In this opinion the Regional Chief Counsel (RCC) explores state laws in Region V that relate to SSA's determination of equitable ownership and may affect the application of the home exclusion. All six states recognize equitable ownership interest and recognize life estates. There are some differences in conveyance requirements and exceptions among the states surveyed.

 

 

You asked for an opinion about what constitutes equitable ownership in the six states in Region V, for purposes of the application of the home exclusion in POMS SI 01130.100. All six states in Region V recognize equitable ownership interests in property. For example, in each of the six states, an equitable ownership interest may arise from the execution of a valid installment contract for the purchase of real property. In addition, all six states in Region V recognize a life estate, which is the most common type of equitable ownership. Each state generally requires any interest in land, including a life estate, to be conveyed in a written document. In some cases, state courts may reform a deed or other written instrument due to mistake and/or fraud. However, all six states also recognize one or more exceptions that allow the conveyance of an equitable ownership interest by oral contract.

 

DISCUSSION

 

To qualify for SSI benefits, an individual’s income and resources must fall below the statutorily mandated limit. See 42 U.S.C. § 1382(a); 20 C.F.R. § 416.202(c), (d); see also POMS SI 00501.001(B)(1). In determining the resources of an individual, the Agency excludes the individual’s home. See 42 U.S.C. § 1382b(a)(1); 20 C.F.R. §§ 416.1210(a), 416.1212(b); see also POMS SI 01130.100(B). A home is defined as “any property in which an individual (and spouse, if any) has an ownership interest and which serves as the individual’s principal place of residence,” including the shelter in which he or she lives, the land on which the shelter is located, and related outbuildings. 20 C.F.R. § 416.1212(a); see POMS SI 01130.100(A)(1).

 

Agency policy acknowledges that an individual who is not the legal owner of his or her home may nevertheless have an equitable ownership interest in the home where permitted by state law. POMS SI 01110.515(C)(3), SI 01130.100(C)(4). Equitable ownership is defined as a form of ownership that exists without legal title to property. POMS SI 01110.515(A)(2)(b). In particular, SSA policy provides that an individual “may acquire an equitable ownership interest in his or her home through personal considerations or by performing certain activities such as: making mortgage payments or paying property taxes; making or paying for additions to a shelter; or making improvements to a shelter.” POMS SI 01110.515(C)(3).

 

The most common type of equitable ownership involves life estates. “A life estate confers upon one or more persons (grantees) certain rights in a property for his/her/their lifetimes or the life of some other person.” POMS SI 01110.515(A)(2)(a), SI 01140.110(A)(6). A life estate is a form of legal ownership that is usually created through a deed or will or by operation of law. POMS SI 01110.515(A)(2)(a). However, the owner of a life estate does not have title to the property. POMS SI 01140.110(A)(6).

 

All six states in Region V recognize equitable ownership interests in real property. In particular, as discussed below, in each of the six states, a n equitable ownership interest may arise from the execution of a valid installment contract^[1] for the purchase of real property, at which time the purchaser or vendee becomes the equitable owner. Therefore, an individual may establish equitable ownership of a property by providing a copy of the installment contract showing that he or she is the purchaser or vendee.

 

With respect to life estates, as discussed below, each of the six states in Region V follows some version of the Statute of Frauds, which requires a conveyance or sale of any interest in land to be in writing. In some instances, a state court may reform the deed or other writing to include a life estate that was originally omitted due to mistake and/or fraud. Thus, an individual may establish a life estate by providing a deed, will, or other legal document evidencing the life estate (including a court order reforming the original document to include the life estate). However, each state has one or more exceptions to the Statute of Frauds that allow the conveyance of an equitable ownership interest in real property by oral contract.

 

 

Illinois

 

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  Equitable Ownership Interest Created by Installment Contract

 

Under Illinois’ doctrine of equitable conversion, an individual becomes an equitable owner upon entering into a valid and enforceable contract to purchase realty, despite the fact that the seller continues to hold the legal title. Grochocinski v. Schlossberg, 402 B.R. 825, 839 (N.D. Ill. Mar. 11, 2009) (citing In re Lefkas Gen. Partners, 112 F.3d 896, 901 (7th Cir. 1997)). This includes installment contracts. SeeCarollo v. Irwin, 959 N.E.2d 77, 84 (Ill. Ct. App. 2011).

 

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  Life Estates

 

Under Illinois law, if a grantor wishes to convey an estate that is less than fee simple (such as a life estate), the grantor must express that intention in the deed; otherwise, it will be presumed that the grantor intended to convey a fee simple estate. 765 Ill. Comp. Stat. 5/13. In addition, under the Illinois Frauds Act, a person generally may not bring an action to enforce a contract for the sale of land or any interest in or concerning land (including a life estate) unless the contract is in writing and signed by the person against whom the action is brought. 740 Ill. Comp. Stat. 80/2. Therefore, a life estate in Illinois generally must be in writing to be enforceable.

 

Illinois courts may, under certain circumstances, reform a written instrument based on oral evidence. For example, in Darst v. Lang, 10 N.E.2d 659, 661 (Ill. 1937), the court reformed a deed conveying a gift of property from parents to their daughter to include a life estate under the doctrine of mutual mistake. The court also noted that alternatively, the deed could be reformed to include the life estate based on fraud. Id. A written instrument “may also be reformed upon proof of a mistake by one party to the contract when the other party knows of the mistake and fails to inform the other party or conceals the truth from him.” Ballard v. Granby, 412 N.E.2d 1067, 1069 (Ill. App. Ct. 1980).

 

EXCEPTION: In Illinois, oral contracts for the conveyance of real property may be excepted from the Statute of Frauds under the doctrine of partial performance. Culbertson v. Carruthers, 383 N.E.2d 618, 623 (Ill. App. Ct. 1978). “ There are three requisites for the application of the doctrine of partial performance: (1) the performance must be in reasonable reliance on the contract, (2) the remedy of restitution must be inadequate, and (3) the performance must be one which in some degree evidences the existence of a contract and is not readily explainable on any other ground.” Brunette v. Vulcan Materials Co ., 256 N.E.2d 44, 47 ( Ill. App. Ct. 1970) (citation omitted). We recommend that any matter involving an allegation of equitable ownership based on partial performance of an oral contract be referred for an OGC opinion.

