Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-13-02757/USCOURTS-ca8-13-02757-0/pdf.json

Nature of Suit Code: 864
Nature of Suit: Social Security - SSID Title XVI
Cause of Action: 

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United States Court of Appeals

For the Eighth Circuit

___________________________

No. 13-2757

___________________________

Stephany Draper

lllllllllllllllllllll Plaintiff - Appellant

v.

Carolyn W. Colvin, Acting Commissioner of the Social Security Administration

lllllllllllllllllllll Defendant - Appellee

------------------------------

National Academy of Elder Law Attorneys; Special Needs Alliance

lllllllllllllllllllllAmici on Behalf of Appellant

____________

 Appeal from United States District Court 

for the District of South Dakota - Sioux Falls

____________

 Submitted: October 9, 2014

 Filed: March 3, 2015

____________

Before MURPHY, SMITH, and GRUENDER, Circuit Judges.

____________

GRUENDER, Circuit Judge.

Appellate Case: 13-2757 Page: 1 Date Filed: 03/03/2015 Entry ID: 4249931 
Stephany Draper appeals from the district court’s decision affirming the

1

termination of her Supplemental Security Income (“SSI”) payments. The district

court held that Draper was not eligible for SSI benefits because the funds in her trust

raised her assets above the eligibility limit. We affirm.

I.

Eighteen-year-old Stephany Draper suffered a traumatic brain injury in a car

accident in June 2006. Draper executed a durable power of attorney, authorizing her

parents, John and Krystal Draper, to, among other things: (1) “demand, sue for,

recover, collect, and receive” every sumof money belonging to or claimed by Draper;

(2) “compromise or compound any claim or demand;” and (3) “fund, transfer assets

to, and to instruct and advise the trustee of any trust wherein [Draper is] or may be

the trustor, or beneficiary.”

Draper began receiving SSI payments in July 2007. Approximately seven

months later, on February 12, 2008, John Draper signed a personal-injury settlement

statement on Draper’s behalf, under which Draper received $429,259.41. Later that

day, Draper’s parents, without referencing the power of attorney, signed documents

creating the Stephany Ann Draper Special Needs Trust. As explained in the trust

document, Draper’s parents intended for the trust to qualify under 42 U.S.C.

§ 1396p(d)(4)(A), meaning that it would provide for Draper’s needs without

“displac[ing] or supplant[ing] public assistance or other sources of support that may

otherwise be available to the beneficiary.” The trust listed as its funding source only

“the proceeds of the settlement of a liability claim,” referring to the money Draper

received in the personal-injury settlement. The trust was funded with the

The Honorable Karen E. Schreier, then Chief Judge, United States District 1

Court for the District of South Dakota.

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$429,259.41 sum in a single deposit on the same day that her parents executed the

trust agreement.

In September 2008, Draper received notice from the Social Security

Administration (“SSA”) that she had been overpaid a total of about $3,000 in SSI

benefits from February through September 2008 because her assets, including the

funds in the trust, exceeded the SSI-eligibility limit of $2,000. The SSA also

informed Draper that her SSI payments would cease. Draper appealed the agency

decision to an Administrative Law Judge (“ALJ”).

The ALJ found that Draper had been overpaid SSI benefits because her specialneeds trust was not exempt from being counted as a personal asset under

§ 1396p(d)(4)(A). To reach this conclusion, the ALJ relied on the SSA’s

interpretation of § 1396p(d)(4)(A) set forth in its ProgramOperations Manual System

(“POMS”), a policy and procedure manual that agency employees use in evaluating

eligibility for SSI benefits. According to the POMS, Draper’s parents had to act as

third-party creators when establishing the trust in order for it to be exempt under

§ 1396p(d)(4)(A). POMS SI 01120.203B(1)(g). The ALJ found that the trust did not

qualify because Draper’s parents acted as Draper’s agents under the power of attorney

when they established the trust. Accordingly, the ALJ held that Draper wasineligible

for SSI benefits.

Draper requested review by the Social Security Appeals Council. While her

appeal was pending and in an effort to remedy the trust’s non-compliance, Draper’s

parents obtained a state court order modifying the trust nunc pro tunc, effective

February 12, 2008, which retroactively listed the state court, rather than Draper’s

parents, as the trust’s settlor. The Appeals Council denied Draper’s request for

review and determined that the state court’s order modifying the trust did not provide

a basis for altering the ALJ’s decision. The district court affirmed the judgment of

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the SSA, likewise holding that the trust failed to meet the requirements laid out in the

POMS. Draper now appeals.

II.

