The South Dakota Supreme Court decision attached actually pre-dates the U.S. Circuit Court of Appeals decision yesterday by a couple of weeks, but comes to the same conclusion, and further adds language that no state may avoid application of the federal rule:

“[¶ 44.] In a CMS memorandum from Gale P. Arden, Director of Disabled and Elderly Health Programs Group at the Center for Medicaid and State Operations in Baltimore, the transfer penalty and pooled trust statutes at issue in this case were clarified. See Memorandum from Gale P. Arden to Jay Gavens, Acting Assoc. Regional Adm’r, Div. of Medicaid and Children’s Health (Apr. 14, 2008). In part, the memorandum stated:

Although a pooled trust may be established for beneficiaries of any age, funds placed in a pooled trust established for an individual age 65 or older may be subject to penalty as a transfer of assets for less than fair market value. When a person places funds in a trust, the person gives up ownership of the funds. Since the individual generally does not receive anything of comparable value in return, placing funds in a trust is usually a transfer for less than fair market value. The statute does provide an exception to imposing a transfer penalty for funds that are placed in a trust established for a disabled individual. However, only trusts established for a disabled individual 64 or younger are exempt from application of the transfer of assets penalty provisions ․

“Id. (emphasis added). CMS issued this memorandum because “it was brought to [its] attention that in many States individuals age 65 or older are establishing pooled trusts, but the States may not be applying the transfer of assets penalty provisions as required by statute.” Id. The memorandum explain[ed] that “[i]f States are allowing individuals age 65 or older to establish pooled trusts without applying the transfer of assets provisions, they are not in compliance with the statute. [F]ederal statute requires the application of the transfer rules in this situation; it [is] not a decision for each State to make.”8 Id.”