In this opinion the Regional Chief Counsel (RCC) explores state laws in Region V that relate to SSA's determination of equitable ownership and may affect the application of the home exclusion. All six states recognize equitable ownership interest and recognize life estates. There are some differences in conveyance requirements and exceptions among the states surveyed.

 

 

You asked for an opinion about what constitutes equitable ownership in the six states in Region V, for purposes of the application of the home exclusion in POMS SI 01130.100. All six states in Region V recognize equitable ownership interests in property. For example, in each of the six states, an equitable ownership interest may arise from the execution of a valid installment contract for the purchase of real property. In addition, all six states in Region V recognize a life estate, which is the most common type of equitable ownership. Each state generally requires any interest in land, including a life estate, to be conveyed in a written document. In some cases, state courts may reform a deed or other written instrument due to mistake and/or fraud. However, all six states also recognize one or more exceptions that allow the conveyance of an equitable ownership interest by oral contract.

 

DISCUSSION

 

To qualify for SSI benefits, an individual’s income and resources must fall below the statutorily mandated limit. See 42 U.S.C. § 1382(a); 20 C.F.R. § 416.202(c), (d); see also POMS SI 00501.001(B)(1). In determining the resources of an individual, the Agency excludes the individual’s home. See 42 U.S.C. § 1382b(a)(1); 20 C.F.R. §§ 416.1210(a), 416.1212(b); see also POMS SI 01130.100(B). A home is defined as “any property in which an individual (and spouse, if any) has an ownership interest and which serves as the individual’s principal place of residence,” including the shelter in which he or she lives, the land on which the shelter is located, and related outbuildings. 20 C.F.R. § 416.1212(a); see POMS SI 01130.100(A)(1).

 

Agency policy acknowledges that an individual who is not the legal owner of his or her home may nevertheless have an equitable ownership interest in the home where permitted by state law. POMS SI 01110.515(C)(3), SI 01130.100(C)(4). Equitable ownership is defined as a form of ownership that exists without legal title to property. POMS SI 01110.515(A)(2)(b). In particular, SSA policy provides that an individual “may acquire an equitable ownership interest in his or her home through personal considerations or by performing certain activities such as: making mortgage payments or paying property taxes; making or paying for additions to a shelter; or making improvements to a shelter.” POMS SI 01110.515(C)(3).

 

The most common type of equitable ownership involves life estates. “A life estate confers upon one or more persons (grantees) certain rights in a property for his/her/their lifetimes or the life of some other person.” POMS SI 01110.515(A)(2)(a), SI 01140.110(A)(6). A life estate is a form of legal ownership that is usually created through a deed or will or by operation of law. POMS SI 01110.515(A)(2)(a). However, the owner of a life estate does not have title to the property. POMS SI 01140.110(A)(6).

 

All six states in Region V recognize equitable ownership interests in real property. In particular, as discussed below, in each of the six states, a n equitable ownership interest may arise from the execution of a valid installment contract^[1] for the purchase of real property, at which time the purchaser or vendee becomes the equitable owner. Therefore, an individual may establish equitable ownership of a property by providing a copy of the installment contract showing that he or she is the purchaser or vendee.

 

With respect to life estates, as discussed below, each of the six states in Region V follows some version of the Statute of Frauds, which requires a conveyance or sale of any interest in land to be in writing. In some instances, a state court may reform the deed or other writing to include a life estate that was originally omitted due to mistake and/or fraud. Thus, an individual may establish a life estate by providing a deed, will, or other legal document evidencing the life estate (including a court order reforming the original document to include the life estate). However, each state has one or more exceptions to the Statute of Frauds that allow the conveyance of an equitable ownership interest in real property by oral contract.

 

 

Illinois

 

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  Equitable Ownership Interest Created by Installment Contract

 

Under Illinois’ doctrine of equitable conversion, an individual becomes an equitable owner upon entering into a valid and enforceable contract to purchase realty, despite the fact that the seller continues to hold the legal title. Grochocinski v. Schlossberg, 402 B.R. 825, 839 (N.D. Ill. Mar. 11, 2009) (citing In re Lefkas Gen. Partners, 112 F.3d 896, 901 (7th Cir. 1997)). This includes installment contracts. SeeCarollo v. Irwin, 959 N.E.2d 77, 84 (Ill. Ct. App. 2011).

 

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  Life Estates

 

Under Illinois law, if a grantor wishes to convey an estate that is less than fee simple (such as a life estate), the grantor must express that intention in the deed; otherwise, it will be presumed that the grantor intended to convey a fee simple estate. 765 Ill. Comp. Stat. 5/13. In addition, under the Illinois Frauds Act, a person generally may not bring an action to enforce a contract for the sale of land or any interest in or concerning land (including a life estate) unless the contract is in writing and signed by the person against whom the action is brought. 740 Ill. Comp. Stat. 80/2. Therefore, a life estate in Illinois generally must be in writing to be enforceable.

 

Illinois courts may, under certain circumstances, reform a written instrument based on oral evidence. For example, in Darst v. Lang, 10 N.E.2d 659, 661 (Ill. 1937), the court reformed a deed conveying a gift of property from parents to their daughter to include a life estate under the doctrine of mutual mistake. The court also noted that alternatively, the deed could be reformed to include the life estate based on fraud. Id. A written instrument “may also be reformed upon proof of a mistake by one party to the contract when the other party knows of the mistake and fails to inform the other party or conceals the truth from him.” Ballard v. Granby, 412 N.E.2d 1067, 1069 (Ill. App. Ct. 1980).

 

EXCEPTION: In Illinois, oral contracts for the conveyance of real property may be excepted from the Statute of Frauds under the doctrine of partial performance. Culbertson v. Carruthers, 383 N.E.2d 618, 623 (Ill. App. Ct. 1978). “ There are three requisites for the application of the doctrine of partial performance: (1) the performance must be in reasonable reliance on the contract, (2) the remedy of restitution must be inadequate, and (3) the performance must be one which in some degree evidences the existence of a contract and is not readily explainable on any other ground.” Brunette v. Vulcan Materials Co ., 256 N.E.2d 44, 47 ( Ill. App. Ct. 1970) (citation omitted). We recommend that any matter involving an allegation of equitable ownership based on partial performance of an oral contract be referred for an OGC opinion.

 

 

Indiana

 

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  Equitable Ownership Interest Created by Installment Contract

 

In Indiana, where there is an installment contract for the sale of real estate, “the vendee becomes the equitable owner thereof; the vendor simply holding the title as security for the purchase money. The vendee, being the equitable owner, secures all the benefits and assumes all the risks of ownership.” Knapp v. Ellyson Realty Co., 211 Ind. 180, 183 (1937). Said risks include the risk of loss, absent any language to the contrary in the contract. Ridenour v. France, 442 N.E.2d 716, 717 (Ind. Ct. App. 1982).

