PS 01415.028 Missouri

A. PS 02-109 Clarification of Home Ownership Interest Created by Marriage for Purposes of Eligibility for Supplemental Security Income Benefits

DATE: December 21, 2001

1. SYLLABUS

This opinion provides clarification regarding the issue of home ownership interest created by marriage for purposes of eligibility for Supplemental Security Income (SSI) benefits. For SSI purposes, a person who lives in a home in which he or she has no ownership interest may be receiving unearned income in-kind from the owner. As outlined in the opinion, property owned separately by either spouse prior to marriage remains separate property if the title remains solely in the spouse's name.

2. OPINION

You have asked for advice as to whether a legal syllabus and memorandum dated August 17, 1977, regarding a home ownership interest created by marriage, applies to property owned by a man as well as a woman prior to marriage and whether there is a more recent decision that should be considered regarding this issue. For the reasons discussed below, we believe that when a man owns property prior to marriage, the property remains separate so that his wife does not acquire an ownership interest.

Factual Background

The memorandum you sent with your request indicates that Charles H~ was a claimant for supplemental security income (SSI) benefits in 1999 and was intermittently married to or living with Rhonda H~, a current SSI recipient. Mr. H~ had purchased a home prior to their marriage. By memorandum dated August 17, 1977, you were advised that a husband did not acquire an ownership interest in a home owned by his wife prior to their marriage where the wife retained the title solely in her name.

Analysis

To obtain SSI benefits, an individual must meet eligibility requirements as well as have limited income and resources. See 20 C.F.R. § 416.1100 (2001). A person who lives in a home in which he or she has no ownership interest may be receiving unearned income in-kind from the owner which affects eligibility under the income requirements for SSI . See 20 C.F.R. §§ 416.1121(h) and 416.1130-416.1132; 42 U.S.C.A § 1382a(a)(2)(A). You have asked whether the advice received in 1977 that a home owned by a woman prior to marriage remains her separate property in which her husband has no ownership interest, applies equally where the home was owned by a man prior to marriage.

As set forth in the previous legal memorandum, Missouri law regarding property owned by a woman at the time of marriage states:

All real estate and any personal property, including rights in action, belonging to any woman at her marriage, or which may have come to her during coverture, by gift, bequest or inheritance, or by purchase with her separate money or means, or be due as the wages of her separate labor, or has grown out of any violation of her personal rights, shall, together with all income, increase and profits thereof, be and remain her separate property and under her sole control, and shall not be liable to be taken by any process of law for the debts of her husband.

Mo. Ann. Stat. § 451.250 (2001).

This statute has not changed since 1969. The statute, as part of the Married Women's Act of 1889, was enacted to place a wife on an equality with her husband in respect to property and personal rights. See Townsend v. Townsend, 708 S.W.2d 646, 649 (Mo. banc 1986); Novcak v. Kansas City Transit, Inc., 365 S.W.2d 539, 541 (Mo. banc 1963); Brawner v. Brawner, 327 S.W.2d 808, 817 (Mo. banc 1959); Rogers v. Rogers, 177 S.W. 382, 384 (Mo. 1915); Clow v. Chapman, 28 S.W. 328, 329-30 (Mo. 1894). The Married Women's Act is in derogation of the common law, wherein the legal existence of the wife was considered merged into the husband, and creates new rights in married women. See Powell v. American Motors Corporation, 834 S.W.2d 184, 188 (Mo. banc 1992) (stating that the historical “unity of spouses” view, which was based upon the fiction that marriage merges the identities of the spouses into a single unit, has been generally legislated out of existence by the various Married Women's Acts); Novak v. Kansas City Transit, Inc., 365 S.W.2d at 540-41; Brawner v. Brawner, 327 S.W.2d at 817; Willott v. Willott, 62 S.W.2d 1084, 1085 (Mo. banc 1933); Nichols v. Nichols, 48 S.W. 947, 953 (Mo. 1898).

The Married Women's Act did not confer any right on the wife that the husband did not have at common law. Thus, there is no analogous statute setting forth a man's right to retain separate property after marriage, as this right existed at common law. Accordingly, regardless of whether the home was owned by the wife or husband prior to the marriage, we believe it is reasonable to conclude that property owned separately by either spouse prior to marriage remains separate property if the title remains solely in the spouse's name. Based on the materials submitted in the case at hand and assuming that the husband retained title solely in his name, the wife did not acquire an ownership interest in the home owned by her husband prior to their marriage.

