In the Matter of the Medical Assistance Pooled Special Needs Trust Of Scott Hewitt ( 2023 )

IN THE SUPREME COURT OF IOWA
No. 22–0736
Submitted February 22, 2023—Filed April 28, 2023
IN THE MATTER OF THE MEDICAL ASSISTANCE POOLED SPECIAL NEEDS
TRUST OF SCOTT HEWITT.
IOWA DEPARTMENT OF HUMAN SERVICES,
Appellant.
Appeal from the Iowa District Court for Jasper County, Thomas P. Murphy,
Judge.
The Iowa Department of Human Services appeals the district court’s grant
of summary judgment in favor of the trustee in its challenge to the trustee’s
accounting of a pooled special needs trust. AFFIRMED.
Oxley, J., delivered the opinion of the court, in which all justices joined.
Brenna Bird, Attorney General, Laura F. Kron (argued), Assistant Attorney
General, and Benjamin C. Chatman, Iowa Department of Human Services, for
appellant.
Elizabeth R. Meyer (argued), Jana M. Weiler, and Elizabeth A. Etchells of
Dentons Davis Brown PC, Des Moines, for the Center for Special Needs Trust
Administration, appellee.
2
OXLEY, Justice.
This case involves a dispute between the Iowa Department of Human
Services (DHS),1 which administers Iowa’s Medicaid program, and the trustee of
a pooled special needs trust held for the benefit of Scott Hewitt. Title XIX of the
Social Security Act (Title XIX) requires that the funds remaining in Mr. Hewitt’s
trust subaccount when he died must be used first to reimburse the state for its
Medicaid expenditures, but only “[t]o the extent” the funds are not retained by
the trust. 42 U.S.C. § 1396p(d)(4)(C)(iv). The trust retained the remaining
balance of $25,876.85, and DHS claims it is entitled to a detailed accounting to
ensure the retained funds were used for a proper purpose. Based on our review
of the governing trust provisions and Iowa trust law, the trustee provided an
adequate accounting and was not required to detail how the trust had, or would,
use the retained funds.
I.
A pooled special needs trust is a specific type of trust established for the
benefit of disabled individuals who receive Medicaid assistance. Because
Medicaid is designed for individuals with little to no income, those eligible to
receive it may not have adequate resources to pay for their nonmedical
necessities. Pooled special needs trusts are a way for such individuals to
maintain their Medicaid eligibility while also providing for their “Medicaid-
ineligible expenses, such as clothing, phone service, vehicle maintenance, and
1DHS began the transition process into the Iowa Department of Health and Human
Services (HHS) during the pendency of this appeal. 2022 Iowa Acts ch. 1131, § 51. We refer to
the agency as DHS throughout this opinion.
3
taxes.” Cox v. Iowa Dep’t of Hum. Servs., 920 N.W.2d 545, 551 (Iowa 2018)
(quoting Ctr. for Special Needs Tr. Admin., Inc. v. Olson, 676 F.3d 688, 695 (8th
Cir. 2012)).
In a pooled trust, an individual’s funds are combined with other
individuals’ funds for investment purposes, and the trustee maintains
subaccounts, or “separate trust ‘accounts’ . . . for each disabled individual.” Id.(quoting Lewis v. Alexander, 685 F.3d 325, 333 (3d Cir. 2012) (in turn quoting
Jan P. Myskowski, Special Needs Trusts in the Era of the Uniform Trust Code, 46
N.H. Bar J. 16, 16 (2005–2006))); see also Soc. Sec. Admin., Program Operations
Manual System (POMS) SI 01120.203D(1) [hereinafter POMS],
https://secure.ssa.gov/poms.nsf/lnx/0501120203 [https://perma.cc/87BZ-
YZ97] (“A pooled trust contains the assets of many different individuals, each
held in separate trust accounts and established through the actions of
individuals for separate beneficiaries.”). “By pooling these small accounts for
investment and management purposes, overhead and expenses are reduced and
more money is available to the beneficiary.” Cox, 920 N.W.2d at 551 (quoting
Lewis, 685 F.3d at 333). As the Social Security Administration explains in its
Program Operations Manual System by way of analogy, “the pooled trust is like a
bank that holds the assets of individual account holders. . . . The pooled trust
instruments usually consist of an overarching ‘master trust’ and a joinder
agreement that contains provisions specific to the individual beneficiary.” POMS
SI 01120.203D(1).