 

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  Life Estates

 

Under the Indiana Statute of Frauds, a conveyance of land or any interest in land (including a life estate), except for a bona fide lease for a term not exceeding three years, must be in writing. Ind. Code Ann. § 31-21-1-1, 31-21-1-13. If a grantor intends to convey a life estate, the grantor must express that intention in the deed; otherwise, Indiana courts will presume that the grantor intended to convey a fee simple estate. Ind. Code Ann. § 32-21-1-16; seeLong v. Horton, 133 N.E.2d 568, 571-73 (Ind. Ct. App. 1956). Additionally, a person generally may not bring an action involving any contract for the sale of land, unless the agreement is in writing and signed by the person against whom the action is brought. Ind. Code Ann. § 32-21-1-1(b)(4). Indiana courts may, however, reform a written instrument when, because of mutual mistake or mistake of one of the parties accompanied by the fraud of the other, the written instrument fails to express the parties’ agreement correctly. Baker v. Pyatt, 9 N.E. 112, 114-18 (Ind. 1886); Harvey v. Hand, 95 N.E. 1020, 1022 (Ind. Ct. App. 1911).

 

EXCEPTION: In Indiana, oral contracts may be excepted from the Statute of Frauds under the doctrine of partial performance. Marathon Oil Co. v. Collins, 744 N.E.2d 474, 478 (Ind. Ct. App. 2001). To qualify for the partial performance exception, Indiana courts require clear and definite proof of a combination of circumstances, such as possession of the property; payment or partial payment of the purchase price; and “valuable and lasting” improvements made to the land based on the oral contract. Id. at 478-79. We recommend that any matter involving an allegation of equitable ownership based on partial performance of an oral contract be referred for an OGC opinion.

 

 

Michigan

 

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  Equitable Ownership Interest Created by Installment Contract

 

“Under Michigan law, the sale of real property under [an installment] contract operates as an equitable conversion.” Batton-Jajuga v. Farm Bureau Gen’l Ins. Co. of Mich., 913 N.W.2d 351, 358 (Mich. Ct. App. 2017) (quotations and citation omitted). Accordingly, when an installment contract becomes effective, the buyer/vendee becomes the equitable owner, acquiring equitable title despite not yet acquiring the legal title. Id.

 

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  Life Estates

 

Under the Michigan Statute of Frauds, no estate or interest in land, other than a lease of one year or less, may be created, granted, declared, assigned, or surrendered except by operation of law, or by a deed or other conveyance in writing. Mich. Comp. Laws § 566.106. In addition, every contract for the sale of any land or any interest in land must be in writing and signed by the seller. Mich. Comp. Laws § 566.108. A life estate is an interest in land and therefore must be established by a written conveyance. In re Estate of Williams , No. 262203, 2005 WL 3304119, *2 (Mich. Ct. App. Dec. 6, 2005). Michigan courts have also reformed a contract or deed under the doctrine of mutual mistake, or when there is mistake on the part of a plaintiff and fraud on the part of a defendant. Schwaderer v. Huron-Clinton Metropolitan Authority , 45 N.W.2d 279, 283-84 (Mich. 1951) (collecting cases).

 

EXCEPTION: In Michigan, “partial performance of an oral contract to convey an interest in land may remove that contract from the operation of the statute of frauds.” Zaborsky v. Kutyla, 185 N.W.2d 586, 587 (Mich. App. Ct. 1971). Consequently, partial performance may establish that a life estate exists, despite not being in writing. SeeEstate of Williams, 2005 WL 3304119 at *3. The factors for establishing partial performance include: possession, improvements in regard to the property, and payment of money pursuant to the contract. Zaborski, 185 N.W.2d at 587. The acts must unequivocally refer to, and result from, the oral agreement. Groening v. McCambridge, 275 N.W. 795, 796 (Mich. 1937). We recommend that any matter involving an allegation of equitable ownership based on partial performance of an oral contract be referred for an OGC opinion.

 

 

Minnesota

 

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  Equitable Ownership Interest Created by Installment Contract

 

In Minnesota, “[t]he vendee in a contract to convey real estate, who has paid a part of the purchase price of the land and entered into possession thereof . . . is the equitable owner of the land, and has an interest therein which he may convey, which is descendible to his heir, and which, if not his homestead, may be subject to the lien of a judgment against him.” Stearns v. Kennedy, 94 Minn. 439, 442 (1905). Thus, an individual purchasing a property through an installment contract has an equitable ownership interest in the property.

 

• •

  Life Estates

 

The Minnesota Statute of Frauds provides that “[n]o estate or interest in lands . . . shall hereafter be created, granted, assigned, surrendered, or declared, unless by act or operation of law, or by deed or conveyance in writing.” Minn. Stat. § 513.04. In addition, every contract for the sale of any land or any interest in land must be in writing and signed by the seller. Minn. Stat. § 513.05. A life estate is an interest in land and therefore must be in writing.

 

Minnesota courts have recognized that a written instrument regarding real property may be reformed when there was a mutual mistake of the parties, or a unilateral mistake accompanied by fraud or inequitable conduct by the other party. Theros v. Phillips, 256 N.W.2d 852, 857 (Minn. 1977); Karger v. Wangerin, 40 N.W.2d 846, 850 (Minn. 1950). For example, in Olson v. Olson, No. 97-1978, 1998 WL 170111, *1-2 (Minn. Ct. App. June 17, 1998), the Minnesota Court of Appeals upheld a trial court’s reformation of a deed based on mutual mistake where a father transferred land to his children but the parties neglected to include a life estate for the father in the deed.

 

EXCEPTION: In Minnesota, an oral contract concerning the conveyance of real property may be taken out of the Statute of Frauds by partial performance. Crossroads Church of Prior Lake MN v. County of Dakota, 800 N.W.2d 608, 614 (Minn. 2011). Generally, partial performance may be established by taking possession of the land and making valuable improvements or paying part of the purchase price. Id . “The underlying principle is that, when one of the contracting parties has relied on an oral agreement to such an extent that it would be a fraud on the part of the other contracting party to void the agreement, equity will make that agreement an exception to the statute of frauds.” Id . (citation omitted). We recommend that any matter involving an allegation of equitable ownership based on partial performance of an oral contract be referred for an OGC opinion.

 

 

Ohio

 

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  Equitable Ownership Interest Created by Installment Contract

 

In Ohio, a vendee in a land installment contract stands as an equitable owner of the property. Blue Ash Bldg. & Loan Co. v. Hahn, 484 N.E.2d 186, 189-90 (Ohio Ct. App. 1984). “An equitable owner is recognized in equity as the owner of the property because ‘the real and beneficial use and title belong to him, although the bare legal title is invested in another.’” Shrock v. Mullet, No. 18 JE 0018, 2019 WL 2767002, *7 (Ohio Ct. App. June 28, 2019) (quoting Levin v. Carney, 161 Ohio St. 513, 518 (1954)).

 

• •

  Life Estates

 

Under the Ohio Statute of Frauds, an estate or interest in land (including a life estate) may only be assigned or granted by deed or note in writing and signed by the party granting or assigning it, or by act and operation of law. Ohio Rev. Code § 1335.04. In addition, no action shall be brought against an individual upon a contract or sale of land or interest in or concerning it (including a life estate) unless the agreement upon which such action is brought is in writing and signed by the party to be charged. Ohio Rev. Code § 1335.05. Consequently, a life estate in Ohio generally must be in writing to be enforceable. Ohio courts may also reform a written agreement such as a deed when it fails to reflect the intent of the parties as the result of a mutual mistake or fraud. Lukacevic v. Daniels , 128 N.E.3d 845, 850-51 (Ohio Ct. App. Jan. 10. 2019) (citations omitted).

 

EXCEPTIONS: In Ohio, an oral contract concerning an interest in real property may be brought outside the Statute of Frauds under the doctrines of partial performance and promissory estoppel. Brown v. Brown, No. 04CA000018, 2005 WL 914490, *3 (Ohio Ct. App. Apr. 14, 2005). “An agreement is removable from operation of the Statutes of Frauds by virtue of partial performance only where the party relying on the agreement changes his position to his detriment thereby making it impractical or impossible to return the parties to their original status. An agreement is removable from operation of the Statutes of Frauds by virtue of the doctrine of promissory estoppel only when there has been a misrepresentation of compliance with the Statutes of Frauds or a promise to make a writing of an oral agreement.” Saydell v. Geppetto’s Pizza & Ribs Franchise Sys., Inc., 652 N.D.2d 218, 224 (Ohio Ct. App. 1994) (citations omitted).We recommend that any allegation of equitable ownership based on an oral agreement involving either partial performance or promissory estoppel be referred for an OGC opinion.

 

 

Wisconsin

 

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  Equitable Ownership Interest Created by Installment Contract

 

In Wisconsin, “[b]y execution of a land contract, the vendee becomes the owner of the land in equity, while the vendor retains legal title to secure the balance due on the purchase price.” Kallenbach v. Lake Publications, Inc., 142 N.W.2d 212, 214 (Wis. 1966). Thus, an individual purchasing a property through an installment contract has an equitable ownership interest in the property.

 

• •

  Life Estates

 

Under Wisconsin law, any transaction of any interest in land (including a life estate) must be evidenced by a conveyance that: (a) identifies the parties; (b) identifies the land; (c) identifies the interest conveyed, and any material term, condition, reservation, exception or contingency upon which the interest is to arise, continue, or be extinguished, limited or encumbered; (d) is signed by or on behalf of each of the grantors; and (e) is signed by or on behalf of all parties, if a lease or contract to convey. Wis. Stat. Ann. § 706.02.^[2] Thus, if a party wishes to enforce a contract affecting real property, “the contract must be in writing, set forth all the essential terms with particularity, and be signed by all parties to the transaction.” Prezioso v. Aerts, 858 N.W.2d 386, 392 (Wis. Ct. App. 2014). Accordingly, a life estate generally must be in writing to be valid. Wisconsin courts may also reform a written agreement that was entered into by mutual mistake or by mistake on the part of one party and fraud by the other party. Bailey v. Hovde, 213 N.W.2d 69, 73 (Wis. 1973).

 

EXCEPTIONS: Wisconsin law provides that a transaction of any interest in land not meeting the requirements of Wis. Stat. § 706.02 may nonetheless be enforceable under the following doctrines of equity: (1) reformation of a deficient conveyance; (2) unjust enrichment; and (3) equitable estoppel. See Wis. Stat. Ann. § 706.04. We recommend that any allegation of equitable ownership based on an oral agreement that involves any of the above doctrines of equity be referred for an OGC opinion.

 

CONCLUSION

 

In each of the states within Region V, equitable ownership may be established by virtue of an installment contract for the purchase of real property. Additionally, each state recognizes a life estate as a type of equitable ownership. A life estate generally must be created in a written document, typically a deed. However, in each of the six states, a court may reform a written document to include a life estate based on mistake and/or fraud.

 

Moreover, each state recognizes one or more exceptions to the general rule that an interest in land (such as a life estate) must be conveyed in writing, with the most common exception being partial performance. Where an individual claims an equitable ownership interest under an oral contract based on partial performance or one of the other doctrines of equity identified above, we recommend the matter be referred for an OGC opinion.

This opinion discusses Illinois state probate law and, more specifically, the process of a surviving spouse renouncing the will of the deceased. In the case referenced, the will of the deceased provided that all of his property would be left equally to his two sons. The SSI beneficiary was not included in the will, but was married to the deceased and resided in the home at the time of his death, leaving the home in February, 2006. Illinois law provides that a surviving spouse has the right to renounce the will and take a statutory 1/3 of the estate, including real property. The SSI beneficiary and the heirs of the deceased have retained attorneys for the probate proceedings and will be contesting ownership of the house. Since the beneficiary has not yet renounced the will, and the unprobated estate will be contested, she does not have an ownership interest in the home. Although the home is not a countable resource at the time the opinion was written, monitoring will be necessary as probate proceedings ensue to determine whether a renunciation action is initiated by the beneficiary.

You asked whether SSI claimant Mary H~ has an ownership interest in the home in which she resided from March 2002, when her husband died, to February 2006, when she moved into an apartment. Based on the current facts, we conclude that Ms. H~ did not have an ownership interest in the house during the period of time she lived in it. We also believe, however, that her case will require ongoing monitoring, since she may successfully elect to renounce Charles H~ will, in which case she might attain an ownership interest in the home at some future date.

FACTS

In 1993, Charles H~ executed an apparently valid will leaving his entire estate to his two adult sons equally, or their heirs. Sometime thereafter, he married Mary H~, the claimant. Mr. H~ then died in March 2002. Ms. H~ maintained residence in her deceased husband's house, located at 808 W. Jackson, Bloomington, IL 61701. In December 2005, Ms. H~ applied for SSI benefits. At the time, the will remained unprobated and uncontested, but a probate action has been initiated, and Ms. H~ probate attorney has indicated that she intends to contest the will. Based on our most recent information, Ms. H~ moved out of her deceased husband's house February 1, 2006, and into an apartment.

DISCUSSION

Ms. H~ current property interest.

Charles H~ apparently valid will provided that all his property, both real and personal, would be left equally to his two sons, Scott and Steven H~. Mr. H~ did not leave anything to his wife. Based on the terms of the will, Ms. H~ thus has no property interest in the house. However, Illinois law provides that a surviving spouse may elect to renounce the will of their deceased spouse, and take one-half of the estate, after payment of all claims, if there are no descendants, or one-third of the estate, if there is a descendant. See 755 ILCS 5/2-8(a) (West 2004). This election must occur within seven months of the admission of the will to probate, or within any extended period of time thereafter the probate court allows. See id. at 5/2-8(b).

A probate case has been opened concerning Charles H~ estate. However, it is unknown precisely when the probate action was initiated, and it is unknown whether Ms. H~ has elected, or will elect, to renounce the will. It is also unknown whether the probate court might grant a requested extension of time to seek renunciation of the will. It is also possible that the validity of the will could be challenged, which might result in the ownership of the home passing by means of intestate succession. See 755 ILCS 5/2-1(a) (providing that where no valid will exists, a surviving spouse receives one-half of the estate, while the descendants receive an equal share of the remaining half). In any case, Ms. H~ attorney has indicated that they intend to contest the will, but he has not indicated whether this includes renunciation of the will. In any case, review of county deed records for McLean county, Illinois, where the property is situated, shows that neither Mary H~ nor Scott or Steven H~ have any property interest in the house. This indicates that no disposition of the property by the probate court has yet taken place, and thus ownership of the property remains with Mr. H~ estate. See 755 ILCS 5/20-1(a) (providing that the estate's representative will take possession of all real estate previously owned by the decedent, during the administration of probate proceedings).

In addition, Agency guidelines provide that Ms. H~ entitlement to renounce Charles H~ will under Illinois law can be deemed an ownership interest in the unprobated estate only if it is uncontested. See POMS SI CHI00830.550(E). Here, it is clear that both Ms. H~ and the heirs of Charles H~ have retained attorneys for the probate proceedings, and that ownership of the house will be contested. Therefore, for this reason as well, it would be inappropriate to consider whatever rights Ms. H~ might have to rise to the level of an ownership interest.

B. Ms. H~ possible future property interest.

Should Ms. H~ elect to renounce the will and take her statutory share of the estate, Illinois law indicates that all property in the estate, including real property, would be subject to the spousal election. See Hopper v. Beavers, 841 N.E.2d 1019, 1027 (Ill. App. Ct. 2005) (The 1965 amendment to the Illinois Probate act indicated that "the legislature intended to eliminate the distinction between the treatment of real property and the treatment of personal property during the administration of a decedent's estate."). However, it is unlikely that Ms. H~ would be entitled to ownership of the house outright, but would more likely take a one-third share. The Probate Act, as amended in 1965, provided that "each parcel of real estate is to be affected by the surviving spouse's renunciation of the will." See In the Matter of the Estate of Brinkman, 326 N.E.2d 167, 169 (Ill. App. Ct. 1975). Thus, if a spouse was entitled to a one-half share of the estate, he or she would be entitled to one-half of each parcel of real estate, in computing the spousal share. However, this section of the Probate Act was amended in 1972, and the Probate Act re-codified, so that the spousal renunciation statute, located at 755 ILCS 5/2-8, simply provides that a spouse electing to renounce will take "1/3 of the entire estate if the testator leaves a descendant or 1/2 of the entire estate if the testator leaves no descendant." (emphasis added).

We are unable to find applicable Illinois case law which discusses the effect of this change in the Probate Act. However, since prior versions of the Probate Act provide that each parcel of real estate was required to be shared, and the current version requires sharing of the entire estate, we believe it is reasonable to conclude that, should Ms. H~ elect to take her statutory 1/3 share of the estate, this share would most likely include a 1/3 share of the house at issue. This approach was adopted by the Illinois Supreme Court to interpret the Probate Act of 1975; the Court affirmed that a spouse's elective share is to be calculated only after payment of debts and claims, even though the most recent version of the Act does not include the same express language found in earlier versions of the Act. See In re Estate of Grant, 415 N.E.2d 416, 418-19 (1980) ("We cannot read into our present section 2-8(a) of the Probate Act of 1975 a different meaning than that clearly expressed in the earlier statute quoted…"). Based on this holding, we believe it is likely that Illinois courts would employ similar reasoning to find that the Probate Act requires a division of each parcel of real estate contained in the entire estate, when determining a surviving spouse's elective share.

Accordingly, should Ms. H~ successfully elect to renounce the will and take her statutory share, she will most likely be awarded 1/3 ownership of the house. In that case, POMS SI 00830.550(B)(2) states that the Agency should consider this partial ownership after the date Ms. H~ receives her ownership interest, as evidenced in writing or by documents, or when the estate is closed, whichever is earlier. See also SI CHI00830.550A ("…an inheritance is received when the estate is closed (or earlier, if the individual alleges receiving it earlier)").

CONCLUSION

Ms. H~ currently has no property or ownership interest in the house which formerly belonged to her husband, Charles H~. In the event that she successfully elects to renounce Charles H~ will and take 1/3 of the estate, it is likely that she will receive a 1/3 share ownership interest in the n house.

The claimant owns an IRA, per court order, that she may not use for her support and maintenance until she reaches age 62 and/or is eligible for Social Security benefits. SI 01120.010 states that if there is legal restriction forbidding the use of the asset, then the asset is not a resource. There is a question as to if or not the court order issued by the state is valid or not, a question that would have to be litigated. Since we do not require individuals to litigate in order to gain access to resources, the IRA should not be considered a resource to the claimant. Because of the court order the claimant is unable to legally use the IRA.

You asked whether an individual retirement account (IRA), in the name of Debra E~, is a resource to her for SSI purposes. We conclude that the IRA should not be considered a resource.

BACKGROUND

Debra J. E~ petitioned the Circuit Court of Tazewell County, Illinois for a divorce from her husband, Donald H. E~. On July 10, 2002, the court entered judgment dissolving their marriage and apportioning the marital property. Judgment of Dissolution of Marriage (Judgment) at 3-7. The court awarded Ms. E~ one-half of the marital portion of three retirement plans: the K plan, the Merrill Lynch plan, and the Kroger stock exchange plan. Judgment at 4, E. The Judgment includes a provision that Ms. E~ "shall not have access to these funds until such time as she reaches the age of 62 years and/or is eligible to receive Social Security benefits." Id. The Judgment recites that qualified domestic relations orders (QDROs) "shall be entered to effectuate said transfers." Id. The court also awarded the couples' residence to Ms. E~, in exchange for her waiver of all interests in another retirement plan, the United Food and Commercial Worker's Union and Employers Midwest Pension Fund. Judgment at 4, F.

Paragraph H of the Judgment recites the parties' representation to the court that Ms. E~ was disabled and "will receive social security disability." Judgment at 4-5, H. The court declined to order Mr. E~ to pay for medical insurance coverage for Ms. E~, "due to the assurance by Medicare that she will receive medical benefits therefrom." We contacted you by telephone to inquire whether Ms. E~ had, in fact, applied for and been awarded Title II disability benefits. You advised that Ms. E~' application for Title II disability benefits was denied.

You also submitted a copy of a distribution statement, which was issued in Ms. E~' name by the Kroger Co. Savings Plan on November 12, 2003 (Kroger Statement). We presume that the Kroger Co. Savings Plan is one of the plans referenced by the court in paragraph E of the Judgment and that the account represents Ms. E~' share of the marital portion of the plan. The Kroger Statement indicates "termination 10/15/03" as the reason for distribution and "lump sum payment" for the option. The balance in Ms. E~' account ($14,242.53) was deposited in an Oppenheimer Funds account via direct rollover. An annual statement from Oppenheimer Funds (Oppenheimer Statement), for the period January 1, 2004, through December 31, 2004, indicates that the funds are in an IRA for the benefit of Ms. E~. The statement shows $15,908.59 as the market value of the fund on December 31, 2004. You also provided a copy of a Consumer Guide, issued by Oppenheimer Funds, which gives general information about the features of a traditional IRA and a Roth IRA, both of which allow withdrawals before age 59 ?? but carry a tax penalty for such withdrawals unless an exception applies . See Consumer Guide at 8, 10, and 11.

DISCUSSION

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash for her support and maintenance. 20 C.F.R. § 416.1201(a). If the individual has the right, authority, or power to liquidate the property, it is a resource. 20 C.F.R. § 416.1201(a). If there is a legal restriction against the use of assets for the individual's support and maintenance, the assets are not a resource for SSI purposes. POMS SI 01120.010. An IRA is a type of retirement fund. POMS SI 01120.210A. The value of a retirement fund for SSI purposes is the amount the SSI beneficiary can currently withdraw from the fund, less any penalty for early withdrawal. POMS SI 01120.210A.3.

A threshold issue is whether the divorce court's order that Mr. E~ transfer part of his Kroger plan account to Ms. E~, made pursuant to the Illinois Marriage and Dissolution of Marriage Act, 750 ILCS 5/501 et seq., is preempted by federal law, specifically by the anti-alienation provision of Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1056(d). Under the principle of preemption, derived from the Supremacy Clause in Article VI of the U.S. Constitution, federal law can supersede or supplant action under a State law if the State law is inconsistent with the federal law. Preemption generally applies where compliance with both federal and State law or regulations is impossible or where the State law or regulation stands as an obstacle to accomplishing the purpose of Congress in enacting the federal law. Boggs v. Boggs, 520 U.S. 833, 844 (1997). See also Ridgeway v. Ridgeway, 454 U.S. 46, 54 (1981) (stating that the Supremacy Clause prevents frustration and erosion of congressional policy embodied in federal rights, but noting that State domestic relations law "must do 'major damage' to 'clear and substantial' federal interests" before preemption will apply) (citing Hisquierdo v. Hisquierdo, 439 U.S. 572, 581 (1979). In addition to preemption under the Supremacy Clause of the Constitution, the ERISA statute contains an explicit preemption provision, stating that ERISA's provisions "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a).

The Kroger Plan, which was the source of the rollover into the IRA, was an employee benefit plan subject to ERISA. Although federal law governing IRAs appears in the Internal Revenue Code (IRC) at 26 U.S.C. § 408, rather than ERISA, it is at least arguable that the IRA in this case may also be subject to ERISA because it includes funds originally derived from employer contributions. See Reliance Insurance Co. v. Zeigler, 938 F.2d 781, 784 (7th Cir. 1991) (IRA purchased by wife with her own money and maintained by a securities broker was not an employee benefit plan because it was not established or maintained by an employer and, therefore, was not subject to preemption under ERISA); LaChappelle v. Fechtor, Detwiler & Co., 901 F. Supp. 22, 25, n. 3 (D. ME 1995) (stating that Department of Labor's refusal to address the question in a private letter ruling seemed to indicate uncertainty as to whether or not SEP-IRAs are subject to ERISA). See also 29 C.F.R. § 2510.3-2(d) (terms "employee pension benefit plan" and "pension plan" do not include IRAs, provided certain requirements are met, including that no contributions are made by the employer or an employee association). But see Metz v. Independent Trust Corp., 994 F.2d 395, 399 (7th Cir. 1993) (fiduciary duties enumerated in ERISA statute not applicable to IRA); Chami v. Provident Life & Accident Insurance Co., 188 F.Supp.2d 1084, 1087 (N.D.Ind. 2002) (stating in dicta that to conclude that an IRA was governed by ERISA because it came into existence solely as a result of exercising the right to roll over a pension plan account into an IRA would be an "absurd result"); In re Templeton, 146 B.R. 757, 761 (1992) (Illinois law exempting debtor's IRA from attachment was not preempted by ERISA because ERISA does not encompass IRAs). We need not resolve the question of whether the IRA in this case is subject to ERISA provisions, however, because ERISA contains an exception to the anti-alienation provision in the case of a qualified domestic relations order (QDRO). 26 U.S.C. § 401(a)(13). In apportioning the marital portion of the E~' retirement funds, the State court wrote that "qualified domestic relations orders shall be entered to effectuate said transfers." Judgment at 4, E. Based on that language and the fact that the Kroger Plan established an account in Ms. E~' name, we assume that a QDRO was, in fact, entered and the QDRO exception to ERISA's anti-alienation provision applied. Thus, we conclude that the State court's order to transfer ownership of funds in the Kroger Plan to Ms. E~ was not preempted by ERISA.

Having determined that the State court had the authority to order transfer of part of Mr. E~' Kroger Plan account to Ms. E~, we turn to the State court's attempted restriction on Ms. E~' withdrawal of funds "until such time as she reaches the age of 62 years and/or is eligible to receive Social Security benefits." See Judgment at 4, E. We note that the language used by the court in paragraph E differs from the language in paragraph H, where the court refers to the parties' expectation that Ms. E~ will receive "social security disability" because she is disabled. Judgment at 4-5, H. Had the court intended to allow Ms. E~ to access the IRA when she became entitled to disability benefits, we believe it would have used the same term it used in paragraph H, i.e., "social security disability" rather than "Social Security benefits." Moreover, based on the representation of the parties that Ms. E~ was currently disabled and would be receiving "social security disability" and Medicare, see Judgment at H and I, a restriction on distributions prior to receiving disability benefits would have served no real purpose, as Ms. E~ would have gained access to the funds shortly after the judgment was entered. Based on the parties' representations to the court, the reference to age 62, and the use of the term "Social Security benefits," we think the court's intent was to restrain Ms. E~ from accessing the funds until she reached age 62 or became eligible for Title II Social Security benefits based on age rather than disability. We also think this comports with a layman's typical understanding and use of the phrase "Social Security benefits."

Under Federal law, the owner of an IRA can withdraw funds at any age, although distributions before age 59 ?? are, in some cases, subject to a 10% penalty tax (over and above the amount of income tax payable due to the distribution). See 26 U.S.C. §§ 72(q), 408(d), 408A(d). See also IRS Publication 590 at 28, 47-49. Therefore, we must consider whether this federal right to distributions at any age preempts the State court's authority to restrain Ms. E~ from accessing the IRA before age 62 or before she becomes eligible for Title II Social Security benefits based on age. We were unable to locate any case law dealing with the issue of whether federal law preempted a State court's restriction on when an individual could receive an IRA distribution or a distribution from any retirement fund.

The IRC contemplates the transfer of rights in an IRA in connection with divorce proceedings. 26 U.S.C. § 408(d)(6). The QDRO provisions in the IRC apply to both employee retirement plans under ERISA and to IRAs. See IRS Publication 590 at 25. One of the requirements for a QDRO is that it cannot alter the amount or form of benefits. 26 U.S.C. § 414(p)(3). The QDRO must not increase the amount of benefits payable or require any type or form of benefit, or any payment option, which would not otherwise be available. 26 U.S.C. § 414(p)(3).

Here, we think the court's restriction on accessing the Kroger Plan, although altering the timing of allowable distributions, may be interpreted to not alter the form of benefit, e.g., lump sum or periodic payments, or the amount of the benefit. Ms. E~ can receive distributions totaling the entire amount of her interest, albeit after age 62 or after becoming entitled to Social Security benefits based on age. Under this interpretation, provided a QDRO was entered in this case and it contained the same restraint as that stated in paragraph E of the judgment, federal law would not preempt the State court's right to restrain Ms. E~' access to her Kroger Plan account or the IRA into which the Kroger Plan account was "rolled over." Under this approach, Ms. E~ does not have access to her IRA funds at this time, and the IRA is not a resource for SSI purposes. POMS SI 01120.010B.2.

One might also interpret the State court's attempted restraint as altering the form of benefit, or more precisely the "options" for payment of benefits, which would mean that the restraint was not a valid QDRO provision under federal law. Under this approach, we would conclude that the IRC provision that an IRA owner may receive a distribution from the IRA at any time preempts the State court's authority to restrict distributions in a State divorce proceeding. Under this interpretation, we would conclude that Ms. E~ has the power to compel a distribution from the IRA. However, to do so Ms. E~ would have to litigate the issue before the State court or risk being held in contempt by the State court for violating the judgment. Because we do not require an SSI recipient to enter into litigation to obtain access to assets, POMS SI 01120.010D.7, the IRA should not be considered a resource under this approach either.

Finally, we note that there is an Illinois statute governing "qualified Illinois domestic relations orders" (QILDROs), which are not the same as QDROs under federal law. 40 ILCS 5/1-119. Under Illinois law, a QILDRO cannot affect "the vesting, accrual, or amount of any benefit, nor the date or conditions upon which any benefit becomes payable, nor the right of the member or the member's survivors to make any election otherwise authorized," subject to certain exceptions. 40 ILCS 5/1-119(b)(3). The Illinois provision prohibiting a change as to the date a benefit becomes payable casts some doubt as to the State court's authority to restrain Ms. E~' access to the IRA funds. However, we think the issue would again have to be resolved by litigation. But, because SSA policy is not to require an SSI recipient to enter into litigation to obtain access to assets, POMS SI 01120.010D.7, we again recommend that the IRA should not be considered to be a resource.

