PS 01405.055 Wisconsin
A. PS 04-150 Review of the Assignment of Annuity Payments Belonging to Raymond W~ (Your Ref. No. S2D5G3))
DATE: November 13, 2000
This opinion concerns annuity payments that are assigned by the annuitant to a company that has purchased the right to receive these payments. In 1997, the annuitant sold rights to $175.00 per month for 240 months in exchange for a lump sum payment of $10,000. The annuitant retained the right to receive $109.00 per month from the annuity. The opinion concludes that, under Wisconsin law, the annuitant is entitled to assign his right to the $175.00 payment to another party. Under this agreement, the annuitant assigned away all rights to these payments. Therefore, the $175.00 payments being made to the company are not countable as the annuitant's income. The $109.00 payments still received by the annuitant are countable income for SSI purposes. The $10,000 lump sum payment received by the annuitant, if retained, would be a resource for SSI purposes beginning in the month after the month it was received.
You have asked whether Mr. W~ assignment of certain annuity payments to Singer Asset Finance Company ("Singer Asset") constituted a total relinquishment of his rights to the payments, or whether Mr. W~ transaction with Singer Asset should be considered a loan. For the following reasons, it is our opinion that Mr. W~ assignment of certain annuity payments was a sale and should be considered a total relinquishment of his rights to the payments.
In May of 1984, Mr. W~ entered into a settlement agreement with American Family Insurance Company ("American Family"). Pursuant to the settlement agreement, American Family established an annuity with National Fidelity Life Insurance Company ("National Fidelity"), which, beginning June 1, 1984, was to pay Mr. W~ $284 a month for life with forty years being guaranteed. James T. W~, Mr. W~ father, was named as the beneficiary of this annuity.
On August 27, 1997, Mr. W~ entered into an agreement ("the Assignment Agreement") with Singer Asset to assign $175.00 out of 240 of the monthly payments due to him under the annuity issued by National Fidelity. The monthly payments assigned to Singer Asset were those beginning in October 1, 1997 and continuing through September 1, 2017. In return for this assignment, Mr. W~ received a payment of $10,000 from Singer Asset. Mr. W~ was also to receive the remaining $109.00 ($284.00 minus $175.00) of each monthly payment.
The Assignment Agreement provides that it was the intention of the parties that the provisions of the agreement constitute the purchase and sale of the seller's right, title, and interest in and to the assigned assets, and not a loan secured by the assigned assets. Assignment Agreement at 2. However, the Assignment Agreement further provides that, in the event that a court of competent jurisdiction holds the transaction is a loan and not a purchase and sale, it is the intention of the parties to conform strictly to the usury laws now or hereafter in effect in any state which laws are applicable to the transaction. Id.
The Assignment Agreement required that Mr. W~ deliver a letter of instructions to American Family and National Fidelity directing that all payments to be made in relation to the assigned assets be sent directly to Singer Asset or its assignee; and deliver another letter of instructions to Singer Asset addressed to American Family and National Fidelity directing that all payments made in relation to the assigned assets after his death be made directly to Singer Asset or its assignee, and changing the beneficiary of the assigned assets to the Estate of Mr. W~ or as otherwise instructed by Singer Asset as sole beneficiary. Id. The Assignment Agreement also required that Mr. W~ deliver to Singer Asset an irrevocable power of attorney appointing Singer Asset or its assignees as his attorney-in-fact to make further changes to the payee instructions and beneficiary designations as it so elects; another irrevocable power of attorney transferring ownership to Singer Asset or its assignee of all assigned payments by way of endorsement of payments instructions or otherwise; and an acknowledgment that he was waiving and abandoning any and all rights to receive the assigned payments and assigning the same irrevocably to Singer Asset. Assignment Agreement at 2-3.