4
When a beneficiary dies, Title XIX allows the pooled trust to retain any
remaining balance in the beneficiary’s subaccount, but any amounts not
retained must be paid to the state to reimburse it for the Medicaid benefits it
provided for the individual. 42 U.S.C. § 1396p(d)(4)(C)(iv).
This case involves a pooled special needs trust established for the benefit
of Scott Hewitt. In December 2018, Mr. Hewitt used funds he received from a
workers’ compensation settlement to fund a pooled special needs trust by
executing a joinder agreement for the Iowa Pooled Trust to establish a
subaccount with the National Pooled Trust. On February 28, 2019, The Center
for Special Needs Trust Administration, Inc. (the Center), as trustee of the
National Pooled Trust, accepted the joinder agreement, and Mr. Hewitt
transferred $32,899.92 from the workers’ compensation settlement to the pooled
special needs trust.
Mr. Hewitt died on July 6. DHS had paid a total of $100,217.48 through
the Iowa Medicaid program to cover medical expenses for Mr. Hewitt between
2005 and the time of his death. In response to DHS’s claim for a medical
assistance debt against Mr. Hewitt’s estate, the Center informed DHS that
Mr. Hewitt’s estate had no assets, his pooled special needs trust subaccount had
a balance of $25,876.85, and that the trust was retaining all of those funds. As
further detailed during litigation, the Center verified that the funds retained from
Mr. Hewitt’s subaccount “were never transferred into an operating account used
for the benefit of the trustee” but had “been retained in the trust’s master client
account.” The master client account, sometimes referred to as the master
5
account, is an account “used to administer the pooled trust” that included
Mr. Hewitt’s subaccount, and all of its funds “are used for the benefit of the
beneficiaries of the pooled trust.” The Center also clarified that when it retains
funds from individual subaccounts, it does so “pursuant to the terms of The
National Pooled Trust” and that it “uses retained funds in furtherance of its
nonprofit mission to provide specialized administrative services for persons with
disabilities for the purpose of improving their quality of life.”
On November 3, 2020, DHS filed a petition to invoke jurisdiction over the
irrevocable trust in the Iowa District Court for Jasper County. See Iowa Code
§ 633C.4(2) (2020). DHS noted that the Center had never invoked the court’s
probate jurisdiction concerning Mr. Hewitt’s pooled special needs trust by filing
the required annual reports with the court as required by Iowa Code chapter
633C.2 DHS’s petition sought a “detailed accounting of how the retained funds
have been or will be used, and [an] order [that] any funds after the payment of
properly retained funds be paid to DHS from the assets of the trust.”
In response, the Center filed an initial and final report covering activity in
the Hewitt subaccount during 2019 (the only year it was in existence) and
reflecting that its remaining balance had been retained by the trust, resulting in
2Because Mr. Hewitt’s trust subaccount was not open for more than a year, however, the
Center’s fiduciary obligation to not only make these annual accountings, but to file them with
the district court is not addressed further here. That issue is addressed in the companion case
filed today, The Center for Special Needs Trust Administration, Inc., v. Iowa Department of Human
Services (In re the Medical Assistance Pooled Special Needs Trust of Steven Muller), ___ N.W.2d ___
(Iowa 2023).
6
a final balance of $0.3 It supplemented the report on October 7, 2021, with a
description of how it uses retained funds for the benefit of other trust
beneficiaries generally, and an explanation that it could not provide a more
detailed accounting of how the retained funds from Mr. Hewitt’s account were
used because the funds were no longer segregated in an individual subaccount.
DHS filed an objection to the supplemental report, and the parties later filed
competing motions for summary judgment.
