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.
FACTS
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.
DISCUSSION
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).
CONCLUSION
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
by:_________________________
Rick D. Y~
Assistant Regional Counsel