutions National Pooled Trust (Master Trust) comply with requirements for a pooled trust?

1. Syllabus

2. Opinion

I. PS 16-091 Resource Status of a Trust Governed by Florida Law

1. Syllabus

2. Opinion

J. PS 12-011 Interest Held in a Florida Trust by a Supplemental Security Income Applicant and Effect of a Florida State Court Order Entered Nunc Pro Tunc and Purporting to Modify the Trust

1. SYLLABUS

2. OPINION

K. PS 07-087 Effect of Trust as Resource for SSI Eligibility Purposes - Florida Number Holder - Mary , SSN ~

1. SYLLABUS

2. OPINION

L. PS 06-043 Effect of Null and Void Clause in Special Needs Trust, Florida Beneficiary - Austin

1. SYLLABUS

2. OPINION

Footnotes: