Last week, we discussed a surprising development in the ongoing battle with the Social Security Administration (“SSA”) over various POMS provisions addressing the “sole benefit” rule for first-party SNTs. The decision of the SSA to remove a controversial illustration of a purported violation of the sole benefit rule in POMS SI 01120.201F.2 has been met by SNT drafters with both elation and dismay. Although the now infamous “Example 1” (characterizing SNT-funded travel expenses of the beneficiary’s family members as a violation of the sole benefit rule) has been deleted, SNT planners and drafters remain in limbo as to the best response to this unexpected move by the SSA. Is this deletion merely a temporary position? Does it represent a “kinder, gentler” forecast for dealings with the SSA and state Medicaid programs? Without clarity on these questions, and whether the SSA may change its mind about other types of previously “safe” disbursements, how should practitioners be drafting their first-party SNTs?
Many well-respected SNT practitioners are recommending that the commonly encountered “laundry list” of suggested permissible expenditures be eliminated from SNT agreements entirely. This approach would avoid the need to amend or modify the SNT each time the SSA changes its position in the POMS on the permissibility of a given disbursement. However, many professional Trustees insist on detailed authorizations in the trust agreement for specific items or services, and in the absence of such express authority will insist on obtaining an order of a court of competent jurisdiction directing the disbursement (at great expense to the SNT). However, having a court order does not immunize the disbursement from attack by the SSA or a state Medicaid program, as recent and pending cases attest.
Some practitioners have suggested reliance upon a provision in the SNT agreement that disbursements be limited to those “permitted by the POMS.” However, it is arguable that many provisions in the POMS exceed the legal authority of the SSA to regulate the establishment and administration of SNTs. The recent decision of the United States Supreme Court denying certiorari in Lewis v. Alexander let stand the 2012 decision of the United States Court of Appeals for the Third Circuit (685 F.3d 325) that the Medicaid program administered in the Commonwealth of Pennsylvania could not impose additional criteria for exemption of pooled SNTs authorized by 42 U.S.C. § 1396p(d)(4)(C). The denial of cert in that case effectively creates a conflict in the Circuits which may well come before the United States Supreme Court in the years ahead. (Note: this conflict in the Circuits will be the topic of a future blog entry.) Including a provision in a SNT agreement that limits disbursements to those “permitted by the POMS” begs the question as to whether the POMS are valid and enforceable, and may preclude the SNT from challenging any suspect POMS provisions.
As noted in last week’s blog entry for 1/25/13, POMS Section SI 01120.227D takes the position that so-called “Null and Void Clauses” are, well, null and void! “For SSI resource purposes, a null and void clause does not cure an otherwise defective trust instrument . . . . and cannot nullify provisions that would otherwise make the trust a countable resource. Null and void clauses cannot overcome missing or conflicting trust provisions.” (This drafter nevertheless includes such a clause in her SNT agreements.)
Unfortunately, there is no generally accepted best practice for the defensive drafting of SNTs in this unsettled environment. In those jurisdictions where it is permissible, a SNT agreement should include a limited power of amendment to ensure continued compliance with relevant law and regulations (without any court involvement, if permissible under state law). Such a power should be vested in the Trustee (or possibly a “Trust Protector,” which this drafter does not use). However, even a limited power to amend is reportedly a fatal flaw in some SSA Regions, and the Trustee must proceed with a judicial modification under state law to effectuate any necessary amendments to a non-compliant SNT agreement.
The SSA is currently engaged in active and productive conversations with SNT advocates (including private practitioners, disability support and advocacy groups, and SNT trustees and administrators) to address these, and other, pressing concerns of the SNT community, the first such meeting having been held on January 16, 2013 at SSA headquarters in Baltimore. While these discussions unfold, practitioners and drafters should be prepared to advocate for more clarity in the evolving area of SNTs and means-tested government benefits, which are the cornerstone of securing the future of our clients with disabling conditions. In appropriate cases, practitioners should embrace the opportunity to litigate on behalf of clients whose means-tested benefits are adversely impacted by unsupported SSA or Medicaid decisions characterizing their SNTs as countable resources.
– Kristen Lewis
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