We review de novo the district court’s decision affirming the denial of SSI

benefits. Byes v. Astrue, 687 F.3d 913, 915 (8th Cir. 2012). We will reverse the

findings of an agency only if they are not supported by substantial evidence or result

from an error of law. 42 U.S.C. § 405(g); Mason v. Barnhart, 406 F.3d 962, 964 (8th

Cir. 2005). “Substantial evidence is ‘less than a preponderance,’ but ‘enough that a

reasonablemind would find it adequate to support the Commissioner’s conclusions.’” 

Travis v. Astrue, 477 F.3d 1037, 1040 (8th Cir. 2007) (quoting Dunahoo v. Apfel, 241

F.3d 1033, 1037 (8th Cir. 2001)). “If substantial evidence supports the

Commissioner’s conclusions, this court does not reverse even if it would reach a

different conclusion, or merely because substantial evidence also supports the

contrary outcome.” Id. “Whether the ALJ based his decision on a legal error is a

question we review de novo.” Juszczyk v. Astrue, 542 F.3d 626, 633 (8th Cir. 2008).

Draper contends the SSA erred by concluding that her trust did not qualify

under § 1396p(d)(4)(A) because her parents satisfied the qualifying-trust criteria or,

alternatively, because the state court’s retroactive action naming itself as settlor

remedied any initial non-compliance. Our review requires us to examine whether

Draper’s parents or the state court properly established a qualifying trust. To

complete this task, we begin our analysis with the text of the statute. We then

examine whether the SSA’s interpretation of any ambiguities in the statute’s text

warrants deference. Finally, we explore whether Draper’s parents took the steps

necessary to comply with the qualifying-trust requirements when creating the

Stephany Ann Draper Special Needs Trust.

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A.

Under Title XVI of the Social Security Act, “[e]very aged, blind, or disabled

individual who is determined . . . to be eligible on the basis of his income and

resources shall . . . be paid benefits by the Commissioner of Social Security.” 42

U.S.C. § 1381a. When such an unmarried individual’s personal resources exceed

$2,000, he or she loses eligibility for SSI benefits. 42 U.S.C. § 1382(a)(3)(B). 

Certain assets are exempt from being counted against this $2,000 limit, however,

including special-needs trusts under § 1396p(d)(4)(A). 42 U.S.C. § 1382b(e)(5). The

question at issue in this case is whether the Stephany Ann Draper Special Needs Trust

qualifies under this statute.

As in any review of agency interpretations offederal law, we begin our analysis

with the text of the statute, 42 U.S.C. § 1396p(d)(4)(A), incorporated by 42 U.S.C.

§ 1382b(e)(5). See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S.

837, 842-44 (1984). We examine whether the statute’s language speaks to the two

issues raised by the parties in this case: (1) whether parents acting under power of

attorney may create and fund a qualifying trust and (2) whether a court’s nunc pro

tunc order modifying a trust such that the court islisted asits originalsettlor operates

to “establish” retroactively a qualifying trust. Section 1396p(d)(4)(A) defines a

qualifying trust as:

A trust containing the assets of an individual under age 65 who is

disabled (as defined in section 1382c(a)(3) of this title) and which is

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.

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We agree with the district court that Congress, in the text of § 1396p(d)(4)(A)

and § 1382b(e)(5), did not speak directly to the questions at issue here. Specifically,

the text does not answer whether parents exercising power of attorney for their child

may create and fund a qualifying trust nor does it explain what process a court or a

parent must follow to “establish” such a trust. Neither § 1396p(d)(4)(A) nor

§ 1382b(e)(5) provides a definition of “parent” or “establish,” and we find no other

indication that Congress contemplated these issues when incorporating

§ 1396p(d)(4)(A)’s language into § 1382b(e)(5). See Chevron, 467 U.S. at 851

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(discussing textual ambiguity). We therefore conclude that the text is ambiguous on

these points and that Congress left a gap for the agency to fill in overseeing the daily

administration of the special-needs trust exception. See Schweiker v. Gray Panthers,

453 U.S. 34, 43 (1981) (noting Congress has granted the agency administering the

Social Security Act “exceptionally broad authority to prescribe standards”);

TeamBank, N.A. v. McClure, 279 F.3d 614, 618-20 (8th Cir. 2002) (stating that an

agency may fill statutory gaps through interpretation). Accordingly, we find that the

agency had authority to interpret the statute, and we next examine whether the SSA

permissibly construed § 1396p(d)(4)(A) in the POMS. See United States v. Mead

Corp., 533 U.S. 218, 229 (2001).

B.

