SI SF01220.310 California Grandfathered Resource Provisions
A. Dollar maximum
1. Categorical dollar limits
Aid to the Totally Disabled (ATD)
Old Age Assistance (OAS)
Aid to the Blind (AB)
b. Individuals with ineligible spouses
The limits established for eligible individuals with ineligible spouses represent the eligible individual’s separate property and his or her share of community property. With the exception of burial trusts and interment plots, which are always considered separate property (see K and L), all property held in the name of the eligible individual or the ineligible spouse is presumed to be community property unless evidence establishes that a given property is separately owned.
ATD/ATD, ATD/OAS, OAS/OAS, ATD/AB, OAS/AB
For eligible couples, the total countable resources in this exclusion may not exceed the limits shown above. As mentioned, all property held in either or both spouses’ names (with the exception of burial trusts and interment plots) is presumed to be community property. In addition, each member’s individual property reserve under this exclusion may not exceed the limits established for individuals. If one member’s individual property reserve exceeds the applicable limits for his or her aid category, that member of the couple is ineligible under the provisions of the State Plan.
B. Property ownership
1. Separate and community property of husbands and wives
California recognized the concept of “separate property” of a husband and wife. Property acquired by the husband or wife prior to marriage is separate property. Property acquired during marriage is separate property if purchased with funds which are the separate property of the owner, such as funds received by gift, inheritance, or the sale of separate property. Funds awarded to a married person in a civil action for personal injuries are the separate property of that person. Under the California State Plan, the separate property owned by one spouse is not considered in determining the eligibility of the other spouse. In addition, one spouse’s share of community property is not considered in determining the eligibility of the other spouse.
Example: Mr. Leary was converted by California as an aged individual with an ineligible spouse. His ineligible spouse inherited $5000 and placed the inheritance in a savings account. Under the State Plan, the inheritance is the separate property of the ineligible spouse and is not considered in determining the eligibility of the individual.
Example: Ms. Joplin was converted by California as a blind individual with an ineligible spouse. She and her husband have a joint savings account of $2600. One-half of the savings account, or $1300, is the spouse’s share of community property. As her share of $1300 is under the State dollar limitation of $1500 for a blind individual, she meets the grandfathered dollar limitation.
2. Owner of property
Under the State Plan, a person can hold or possess property and yet not “own” it. It is presumed that the person who holds property, or in whose name it stands, “owns” it, but this presumption can be rebutted by evidence showing that there is no right to use the property, to receive the proceeds, or to dispose of it. Thus, the rights to possess, use, control, and dispose of property is a criterion of ownership and must be considered along with possession of legal title.
C. Additional property reserve (personal property/effects exclusion)
In addition to the above dollar/resource limitations, a recipient may retain items of personal property, other than cash, securities, instruments of indebtedness such as notes, mortgages and deeds of trust (not otherwise excluded under the Home Exclusion), of a market value not to exceed one thousand dollars ($1000). When an eligible couple is involved, each member may retain additional personal non-liquid property not to exceed a market value of $1000.
In no instance, however, may the total value of an individual recipient’s property that is excluded under SI SF01220.310B and this section, exceed $2000. An eligible couple may potentially have up to $4000 in excluded resources through a combination of the dollar maximum ad the personal property/effects exclusions within the conditions discussed for each type of exclusion.
Example: Mr. Finch, a converted aged recipient, has savings of $1100 and one other countable resource, a motor boat worth $800. His savings are within the dollar maximum for an aged individual. The boat may be evaluated under the personal effective exclusion and, as the market value is within the $1000 limitation, the motor boat is excluded. Finally, because the total excluded resources under the dollar maximum and the personal property/effects exclusion are within the overall $2000 limitation, Mr. Finch remains eligible under the provisions of the State Plan.
Example: Ms. Morningstar, a converted disabled recipient, has savings of $350 and owns stereo and recording equipment valued at $1350. Even though the total value of the two resources ($1700) is under $2000, the recipient exceeds the personal effects limitation of $1000 and, therefore, does not meet the resource eligibility requirements of the State Plan.
D. Home exclusion
1. Property used as a home
Real or personal property owned by the recipient (or in which the recipient owns an interest with any other person) used as a home is excluded in determining countable resource values. The State of California placed no limit on the value of the home.
The home may be a single dwelling or one with multiple units, provided that the units not occupied by the recipient are yielding income consistent with their rental value. However, if the units have little or no net rental income, but are being rented as continuously as possible, the home and units remain excludable. This provision applies to units attached to the “home” and to rental units contiguous to the “home”.
A home includes any property right the recipient may have in a home or institution in which he is living. A property right in a home or institution may result from an advance payment to the institution, such as a property assignment, accommodation, or founder’s fee.