Frank V. S~
Chief Counsel, Region VII

By
Rhonda N~
Assistant Regional Counsel

B. PS 01-023 Proper Valuation of Inherited Property When Such Assets are Part of an Estate and the Heir Seeks SSI Entitlement

DATE: August 2, 1999

1. SYLLABUS

This opinion contains a State-by-State synopsis for the Kansas City Region of when inherited property or property in an unprobated estate is income or a resource to the heir for SSI purposes.

2. OPINION

You requested a legal opinion reviewing Kansas state law on inheritances. Specifically, you sought an explanation as to when title to personal property passes to an heir when an estate is in probate so as to determine eligibility for SSI benefits and if any statutory or common law changes had taken place since 1994 if this response was contrary to earlier advice. You asked for a review of the state laws in Iowa, Missouri, and Nebraska in regard to when title to real and personal property passes to an heir. You further asked if crops could be added to the list of examples of personal property in Kansas. Below is our response to the specific issues raised.

Your request was occasioned by a letter from an attorney who represented an SSI recipient. The recipient's benefits had been withheld when it was learned that she was the beneficiary of her mother's estate, the proceeds of which were later placed in a special needs trust in the interest of the recipient. In his letter, the attorney stated that the Agency's action denying benefits was in error because the SSI recipient did not have a possessory interest in the personal property of her mother's estate before such estate was probated. The attorney stated that Kansas law holds that the personal representative takes title to personal property of the estate of a deceased person. He also stated that unharvested crops were personal property under Kansas law.

Background

Generally, a resource, for SSI purposes, includes assets that an individual owns and could convert to cash to be used for his or her support. See 20 C.F.R. § 404.1201(a) (1998). If the individual has the right, authority, or power to liquidate the property (or his or her share of the property), it is a resource.

See id. Under the Program Operations Manual (POMS), an individual is deemed to have an ownership interest in an unprobated estate when documents such as a will or court records indicate that the individual is an heir to the property of a decedent, or the individual has use of the property or receives income from it, or the individual is related to the decedent such that he or she is entitled to a share of the property under state intestacy laws, and the inheritance, use of income, and distributions are uncontested. POMS SI 01120.215B(2). The interest in an unprobated estate is not considered a resource, however, until the month following the month in which it meets the definition of income. POMS SI 01120.215B(3).

An inheritance is considered income when it is received. See POMS SI 00830.550; see generally 20 C.F.R. § 416.1123(a). Inheritance is generally assumed to be received, absent regional instructions regarding state law to the contrary, at the earliest of either the date the individual alleges receiving the inheritance, or the date the estate is closed. See POMS SI 0083.55B(B)(2).

Missouri Law

It is well-settled under Missouri law that upon the death of a person, equitable title to a decedent's real estate passes immediately to the heirs. See Mo. Rev. Stat. § 473.260 (1992); Baker v. Dale, 123 F.Supp. 364 (W. D. Mo. 1954); Missouri v. Cox, 784 S.W.2d 244, 245 (Mo. App. 1989); In re J~'s Will, 291 S.W.2d 214 (Mo. App. 1956). Missouri, like most states, follows the common law rule that favors estates vesting at the earliest possible period, to prevent the title to property from being left uncertain. See Tindall v. Tindall, 66 S.W. 1092, 1094 (Mo. 1902).