The district court granted summary judgment for the Center. After
agreeing with the parties’ interpretation that State and Federal Medicaid law
permits the trust to retain residual funds for proper purposes after the death of
a beneficiary, the court analyzed what implications that interpretation has on
the Center’s accounting obligations. The district court recognized that DHS
would be entitled to recover funds if the Center “distributes any retained funds
to family members of the beneficiary.” But the court concluded that the
representations from the Center that all funds in “the master account are used
for the benefit of the beneficiaries of the pooled trust” satisfied its reporting
obligations, and no further accounting was required absent evidence that the
3The schedules attached to the initial and final report reflect: the $32,899.92 funding
from Mr. Hewitt’s workers’ compensation settlement, no distributions, and a total of $7,028 in
disbursements over the five months the account was open. The disbursements included: $1,908
in trustee fees, $1,250 in Medicare Set-Aside administrative services fees, $3,120 in preneed
services, $250 in tax analysis fees, and $500 for an administrative closing fee. After a $4.93 gain,
the $25,876.85 balance was retained by the trust. The parties and district court identify
$25,871.92 as the retained amount, which is reflected on the final report as the subtotal of Mr.
Hewitt’s subaccount prior to “capital transactions and adjustments” of the same amount.
Schedule “D” to the final report reflects the “account change” that took that balance to $0, which
was a net of the $4.93 gain and the $25,876.85 retention. We will use $25,876.85 as the retained
amount throughout this opinion.
7
Center breached its trustee duties under Iowa law. We retained DHS’s appeal
from that decision.
II.
We review summary judgment rulings for correction of errors at law. Kirlin
v. Monaster, 984 N.W.2d 412, 415 (Iowa 2023). “Summary judgment is proper if
the only issue is the legal consequences flowing from undisputed facts.” Id.(quoting Johnson v. Associated Milk Producers, Inc., 886 N.W.2d 384, 389 (Iowa
2016)). Because the only issues here involve the interpretation of statutory and
trust provisions, summary judgment was “the proper vehicle to test the validity
of [the] claim[s] . . . [a]nd we need only decide whether the district court properly
applied the law.” Id. (first and third alterations and omission in original) (quoting
Hill v. State, Dep’t of Hum. Servs., 493 N.W.2d 803, 804–05 (Iowa 1992)).
DHS argues on appeal that a pooled special needs trust can only retain
funds from an individual beneficiary’s subaccount for specific authorized
purposes and that, as a beneficiary of the subaccount, DHS is entitled to an
accounting to ensure proper disposition of any retained funds. To the extent the
trustee did not retain the funds for a proper purpose, DHS claims it is entitled
to the funds as reimbursement of its Medicaid expenditures. DHS’s appeal
explores the intersection between Medicaid trust rules and the Iowa Trust Code,
so we start with an explanation of each.
8
To describe the Social Security Act as “complex” is an understatement.4
As complicated as its scheme is to wade through, though, the issues in this case
are limited to a narrow provision governing the interplay between trusts and
Medicaid eligibility. An understanding of the trust provisions helps set the stage.
Medicaid is a cooperative federal aid program that subsidizes participating
states that provide medical assistance to their residents. See Olson, 676 F.3d at
694. As a needs-based program, Medicaid eligibility turns on the resources and
income available to an individual or family. See Iowa Dep’t of Hum. Servs. v.