Retention of two pieces of property for use as a home is permissible under the State Plan only when the recipient’s health condition will not permit him or her to live in either one the entire year. If a recipient owns two dwellings, and only one may be excluded as a home, the second dwelling must meet the requirements for Property Necessary for Self-Support (discussed in SI SF01220.310H) in order to be excluded.
2. Use of property to acquire a home
The recipient who does not own a suitable home, or who sells his or her home to purchase another, may use any real property, or the proceeds from the sale of real property, to buy a home. Any such property, or the proceeds from the sale of such property, is considered a “home” and excluded if two conditions are met:
The recipient has a definite plan to use the property by converting it to another piece of property or by transferring title within six months for the purpose of providing himself or herself with a home.
The property or the proceeds received from the sale of the property are used to purchase a home or apply on the balance due on a home already purchased within one year from the date of the sale. Such proceeds may also be applied to the costs of moving necessary furnishings and repair and alteration to the home, or an amount may be retained within the set dollar maximum applicable to the recipient.
This means that real property and the proceeds from the sale of real property may be evaluated as a “home” for up to 18 months after initiation of a plan to purchase a home within the two time periods identified above.
Example: Dr. Newman, a recipient converted by California, owns a home worth $30,000. He decides to sell his home to buy a condominium and sells his home for $310,000 on August 4, 2014. As the condominium is still being built, he deposits $310,000 in a savings account and moves to a rented apartment. Under the State Plan, the $310,000 is excluded as a countable resource for one year from the date of sale, or until August 4, 2015. If the recipient buys his condominium within the one-year period, the requirements of the exclusion are met. After the year has expired, or after he buys the replacement home, if he retains any savings/cash above the applicable dollar limit, he would be ineligible under the provisions of the State Plan.
Example: Ms. Fletcher, converted by California, inherits a ranch in the San Fernando Valley. She does not own a home and she ponders whether she should sell her newly acquired ranch in order to buy a home. According to the State Plan, she has six months to execute her intention of selling the ranch in order to purchase a home. During those six months, the ranch is excluded as a countable resource. She may sell the ranch and place the proceeds in a bank and she has one year from the date of the sale to purchase a home. During this one year, the proceeds in the savings account are excludable as a countable resource.
3. Proceeds in the form of a negotiable instrument (trust deeds, mortgages)
Proceeds of a property sale in the form of a trust deed, promissory note, or mortgage continue to be evaluated as a “home.” Therefore, the proceeds are excluded after a home is purchased as long as all payments from the negotiable instrument (including the principal and interest) are applied on the balance due on the home or for the cost of necessary repairs, moving expenses, or necessary furnishings. The term “balance due”, as used in this exclusion, is limited to principal and interest payments on the home. If the payments from the negotiable instrument are not all used to apply to the balance due on the current home, the instrument is a countable resource, the market value of which is applied to the dollar maximum.
NOTE: If, under this provision of the State Plan, a trust deed (or other negotiable instrument) is excluded as a resource, the interest portion of the payment received by the recipient is countable income. The portion of the payment received that is principal is not income (it is resources).
Example: Ms. Corriveau is a recipient converted by California. During a redetermination, the SSA field office (FO) learns that she owns a trust deed with a face value of $25,000 and from which she receives a monthly payment of $225. The FO learns that she sold some property and is using the payment from the trust deed to pay the mortgage note on her current home. The mortgage payment on the current home is $230. As the payment from the trust deed is all applied to the balance due on the current home, the trust deed is an excludable resource. The FO also learns that, of the $225 payment, $125 is principal and $100 is interest. In this instance, the recipient has $100 countable unearned income.
Example: Mr. Roberts, converted by California, decides to sell his home in San Francisco and buy another in Walnut Creek. He sells his home and receives $5000 cash and a trust deed with a face value of $15,000. He receives a monthly payment on the trust deed of $175, of which $100 is interest and $75 is principal. He buys his home in Walnut Creek, paying $5000 down with a monthly mortgage (principal and interest only) payment of $190. As all of the payments received from the trust deed are being applied to the balance due on the second home, the trust deed is excludable as a countable resource under the State Plan. The $100 interest portion of the payment is, however, countable unearned income.
Mr. Sarabia, converted by California, completes a redetermination during which the FO learns he holds a trust deed that generates monthly payments to him of $236. His month principal and interest payment on the home in which he now resides is $175. He does not apply the excess payment from the trust deed to the balance due on his current home. In this instance, the trust deed cannot be excluded as a countable resource under the State Plan because not all of the payments derived from the trust deed are applied to the balance due on the current home. The market value of the trust deed will have to be determined and the value so established is a countable resource. In addition, the FO will have to determine how much of the $236 payment is interest, as the interest is countable unearned income.
E. Life insurance
The cash surrender value of life insurance on the life of the recipient is a countable resource to be included in the recipient’s dollar maximum.
F. Household goods
Household goods with a value up to $1500 are excluded, with the provision that no one item may have a value in excess of $300.