However, a probate estate is itself not a legal entity that can own property. A probate estate is the property, not the possessor or owner of the property. The probate estate cannot possess or own; it can only be possessed or owned. Missouri v. S.E., 675 S.W.2d 86, 87 (Mo. App. 1984); In re Estate of C~, 522 S.W.2d 36, 41 (Mo. App. 1975). Thus, a testator's property is not owned by the probate estate. Nor is it owned by the personal representative of the probate estate. The personal representative merely take custody of the property, to discharge whatever debts burden the property before distribution; it is the heir who has the real interest in the property. In fact, real property cannot even be sold through the probate court without making the named beneficiaries party to the action. See, e.g., Clapper v. Chandler, Administrator, 406 S.W.2d 114, 120 (Mo. App. 1966). Although an heir's interest may be of no economic value until the will is probated, a Missouri heir may nonetheless legally sell or convey this interest immediately upon the death of the testator, without waiting for probate. Trenton Motor Company v. Watkins, 291 S.W.2d 659, 663 (Mo. App. 1956). This power of control itself constitutes a definite and irrefutable interest in property, albeit an equitable interest, which vests upon the death of the benefactor. Mo. Rev. Stat. § 473.260 (1992); In re J~'s Will, supra; see In re P~, 40 B.R. 811, 813 (Bankr. M. D. Tenn. 1984). A named heir under a will "has a legal and a beneficial interest in the residual estate which it acquire[s] upon the death of the [decedent]." Missouri ex rel. Eagleton v. Hon. Harry A. Hall, 389 S.W.2d 798, 801 (Mo. 1965). Title passes to beneficiaries subject only to "the possession of [the decedent's] [personal representative] for probate purposes." In re Estate of W~, 380 S.W.2d 333, 338 (Mo.1964). Indeed, Missouri is rather unremarkable in this regard, as the law of most states specifies that equitable title in a decedent's estate vests immediately upon date of death in the heirs, subject to the claims of creditors of the decedent and the costs of administration. See generally Bostian v. Milens, 193 S.W.2d 797, 803-04 (Mo. App. 1946) (and authorities therein cited). Therefore, personal and real property held in probate is a resource for SSI purposes under Missouri law.

Valuation Problems

Some problems may arise when the agency tries to appraise the fair market value of personal property that is held in probate. It should be remembered by anyone appraising such property that the fair market value of such items is reduced by the fact that the heir has only an equitable interest in such property. True fair market value can only be measured when an heir has legal title to transfer such property.

Determining the fair market value of that interest prior to the distribution of the estate may be difficult in some cases, however, since personal and real property may be sold or the interest in the estate may be expended to cover the obligations of the estate. If the estate has little or no debt, the heir's interest may be fairly easily determinable at the date of death. If the estate is heavily indebted or the amount of indebtedness is unknown, the heir's interest may be so speculative as to render it without any fair market value. Should assistance be required in properly evaluating the value of an estate, you may refer any relevant information to our office for an opinion.

Crops as Personal Property

In Kansas, crops growing on land at the time of death of a decedent pass to the personal representative as part of the personal property of the estate. Lindholm v. Nelson, 264 P. 50 (Kan. 1928). Unharvested crops are also considered personal property in Iowa, Jones v. Hughes, et al., 506 N.W.2d 810 (Iowa Ct. App. 1993), Missouri, Davis v. Cramer, 176 S.W. 85 (Mo. App. 1915) and Nebraska, In re M~'s Estate v. Knicely, et al., 287 N.W. 760 (Neb. 1939). Therefore, POMS SI 01110.100C should include crops as personal property for all four states in Region VII.

Summary

In all states in our region, you may assume that an individual has an alienable property interest in an estate as of the date of death of the testate or intestate. Therefore, an interest would be received and constitute income or a resource as of the date of death.

If the individual has attempted to disclaim his or her interest, or if there are any other unresolved issues that prevent you from determining the income or resource status of an inheritance, we suggest that you refer any relevant information to our office for an opinion.

C. PS 00-463 Proper Valuation of Inherited Property When Such Assets are Part of an Estate and the Heir Seeks SSI Entitlement

DATE: August 2, 1999

1. SYLLABUS

This opinion summarizes the inheritance laws for the four States of Region VII. In all four States an heir is considered to have received an ownership interest in an estate as of the date of death of the decedent. This is true even if the estate's property is in probate. For SSI purposes, receipt of ownership interest in an estate counts as income in the month of death and the ownership interest counts as a resource in the following month. In addition, unharvested crops are considered part of the personal property of the estate in all four States in Region VII.

2. OPINION

You requested a legal opinion reviewing Kansas state law on inheritances. Specifically, you sought an explanation as to when title to personal property passes to an heir when an estate is in probate so as to determine eligibility for SSI benefits and if any statutory or common law changes had taken place since 1994 if this response was contrary to earlier advice. You asked for a review of the state laws in Iowa, Missouri, and Nebraska in regard to when title to real and personal property passes to an heir. You further asked if crops could be added to the list of examples of personal property in Kansas. Below is our response to the specific issues raised.