The district court determined that the POMS provisions at issue warrant

deference under Skidmore v. Swift & Co., 323 U.S. 134 (1944). Skidmore deference

recognizes that an agency’s interpretation of the statute it is charged with

implementing “may merit some deference whatever its form, given the ‘specialized

experience and broader investigations and information’ available to the agency, and

If anything, § 1396p(d)(2)(A) provides a definition of “establish” contrary to 2

Draper’s position. However, we acknowledge that it is unclear whether

§ 1396p(d)(2)(A) applies to § 1396p(d)(4)(A) and whether Congress incorporated

definitions from § 1396p(d)(2)(A) into § 1382b(e)(5).

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given the value of uniformity in its administrative and judicial understandings of what

a national law requires.” Mead, 533 U.S. at 234 (quoting Skidmore, 323 U.S. at 139). 

Such deference operates along a spectrum. Id. at 228. The amount of deference

afforded to an agency interpretation under Skidmore turns on several factors,

including: (1) the thoroughness of the agency’s consideration, (2) the validity of its

reasoning, (3) consistency with earlier and later pronouncements, (4) formality,

(5) expertise of the agency, and (6) all those other factors “which give it power to

persuade, if lacking power to control.” Id. at 228-29 (quoting Skidmore, 323 U.S. at

140). 

We conclude that the district court properly held that the provisions in the

POMS interpreting § 1396p(d)(4)(A) warrant Skidmore deference. According respect

under Skidmore here is consistent with the Supreme Court’s conclusions that “[t]he

Social SecurityAct is among the most intricate ever drafted by Congress,” Schweiker,

453 U.S. at 43, and that Congress routinely relies on agencies to fill gaps in the

statutes they administer. See 42 U.S.C. § 405(a) (giving the Commissioner “full

power and authority to make rules and regulations and to establish procedures” to

administer the Social Security Act); Chevron, 467 U.S. at 843 (noting that Congress

explicitly and implicitly delegates authority to agenciesto fill statutory gaps); see also

Wash. State Dep’t of Soc. & Health Servs. v. Guardianship Estate of Keffeler, 537

U.S. 371, 385-86 (2003) (granting the POMS provisions examined in that case

respect under Skidmore); Gragert v. Lake, 541 F. App’x 853, 856 n.1 (10th Cir. 2013)

(stating that the POMS warrants respect under Skidmore); Carillo-Yeras v. Astrue,

671 F.3d 731, 735 (9th Cir. 2011) (stating that the POMS may be entitled to respect

under Skidmore “to the extent it provides a persuasive interpretation of an ambiguous

regulation”); accord Davis v. Sec’y of Health & Human Servs., 867 F.2d 336, 340

(6th Cir. 1989) (“Although the POMS is a policy and procedure manual that

employees of the [administering agency] use in evaluating Social Security claims and

does not have the force and effect of law, it is nevertheless persuasive.”).

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We further agree with the district court’s conclusion that the POMS provisions

at issue here—namely, those in POMS SI 01120.203B—warrant relatively strong

Skidmore deference. The relevant POMS provisions fall squarely within the SSA’s

area of expertise. See Hagans v. Comm’r of Soc. Sec., 694 F.3d 287, 303 (3d Cir.

2012) (explaining that the SSA “has a great deal of expertise in administering” the

Social Security program). In addition, the POMS provisions demonstrate valid

reasoning; that is, the detailed process required for establishing qualifying specialneeds trusts contained in the POMS is consistent with “Congress’s command that all

but a narrow class of an individual’s assets count as a resource when determining the

financial need of a potential SSI beneficiary.” Draper v. Colvin, No. CIV.

12-4091-KES, 2013 WL 3477272, at *9 (D.S.D. July 10, 2013) (citing 42 U.S.C. §

1382b). Finally, the provisions interpreting § 1396p(d)(4)(A) are part of a relatively

long-standing and consistent interpretation that ensures universal applicability of the

statute. Id.; see Sai Kwan Wong v. Doar, 571 F.3d 247, 261 (2d Cir. 2009) (noting

that “the deference due to an agency interpretation is at the high end of the spectrum

of deference when the interpretation in question is not merely ad hoc but is applicable

to all cases” (quoting Estate of Landers v. Leavitt, 545 F.3d 98, 110 (2d Cir. 2008));

cf. Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 212 (1988) (declining to grant

deference to an interpretation that emerged during litigation rather than through

earlier agency action). Draper has not pointed to any contrary interpretation of

§ 1396p(d)(4)(A) advanced by the SSA since the special-needs trust exception was

incorporated into § 1382b. For these reasons, we conclude the district court correctly

held that Draper had to comply with the requirements listed in the POMS to establish

a qualifying trust.

C.