 

 

Indiana

 

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  Equitable Ownership Interest Created by Installment Contract

 

In Indiana, where there is an installment contract for the sale of real estate, “the vendee becomes the equitable owner thereof; the vendor simply holding the title as security for the purchase money. The vendee, being the equitable owner, secures all the benefits and assumes all the risks of ownership.” Knapp v. Ellyson Realty Co., 211 Ind. 180, 183 (1937). Said risks include the risk of loss, absent any language to the contrary in the contract. Ridenour v. France, 442 N.E.2d 716, 717 (Ind. Ct. App. 1982).

 

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  Life Estates

 

Under the Indiana Statute of Frauds, a conveyance of land or any interest in land (including a life estate), except for a bona fide lease for a term not exceeding three years, must be in writing. Ind. Code Ann. § 31-21-1-1, 31-21-1-13. If a grantor intends to convey a life estate, the grantor must express that intention in the deed; otherwise, Indiana courts will presume that the grantor intended to convey a fee simple estate. Ind. Code Ann. § 32-21-1-16; seeLong v. Horton, 133 N.E.2d 568, 571-73 (Ind. Ct. App. 1956). Additionally, a person generally may not bring an action involving any contract for the sale of land, unless the agreement is in writing and signed by the person against whom the action is brought. Ind. Code Ann. § 32-21-1-1(b)(4). Indiana courts may, however, reform a written instrument when, because of mutual mistake or mistake of one of the parties accompanied by the fraud of the other, the written instrument fails to express the parties’ agreement correctly. Baker v. Pyatt, 9 N.E. 112, 114-18 (Ind. 1886); Harvey v. Hand, 95 N.E. 1020, 1022 (Ind. Ct. App. 1911).

 

EXCEPTION: In Indiana, oral contracts may be excepted from the Statute of Frauds under the doctrine of partial performance. Marathon Oil Co. v. Collins, 744 N.E.2d 474, 478 (Ind. Ct. App. 2001). To qualify for the partial performance exception, Indiana courts require clear and definite proof of a combination of circumstances, such as possession of the property; payment or partial payment of the purchase price; and “valuable and lasting” improvements made to the land based on the oral contract. Id. at 478-79. We recommend that any matter involving an allegation of equitable ownership based on partial performance of an oral contract be referred for an OGC opinion.

 

 

Michigan

 

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  Equitable Ownership Interest Created by Installment Contract

 

“Under Michigan law, the sale of real property under [an installment] contract operates as an equitable conversion.” Batton-Jajuga v. Farm Bureau Gen’l Ins. Co. of Mich., 913 N.W.2d 351, 358 (Mich. Ct. App. 2017) (quotations and citation omitted). Accordingly, when an installment contract becomes effective, the buyer/vendee becomes the equitable owner, acquiring equitable title despite not yet acquiring the legal title. Id.

 

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  Life Estates

 

Under the Michigan Statute of Frauds, no estate or interest in land, other than a lease of one year or less, may be created, granted, declared, assigned, or surrendered except by operation of law, or by a deed or other conveyance in writing. Mich. Comp. Laws § 566.106. In addition, every contract for the sale of any land or any interest in land must be in writing and signed by the seller. Mich. Comp. Laws § 566.108. A life estate is an interest in land and therefore must be established by a written conveyance. In re Estate of Williams , No. 262203, 2005 WL 3304119, *2 (Mich. Ct. App. Dec. 6, 2005). Michigan courts have also reformed a contract or deed under the doctrine of mutual mistake, or when there is mistake on the part of a plaintiff and fraud on the part of a defendant. Schwaderer v. Huron-Clinton Metropolitan Authority , 45 N.W.2d 279, 283-84 (Mich. 1951) (collecting cases).

 

EXCEPTION: In Michigan, “partial performance of an oral contract to convey an interest in land may remove that contract from the operation of the statute of frauds.” Zaborsky v. Kutyla, 185 N.W.2d 586, 587 (Mich. App. Ct. 1971). Consequently, partial performance may establish that a life estate exists, despite not being in writing. SeeEstate of Williams, 2005 WL 3304119 at *3. The factors for establishing partial performance include: possession, improvements in regard to the property, and payment of money pursuant to the contract. Zaborski, 185 N.W.2d at 587. The acts must unequivocally refer to, and result from, the oral agreement. Groening v. McCambridge, 275 N.W. 795, 796 (Mich. 1937). We recommend that any matter involving an allegation of equitable ownership based on partial performance of an oral contract be referred for an OGC opinion.

 

 

Minnesota

 

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  Equitable Ownership Interest Created by Installment Contract

 

In Minnesota, “[t]he vendee in a contract to convey real estate, who has paid a part of the purchase price of the land and entered into possession thereof . . . is the equitable owner of the land, and has an interest therein which he may convey, which is descendible to his heir, and which, if not his homestead, may be subject to the lien of a judgment against him.” Stearns v. Kennedy, 94 Minn. 439, 442 (1905). Thus, an individual purchasing a property through an installment contract has an equitable ownership interest in the property.

 

• •

  Life Estates

 

The Minnesota Statute of Frauds provides that “[n]o estate or interest in lands . . . shall hereafter be created, granted, assigned, surrendered, or declared, unless by act or operation of law, or by deed or conveyance in writing.” Minn. Stat. § 513.04. In addition, every contract for the sale of any land or any interest in land must be in writing and signed by the seller. Minn. Stat. § 513.05. A life estate is an interest in land and therefore must be in writing.