Your request was occasioned by a letter from an attorney who represented an SSI recipient. The recipient's benefits had been withheld when it was learned that she was the beneficiary of her mother's estate, the proceeds of which were later placed in a special needs trust in the interest of the recipient. In his letter, the attorney stated that the Agency's action denying benefits was in error because the SSI recipient did not have a possessory interest in the personal property of her mother's estate before such estate was probated. The attorney stated that Kansas law holds that the personal representative takes title to personal property of the estate of a deceased person. He also stated that unharvested crops were personal property under Kansas law.

Background

Generally, a resource, for SSI purposes, includes assets that an individual owns and could convert to cash to be used for his or her support. See 20 C.F.R. § 404.1201(a) (1998). If the individual has the right, authority, or power to liquidate the property (or his or her share of the property), it is a resource.

See id. Under the Program Operations Manual (POMS), an individual is deemed to have an ownership interest in an unprobated estate when documents such as a will or court records indicate that the individual is an heir to the property of a decedent, or the individual has use of the property or receives income from it, or the individual is related to the decedent such that he or she is entitled to a share of the property under state intestacy laws, and the inheritance, use of income, and distributions are uncontested. POMS SI 01120.215B(2). The interest in an unprobated estate is not considered a resource, however, until the month following the month in which it meets the definition of income. POMS SI 01120.215B(3).

An inheritance is considered income when it is received. See POMS SI 00830.550; see generally 20 C.F.R. § 416.1123(a). Inheritance is generally assumed to be received, absent regional instructions regarding state law to the contrary, at the earliest of either the date the individual alleges receiving the inheritance, or the date the estate is closed. See POMS SI 0083.55B(B)(2).

Missouri Law

It is well-settled under Missouri law that upon the death of a person, equitable title to a decedent's real estate passes immediately to the heirs. See Mo. Rev. Stat. § 473.260 (1992); Baker v. Dale, 123 F.Supp. 364 (W. D. Mo. 1954); Missouri v. Cox, 784 S.W.2d 244, 245 (Mo. App. 1989); In re J~'s Will, 291 S.W.2d 214 (Mo. App. 1956). Missouri, like most states, follows the common law rule that favors estates vesting at the earliest possible period, to prevent the title to property from being left uncertain. See Tindall v. Tindall, 66 S.W. 1092, 1094 (Mo. 1902).

However, a probate estate is itself not a legal entity that can own property. A probate estate is the property, not the possessor or owner of the property. The probate estate cannot possess or own; it can only be possessed or owned. Missouri v. S.E., 675 S.W.2d 86, 87 (Mo. App. 1984); In re Estate of C~, 522 S.W.2d 36, 41 (Mo. App. 1975). Thus, a testator's property is not owned by the probate estate. Nor is it owned by the personal representative of the probate estate. The personal representative merely take custody of the property, to discharge whatever debts burden the property before distribution; it is the heir who has the real interest in the property. In fact, real property cannot even be sold through the probate court without making the named beneficiaries party to the action. See, e.g., Clapper v. Chandler, Administrator, 406 S.W.2d 114, 120 (Mo. App. 1966). Although an heir's interest may be of no economic value until the will is probated, a Missouri heir may nonetheless legally sell or convey this interest immediately upon the death of the testator, without waiting for probate. Trenton Motor Company v. Watkins, 291 S.W.2d 659, 663 (Mo. App. 1956). This power of control itself constitutes a definite and irrefutable interest in property, albeit an equitable interest, which vests upon the death of the benefactor. Mo. Rev. Stat. § 473.260 (1992); In re J~'s Will, supra; see In re P~, 40 B.R. 811, 813 (Bankr. M. D. Tenn. 1984). A named heir under a will "has a legal and a beneficial interest in the residual estate which it acquire[s] upon the death of the [decedent]." Missouri ex rel. Eagleton v. Hon. Harry A. Hall, 389 S.W.2d 798, 801 (Mo. 1965). Title passes to beneficiaries subject only to "the possession of [the decedent's] [personal representative] for probate purposes." In re Estate of W~, 380 S.W.2d 333, 338 (Mo.1964). Indeed, Missouri is rather unremarkable in this regard, as the law of most states specifies that equitable title in a decedent's estate vests immediately upon date of death in the heirs, subject to the claims of creditors of the decedent and the costs of administration. See generally Bostian v. Milens, 193 S.W.2d 797, 803-04 (Mo. App. 1946) (and authorities therein cited). Therefore, personal and real property held in probate is a resource for SSI purposes under Missouri law.