We next examine whether Draper’s trust complied with the POMS provisions

interpreting § 1396p(d)(4)(A). POMS SI 01120.203 provides a detailed process for

creating a qualifying trust under this statute: “[T]o qualify for the special needs trust

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exception, the assets of the disabled individual must be put into a trust established

through the actions of the disabled individual’s: parent(s); grandparent(s); legal

guardian(s); or a court.” POMS SI 01120.203B(1)(f). When a parent seeks to

establish a trust for a legally competent adult, the POMS states that the parent “may

establish a ‘seed’ trust using a nominal amount of his or her own money, or if State

law allows, an empty or dry trust.” Id. After a seed trust or an “empty” or “dry” trust

is established, “the legally competent disabled adult may transfer his or her own

assets to the trust or another individual with legal authority (e.g., power of attorney)

may transfer the individual’s assets into the trust.” Id. Importantly, “[t]he special

needs trust exception does not apply to a trust established through the actions of the

disabled individual himself or herself.” Id. Regarding the funding of the trust, the

POMS provides the following:

The person establishing the trust with the assets of the individual or

transferring the assets of the individual to the trust must have legal

authority to act with respect to the assets of that individual. Attempting

to establish a trust with the assets of another individual without proper

legal authority to act with respect to the assets of the individual will

generally result in an invalid trust.

. . .

[A] trust established under a [power of attorney] will result in a trust we

consider to be established through the actions of the disabled individual

himself or herself because the [power of attorney] merely establishes an

agency relationship.

POMS SI 01120.203B(1)(g).

Draper contends that her trust, at its inception, satisfied each of the POMS

criteria. Specifically, she alleges that her parents, acting in their individual capacities,

created a valid, qualifying, special-needs trust for her benefit. Only after the trust was

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established, she argues, was it funded with proceeds from the personal-injury

settlement. Draper contends that this sequence of events conformed with both South

Dakota law, see S.D. Codified Laws § 55-1-4 (noting that, under South Dakota law,

an express trust is created when the “trustor indicat[es] with reasonable certainty . . .

[t]he subject, purpose, and beneficiary”), and with the requirements set forth in the

POMS.

Draper presents two theories supporting her conclusion. First, she argues that

evidence in the record shows that her parents, acting in their individual capacities,

formed a trust without a res—a so-called “empty” or “dry” trust —and that this 3

“empty” trust only later was funded with her personal-injury settlement proceeds. 

Thus, she argues that her parents complied with POMS SI 01120.203B(1)(f) because

POMS SI 01120.203B(1)(f) permits this sequence of events in states recognizing

“empty” trusts. Assuming without deciding that South Dakota law permits “empty”

trusts, we nevertheless find that Draper’s argument fails. The evidence shows that

Draper’s trust was not designed as an “empty” trust. Instead, the trust had an initial

res—the proceeds of the personal-injury settlement. The trust agreement executed

on February 12, 2008 made this fact explicit, stating that “[t]his trust is funded with

the proceeds of the settlement of a liability claim” (emphasis added), a $429,259.41

sum, which was transferred into the trust in a single deposit that same day. Thus, we

see no evidence of an intent to create an “empty” trust to comply with the POMS, and

we find no error in the district court’s conclusion on this basis.

We note that the terms “dry” and “empty” trust, as used in trust law, 3

sometimesrefer to something other than a trust formed without assets. See, e.g., 1 H.

Tiffany, Real Property § 247 (3d ed. 1939) (defining dry trusts); Norman Veasey,

Kutak Symposium: Professional Responsibility and the Corporate Lawyer, 13 Geo.

J. Legal Ethics 331, 344 (2000) (mentioning empty trusts). However, the parties here

agree that the POMS intended to refer to a trust created without an existing res.

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This finding brings us to Draper’s second theory—even if the trust was not

designed to be “empty,” her parentsstill complied with the POMS because they acted

only in their individual capacities when establishing her trust. We disagree. First,

under traditional trust-law principles, establishing a non-empty trust requires more

than the execution of trust documents; the funding of the trust with its initial res plays

a key role. See Restatement (Third) of Trusts § 2 cmt. i (2003) (noting that “merely

entering into . . . an agreement or instrument of trust does not initially create a trust

because of the absence of trust property, [but] a trust may . . . be created later if and

when a transfer of trust property to the trustee is made with reference to that

agreement or instrument”). Second, when a trust is formed with an initial, existing

res, like the trust at issue here, both the POMS and traditional trust law hold that

someone with a legal interest in the entire res must be involved in the trust’s creation;

otherwise, the trust isinvalid. POMS SI 01120.203B(1)(g) (“Attempting to establish

a trust with the assets of another individual without proper legal authority . . . will

generally result in an invalid trust.”); Restatement (Third) of Trusts § 41 cmt. b

(2003) (“[O]ne cannot create a trust of property of which another has sole and

complete ownership.”).