 

Minnesota courts have recognized that a written instrument regarding real property may be reformed when there was a mutual mistake of the parties, or a unilateral mistake accompanied by fraud or inequitable conduct by the other party. Theros v. Phillips, 256 N.W.2d 852, 857 (Minn. 1977); Karger v. Wangerin, 40 N.W.2d 846, 850 (Minn. 1950). For example, in Olson v. Olson, No. 97-1978, 1998 WL 170111, *1-2 (Minn. Ct. App. June 17, 1998), the Minnesota Court of Appeals upheld a trial court’s reformation of a deed based on mutual mistake where a father transferred land to his children but the parties neglected to include a life estate for the father in the deed.

 

EXCEPTION: In Minnesota, an oral contract concerning the conveyance of real property may be taken out of the Statute of Frauds by partial performance. Crossroads Church of Prior Lake MN v. County of Dakota, 800 N.W.2d 608, 614 (Minn. 2011). Generally, partial performance may be established by taking possession of the land and making valuable improvements or paying part of the purchase price. Id . “The underlying principle is that, when one of the contracting parties has relied on an oral agreement to such an extent that it would be a fraud on the part of the other contracting party to void the agreement, equity will make that agreement an exception to the statute of frauds.” Id . (citation omitted). We recommend that any matter involving an allegation of equitable ownership based on partial performance of an oral contract be referred for an OGC opinion.

 

 

Ohio

 

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  Equitable Ownership Interest Created by Installment Contract

 

In Ohio, a vendee in a land installment contract stands as an equitable owner of the property. Blue Ash Bldg. & Loan Co. v. Hahn, 484 N.E.2d 186, 189-90 (Ohio Ct. App. 1984). “An equitable owner is recognized in equity as the owner of the property because ‘the real and beneficial use and title belong to him, although the bare legal title is invested in another.’” Shrock v. Mullet, No. 18 JE 0018, 2019 WL 2767002, *7 (Ohio Ct. App. June 28, 2019) (quoting Levin v. Carney, 161 Ohio St. 513, 518 (1954)).

 

• •

  Life Estates

 

Under the Ohio Statute of Frauds, an estate or interest in land (including a life estate) may only be assigned or granted by deed or note in writing and signed by the party granting or assigning it, or by act and operation of law. Ohio Rev. Code § 1335.04. In addition, no action shall be brought against an individual upon a contract or sale of land or interest in or concerning it (including a life estate) unless the agreement upon which such action is brought is in writing and signed by the party to be charged. Ohio Rev. Code § 1335.05. Consequently, a life estate in Ohio generally must be in writing to be enforceable. Ohio courts may also reform a written agreement such as a deed when it fails to reflect the intent of the parties as the result of a mutual mistake or fraud. Lukacevic v. Daniels , 128 N.E.3d 845, 850-51 (Ohio Ct. App. Jan. 10. 2019) (citations omitted).

 

EXCEPTIONS: In Ohio, an oral contract concerning an interest in real property may be brought outside the Statute of Frauds under the doctrines of partial performance and promissory estoppel. Brown v. Brown, No. 04CA000018, 2005 WL 914490, *3 (Ohio Ct. App. Apr. 14, 2005). “An agreement is removable from operation of the Statutes of Frauds by virtue of partial performance only where the party relying on the agreement changes his position to his detriment thereby making it impractical or impossible to return the parties to their original status. An agreement is removable from operation of the Statutes of Frauds by virtue of the doctrine of promissory estoppel only when there has been a misrepresentation of compliance with the Statutes of Frauds or a promise to make a writing of an oral agreement.” Saydell v. Geppetto’s Pizza & Ribs Franchise Sys., Inc., 652 N.D.2d 218, 224 (Ohio Ct. App. 1994) (citations omitted).We recommend that any allegation of equitable ownership based on an oral agreement involving either partial performance or promissory estoppel be referred for an OGC opinion.

 

 

Wisconsin

 

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  Equitable Ownership Interest Created by Installment Contract

 

In Wisconsin, “[b]y execution of a land contract, the vendee becomes the owner of the land in equity, while the vendor retains legal title to secure the balance due on the purchase price.” Kallenbach v. Lake Publications, Inc., 142 N.W.2d 212, 214 (Wis. 1966). Thus, an individual purchasing a property through an installment contract has an equitable ownership interest in the property.

 

• •

  Life Estates

 

Under Wisconsin law, any transaction of any interest in land (including a life estate) must be evidenced by a conveyance that: (a) identifies the parties; (b) identifies the land; (c) identifies the interest conveyed, and any material term, condition, reservation, exception or contingency upon which the interest is to arise, continue, or be extinguished, limited or encumbered; (d) is signed by or on behalf of each of the grantors; and (e) is signed by or on behalf of all parties, if a lease or contract to convey. Wis. Stat. Ann. § 706.02.^[2] Thus, if a party wishes to enforce a contract affecting real property, “the contract must be in writing, set forth all the essential terms with particularity, and be signed by all parties to the transaction.” Prezioso v. Aerts, 858 N.W.2d 386, 392 (Wis. Ct. App. 2014). Accordingly, a life estate generally must be in writing to be valid. Wisconsin courts may also reform a written agreement that was entered into by mutual mistake or by mistake on the part of one party and fraud by the other party. Bailey v. Hovde, 213 N.W.2d 69, 73 (Wis. 1973).

 

EXCEPTIONS: Wisconsin law provides that a transaction of any interest in land not meeting the requirements of Wis. Stat. § 706.02 may nonetheless be enforceable under the following doctrines of equity: (1) reformation of a deficient conveyance; (2) unjust enrichment; and (3) equitable estoppel. See Wis. Stat. Ann. § 706.04. We recommend that any allegation of equitable ownership based on an oral agreement that involves any of the above doctrines of equity be referred for an OGC opinion.

 

CONCLUSION

 

In each of the states within Region V, equitable ownership may be established by virtue of an installment contract for the purchase of real property. Additionally, each state recognizes a life estate as a type of equitable ownership. A life estate generally must be created in a written document, typically a deed. However, in each of the six states, a court may reform a written document to include a life estate based on mistake and/or fraud.