Valuation Problems

Some problems may arise when the agency tries to appraise the fair market value of personal property that is held in probate. It should be remembered by anyone appraising such property that the fair market value of such items is reduced by the fact that the heir has only an equitable interest in such property. True fair market value can only be measured when an heir has legal title to transfer such property.

Determining the fair market value of that interest prior to the distribution of the estate may be difficult in some cases, however, since personal and real property may be sold or the interest in the estate may be expended to cover the obligations of the estate. If the estate has little or no debt, the heir's interest may be fairly easily determinable at the date of death. If the estate is heavily indebted or the amount of indebtedness is unknown, the heir's interest may be so speculative as to render it without any fair market value. Should assistance be required in properly evaluating the value of an estate, you may refer any relevant information to our office for an opinion.

Crops as Personal Property

In Kansas, crops growing on land at the time of death of a decedent pass to the personal representative as part of the personal property of the estate. Lindholm v. Nelson, 264 P. 50 (Kan. 1928). Unharvested crops are also considered personal property in Iowa, Jones v. Hughes, et al., 506 N.W.2d 810 (Iowa Ct. App. 1993), Missouri, Davis v. Cramer, 176 S.W. 85 (Mo. App. 1915) and Nebraska, In re M~'s Estate v. Knicely, et al., 287 N.W. 760 (Neb. 1939). Therefore, POMS SI 01110.100C should include crops as personal property for all four states in Region VII.

Summary

In all states in our region, you may assume that an individual has an alienable property interest in an estate as of the date of death of the testate or intestate. Therefore, an interest would be received and constitute income or a resource as of the date of death.

If the individual has attempted to disclaim his or her interest, or if there are any other unresolved issues that prevent you from determining the income or resource status of an inheritance, we suggest that you refer any relevant information to our office for an opinion.

D. PS 00-383 Illinois Trust for Lorraine S~

DATE: July 17, 1997

1. SYLLABUS

Under Missouri law, a party cannot, by contract or agreement, alter his obligation to pay future child support without judicial modification of the support decree. Therefore, payments made by one parent to a trust in lieu of court ordered support payments are considered the child's income, available for the child's support and maintenance.

Caution: Because of a change in the Social Security Act, this precedent may only be applicable to trusts established before 1/1/00.

2. OPINION

You requested a legal opinion regarding a document creating a discretionary supplemental trust with SSI recipient Lorraine S~ (Lorraine) as beneficiary. You inquired whether Lorraine has unrestricted access to the trust principal for her support and maintenance, i.e., whether the trust principal is a resource for SSI purposes. You also inquired as to the validity of the Statement of Intent by which Lorraine's father agreed that support payments would be paid into the trust.

We conclude that the Statement of Intent, which sought to modify the court order of support, would be held invalid under applicable state law, and that the trust assets should be considered Lorraine's income or resources for SSI purposes, at least to the extent that the assets were derived from payments made pursuant to the Statement of Intent or from other property which had been owned by Lorraine or by her guardian on Lorraine's behalf.

Background

Pertinent Documents Other than the Declaration of Trust

Lorraine, currently twenty-one years old, is the disabled daughter of Deborah S~ (Deborah) and David S~ (David). Deborah and David were divorced in Missouri in 1995. The Judgment/Decree of Dissolution (divorce decree), entered on November 1, 1995, states that there were two children of the marriage: Lorraine, born March 15, 1976, and Lynne, born October 4, 1978. Divorce Decree at 2. The divorce decree awards child support "for the parties' minor children" in the amount of $566 per month per child to be paid by David to Deborah. It further states, "The Court hereby finds that the child LORRAINE is incapacitated and in need of parental support past the age of emancipation." Divorce Decree at 3. It incorporates all terms of a Marital Settlement Agreement (settlement agreement). Divorce Decree at 2. It also permits Deborah to remove the residency of the children to Illinois. Divorce Decree at 4.