Lohman (In re Est. of Melby), 841 N.W.2d 867, 875 (Iowa 2014). “[T]he program
contemplates that families will spend available resources first, and when those
resources are completely depleted [(subject to some limited exceptions)],
Medicaid may provide payment.” Id.“State participation in the Medicaid program is voluntary, but states
choosing to participate ‘must comply with all federal statutory and regulatory
requirements.’ ” Cox, 920 N.W.2d at 551 (quoting Lankford v. Sherman,
451 F.3d 496, 504 (8th Cir. 2006)). One such requirement is the treatment of
trusts as detailed in subsection 1396p(d) of title 42. See Olson, 676 F.3d at 694–
95 (citing 42 U.S.C. § 1396a(a)(18)). Recognizing that trusts can be used to
shelter assets, Congress enacted a comprehensive system in subsection
4The Social Security Act, of which the Medicaid trust rules are a part, contains a
“Byzantine construction,” Schweiker v. Gray Panthers, 453 U.S. 34, 43 (1981), making it “almost
unintelligible to the uninitiated,” Friedman v. Berger, 547 F.2d 724, 727 n.7 (2d Cir. 1976)
(Friendly, J.). It has been described as “an aggravated assault on the English language, resistant
to attempts to understand it.” Schweiker, 453 U.S. at 43 n.14 (quoting Friedman v. Berger, 409
F. Supp. 1225, 1226 (S.D.N.Y. 1976)).
9
1396p(d) to direct how trusts affect Medicaid eligibility. See Lewis, 685 F.3d at
343. As a general matter, Congress requires that assets held in trust be
considered resources available to the beneficiary, which in turn reduces the
beneficiary’s eligibility for Medicaid. See 42 U.S.C. § 1396p(d)(3). This reflects
Congress’s primary objective “to prevent Medicaid recipients from receiving
taxpayer-funded health care while they shelter[] their own assets for their benefit
and the benefit of their heirs.” Lewis, 685 F.3d at 343; see also Johnson v. Guhl,
357 F.3d 403, 405 (3d Cir. 2004) (“Because Medicaid is available only to the
needy, creative lawyers and financial planners have devised various ways to
‘shield’ wealthier claimants’ assets in determining Medicaid eligibility.”).
But Congress excepted three types of trusts from this general eligibility
rule. See 42 U.S.C. § 1396p(d)(4)(A)–(C); see also Iowa Admin. Code r. 441—
75.24(3)(a)–(c) (providing the same exceptions); POMS SI 01120.203A (describing
trusts established pursuant to 42 U.S.C. § 1396p(d)(4)(A) and (C) as “Medicaid
trust exceptions”). The three types of excepted trusts are: an income trust funded
only with the individual’s income from a pension, Social Security benefits, or
other stream of income, 42 U.S.C. § 1396p(d)(4)(B); an individual trust
established for a disabled individual under the age of 65, id. § 1396p(d)(4)(A);
and a pooled special needs trust established for a disabled individual of any age,
id. § 1396p(d)(4)(C). The Iowa Medicaid regime covering medical assistance trusts
hews close to the federal scheme. See Iowa Code § 633C.1(7) (defining “medical
assistance special needs trust” to cover both the individual trusts described in
42 U.S.C. § 1396p(d)(4)(A) and the pooled trusts in 42 U.S.C. § 1396p(d)(4)(C));
10
Iowa Admin. Code r. 441—75.24(3)(c) (imposing the same requirements on Iowa
pooled medical assistance special needs trusts as those found in 42 U.S.C.
§ 1396p(d)(4)(C)).
Special needs trusts, 42 U.S.C. § 1396p(d)(4)(A), and pooled special needs
trusts, id. § 1396p(d)(4)(C), are “ ‘discretionary trust[s] established for the benefit
of a person with a severe and chronic or persistent disability and [are] intended
to provide for expenses that assistance programs such as Medicaid do not cover.’
These expenses—books, television, Internet, travel, and even such necessities as
clothing and toiletries—would rarely be considered extravagant.” Lewis, 685 F.3d
at 333 (citation omitted) (quoting Sullivan v. County of Suffolk, 174 F.3d 282, 284
(2d Cir. 1999)). The exceptions for these trusts in Title XIX reflect Congress’s
secondary objective in enacting subsection 1396p(d), which was “to shield
special needs trusts from impacting Medicaid eligibility.” Id. at 343.