 

Moreover, each state recognizes one or more exceptions to the general rule that an interest in land (such as a life estate) must be conveyed in writing, with the most common exception being partial performance. Where an individual claims an equitable ownership interest under an oral contract based on partial performance or one of the other doctrines of equity identified above, we recommend the matter be referred for an OGC opinion.

The opinion establishes the principle that courts in Michigan cannot invoke nunc pro tunc (literally, now for then, meaning having retroactive effect) where no previous court order exists. On July 10, 2006 the beneficiary's legal guardian established a Supplemental Needs Trust that met all the requirements so that it is not a countable resource. The court established the trust nunc pro tunc effective August 1, 2000. The effective date of the Supplemental Needs Trust is actually July 10, 2006 because nunc pro tunc is not properly invoked. Attempting to establish an earlier effective date is an attempt to offset the negligence of the guardian in not establishing the trust earlier. There was no error or omission on the part of the court in August of 2000 simply neglect on the part of the guardian

You asked us whether Doyle M~ trust is a resource for SSI purposes. For the reasons discussed below, we conclude that the trust is not a resource. However, the trust has an effective date of July 10, 2006.

BACKGROUND

On July 10, 2006, the Doyle M~, Jr. Supplemental Needs Trust was created by Donald M. S~, the court appointed guardian and trustee of Mr. M~, as grantor. Agency documents establish that Mr. M~ is an adult, born in 1973. In the court order establishing the supplemental needs trust, the court found that Mr. M~ is a developmentally disabled person. Court Order, finding #6. Court and agency documents in the file indicated that the trust was funded by a LaSalle Bank account with a balance of $34,501.69 from a medical malpractice lawsuit settlement. Court Order, finding #5. The court established the trust nunc pro tunc, effective on August 1, 2000. Court Order, para. B. The trust states that the trustee shall distribute the trust estate, subject to the restrictions of Art. IV, which allows the trustee, in his sole discretion, to make distributions from the trust in order to "supplement" government benefits, such as Medicaid and Supplemental Security Income, but not to furnish the beneficiary with minimal or other maintenance or support otherwise provided by a government program.

The trust provides, at Art. V, that after Mr. M~ death, the trust shall terminate and the trustee shall pay, in the following order:

(1) The state of Michigan or any other state for any and all Medicaid benefits paid on behalf of Mr. M~ ;(2) Taxes due from the trust to the state and federal government;

(3) Reasonable fees for the administration of the trust estate such as an accounting of the trust to the court, completion, and filing of documents.

(4) Doyle M~ heirs at law.

DISCUSSION

This trust is subject to the statutory provisions of Section 1613(e) of the Social Security Act for trusts established on or after January 1, 2000. See 42 U.S.C. § 1382b(e); POMS SI 01120.201. Generally, under these provisions, trusts established with the assets of the individual are considered resources for SSI purposes even if they are irrevocable. However, there is an exception for certain trusts that are established under 42 U.S.C. § 1396p(d)(4)(A), commonly known as the special needs trust exception. See POMS SI 01120.203. For this exception to apply, the trust must be:

(1) Established with the assets of a disabled individual under age 65;

(2) Established for the benefit of the individual by a parent, grandparent, legal guardian, or court; and

(3) Provide that the state will receive all amounts remaining in the trust upon the death of the individual up to an amount equal to the total medical assistance paid on behalf of the individual under a state Medicaid plan.

Assuming Mr. M~ is found disabled, the trust would meet all three requirements for 42 U.S.C. § 1396p(d)(4)(A). It was established with $34,501.69 in assets from a malpractice lawsuit of Doyle M~, who is under age 65, and it was established for Doyle M~ benefit by his guardian. The court documents that Mr. M~, although an adult, is developmentally disabled, and therefore, presumably, not competent. The trust also meets the third requirement for the special needs trust exception, as Art. V clearly requires at the death of Mr. M~, reimbursement of the state for Medicaid payments prior to any other payment, including any federal or state taxes, fees for administration of the trust, or distribution to heirs. Therefore, the trust comes within the special needs exception to counting it as a resource under the Social Security Act.

Since the trust is not considered a resource under § 1613(e) of the Act, we must consider whether it is a resource under the regular resource rules. See POMS SI 01120.203(B)(1)(a). Here, the trust is not a resource under the regular resource rules, because it is irrevocable; Mr. M~ cannot direct the trustee to provide for his support and maintenance; and he cannot sell his beneficial interest in the trust. See POMS SI 01120.200(D)(1).

Although your memorandum did not request a determination regarding the effective date of the trust, we believe it may be important for you to know this information. In Memorandum from Reg. Chief Counsel, Region V, to Ass't Reg. Comm.-MOS, Chicago, SSI-Michigan Review of the Effective Date of the Special Needs Trust for Anthony Michael Reed, 2 (October 3, 2002), we advised that the principle of nunc pro tunc, as interpreted in Michigan, would not be applicable to effectuate retroactive dating of the trust, if this document were genuinely challenged. The general rule in Michigan is that the function of a nunc pro tunc order is "to supply an omission in the record of action previously taken by the court but not properly recorded; an order nunc pro tunc may not be utilized to supply a previously omitted action." Sleboede v. Sleboede, 384 Mich. 555, 559, 184 N.W.2d 923, 925 (1971); George v. Sullivan, 909 F.2d 857 (6th Cir. 1990) (discussing the limited use by the Michigan Supreme Court of nunc pro tunc). "'In other words its function is not to make an order now for then, but to enter now for then an order previously made.'" Sleboede, 384 Mich. at 559, quoting Mathey v. Mathey, 175 Kan. 446, 451, 264 P.2d 1058, 1062 (1953). Thus, it "is an entry made now of something previously done, to have effect as of the former date." POMS PR 06210.025 (Mich.). For example, when a judge orally grants a divorce in court, but, through inadvertence or mistake, the written judgment is not properly entered, orders of nunc pro tunc have been granted recognizing the date the judge granted the divorce in court. E.g., Vioglavich v. Vioglavich, 113 Mich. App. 376, 317 N.W. 2d 633 (1982).