The notarized settlement agreement, signed by David on August 15, 1995, in Missouri, and by Deborah on October 25, 1995, in Illinois, requires David to pay to Deborah $566 per month, per child "for the parties' children as and for child support for the care, support and education of the parties' minor children." Settlement agreement at 6. It further states: The parties agree and stipulate that the child LORRAINE S~ is incapacitated and is in need of parental support past the age of emancipation, and said support shall continue until her death, the death of the Respondent, or further Order of the Court. Settlement agreement at 6. Paragraph 15 provides that no modification or waiver of any of the terms will be valid unless it is made in writing and executed with the same formality as the settlement agreement. Settlement Agreement at 10.

On October 24, 1995, one day before the settlement agreement was finally executed, David signed a notarized Statement of Intent agreeing to contribute monthly to a trust to be created for Lorraine's benefit, in lieu of the court ordered child support payments.

On January 26, 1996, the Circuit Court of Kane County, Illinois appointed Deborah as Lorraine's guardian.

Declaration of Trust

On January 30, 1996, Deborah executed, in Illinois, a declaration of trust (declaration), as "Settlor and Trustee," creating the "Lorraine S~ Discretionary Supplemental Trust." The declaration recites that Deborah transferred $10.00 to the trustee which, along with any additional property received from her or any other person and all investments and reinvestments, was to constitute the trust estate. Declaration at 1.

The declaration makes clear that Deborah's intent as settlor is to provide supplemental support beyond any support which can be provided by any governmental, public, or private agency. To this end, it states that no part of the trust is to be considered owned by Lorraine, that Lorraine has no vested right or interest in the income or principal, and that no property, goods or services purchased or owned by the trust for Lorraine's use is to be considered as under Lorraine's control. 1. The declaration prohibits any expenditure for "basic food, clothing and shelter" or making any trust income or principal available to Lorraine for conversion into such items, unless all governmental and private agency benefits for which Lorraine may be eligible because of her disability have been fully exhausted. 3, § 4. The declaration also prohibits any direct payment to Lorraine and prohibits the trustee from making any distribution for Lorraine's support if such support is otherwise available through a governmental agency. 1,3.

Within this framework, the Trustee has sole discretion to distribute principal or income for Lorraine's exclusive benefit to provide for her supplemental support and maintenance, but only to the extent that such items are not otherwise available through any governmental entity or private agency. 2; 3, §§ 5-9. The declaration also contains spendthrift provisions, protecting the trust estate from the creditors' claims and prohibiting assignment of a beneficiary's interest. 3, § 3; 5, § 2.

Deborah is Trustee. If her acting as Trustee in any way jeopardizes Lorraine's entitlement to government benefits or subjects the trust to claims of reimbursement by any private or governmental body, successor trustees are named. 5.

Deborah, as settlor, has reserved the right to amend the trust "in whole or in part for whatever reason" and has given the Trustee the right to amend or reform the trust provisions the Trustee deems it necessary, due to changes in law, in order to preserve the stated intent of the trust. 3, § 10. In the event of a court determination that reimbursement is required or disqualification from, or reduction, in governmental benefits, the declaration directs the Trustee to amend or reform the trust to effect the Settlor's purpose and, if that cannot be done, to terminate the trust and distribute the trust principal and income to Deborah, "not in any fiduciary capacity, but as [Deborah's] sole and exclusive property without any preconditions or requirements on the use or application of those funds." 3, § 11. If Deborah is deceased at the termination of the trust, distribution is to be made to Lorraine's guardians, also as their sole and exclusive property and not in any fiduciary capacity, or, if no guardian to the Trustees as their sole and exclusive property and not in any fiduciary capacity. Id. If the trust is still in existence at Lorraine's death, the trust estate is to be distributed to Deborah or to her heirs, per stirpes. 4.

DISCUSSION

Resources, for SSI purposes, include assets that a person owns and can convert to cash to be used for the person's support and maintenance. See 20 C.F.R. § 416.1201(a). If the person has the right or power to liquidate property, or her share of the property, it is a resource. Id. Trust assets are considered an SSI recipient's resource if the SSI recipient has the power to revoke the trust and use the trust assets to meet his needs for food, clothing, or shelter, or if he can direct use of the trust assets for such purposes. See POMS SI 01120.200(D)(1)(a). Whether the person can revoke the trust or direct use of the trust assets depends on the terms of the declaration of trust and on applicable State law. POMS SI 01120.200(D)(2).