A pooled special needs trust, like the one involved here, differs in
significant respects from the other two. First, the trustee must be a nonprofit
organization. 42 U.S.C. § 1396p(d)(4)(C)(i) (requiring the trust to be “established
and managed by a non-profit association”); see also Iowa Admin. Code r. 441—
75.24(3)(c)(1). Second, the trustee must maintain separate accounts for each
beneficiary that are established and used solely for the benefit of that disabled
individual, but the trustee can pool the accounts for investment and
management purposes. 42 U.S.C. § 1396p(d)(4)(C)(ii), (iii); Iowa Admin. Code
r. 441—75.24(3)(c)(2)–(3). Finally, and critical to the dispute here, whereas the
11
other two types of trusts must include a Medicaid payback provision,5 which
requires the trust to first use any funds remaining at the beneficiary’s death to
reimburse the state for Medicaid payments made on the beneficiary’s behalf, see
42 U.S.C. § 1396p(d)(4)(A), (B)(ii); see also Iowa Admin. Code r. 441—75.24(3)(a)–
(b), a pooled special needs trust is only required to reimburse the state for its
Medicaid payments “[t]o the extent [those] amounts . . . are not retained by the
trust,” 42 U.S.C. § 1396p(d)(4)(C)(iv); see also Iowa Admin. Code r. 441—
75.24(3)(c)(4). This critical distinction from the other two types of trusts reveals
“Congress’ evident solicitude for . . . pooled trusts.” Lewis, 685 F.3d at 348.
DHS does not dispute that the trust at issue here is a pooled special needs
trust or that the trust can “retain” the balance remaining in an individual’s
subaccount. It nonetheless argues that there are (or should be) limits on how
the trust can use retained funds, and that the Center cannot simply choose to
retain the entire remaining balance in a subaccount as a windfall when a
beneficiary dies. And if some limits exist, DHS argues it should be entitled to a
detailed accounting of how the retained funds are actually used.
The cases relied on by DHS to suggest there must be some limit to prevent
the Center from retaining all amounts left at a beneficiary’s death do not support
its position. Rather, those cases reveal that the specific trust instruments, and
sometimes state law, determine whether there are specific limits on how much
of a beneficiary’s subaccount can be retained by the trust. For instance, in
5David A. Rephan & Joelle Groshek, ABLE Act Accounts: Achieving a Better Life Experience
for Individuals with Disabilities with Tax-Preferred Savings (and the Old Reliable Special and
Supplemental Needs Trusts), 42 Mitchell Hamline L. Rev. 963, 969 (2016).
12
National Foundation for Special Needs Integrity, Inc. v. Reese, the trust agreement
provided that the trustee would not retain any portion of the beneficiary’s funds
upon death, and amounts remaining in the beneficiary’s subaccount would be
used to reimburse the state for medical assistance it had paid for the beneficiary.
881 F.3d 1023, 1026 (7th Cir. 2018). In contrast, neither Mr. Hewitt’s joinder
agreement nor the National Pooled Trust’s governing document limited the
amount of funds the trust could retain from Mr. Hewitt’s subaccount upon his
death. Both required only that any amounts not retained had to be used to
reimburse the state.
Similarly, the trust agreement in Pfoser v. Harpstead “provided that up to
90 percent of any funds remaining in the sub-account at the time of Pfoser’s
death must be paid to the State to reimburse the Medical Assistance program
for the costs paid on [his] behalf,” and the trust “would retain the other 10
percent in a charitable trust for the benefit of indigent pooled trust beneficiaries
who had exhausted the funds in their sub-accounts.” 953 N.W.2d 507, 512
(Minn. 2021). That provision mirrored Minnesota law, which provides that pooled
special needs trusts operating in Minnesota qualify for the Medicaid eligibility
exception only if they limit how much a trust may retain to “ten percent of the
account value at the time of the beneficiary’s death” and limit the use of retained
funds “for the benefit of disabled individuals who have a beneficiary interest in
the pooled trust.” Minn. Stat. § 256B.056, subd. 3b(d) (2020).6 Again, in
6Although the validity of this statute was not at issue in Pfoser, see 953 N.W.2d at 515–
16 (noting that the trust at issue met the Minnesota statutory requirements for a pooled special
needs trust, but addressing the separate issue of whether a transfer into the pooled special needs
13
contrast, Iowa law mirrors federal law and places no limits on the amount of
funds that can be retained by the trustee of a pooled special needs trust. Iowa
Admin. Code r. 441—75.24(3)(c)(4). DHS’s argument for limits on the Center’s
ability to retain funds from the subaccount is contrary to both Iowa law and the
governing trust documents.