Draper’s parents, in their individual capacities, had no interest in the entire sum

constituting the trust’s initial res, Draper’s personal-injury settlement proceeds.4

Instead, they held an interest in the full settlement sum only in their capacity as

Draper’s agents exercising the power of attorney. Because Draper wishes to avoid

a finding that her parents created an invalid trust, we find substantial evidence in the

record that Draper’s parents necessarily were acting as her agents when they

incorporated all of her settlement proceeds and thus when they established the

Stephany Ann Draper Special Needs Trust. When Draper’s parents exercised the

In a motion filed in the district court, Draper’s parents conceded that they did

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not contribute any of their own funds to the trust’s initial res and that they did not

create a seed trust for their daughter.

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power of attorney in this way—by funding a trust wherein Draper was the

beneficiary —the POMS “consider[ed] [the trust] to be established through the

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actions of the disabled individual . . . herself.” POMS SI 01120.203B(1)(g). 

Therefore, according to the POMS, the trust did not qualify under § 1396p(d)(4)(A). 

POMS SI 01120.203B(1)(f) (noting that “[t]he special needs trust exception does not

apply to a trust established through the actions of the disabled individual himself or

herself”).

Admittedly, some evidence in the record supports Draper’s claim that her

parents intended to act in their individual capacities. Draper’s parents identified

themselves individually as settlors and trustees, and the trust document explicitly

states that it was established “pursuant to 42 U.S.C § 1396p(d)(4)(A),” a provision

which notes that a third party, such as a parent, must create the special needs trust for

the benefit of the disabled person. Nevertheless, as discussed above, other facts

provide substantial evidence to support the conclusion that Draper’s parents acted

using the power of attorney when establishing the trust. See Travis, 477 F.3d at 1040

(“If substantial evidence supports the Commissioner’s conclusions, this court does

not reverse even if it would reach a different conclusion, or merely because

substantial evidence also supports the contrary outcome.”).

Importantly, the POMS provides the specific steps Draper’s parents had to

follow if they wished to create a qualifying trust under § 1396p(d)(4)(A). First,

Draper’s parents, acting asindividuals, needed to establish an “empty” trust or a seed

trust with their own assets asthe trust’s initial res. POMS SI 01120.203B(1)(f). Only

after the “empty” trust was formed or the seed trust was funded could Draper or her

parents, using power of attorney, transfer Draper’s money into the already-established

trust. Id. Substantial evidence in the record supportsthe SSA’s finding that Draper’s

parents did not take these initial actions, nor did they dissolve and recreate the trust

This action expressly was permitted by the power of attorney.

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to comply with the POMS at any point during this lengthy litigation. Accordingly,

we cannot find in her favor. In reaching this conclusion, we recognize that we draw

a hard line. However, we are not persuaded that we must find in favor of Draper

because her parents came “close enough” to meeting the requirements laid out in the

POMS. Only by enforcing compliance with the letter of the POMS can the agency

oversee the vast SSI program, effectively administer the Act, and consistently

distribute benefits to disabled individuals.

D.

Finally, we agree with the SSA’s finding that the state court’s nunc pro tunc

order did not “establish” the trust under § 1396p(d)(4)(A). See Browning v. Sullivan,

958 F.2d 817, 823 n.4 (8th Cir. 1992) (describing our procedure for reviewing

decisions based on evidence submitted to the Appeals Council but not the ALJ). 

POMS SI 01120.203B(1)(f) notes that court-created trusts comply with

§ 1396p(d)(4)(A) only if “the creation of the trust [is] required by court order.” The

facts here show that the South Dakota court did not order the special-needs trust’s

creation. Instead, the court merely assigned itself a retroactive role in the alreadyestablished Stephany Ann Draper Special Needs Trust. We find that this action

functioned as an “approval,” an action insufficient to comply with § 1396p(d)(4)(A). 

See POMS SI 011020.203B(1)(f) (“Approval of a trust by a court is not sufficient.”). 

Thus, we affirmthe SSA’s determination that the state court’s action did not bring the

trust into compliance with the POMS.

III.

We therefore conclude that the agency and the district court correctly held that

the Stephany Ann Draper Special Needs Trust is a countable resource for SSI

purposes and that Draper is not entitled to SSI benefits as long as the funds in her

trust raise her resources above the $2,000 eligibility limit. We affirm.

______________________________

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