We deal first with the additions to the trust made pursuant to the Statement of Intent signed by Lorraine's father, David. If the support payments had been made by Lorraine's father to Deborah in compliance with the settlement agreement that the Missouri court incorporated into the divorce decree, the payments would have been considered Lorraine's income for SSI purposes. See 20 C.F.R. 416.1121(b). The Statement of Intent seeks to modify the court's support order in two ways. First, instead of making support payments directly to Deborah for Lorraine's benefit, in accordance with divorce decree, the Statement of Intent contemplates payment of the same amount to Deborah as Trustee of the discretionary trust. Second, the divorce decree required that the payments be used for Lorraine's "support." As Lorraine's guardian, Deborah has a duty to use the funds for Lorraine's support. Under the terms of the discretionary trust, however, Deborah could use the funds for supplemental costs, but she would be precluded from making disbursements for basic food, clothing and shelter, and she would have no obligation to make any disbursements at all.

The question is whether Lorraine's parents can enter into an agreement which affects Lorraine's rights and effectively modifies the order of the Missouri court. The duty of support which is applicable is that of the law of the state where the obligor is present, in this case the father's domiciliary state of Missouri. See 750 ILCS 20/7. Illinois law also recognizes a child support order issued in another state, if it is the only such order. 750 ILCS 22/207. In addition, a post-majority child support obligation entered into pursuant to a divorce settlement agreement will be recognized by Illinois courts. See In re Marriage of Leming, 590 N.E.2d 1027, 1028 (Ill. App. 1992). Thus, the support order encompassed by the Missouri court's divorce decree is controlling and would be recognized by an Illinois court.

Under Missouri law, a party cannot, by contract or agreement, alter his obligation to pay future child support. Because child support payments are for the benefit of the child, the parties cannot settle or compromise future payments without judicial modification of the support decree. Only a court has the power to alter future child support payments. Mora v. Mora, 861 S.W.2d 226, 227 (Mo. App. 1993); see also, Boland v. State of Missouri, Dept. of Social Services, 910 S.W.2d 754, 758 (Mo. App. 1995), McLaughlin v. Horrocks, 883 S.W.2d 95, 97 (Mo. App. 1994).

Illinois case law is in accord. See Blisset v. Blisset, 526 N.E.2d 125, 127 (Ill. 1988) (parents may modify an agreement for child support only by petitioning the court for modification); Miller v. Miller, 516 N.E.2d 837 (Ill. App. 1987)(mother could not consent to modification of settlement, incorporated into divorce decree, which provided that father would pay college expenses for child, even after age 18).

Although David signed the Statement of Intent prior to the date of the divorce decree, in the divorce decree the court refers only to the settlement agreement. There is no indication that the court was aware at that time, or was subsequently informed, of the Statement of Intent or the plans to create a discretionary trust. Since payment of the support into the discretionary trust amounts to a modification of the court's support order, we conclude that such modification would not be valid without court approval. Therefore, the payments made by David to the trust in lieu of the court ordered support payments should be considered Lorraine's income, available for her support and maintenance, the purpose apparently intended by the Missouri court's divorce decree.

Even if the Statement of Intent were found to be valid, we believe that the portion of the trust assets derived from the payments made pursuant to the Statement of Intent should, nevertheless, be treated as Lorraine's income for SSI purposes. We also think it reasonable to conclude, in the absence of any indication that the rest of the trust assets were derived from property belonging to someone other Lorraine, that all of the trust assets should be considered Lorraine's resource. This is especially true since the Declaration of Trust suggests that Deborah, as settlor, contributed only $10.00 to the trust.

Under Illinois law, a discretionary trust for the benefit of a disabled person is not liable to pay or reimburse the State or any public agency for financial aid or services to the disabled person, except to the extent that the trust was created by the disabled person or the trust assets are distributed to, or under the control of, the disabled person. 760 ILCS 5/15.1 (1996 Supp.). Although the exception is not applicable where the trust complies with federal Medicaid reimbursement requirements, id., the declaration in this case, while referring to the applicable Illinois statute, see 1, does not provide for Medicaid reimbursement. See POMS SI 01730.048.

Under the terms of the declaration of trust, Lorraine does not, herself, have any right to revoke the trust or direct use of the trust assets for her support. Nor is Lorraine named as the person who created the trust (settlor). However, Lorraine's mother and guardian, Deborah, has virtually total control over use of the trust assets. As settlor, Deborah retained the right to amend the trust, in whole or in part, for any reason, which amounts to the power to revoke. See Bogert, Trusts 516 (6th ed. 1987)(under a power to amend, an irrevocable trust may be made revocable).