Even if neither the trust documents nor Iowa law limits the amount of
funds that the Center can retain, DHS argues that the Center can use retained
funds only for a “proper” purpose, including for the benefit of other beneficiaries
of the pooled trust, see Olson, 676 F.3d at 695 (“Residual amounts in the pooled
trust after the beneficiary’s death do not have to be paid back to the state, and
may be kept by the non-profit for the benefit of other pooled-trust beneficiaries.”),
or to cover administration fees and other overhead costs, see Lewis, 685 F.3d at348–49 (“Retaining the residual enables the trust to cover administrative fees
and other overhead without increasing charges on accounts of living
beneficiaries[.]”). From this premise, DHS argues the Center must account for its
use of any retained funds so that DHS can determine whether the retained funds
are used for an improper purpose, which would entitle DHS to recover some of
the remaining funds.
trust subjected the beneficiary to a transfer penalty, which turned on whether the transfer was
given for “valuable consideration”), the United States Court of Appeals for the Third Circuit held
in Lewis v. Alexander that a Pennsylvania law imposing similar restrictions on a pooled special
needs trust’s ability to retain funds was preempted by Title XIX, see Lewis, 685 F.3d at 346–49
(holding the Pennsylvania statute that limited a trustee to retaining only 50% of remaining trust
balance was preempted by 42 U.S.C. § 1396p(d)(4)(C) because that statute “leaves it to the trust
to decide how much—if any—money should be provided to the State to reimburse it for Medicaid
expenses”). We need not tarry on this issue, however, because Iowa law mirrors federal law on
this point. Compare 42 U.S.C. § 1396p(d)(4)(C)(iv), with Iowa Admin. Code r. 441—75.24(3)(c)(4).
14
DHS’s position—that it is entitled to an accounting of how the retained
funds are actually used, not just that they were retained for a proper purpose—
cannot be squared with the governing Medicaid statutes or Iowa trust law for
two reasons.
First, the Center cannot retain the funds until the beneficiary dies, which
simultaneously triggers the termination of the trust and ends the need for any
further accounting. See 42 U.S.C. § 1396p(d)(4)(C)(iv). When the beneficiary dies,
his or her individual trust subaccount terminates and the trustee winds up that
individual subaccount by distributing the trust res and providing a final
accounting. See Iowa Code § 633A.2201(1)(b) (“[A] trust terminates when . . .
[t]he trust purpose is fulfilled.”).7 “On termination of a trust, the trustee may
exercise the powers necessary to wind up the affairs of the trust and distribute
the trust property to those entitled to the trust property.” Id. § 633A.2201(2). For
a pooled special needs trust, distribution of the trust subaccount includes
choosing whether to retain the remaining subaccount balance, in whole or in
part, and remitting any balance first to DHS to reimburse its Medicaid
expenditures and, if any funds remain, then to any residual beneficiaries. See
42 U.S.C. § 1396p(d)(4)(C)(iv); see also Reese, 881 F.3d at 1026 (“The trust
agreement can direct who should receive any assets that might remain after
reimbursement.”).
7That the trust subaccount terminates at the beneficiary’s death and must be wound up
is consistent with the trust documents governing Mr. Hewitt’s subaccount. Section 5.08 of the
joinder agreement directs: “At the death of the Beneficiary, the Trustee shall wind up the affairs
of the Trust . . . .”
15
But once the trust terminates and the trustee distributes the trust assets,
there is no longer a trust to account for. As we recognized in Cox v. Iowa
Department of Human Services, each subaccount managed by a pooled special
needs trust is considered a separate trust for that individual beneficiary.