Here, it appears Mr. M~ guardian neglected to establish the trust on August 1, 2000. The attempt to date the trust retroactively is an attempt to address this negligence. It is not simply to make an entry appropriately reflecting the date on which the "Supplemental Needs Trust for Doyle M~, Jr. " actually was created. As such, consistent with our earlier advice, the principle of nunc pro tunc would not be properly invoked.

CONCLUSION

In sum, the trust meets the requirements of the Medicaid Payback provisions under 42 U.S.C. § 1396p(d)(4)(A), and is not a resource under the regular resource rules. The effective date of the trust should be viewed as July 10, 2006.

Per SI 01140.300, the property in the contract is not a resource to the beneficiary. However, the land contract is a resource to the beneficiary. The value of the contract is the outstanding principal of the contract. Because the seller still owes on the land in the land contract and the selling price of the land is equal to the mortgage against it, the contract is a resource valued at 0.00 dollars.

You asked whether a land contract for the sale of property is a resource to Richard T~ for SSI purposes. We have reviewed the documents that you provided and concluded that, for the reasons stated below, the land contract is a resource with zero value, the payments of $533.47 are not a resource so long as they are not retained beyond the month of receipt, and the payments used for taxes assessments, and insurance premiums are not a resource.

BACKGROUND

According to the facts provided, on February 3, 2005, Richard T~ and his wife Carol T~ (hereinafter "Seller") executed a land contract to sell their property, commonly known as 27315 Currier, in Wayne County Michigan, to Shane N. (hereinafter "Purchaser"). At the time of the sale, the property was encumbered by a mortgage from New Century Mortgage Century, in the amount of $80,232.64 in principal balance with an interest rate of 6.9%, payable in monthly payments of $533.47. Also, $154.82 is owed in escrow, payable in monthly payments of $45.90.

According to the terms of the land contract entered into between the Seller and the Purchaser, the Purchaser agrees to pay the Seller the sum of $80,232.64. This amount bears an interest rate of 6.9% per annum, and the purchase money and interest are payable in monthly installments of $533.47, beginning on April 1, 2005. The contract provides that the entire purchase money and interest shall be paid within 14 years from the date of the contract. In addition, the Purchaser agrees to pay to the Seller $91.90 per month (adjustable), in order to offset the monthly cost of taxes, assessments, and insurance premiums.

According to the land contract, the Seller agrees, upon receiving payment in full of all sums owing, a good and sufficient Warranty Deed conveying title to the land to the Purchaser, subject to certain restrictions and encumbrances.

Also included in the provided materials is a document from First National Acceptance Company, dated April 1, 2005, which indicates that if Seller were to sell his rights to the land contract in question, First National Acceptance Company would pay him a lump sum of $35,900.00.

For purposes of this memorandum, we presume that Richard and Carol T~ have equal ownership in the property. See POMS SI CHI 01110.510.

DISCUSSION

For SSI purposes, "resource means cash or other liquid assets or any real or personal property that an individual (or spouse, if any) owns and could convert to cash to be used for his or her support or maintenance." 20 C.F.R. § 416.1201(a). Generally, real property that is not a beneficiary's principal place of residence is a countable resource. POMS SI 01130.100A.6.a.

A property agreement is a pledge or security of a particular property for the payment of a debt or the performance of some other obligation within a specified period. POMS SI 01140.300B.2. Property agreements on real estate generally are referred to as mortgages but also may be called real estate contracts, contracts for deed, deeds of trust, and so on. Id. A property agreement is a resource to the seller, who is the owner of the agreement. POMS SI 01140.300C.1. The land contract entered into between the Seller and the Purchaser meets the definition of a property agreement. The resource value of a property agreement (to the Seller) is assumed to be its outstanding principal balance, unless the individual provides evidence to the contrary. POMS SI 01140.300C.3.

In the present case, there does appear to be evidence to the contrary - the Seller of the property in question has an outstanding mortgage on the property equal in amount to the land contract. In the present case, the Seller obtained a loan (mortgage) from New Century Mortgage Corporation. The Seller then presumably used the loan proceeds to obtain the property in question. The outstanding amount of the loan, as of March 1, 2005, was $80,232.64 in principal with interest at a rate of 6.9%, amounting to monthly payments in the amount of $533.47. The land contract entered into between the Seller and the Purchaser relates to the same property on which the Seller obtained a mortgage from New Century Mortgage Corporation. The land contract is comprised of two components. First, the monthly installment payment of $533.47, payable to the Seller, which will be applied toward a principal balance of $80,232.64 and interest. Second, the monthly payments of $91.90, payable to the Seller, which will be used to pay taxes, assessments, and insurance premiums for the premises in question.

The monthly payments of $533.47 as well as the outstanding principal balance of $80,232.64 payable from the Purchaser to the Seller are identical to the outstanding monthly mortgage payments and outstanding principal payable from the Seller to New Century Mortgage Corporation. Therefore, the payments by the Purchaser to the Seller effectively reflect the proceeds of the mortgage loan since they are payments being received in exchange for the mortgaged property, which was presumably purchased with the proceeds of the New Century Mortgage Corporation loan. It follows that the monthly payments from the Purchaser to the Seller would not be a resource to the Seller so long as they are being used to payoff the Seller's loan to New Century Mortgage Corporation. See POMS SI 01120.220B.1 (cash provided by the lender is not income but is the borrower's resource if retained the month following the month of receipt), cf. Memorandum from Reg. Chief Counsel, Chicago to Ass't Reg. Comm. MOS, SSI - Review of the Installment Sale of Land Contract for Robert and Rhonda Kaiser at 4 (Jan. 24, 2005). However, if the monthly payments are retained by the Seller in the month following receipt, such payments would be considered a resource. See POMS SI 01120.220B.1.