CONCLUSION

We conclude that federal law does not preempt the State court judgment ordering Mr. E~ to transfer part of his Kroger Plan account to Ms. E~. Because litigation would otherwise be required to resolve the issues of whether federal law preempts the State court's restriction on Ms. E~' access to the funds prior to age 62 or receipt of Title II benefits based on age, and whether the State court had authority under State law to order such a restriction, we recommend that the Oppenheimer Fund IRA in Ms. E~' name, which resulted from the rollover of her share of the Kroger Plan account, should not be considered a resource for SSI purposes.

State law in most Region V states prevents formal and informal loan agreements entered into with minors from being enforceable against the minor parties. Each state has specific exceptions that may apply depending on the circumstances surrounding the loan agreement. For example, minors that have been emancipated by the court may enter into valid loan agreements in some states, and loans for necessities may be enforceable depending on state law. All states in Region V have specific laws regarding the ratification of a loan upon a minor attaining age of majority (age 18 in all states in Region V). Loans entered into with a minor must be examined closely to determine whether ratification has occurred and the loan is, therefore, enforceable.

You asked for an opinion on whether loan agreements entered into by minors - whether formal or informal - are enforceable in the six states in Region V. In each of the six states in Region V, a contract, including a loan, entered into with a minor (defined as an individual who has not reached the age of eighteen) is generally voidable by the minor party, but not by the party who is of the age of majority. Such agreements, therefore, are not enforceable against minors, regardless of whether the loan contract is a formal, written agreement. However, some exceptions apply. Below is a general discussion of our conclusions and an outline of the particular rules for each state in Region V.

DISCUSSION

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash for her support and maintenance. If the individual has the right, authority, or power to liquidate the property, it is a resource. Loan proceeds and payments and loan agreements may be considered a resource or income to the borrower and lender, and the rules for determining when a loan counts as a resource vary based on whether the underlying loan agreement is a bona fide loan. In order to constitute a bona fide loan, a loan must be enforceable under state law. You have asked whether a loan agreement entered into with a minor is enforceable under state law.

In all Region V states, minors generally lack the legal capacity to contract. The age of majority is eighteen in all Region V states. Loan agreements entered into with a minor, whether formal, written agreements or otherwise, therefore, are not enforceable under state law, because they are voidable at the option of the minor party. Certain exceptions apply, however, and some loans entered into with minors are enforceable. For example, if a minor takes out a loan for the purchase of necessities, the loan will be enforceable under state law. Additionally, in some states in Region V, a minor's loan is enforceable if the minor fraudulently represented that he was of the age of majority when he took out the loan. Further, a minor may ratify or disaffirm a loan upon attaining the age of majority; ratification renders the loan enforceable. The states in Region V generally require a clear, intentional act to constitute ratification. Some states in Region V dictate that a loan will be deemed ratified where a minor fails to disaffirm the loan within a reasonable time after attaining the age of majority.

The six states in Region V follow essentially similar rules regarding the enforceability of loans to which a minor is a party. However, some slight differences exist. Below we have outlined the particular rules for each state in Region V. Please use these outlines in drafting your POMS Regional Supplement. Our office would be happy to review your draft guidelines.

Illinois

Age of Majority

In Illinois, the age of a majority is eighteen.

General Rule

A loan agreement with a minor is not enforceable because the loan agreement is voidable by the minor party.

Exceptions

A minor who has been emancipated by court order may enter valid loan contracts, which are thus enforceable.

A loan with a minor is enforceable if it is entered into for the purpose of obtaining necessities; necessities includes items such as food, clothing, lodging, and education, but typically does not include automobiles, even if used to earn a living.

Ratification

A loan agreement becomes enforceable against a minor party if the minor, upon reaching the age of majority, ratifies the loan agreement. Illinois law allows a minor to either ratify a contract with an intentional act after reaching the age of majority, or to disaffirm the contract within a reasonable time or within the statute of limitations applicable to the type of loan at issue. Acts which may constitute ratification include making payments on a loan, or causing a loan contract to be recorded. In Illinois, if a minor fails to ratify a loan agreement upon attaining age of majority, the loan may nonetheless be deemed ratified, and thereby rendered enforceable against the minor, if he fails to disaffirm the loan agreement within any applicable statute of limitations. If you cannot clearly determine whether a disaffirmance has occurred within a reasonable time or within an applicable statute of limitations, please request a legal opinion from OGC.

Indiana

Age of Majority

In Indiana, the age of majority is eighteen.

General Rule

Any loan entered into with a minor is not enforceable because the loan contract is voidable at the minor's option. A minor may void his contract at any time prior to, or upon attaining, the age of majority. Whether emancipation affects the minor's right to disaffirm his contracts depends upon the scope of the emancipation. If you cannot clearly determine whether a minor's emancipation affects his ability to enter valid loan contracts, please consult OGC for a legal opinion.

Exceptions

A loan entered into by a minor who represented in writing that he was eighteen or over in obtaining the loan is enforceable.

Loans by minors for necessities are enforceable, so long as the minor is not living at home or otherwise being supported by his parents. Necessities include items such as food, clothing, lodging, medical services, and education as well as such provisions provided for the minor's spouse, but generally do not include automobiles. Medical services are considered necessities regardless of whether a minor is living at home or being supported by his parents.

Ratification

A minor may ratify a loan contract upon reaching the age of majority, rendering the loan enforceable. Ratification is not presumed, or deemed, to occur unless there is some affirmative act. A ratifying act may be done without the minor having explicit knowledge that his acts constitute a ratification or that he was not otherwise liable. However, ratification induced by fraud or undue influence is not valid and will not render a loan agreement enforceable. Whether a valid ratification has occurred depends on the facts of particular case, but the ratification should be in proportion to the nature of the original transaction. For example, if a minor party, after reaching the age of majority, agrees to pay, or makes a payment on, a simple loan which he entered into by himself while a minor, ratification has occurred.

Michigan

Age of Majority

The age of majority in Michigan is eighteen.

General Rule

A loan agreement with a minor is not enforceable because minors lack the legal capacity to contract and their contracts are voidable. Emancipation of a minor does not affect this general rule. However, if you have evidence of a minor's emancipation that indicates the minor may enter a valid contract, please request a legal opinion from OGC regarding whether that minor's loan is enforceable.

Exceptions

If a minor willfully misrepresented his age to obtain a loan, and if the misrepresentation was either made in writing in a separate instrument or admitted in open court, the loan is enforceable against the minor party. Such a loan may not be disaffirmed by the minor upon attaining the age of majority.

Loan agreements entered into by minors for the purchase of necessities are enforceable under state law. Necessities include items such as clothing and books for education.

Ratification

A loan is rendered enforceable in Michigan if a minor ratifies the loan with an affirmative act upon reaching the age of majority. Ratification consists of making a distinct acknowledgement of a loan contract and indicating an intention to be bound by it, for example by writing a letter acknowledging one's loan and promising to pay it. A minor may also disaffirm his loan upon attaining the age of majority. Silence may be sufficient to constitute ratification only where it would be inequitable to permit the defense of infancy. If a question arises as to whether a loan has been ratified based on silence, or a failure to disaffirm, please request a legal opinion from OGC.

