Basic (10-08)

PR 06705.006 California

A. PR 06-114 Feliza D~ Title II Claim No. ~

DATE: April 19, 2006

1. SYLLABUS

This opinion states that when a debtor establishes a revocable living trust prior to death, the following information is needed: (1) the extent of the trust's assets at the time of death, (2) the extent that such assets remain in the trust, and (3)the extent to which any trust assets were distributed and to whom. Once this information is obtained and sufficient assets remain in the trust, an informal demand should be made to the Trustee. If no significant assets remain, an informal demand should be made on any distributee(s)). Although civil action is not barred, the Trustee or distributee may assert the one-year statute of limitations that applies to claims brought against a deceased debtor under California law.

2. OPINION

REQUEST

You asked for advice as to how the Debt Specialist of the Debt Management Section should proceed with respect to collecting the $1,182.00 balance of a Title II overpayment made to Feliza Lasay D~, the number holder, who is now deceased. Although there is no record of any probate proceeding, the number holder established a revocable living trust prior to death. Pursuant to Cal. Prob. Code § 850 (2005), the Successor Trustee petitioned the Los Angeles Superior Court for an order confirming the assets of the trust and the court granted the petition.

ADVICE

The Debt Specialist should obtain a copy of the trust document from the court's record to determine (1) the nature and extent of the trust's assets at the time of the number holder's death, (2) the extent that such assets remain in the trust, and (3) the nature and extent to which any trust assets have been distributed and to whom. The Debt Specialist should then attempt to recover the balance of the overpayment. If sufficient assets remain in the trust, the Debt Specialist should make an informal demand of the Successor Trustee. If no significant asset remains in the trust, the Debt Specialist should make an informal demand(s) of any distributee(s) of the trust's assets. In seeking to recover the balance of the overpayment, the Debt Specialist should be aware that the Social Security Administration (SSA) will not refer this debt for collection through a civil suit because the outstanding balance of the debt is less than $3,000.00.

FACTUAL BACKGROUND

SSA determined that the number holder was overpaid $3,577.00 based on her work and earnings for 1991. In August 1993, SSA began recovering the overpayment through partial benefit adjustment (Attachment A). On November 3, 2002, the number holder established the Feliza L. D~ Revocable Living Trust (Attachment C). On August 29, 2004, the number holder died. At the time of her death, the number holder was a resident of Los Angeles, California and the outstanding balance of the overpayment was $1,182.00 (Attachment B).

On January 20, 2005, SSA submitted an inquiry to the Los Angeles Superior Court as to whether probate had commenced with respect to the number holder (Attachment B). On January 31, 2006, the court responded with a Case Summary of In re The Feliza Lasay D~ Revocable Living Trust, Case No. BP 090233 and with a copy of the first page of the petition that had commenced the action (Attachment D). On February 3, 2005, Paul L. D~, the Successor Trustee of the trust, commenced an action pursuant to Cal. Prob. Code § 850 (2005) to confirm ownership of the trust's assets. On April 4, 2005, the court granted the petition. Although the Case Summary states that the action remains pending, our office confirmed, by telephone with the Clerk of the Court, that no further documents have been filed, that no future hearing is scheduled, and that no probate action was commenced for the number holder.

DISCUSSION

If a debtor is deceased, the decedent's estate is liable for an overpayment. Program Operations Manual System (POMS) GN 02215.050.A. Recovery from an estate will be explored, however, only if the overpayment is $600 or more and cannot be recovered in full from an underpayment, from a Lump Sum Death Payment payable on the same earnings record, or from benefits payable on the same earnings record to a person living in the same household with the debtor at the time of the overpayment. POMS GN 02215.050.B.

Where an estate is closed or will not be administered, though, collection efforts should be terminated only if (1) there is no estate administrator and funds cannot be traced to any distributee, (2) there are no assets to pursue, and (3) adjustment cannot be proposed against benefits due other persons who were in different households at the time of overpayment. POMS GN 02215.050.B.

In this case, no probate proceeding was commenced with respect to the deceased number holder. Moreover, the Successor Trustee of the number holder's trust obtained an order confirming ownership of the trust's assets. It is reasonable to presume that the number holder placed all of her assets into her revocable living trust and that, at the time of her death, the number holder left no assets that were subject to probate. See Cal. Prob. Code § 13050(a) (2006) (property transferred to revocable living trust is not subject to probate administration).

In California, however, property that is in a revocable living trust at the time of the settlor's death is subject to the claims of the settlor's creditors. Cal. Prob. Code § 19001 (2006). Upon the settlor's death, the trustee has an option of commencing a proceeding in the Superior Court that is similar to probate. Cal. Prob. Code § 19010 (2006).

If the trustee commences such a proceeding, the trustee must file, publish, and give notice that all claims against the trust must be filed in court within 4 months of publication or within 30 days if notice was served by mail or in person. Cal. Prob. Code §§ 19003, 19040 (2006). If the trustee files, publishes, and gives such notice, any claim that is not filed in compliance with the notice is barred from collecting from the trust. Cal. Prob. Code § 19004 (2006). If the trustee, however, does not commence such a proceeding, the trust remains liable to the settlor's creditors as otherwise provided by law. Cal. Prob. Code § 19008 (2006). The trustee does not incur liability for failing to initiate such proceedings. Cal. Prob. Code § 19010 (2006).

There is no record in this case that any proceeding was commenced except for Case No. P 090233. Accordingly, the trust property identified in the Successor Trustee's petition is subject to SSA's overpayment claim. Cal. Prob. Code § 19001 (2006).

The Debt Specialist should proceed by obtaining a complete copy of the Successor Trustee's petition which includes the declaration of trust that was attached as Exhibit 1 and a complete copy of the court's order that granted the petition. Such documents should permit SSA to determine (1) the nature and extent of the trust's assets at the time of the number holder's death, (2) the extent that such assets remain in the trust, and (3) the nature and extent to which any trust assets have been distributed and to whom. Depending on whether significant assets remain in the trust, the Debt Specialist should seek to recover the overpayment by making an informal demand on the Successor Trustee or upon any distributee(s). See POMS GN 02215.105 (compromise settlement overview).

In attempting to recover the balance of the overpayment, the Debt Specialist should be aware that SSA will not refer this debt for collection through a civil suit. See POMS GN 02215.150 (referring a Title II debt for collection). Among the several factors that are considered in determining whether to attempt collection through a civil suit, SSA will not consider referring any claim unless the debtor is a federal employee and the amount of the debt is $200.00 or more or the debtor is not a federal employee and the amount of the claim is $3,000.00 or more. POMS GN 02215.150.B. There is no evidence that the number holder in this case was a federal employee at the time of her death. Accordingly, the $1,182.00 balance of the overpayment precludes referring this claim for civil collection.

While SSA's internal guidelines preclude civil collection, the Debt Specialist also should be aware that a civil action apparently would not be barred by any statute of limitations. Although the Successor Trustee or a trust distributee may assert the one-year statute of limitations that applies to claims brought against a deceased debtor under California law, Cal. Prob. Code § 366.2 (2006), a civil action to collect the overpayment in this case would be a claim that arose under federal law and arguably would not be subject to a statute of limitations under state law. In such cases, SSA recognizes a six-year statute of limitations. See POMS GN 02215.150.B.2. (civil action to collect Title II overpayment must be commenced within six years after overpayment determination has been made). Here, the partial benefit adjustment that SSA effected from 1993 through the number holder's death in 2004 tolled the six-year limitations period.


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http://policy.ssa.gov/poms.nsf/lnx/1506705006
PR 06705.006 - California - 10/01/2008
Batch run: 11/29/2012
Rev:10/01/2008