Deborah is also Lorraine's guardian. Where a guardian holds legal title, on behalf of a sole beneficiary of a trust, to assets which are subsequently transferred into a trust, the trust beneficiary is, in effect, the settlor of the trust. See In re Estate of Hickey, 635 N.E.2d 853, 855 (Ill. App. 1994), cert. denied, 642 N.E.2d 1281 (one who furnishes consideration is the settlor of the trust). Therefore, if Lorraine is the sole beneficiary of the trust, she is the settlor, at least with regard to whatever portion of the trust res was derived from assets which were hers or which her guardian held for her benefit. As we discuss below, contributions of the support payments to the trust should be considered contributions from Lorraine.

In this case, it is not clear from the documents submitted whether Deborah created the trust in her own right or in her capacity as Lorraine's guardian; nor is it clear what portion of the trust assets were derived from property which had been owned by Lorraine or which Deborah held on Lorraine's behalf. The declaration does not indicate whether even the $10.00 that initially funded the trust was Deborah's money or Lorraine's money. Nor is there any information about additions to the trust other than the payments made by David pursuant to the Statement of Intent. If Deborah created the trust as Lorraine's guardian, or if all of the assets of the trust derived from property previously held by Lorraine or by Deborah on Lorraine's behalf as guardian, then Lorraine is the true settlor of the trust and can revoke the entire trust, or amend it to allow access for her support and maintenance. Thus, all of the trust assets would be her resources for SSI purposes.

Under the agreement between Lorraine's parents, Deborah receives the "support" payments as trustee for Lorraine. Nevertheless, those support payments are, in effect, Lorraine's income. Thus, as to the portion of the trust res traceable to those "support" payments, Lorraine is actually the settlor of the trust. Through her guardian, she has the power to revoke the trust by virtue of Deborah's retention of the unconditional power to amend the trust. If she is the sole beneficiary of the trust, Lorraine also has the power to revoke any portion of the trust for which she can be considered the settlor. See Stewart v. Merchants National Bank of Aurora, 278 N.E.2d 10, 12 (Ill. App. 1972) (trust settlor who is also the sole beneficiary can revoke the trust without the trustee's consent, even though no power of revocation was reserved when the trust was created). Thus, the portion of the trust which is derived from the "support" payments should be considered Lorraine's resource for SSI purposes.

That the declaration calls for disbursement, upon termination of the trust, to Deborah in her own right, rather than on Lorraine's behalf does not change the result. Since Deborah retained the unconditional right to amend the trust, including the right to amend the provisions for disbursement upon termination of the trust, no intent to create a remainder interest in someone other than Lorraine can be implied. Thus, Lorraine is the sole beneficiary of the trust and has the power to revoke the portion of the trust as to which she is the settlor. Furthermore, as Lorraine's guardian, Deborah would have a fiduciary duty to use that portion of the trust assets which derived from Lorraine's assets not for her own benefit, but for Lorraine's benefit. To receive the assets of the trust in her own right would be a violation of Deborah's fiduciary duty as Lorraine's guardian.

While the declaration recites that Deborah paid $10.00 into the trust at its creation, there is no clear indication whose funds were used to create the trust, nor is there any indication as to whether there were any subsequent additions to the trust res. We think it unlikely that Deborah, who would have to provide an accounting as guardian, would combine Lorraine's property with another person's property in forming the trust res. Deborah is receiving additions to the trust from David in lieu of the court ordered support payments, additions which are actually Lorraine's property. This implies that the trust was created by Deborah as Lorraine's guardian with Lorraine's assets and that Lorraine is, therefore, the true settlor. As settlor, Lorraine would have the power, through her guardian, to revoke the trust or to compel payments from the trust for her support and maintenance. We conclude that, unless Deborah can show that she did not create the trust in her capacity as guardian and that certain trust assets were derived from sources other than Lorraine's property, all of the assets of the trust should be considered Lorraine's resources for SSI purposes.


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/1601415028
PS 01415.028 - Missouri - 09/17/2002
Batch run: 11/29/2012
Rev:09/17/2002