For similar reasons, the land contract itself would be a resource with no value. Specifically, if the monthly payments the Seller receives are not considered a resource because they are being used to pay back a loan, then the land contract, which is basically the present value of the sum of the monthly payments over time should be considered a resource with zero value. The land contract would only have value as a resource if the Seller were to receive more money under the contract then was required to pay off the outstanding mortgage. See Memorandum from Reg. Chief Counsel to Ass't Reg. Comm. MOS, SSI-Wisconsin-Review of a Land Contract from Norine A. Strenlow at 3 (Nov. 15, 1999) (Land contract found to be a resource to the extent of the purchase price minus the existing obligation to Farm Credit Services); see also Memorandum from Reg. Chief Counsel, Chicago to Ass't Reg. Comm. MOS, Chicago, SSI-Ohio-Review of Land Installment Contract of Paul Moore at 4 (April 21, 2004). However, based on the facts given to us, there is no evidence that such is the case here since the monthly payments under the land contract are identical to the payments due on the mortgage.

Finally, the monthly payments of $91.90, which the Seller is contractually obligated under the land contract to use to pay taxes, assessments, and insurance premiums for the property in question, would not be a resource, because the Seller cannot legally use the $91.90 for support or maintenance. See POMS SI 01110.100B.1. (resources defined).

CONCLUSION

We conclude, for the above reasons, that the land contract is a resource with zero value, the payments of $533.47 are not a resource to Mr. T~ so long as they are not retained beyond the month of receipt, and the payments used for taxes assessments, and insurance premiums are not a resource.

State law in most Region V states prevents formal and informal loan agreements entered into with minors from being enforceable against the minor parties. Each state has specific exceptions that may apply depending on the circumstances surrounding the loan agreement. For example, minors that have been emancipated by the court may enter into valid loan agreements in some states, and loans for necessities may be enforceable depending on state law. All states in Region V have specific laws regarding the ratification of a loan upon a minor attaining age of majority (age 18 in all states in Region V). Loans entered into with a minor must be examined closely to determine whether ratification has occurred and the loan is, therefore, enforceable.

You asked for an opinion on whether loan agreements entered into by minors - whether formal or informal - are enforceable in the six states in Region V. In each of the six states in Region V, a contract, including a loan, entered into with a minor (defined as an individual who has not reached the age of eighteen) is generally voidable by the minor party, but not by the party who is of the age of majority. Such agreements, therefore, are not enforceable against minors, regardless of whether the loan contract is a formal, written agreement. However, some exceptions apply. Below is a general discussion of our conclusions and an outline of the particular rules for each state in Region V.

DISCUSSION

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash for her support and maintenance. If the individual has the right, authority, or power to liquidate the property, it is a resource. Loan proceeds and payments and loan agreements may be considered a resource or income to the borrower and lender, and the rules for determining when a loan counts as a resource vary based on whether the underlying loan agreement is a bona fide loan. In order to constitute a bona fide loan, a loan must be enforceable under state law. You have asked whether a loan agreement entered into with a minor is enforceable under state law.

In all Region V states, minors generally lack the legal capacity to contract. The age of majority is eighteen in all Region V states. Loan agreements entered into with a minor, whether formal, written agreements or otherwise, therefore, are not enforceable under state law, because they are voidable at the option of the minor party. Certain exceptions apply, however, and some loans entered into with minors are enforceable. For example, if a minor takes out a loan for the purchase of necessities, the loan will be enforceable under state law. Additionally, in some states in Region V, a minor's loan is enforceable if the minor fraudulently represented that he was of the age of majority when he took out the loan. Further, a minor may ratify or disaffirm a loan upon attaining the age of majority; ratification renders the loan enforceable. The states in Region V generally require a clear, intentional act to constitute ratification. Some states in Region V dictate that a loan will be deemed ratified where a minor fails to disaffirm the loan within a reasonable time after attaining the age of majority.

The six states in Region V follow essentially similar rules regarding the enforceability of loans to which a minor is a party. However, some slight differences exist. Below we have outlined the particular rules for each state in Region V. Please use these outlines in drafting your POMS Regional Supplement. Our office would be happy to review your draft guidelines.

Illinois

Age of Majority

In Illinois, the age of a majority is eighteen.

General Rule

A loan agreement with a minor is not enforceable because the loan agreement is voidable by the minor party.

Exceptions

A minor who has been emancipated by court order may enter valid loan contracts, which are thus enforceable.

A loan with a minor is enforceable if it is entered into for the purpose of obtaining necessities; necessities includes items such as food, clothing, lodging, and education, but typically does not include automobiles, even if used to earn a living.

Ratification

A loan agreement becomes enforceable against a minor party if the minor, upon reaching the age of majority, ratifies the loan agreement. Illinois law allows a minor to either ratify a contract with an intentional act after reaching the age of majority, or to disaffirm the contract within a reasonable time or within the statute of limitations applicable to the type of loan at issue. Acts which may constitute ratification include making payments on a loan, or causing a loan contract to be recorded. In Illinois, if a minor fails to ratify a loan agreement upon attaining age of majority, the loan may nonetheless be deemed ratified, and thereby rendered enforceable against the minor, if he fails to disaffirm the loan agreement within any applicable statute of limitations. If you cannot clearly determine whether a disaffirmance has occurred within a reasonable time or within an applicable statute of limitations, please request a legal opinion from OGC.

Indiana

Age of Majority

In Indiana, the age of majority is eighteen.

General Rule

Any loan entered into with a minor is not enforceable because the loan contract is voidable at the minor's option. A minor may void his contract at any time prior to, or upon attaining, the age of majority. Whether emancipation affects the minor's right to disaffirm his contracts depends upon the scope of the emancipation. If you cannot clearly determine whether a minor's emancipation affects his ability to enter valid loan contracts, please consult OGC for a legal opinion.

Exceptions

A loan entered into by a minor who represented in writing that he was eighteen or over in obtaining the loan is enforceable.

Loans by minors for necessities are enforceable, so long as the minor is not living at home or otherwise being supported by his parents. Necessities include items such as food, clothing, lodging, medical services, and education as well as such provisions provided for the minor's spouse, but generally do not include automobiles. Medical services are considered necessities regardless of whether a minor is living at home or being supported by his parents.