920 N.W.2d at 551 (describing the required subaccounts as “separate trust
‘accounts’ being maintained for each disabled individual.” (quoting Lewis,
685 F.3d at 333)); see also POMS SI 01120.203D(1) (When “evaluating the trust,
it is important to distinguish between the master trust, which is established
through the actions of the nonprofit association, and the individual trust
accounts within the master trust, which are established through the actions of
the individual or another person or entity for the individual, through a joinder
agreement.” (emphasis added)). Thus, DHS’s interest extended only to
Mr. Hewitt’s individual trust subaccount, and does not entitle it to an accounting
of the Center’s “master trust” account.
Second, section 1396p(d)(4)(C) gives DHS an interest as a contingent
beneficiary—contingent on whether the trust retains the remaining funds. See
42 U.S.C. § 1396p(d)(4)(C)(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.” (emphasis added)). The
contingency is defeated and DHS’s interest ends under the terms of the statute
when the trust retains the remaining funds, not when it ultimately uses them.
16
This is consistent with Congress’s chosen treatment of pooled special needs
trusts in Title XIX, “intended to shield the trust from repayment obligations”
based on the trust’s retention decision. Lewis, 685 F.3d at 348–49 (identifying
section 1396p(d)(4)(C) as a “protective provision” that “leaves it to the trust to
decide” whether and how much reimbursement the state is entitled to). Because
a trustee’s accounting duty only requires it to keep beneficiaries “reasonably
informed about the administration of the trust and the material facts necessary
to protect the beneficiaries’ interests,” Iowa Code § 633A.4213, and because,
after the trust retains the funds as part of the wind up process, there is no longer
a contingent interest in favor of DHS (or even a trust subaccount to administer),
DHS is only entitled to an accounting showing that the trust retained the funds
for a proper purpose.
The accounting provided by the Center here informed DHS of the activity
in Mr. Hewitt’s subaccount during the relevant period, that the Center retained
the full remaining balance left at the time of his death, and that the retained
amount would be used “pursuant to the terms of The National Pooled Trust” and
“in furtherance of its nonprofit mission to provide specialized administrative
services for persons with disabilities for the purpose of improving their quality of
life.” The trust documents also identified what the retained funds could not be
used for. Section 6.3 of the National Pooled Trust’s governing document, titled
“Specifically Prohibited Expenses,” expressly prohibits the Center from using
retained funds for improper purposes, including to: “1) pay taxes due from the
estate of a Beneficiary other than those arising from inclusion of the Trust in the
17
estate; 2) pay inheritance taxes due for residual beneficiaries; 3) make payment
of debts owed to third parties; 4) pay for funeral expenses; and/or, 5) make any
payments to residual beneficiaries.”8
The Center’s affirmation that it retained the funds in the master account
for the benefit of the trust beneficiaries and would not use the funds for the
specified prohibited purposes satisfied its accounting obligations. To impose
continuing accounting obligations until the funds are in fact used would ignore
both that DHS’s contingent interest dissipated when the Center retained the
balance and that the trust terminated, leaving nothing to further report. To the
extent DHS is nevertheless concerned that the trust’s ultimate disposition of
retained funds is improper, there are other avenues by which it can seek to
remedy any suspected misuse. See The Ctr. for Special Needs Tr. Admin., Inc. v.
Iowa Dep’t of Hum. Servs., (In re the Med. Assistance Pooled Special Needs Tr. of
Steven Muller), ___ N.W.2d ___, ___ (Iowa 2023). A petition for an accounting is
not one of them.
III.
The district court’s summary judgment is affirmed.
AFFIRMED.
8These limitations are also reflected in the Social Security Administration’s Program
Operations Manual System, see POMS SI 01120.203E(2), which is followed by a note: “For the
purpose of prohibiting payments prior to reimbursement of the State(s) for medical assistance, a
pooled trust is not considered a residual or remainder beneficiary. Remember that a pooled trust
has the right to retain funds upon the death of the beneficiary.” Id. (emphasis added). This note
reflects that a pooled trust that retains funds on the death of a beneficiary is not paying itself as
a residual beneficiary but, by statute, is authorized to retain the funds rather than use them to
reimburse the state.