An automobile is excluded as a resource only if:
The vehicle is necessary to implement an approved plan for employment, rehabilitation or self-care necessary for employment
The recipient has $1500 or less in equity in the automobile.
In all other instances, the equity the recipient has in the motor vehicle is a countable resource that can be applied to either the dollar maximum or the personal property/effects exclusion of the State Plan. The equity may not be split between the two exclusions.
H. Property necessary for self-support (not contiguous to the home)
Additional real property may be owned by the recipient and/or his or her spouse and excluded as a countable resource under the State Plan if up to two conditions are met. The conditions vary by aid category.
1. Converted aged and disabled recipients
The total county assessed value (not the assessed market value) of the property does not exceed $5000.
The property is yielding a minimum net return of six percent (6%) per year on the assessed market value of the property.
NOTE: If the recipient and/or spouse are not the sole owners of the property, only their proportionate share of the county assessed value is considered.
Example: Ms. Russell is an aged recipient converted by California. She owns a two-unit building that she is renting out and lives elsewhere. She receives total gross rental income of $250 per month and her net return per year is $1500. The assessed market value of the property is $16,800; the county assessed value is $4200. As the county assessed value is under $5000, the first condition is met. As she nets $1500 per year, she meets the six percent net annual return requirement ($16,800 x 6% = $1008). The income-producing property is, therefore, excludable as a countable resource under the State Plan. The net rental income is countable income and is calculated according to federal income rules.
Example: Mr. Pacheco is an aged recipient converted by California. He is living in Los Angeles and owns a home in Sacramento he is currently renting out at $250 per month. The assessed market value of the Sacramento property is $26,000; the county assessed value is $6400. As the county assessed value is over $5000, the property is not excluded as a resource under the State Plan. The tax-assessed market value of the real property is a countable resource under the State Plan (see SI SF01220.310I).
2. Converted blind recipients
For income producing property held by an AB convertee or in combination with his or her spouse, there is no assessed value limit in order to apply the exclusion, but the property must yield a minimum net return of six percent (6%) per year on the on the assessed market value of the property.
If the property is vacant for a portion of the year, only the prorated percentage of net return that represents the period of occupancy will be used.
I. Value of real property
To determine the value of the real property, which is the amount of the countable resource under the State Plan, subtract any allowable encumbrance from the tax-assessed market value. The allowable encumbrances are:
deeds of trust
other loans on the property
delinquent tax liens
any remaining unpaid balance on the property
If material, verify encumbrances on real property by examination of the loan or repayment records, statement from a mortgage holder, or other evidentiary proof of indebtedness.
NOTE: If the recipient and/or spouse are not the sole owners of the property, only their proportionate share of the tax-assessed market value (less encumbrances) is included in their respective holdings.
J. Utilization of non-home real property
Under the State Plan, non-home real property is expected to produce sufficient income (see SI SF01220.310H) in order to be excluded as a resource. If non-home real property is not producing an acceptable level of income, the recipient has three months from the date of notification in which to initiate a plan for acceptable utilization of the property. In addition, he or she has an additional nine months to develop and implement the plan devised, for a total of one year from the date of notification. During this period of plan-initiation and development, the non-home real property is excluded as a countable resource. Failure of a recipient to consider development of a plan for utilization results in the non-home real property becoming countable immediately.
Examples of acceptable methods of utilization include:
taking steps to increase the amount of net rental income
listing the property for sale at a price consistent with its market value
When sale of the property is the only reasonable method of utilization, the property is not a countable resource as long as the recipient makes a continuous and bona fide effort to sell the property.
Advise a converted recipient, who has non-home real property that is not meeting the requirements of SI SF01220.310H, of the utilization requirements of the State Plan and of the time periods he or she has to initiate and develop a utilization plan. This notification must be in writing. Control the case for the end of initial three-month period to review the utilization plan with the recipient. After the initial review, recontact the recipient at the end of the nine-month development period.
1. Burial plots
The value of an interment plot, vault, or crypt retained for the use of the owner is excluded.
2. Burial reserves
The following burial reserves are excluded when the total amount paid for all such items does not exceed $1000:
money or securities placed in an irrevocable trust for funeral, cremation, or interment expenses
life or burial insurance purchased specifically for funeral, creation, or interment expenses, which is placed in an irrevocable trust or which has no loan or cash value available to the insured during his or her lifetime
securities issued by a licensed cemetery authority which, by their terms, are convertible only into payment for funeral, cremation, or interment
L. Other exclusions
In addition to the exclusions in SI SF01220.310C through SI SF01220.310K, the following are excluded under the California State Plan:
funds held in an escrow account if the escrow can be revoked only upon the consent of all parties involved
stock in a water company not appurtenant to the land in the amount necessary for agricultural purposes
the value of wedding and engagement rings, heirlooms, and clothing
loans not available for current use because of the conditions imposed by the lender
a share in an estate which has not been distributed and of which the recipient has no economic use