Minnesota

Age of Majority

The age of majority in Minnesota is eighteen.

General Rule

Any loan agreement with a minor which has not been fully executed (performed) is not enforceable. A minor who enters a loan agreement by fraud may still disaffirm the contract. If you are presented with evidence of emancipation, or other evidence showing that a minor's loan obligation may be authorized by law, please consult with OGC for a legal opinion regarding whether the loan is enforceable.

Exceptions

A loan a minor enters for the purchase of necessities, however, is enforceable. Necessities includes items such as food, clothing, and lodging, but not transportation expenses.

Ratification

A minor party may affirm his loan by a ratifying act upon reaching the age of majority; the loan is then enforceable in Minnesota. A ratification consists of some word, act, or deed that indicates an intention to be bound by the loan. A minor also may disaffirm his loan within a reasonable time after attaining the age of majority. In Minnesota, unlike in the other states in Region V, a minor is required to return the proceeds of a loan in order to disaffirm the loan. If the minor does not actively disaffirm within a reasonable time of attaining majority, the loan will be considered ratified. The fact that a minor may be unaware of his right to disaffirm will not absolve him of his duty to act promptly in disaffirming the loan in order to avoid liability. If you cannot clearly determine whether a loan has been disaffirmed within a reasonable time, please request a legal opinion from OGC regarding whether the loan is enforceable.

Ohio

Age of Majority

In Ohio, the age of majority is eighteen.

General Rule

A loan entered into with a minor is not enforceable because the loan is voidable at the minor's option. If you are presented with evidence of emancipation, or other evidence showing that a minor's loan obligation may be authorized by law, please consult with OGC for a legal opinion regarding whether the loan is enforceable.

Exceptions

Loans entered into with a minor for the purchase of necessities are enforceable. To be enforceable, however, such loan contracts must be fair and reasonable, and must be made by the non-minor party in good faith and without knowledge of the minor's lack of capacity to contract. Necessities include "food, medicine, clothing, shelter, or personal services usually considered reasonably essential for the preservation and enjoyment of life."

Ratification

If a minor does not disaffirm his loan or other contract within a reasonable time after reaching the age of majority, ratification may be inferred from his voluntary actions, regardless of whether he had a definite intent to ratify the contract. For example, a minor who makes payments on a car loan and uses the car after reaching the age of majority is considered to have ratified his loan contract. In such a case, the loan agreement would then be rendered enforceable under state law. If you cannot clearly ascertain whether a loan has been disaffirmed by the minor upon reaching the age of majority, please request an opinion from OGC regarding whether the loan is enforceable under state law.

Wisconsin

Age of Majority

The age of majority in Wisconsin is eighteen.

General Rule

A loan entered into with a minor is not enforceable because it is voidable at the minor's option. This rule does not change depending on whether the minor is emancipated.

Exceptions

Loans to minors for the purpose of purchasing necessities are enforceable in Wisconsin. What constitutes necessities includes those items necessary for the minor's personal care and maintenance, but does not usually include cars.

Ratification

A minor may ratify a contract upon reaching the age of majority, and such ratification may be express or implied, as long as the intention to be bound by the contract is "clearly manifested." While ratification does not require express knowledge of the voidable act [or contract], it does require knowledge of "all material facts relating to the act." Thus, ratification may consist of simply being aware of one's interest in, and continuing to enjoy the benefits of, a loan contract entered into while a minor. Ratification renders the loan enforceable.

CONCLUSION

As discussed above, loans entered into with minors generally are not enforceable against the minor parties. Some exceptions apply, and certain loans of minors, such as those for necessities or those where a minor fraudulently misrepresents his age, may be enforceable, depending on the law of the minor's state. Further, a minor may ratify a loan upon attaining the age of majority, at which point the loan is rendered enforceable. Some states in Region V will deem ratification to occur if the minor fails to disaffirm his loan within a reasonable time upon attaining majority. If you cannot clearly determine whether a particular loan has been ratified and is thereby rendered enforceable, please request a legal opinion from OGC.

This opinion addresses the Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA); specifically at what age custodial property must be turned over to a minor. This opinion affects the States in the Chicago region. The policy varies from State to State.

This is with reference to your Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA) regional transmittal. In our July 3, 1996 opinion, we provided advice regarding the correct age at which custodial property must be turned over to a minor under Wisconsin's UTMA provisions. Wis. Stat. Ann. §§ 880.61 to 880.72 (West 1991 & Supp. 1995). Your inquiry asks that we generally review the regional transmittal and specifically review the interpretation of Wisconsin's UTMA provisions as set forth in the transmittal.

Many states, including Wisconsin, substantially revised their versions of the UGMA in order to expand the kinds of property that could be made the subject of a gift under the Act. Of the states discussed in the regional transmittal, only Michigan appears to have retained its UGMA provisions rather than adopt UTMA provisions.

In Wisconsin, for custodianships established after April 8, 1988, minors assume control of assets held on their behalf depending on how the UTMA custodianship was established. Section 880.625 (transfers by gift or exercise of power of appointment) and section 880.63 (transfers by will or trust) custodianships end at age 21. Section 880.635 (other transfers by fiduciaries) and section 880.64 (transfers by obligors) custodianships end at age 18. Wis. Stat. Ann. § 880.705 (West 1991 & Supp. 1995).

The UTMA provisions of Illinois and Minnesota by and large make similar distinctions. In Illinois, for custodianships established after July 1, 1986, section 5 (transfer by gift or exercise of power of appointment) and section 6 (authorized transfers, including by will or trust) custodianships end at age 21. Section 7 (other transfers by fiduciaries) and section 8 (transfers by other obligors) custodianships end at age 18. 760 Ill. Comp. Stat. Ann. 20/21 (West 1992 & Supp. 1996); 755 Ill. Comp. Stat. Ann. 5/11-1 (West 1992 & Supp. 1996).

Minnesota provides that for custodianships established before January 1, 1986, minors assume control of assets at age 18. Minn. Stat. Ann. § 527.04(4) (West 1975); Minn. Stat. Ann. § 527.42(b) (West Supp. 1996). But, for custodianships established on or after January 1, 1986, section 527.24 (transfers by gift or exercise of power of appointment) and section 527.25 (transfers authorized by will or trust) custodianships end at age 21. Section 527.26 (other transfers by fiduciaries and conservators) and section 527.27 (transfers by obligors) custodianships end at age 18. Minn. Stat. Ann. § 527.40 (West 1975 & Supp. 1996).

In Indiana, for custodianships established after July 1, 1989,minors assume control of assets at age 21. Ind. Code Ann. § 30-2-8.5-35 (West 1994 & Supp. 1996). Ohio provides that, for custodianships established on or after May 7, 1986, custodial property is to be delivered or paid over to the minor at age 21, unless the donor or transferor, in a written instrument, provided that the custodian was to deliver or pay over the property to the minor at a different age between 18 and 21. Ohio Rev. Code Ann. § 1339.34(D)(1), (2) (Anderson 1993 & Supp. 1995).*/

Michigan, which has not adopted UTMA provisions, has UGMA provisions, which provide that custodial property is to be delivered or paid over to a minor at age 18. Mich. Comp. Laws Ann. § 554.454(4) (West 1988 & Supp. 1996).