Under Wisconsin law, the owner of any rights under a life insurance policy or annuity contract may assign those rights. See Wis. Stat. § 632.47. Although an annuitant (i.e., the party entitled to receive payments under an annuity contract) does not own the annuity policy, he or she does have the right to receive payments and, accordingly, may transfer that right. See Valley Bank v. Guyette, 1994 WL 613014, * 4 (Wis. Ct. App. 1994) (unpublished disposition) (an annuitant may transfer what she does own, her rights to receive payments under the annuity). Mr. W~ was therefore entitled, under Wisconsin law, to assign his right to receive payments under the annuity issued by National Fidelity to another party.
Because Mr. W~, as a matter of law, had the right to assign his right to receive payments under the annuity contract with National Fidelity, we examined the contract with Singer Asset to determine whether the assignment of his monthly payments under the annuity was part of a genuine sale and purchase, or a secured loan. The Assignment Agreement provides that it shall be governed, construed, and enforced in accordance with the substantive laws of the State of Florida, Assignment Agreement at 10. Nonetheless, both Florida and Wisconsin law require that a contract should be interpreted to reflect the intent of the parties who entered into the agreement. See St. Augustine Pools, Inc. v. James M. Barker, Inc., 687 So.2d 957, 958 (Fla. 5th DCA 1997); Heritage Mut. Ins. Co. v. Treech Ins. Exchange, 516 N.W.2d 8, 9 (Wis. Ct. App. 1994). Florida and Wisconsin law also provide that the best evidence of the parties' intent is the language of the contract itself. See Jacobs v. Petrino, 351 So.2d 1036, 1039 (Fla. 4th DCA 1976); Central Auto Co. v. Reichert, 273 N.W.2d 360, 364 (Wis. Ct. App. 1978). Here, the Assignment Agreement provides that "[i]t is the intention of the parties hereto that the provisions of this Agreement and Related Documents constitute the purchase and sale of all of [Mr. W~] right, title and interest in and to the Assigned Assets, and not a loan secured by the Assigned Assets." Assignment Agreement at 2. Although there is also language in the agreement describing the transaction as loan, this language was explicitly included so that the transaction would comply with usury laws in the unintended event that a court of competent jurisdiction held the transaction was a loan. Thus, the language of the document indicates that it was the parties' intent to relinquish all of Mr. W~ rights and interest in the assigned payments, as opposed to merely creating a security interest in the assigned payments.
In addition to the parties' explicit declaration of intent, other provisions of the Assignment Agreement also suggest that the transaction was a sale and purchase, and not a loan. Specifically, the agreement provides that Mr. W~ must waive and abandon any and all rights in the assigned payments, execute a special irrevocable power of attorney appointing Singer Asset or its assignee as his attorney-in-fact to make further changes to the payee instructions and beneficiary designations as it so elects, and execute another special irrevocable power of attorney to transfer ownership to Singer Asset of all assigned payments by way of endorsement of payment instruments or otherwise. Assignment Agreement at 2-3. The Terms Rider to the Assignment Agreement further defines the assigned assets as all right, title, and interest of Mr. W~ to receive the assigned payments due to him under the annuity. Terms Rider at 1. The Assignment Agreement thus establishes that it was the parties' intent that Mr. W~ have no control, interest, or other rights with respect to the payments that were assigned to Singer Asset, and he has no right to revoke the assignment of the payments to Singer Asset.
Based on the information provided to us, Mr. W~ sold his rights to the annuity. Therefore, only $109.00 per month should be counted as monthly income from the annuity. The $10,000 which Mr. W~ received from Singer Asset, however, would be considered Mr. W~ resource if he retained it to the following month. See 20 C.F.R. § 416.1103(c).
For the above stated reasons, it is our opinion that, based on the documents provided to us, Mr. W~ assignment to Singer Asset of $175.00 of 240 of the monthly payments due to him under the annuity issued by National Fidelity to Singer Asset was a sale and total relinquishment of his right to those portions of payments. The portion of the annuity should therefore not be considered as income to Mr. W~.
Thomas W. C~
Chief Counsel, Region V
Rick D. Y~
Assistant Regional Counsel