Ratification

A minor may ratify a loan contract upon reaching the age of majority, rendering the loan enforceable. Ratification is not presumed, or deemed, to occur unless there is some affirmative act. A ratifying act may be done without the minor having explicit knowledge that his acts constitute a ratification or that he was not otherwise liable. However, ratification induced by fraud or undue influence is not valid and will not render a loan agreement enforceable. Whether a valid ratification has occurred depends on the facts of particular case, but the ratification should be in proportion to the nature of the original transaction. For example, if a minor party, after reaching the age of majority, agrees to pay, or makes a payment on, a simple loan which he entered into by himself while a minor, ratification has occurred.

Michigan

Age of Majority

The age of majority in Michigan is eighteen.

General Rule

A loan agreement with a minor is not enforceable because minors lack the legal capacity to contract and their contracts are voidable. Emancipation of a minor does not affect this general rule. However, if you have evidence of a minor's emancipation that indicates the minor may enter a valid contract, please request a legal opinion from OGC regarding whether that minor's loan is enforceable.

Exceptions

If a minor willfully misrepresented his age to obtain a loan, and if the misrepresentation was either made in writing in a separate instrument or admitted in open court, the loan is enforceable against the minor party. Such a loan may not be disaffirmed by the minor upon attaining the age of majority.

Loan agreements entered into by minors for the purchase of necessities are enforceable under state law. Necessities include items such as clothing and books for education.

Ratification

A loan is rendered enforceable in Michigan if a minor ratifies the loan with an affirmative act upon reaching the age of majority. Ratification consists of making a distinct acknowledgement of a loan contract and indicating an intention to be bound by it, for example by writing a letter acknowledging one's loan and promising to pay it. A minor may also disaffirm his loan upon attaining the age of majority. Silence may be sufficient to constitute ratification only where it would be inequitable to permit the defense of infancy. If a question arises as to whether a loan has been ratified based on silence, or a failure to disaffirm, please request a legal opinion from OGC.

Minnesota

Age of Majority

The age of majority in Minnesota is eighteen.

General Rule

Any loan agreement with a minor which has not been fully executed (performed) is not enforceable. A minor who enters a loan agreement by fraud may still disaffirm the contract. If you are presented with evidence of emancipation, or other evidence showing that a minor's loan obligation may be authorized by law, please consult with OGC for a legal opinion regarding whether the loan is enforceable.

Exceptions

A loan a minor enters for the purchase of necessities, however, is enforceable. Necessities includes items such as food, clothing, and lodging, but not transportation expenses.

Ratification

A minor party may affirm his loan by a ratifying act upon reaching the age of majority; the loan is then enforceable in Minnesota. A ratification consists of some word, act, or deed that indicates an intention to be bound by the loan. A minor also may disaffirm his loan within a reasonable time after attaining the age of majority. In Minnesota, unlike in the other states in Region V, a minor is required to return the proceeds of a loan in order to disaffirm the loan. If the minor does not actively disaffirm within a reasonable time of attaining majority, the loan will be considered ratified. The fact that a minor may be unaware of his right to disaffirm will not absolve him of his duty to act promptly in disaffirming the loan in order to avoid liability. If you cannot clearly determine whether a loan has been disaffirmed within a reasonable time, please request a legal opinion from OGC regarding whether the loan is enforceable.

Ohio

Age of Majority

In Ohio, the age of majority is eighteen.

General Rule

A loan entered into with a minor is not enforceable because the loan is voidable at the minor's option. If you are presented with evidence of emancipation, or other evidence showing that a minor's loan obligation may be authorized by law, please consult with OGC for a legal opinion regarding whether the loan is enforceable.

Exceptions

Loans entered into with a minor for the purchase of necessities are enforceable. To be enforceable, however, such loan contracts must be fair and reasonable, and must be made by the non-minor party in good faith and without knowledge of the minor's lack of capacity to contract. Necessities include "food, medicine, clothing, shelter, or personal services usually considered reasonably essential for the preservation and enjoyment of life."

Ratification

If a minor does not disaffirm his loan or other contract within a reasonable time after reaching the age of majority, ratification may be inferred from his voluntary actions, regardless of whether he had a definite intent to ratify the contract. For example, a minor who makes payments on a car loan and uses the car after reaching the age of majority is considered to have ratified his loan contract. In such a case, the loan agreement would then be rendered enforceable under state law. If you cannot clearly ascertain whether a loan has been disaffirmed by the minor upon reaching the age of majority, please request an opinion from OGC regarding whether the loan is enforceable under state law.

Wisconsin

Age of Majority

The age of majority in Wisconsin is eighteen.

General Rule

A loan entered into with a minor is not enforceable because it is voidable at the minor's option. This rule does not change depending on whether the minor is emancipated.

Exceptions

Loans to minors for the purpose of purchasing necessities are enforceable in Wisconsin. What constitutes necessities includes those items necessary for the minor's personal care and maintenance, but does not usually include cars.

Ratification

A minor may ratify a contract upon reaching the age of majority, and such ratification may be express or implied, as long as the intention to be bound by the contract is "clearly manifested." While ratification does not require express knowledge of the voidable act [or contract], it does require knowledge of "all material facts relating to the act." Thus, ratification may consist of simply being aware of one's interest in, and continuing to enjoy the benefits of, a loan contract entered into while a minor. Ratification renders the loan enforceable.

CONCLUSION

As discussed above, loans entered into with minors generally are not enforceable against the minor parties. Some exceptions apply, and certain loans of minors, such as those for necessities or those where a minor fraudulently misrepresents his age, may be enforceable, depending on the law of the minor's state. Further, a minor may ratify a loan upon attaining the age of majority, at which point the loan is rendered enforceable. Some states in Region V will deem ratification to occur if the minor fails to disaffirm his loan within a reasonable time upon attaining majority. If you cannot clearly determine whether a particular loan has been ratified and is thereby rendered enforceable, please request a legal opinion from OGC.