Thomas W. C~

Chief Counsel, Region V

The issue is whether funds held in a conservatorship account constitute a countable resource to the SSI recipient and whether monthly payments made to the claimant's mother from the account for the care and maintenance of the claimant are income to the claimant.

The conservatorship account was started with a law suit settlement of the claimant's. Because the claimant is a minor, the court appointed the bank to be the guardian of the claimant's estate. The court must approve all disbursements from the account. The court approved payment to the claimant's mother for the claimant's care and support. Even though the individual must petition the court for withdrawal of funds from the account, the funds are considered available for the claimant's support and maintenance. The court order comports with Illinois State law concerning the availability of conservatorship account funds for support and maintenance.

Since the account is available for the claimant's support and maintenance, it is considered her resource. Therefore, the payments made to the claimant's mother are not income to the claimant. They are conversion of a resource.

You asked for a legal opinion concerning whether funds held in a conservatorship account constitute a countable resource to Jennifer J~ (Ms. J~), an SSI recipient. In addition, you asked whether the monthly payments being made to Ms. J~'s mother from this account should be counted as income to Ms. J~. Based on the facts as we understand them, we conclude that the account is available for Ms. J~'s care and maintenance and, therefore, may be considered her resource. Because it is her resource, the monthly payments made to Ms. J~'s mother from this account should not be counted as income to Ms. J~. If the property in the account were not a countable resource, then the payments would be countable income.

BACKGROUND

Jennifer J~ settled a law suit for $500,000 on February 11, 1997. The Circuit Court of Cook County, Illinois, Probate Division, appointed American National Bank & Trust Company of Chicago (the bank) as the guardian of Ms. J~'s estate because she was a minor. Pursuant to the court's order, the settlement was distributed as follows: Ms. J~'s attorneys received payment of their fees and reimbursement of their costs (approximately $183,915); and Public Aid reimbursement of a lien (approximately $4,440). The remainder (approximately $311,645) was placed in a conservatorship account at the bank, in Ms. J~'s name. The settlement order states that these funds are to be held for the benefit of Ms. J~, subject to order of the court.

The file does not contain court orders issued April 30, 1998 and July 13, 1998, authorizing the monthly payments to Ms. J~'s mother. However, an accounting of the disbursements from the account, which was titled "Distributions For The Benefit Of The Ward," indicated that Ms. J~'s mother received monthly payments of $450 beginning in May 1998 "for care and support for Jennifer J~." Beginning in July 1998, the court increased her monthly "care and support" payment to $650 per month. The file contains a July 1998 court petition on behalf of Ms. J~ to increase the monthly payment for her "care and maintenance," which indicated that the increase was necessary because Ms. J~'s housing expenses had increased. The petition also noted that the current market value of her account was $355,000, and that the increase in the monthly payment would not invade the principal of the account. The most recent accounting, on April 24, 1999, indicated that Ms. J~'s account was worth approximately $387,000.

DISCUSSION

The primary purpose of the Supplemental Security Income program is to assure a minimal level of income to low-income aged, blind, and disabled persons who have income and resources below an amount established by the Federal government. 20 C.F.R. § 416.110. Under this program, if the value of an individual's resources exceeds a resource limitation, that person is not eligible for SSI benefits. 20 C.F.R. §§ 416.110(a), 416.1205 (resource limit for SSI is $2,000 as of Jan. 1, 1989).

A resource, for SSI purposes, includes assets that the individual owns and could convert to cash to be used for her support and maintenance. 20 C.F.R. § 416.1201(a). When a fiduciary (such as a guardian or conservator) manages and controls funds owned by an SSI recipient, those funds are considered to be available to the recipient for the recipient's support and maintenance, absent a legal restriction on the use of or access to the funds. POMS SI 01140.215. The funds in this case are held in a conservatorship account, also known as a "blocked" account, in that the conservator may access funds held on behalf of Ms. J~ only with the permission of the court. We have previously advised that funds held in a blocked account under Illinois law are presumed to be available to beneficiaries for their support and maintenance, absent a legal restriction on the conservator's use of or access to the funds. See Information Pertaining to the Illinois Conservatorship Account of George W. P., Jr.; SSN: ~, (G.) to SSA-V, ARC-POS (S.) (November 21, 1991); Blocked Account in Illinois as SSI Resource: Duane P. C., Jr., ~, (M.) to SSA-V, ARC-POS (P.-W.) (December 7, 1990).

The regulations provide that funds held in a financial institution account are counted as a resource if the individual owns the account and can use the funds for her support and maintenance. 20 C.F.R. § 416.1208(a). Although neither the Social Security Act nor the implementing regulations specifically address the issue of conservatorship accounts, SSA's Program Operations Manual System (POMS) describes the circumstances under which the agency will consider funds in a conservatorship account to be an individual's resource. POMS SI 01120.010(C)(3); POMS SI 01140.215. These POMS sections provide that the agency should consider State law, and establishes the following policy for determining whether the account is a resource:

If State law requires that funds in a conservatorship account be made available for the care and maintenance of an individual, we assume, absent evidence to the contrary, that funds in such an account are available for the individual's support and maintenance and are, therefore, that individual's resource.

POMS SI 01120.010(C)(3); POMS SI 01140.215(B)(1). The POMS also states that even though an individual must petition the court for withdrawal of the account funds, the funds may be considered available for the individual's support and maintenance. According to POMS SI 01140.215(B)(3), in deciding whether the account funds are available for support and maintenance, the agency should review the history of petitions for withdrawal of the account funds, and whether the court approved or denied those petitions. According to the POMS, if a denial by the court appears to be an exception rather than the rule, the funds may be determined to be a resource for SSI purposes. POMS SI 00140.215(B)(3).

Here, the court originally authorized a $450 monthly payment from the account funds for Ms. J~'s care and maintenance. The court order comports with Illinois state law concerning the availability of conservatorship account funds for support and maintenance. See Ill. Stat. Ch. 755 § 5/11-13(b) ("the guardian of the estate ... shall apply the income and principal of the estate so far as necessary for the comfort and suitable support and education of the ward"); see also In re Estate of Berger, 520 N.E.2d 690, 697 (1st Dist. Ill. 1987), appeal denied Goodman v. Berger, 530 N.E.2d 244 (1988) (same). Further, upon Ms. J~'s petition, the court authorized an increased monthly payment. Ms. J~'s court petition stated that the increase was needed to pay for her increased housing expenses. The file clearly indicates that the account funds are being paid for Ms. J~'s care and maintenance. Therefore, it is reasonable to conclude that the property in the account is available as a resource and can be considered in determining Ms. J~'s SSI eligibility. Because the property in the account is Ms. J~'s resource, the monthly payments from the account are not income. See POMS SI 00810.010(A); SI 01110.600(B)(4). However, if the account were not a resource, the $650 monthly payments would be countable income.

Our conclusion comports with the purpose of the SSI program. 20 C.F.R. § 416.110. Ms. J~ has an estate worth approximately $387,000. This amount greatly exceeds the program's resource limitations, and State law requires that it be used for Ms. J~'s support. 20 C.F.R. § 416.1205; Ill. Stat. Ch. 755 § 11-13(b). Thus, Ms. J~ does not appear to belong to the class of low-income individuals that Congress intended to assist through the SSI program.

Thomas W. C~

Chief Counsel, Region V

Catherine A. S.

Assistant Regional Counsel