This opinion addresses the Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA); specifically at what age custodial property must be turned over to a minor. This opinion affects the States in the Chicago region. The policy varies from State to State.

This is with reference to your Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA) regional transmittal. In our July 3, 1996 opinion, we provided advice regarding the correct age at which custodial property must be turned over to a minor under Wisconsin's UTMA provisions. Wis. Stat. Ann. §§ 880.61 to 880.72 (West 1991 & Supp. 1995). Your inquiry asks that we generally review the regional transmittal and specifically review the interpretation of Wisconsin's UTMA provisions as set forth in the transmittal.

Many states, including Wisconsin, substantially revised their versions of the UGMA in order to expand the kinds of property that could be made the subject of a gift under the Act. Of the states discussed in the regional transmittal, only Michigan appears to have retained its UGMA provisions rather than adopt UTMA provisions.

In Wisconsin, for custodianships established after April 8, 1988, minors assume control of assets held on their behalf depending on how the UTMA custodianship was established. Section 880.625 (transfers by gift or exercise of power of appointment) and section 880.63 (transfers by will or trust) custodianships end at age 21. Section 880.635 (other transfers by fiduciaries) and section 880.64 (transfers by obligors) custodianships end at age 18. Wis. Stat. Ann. § 880.705 (West 1991 & Supp. 1995).

The UTMA provisions of Illinois and Minnesota by and large make similar distinctions. In Illinois, for custodianships established after July 1, 1986, section 5 (transfer by gift or exercise of power of appointment) and section 6 (authorized transfers, including by will or trust) custodianships end at age 21. Section 7 (other transfers by fiduciaries) and section 8 (transfers by other obligors) custodianships end at age 18. 760 Ill. Comp. Stat. Ann. 20/21 (West 1992 & Supp. 1996); 755 Ill. Comp. Stat. Ann. 5/11-1 (West 1992 & Supp. 1996).

Minnesota provides that for custodianships established before January 1, 1986, minors assume control of assets at age 18. Minn. Stat. Ann. § 527.04(4) (West 1975); Minn. Stat. Ann. § 527.42(b) (West Supp. 1996). But, for custodianships established on or after January 1, 1986, section 527.24 (transfers by gift or exercise of power of appointment) and section 527.25 (transfers authorized by will or trust) custodianships end at age 21. Section 527.26 (other transfers by fiduciaries and conservators) and section 527.27 (transfers by obligors) custodianships end at age 18. Minn. Stat. Ann. § 527.40 (West 1975 & Supp. 1996).

In Indiana, for custodianships established after July 1, 1989,minors assume control of assets at age 21. Ind. Code Ann. § 30-2-8.5-35 (West 1994 & Supp. 1996). Ohio provides that, for custodianships established on or after May 7, 1986, custodial property is to be delivered or paid over to the minor at age 21, unless the donor or transferor, in a written instrument, provided that the custodian was to deliver or pay over the property to the minor at a different age between 18 and 21. Ohio Rev. Code Ann. § 1339.34(D)(1), (2) (Anderson 1993 & Supp. 1995).*/

Michigan, which has not adopted UTMA provisions, has UGMA provisions, which provide that custodial property is to be delivered or paid over to a minor at age 18. Mich. Comp. Laws Ann. § 554.454(4) (West 1988 & Supp. 1996).

Thomas W. C~

Chief Counsel, Region V

This opinion concerns the validity of a quit claim deed that was never recorded with the State or county government. Under Michigan law, a quit claim deed can be valid despite the fact that it was not recorded with the State or county.

This matter involves a quitclaim deed has never been filed with the state or local government. You asked whether this lack of recording affects the property transfer. Our research indicates that the fact that a deed has not been recorded does not effect the property transfer. However, the record in this case suggests that the transfer may be affected by a family trust, which has not been provided to our office

BACKGROUND

On May 7, 1990, Bruce and Patricia G~ signed over to their son Danny the family home via a warranty quitclaim deed. The deed, however, has never been filed with the state of Michigan or the local county government. A note in the file indicates that the deed was not recorded "because there is a family trust involved." We were not provided a copy of the trust. You asked whether a legal transfer of property has occurred.

DISCUSSION

An individual is eligible for SSI benefits if the person is aged, blind, or disabled; is a citizen living in the United States; and meets the income and resource limits. POMS SI 00501.001. As a program based on need, SSI uses the value of a person's resources as one of two "need" criteria in determining eligibility. (The other need criterion is income.) The general expectation is that individuals or couples whose resources exceed the applicable limit will use the excess to meet their needs before becoming eligible for SSI benefits. POMS SI 01110.001A. Not everything a person owns (i.e., not every asset) is a resource and not all resources count against the statutory limit. POMS SI 01110.001B.2.

The Social Security Act and other Federal statutes require the exclusion of certain types and amounts of resources. 42 U.S.C. § 1382b. Any asset that is a resource but is not specifically excluded is "countable." POMS SI 01110.001B.2.

An individual's home, regardless of value, is an excluded resource. 42 U.S.C. § 1382b(a)(1); POMS SI 01130.100A. An individual's home is property in which he or she has an ownership interest and that serves as his or her principal place of residence. POMS SI 01130.100A.2. Danny G~ resides in his home. The home was transferred to him via a quitclaim deed. The transfer has never been recorded with the state of Michigan or the local county government, however, "because there is a family trust involved." The fact that the transfer has never been recorded, however, does not change the fact that the home was transferred. See Evans v. Halloway Sand & Gravel, Inc., 308 N.W.2d 440 (Mich. 1981). On the other hand, the trust, which apparently prevented recording of the transfer, could affect the transfer, depending on the trust terms. Our repeated attempts for the regional office to obtain the trust from the local service office, however, were unsuccessful. Therefore, we are unable to determine what affect, if any, this family trust may have on ownership of the property.

CONCLUSION

In sum, as a general rule, the failure to record a transfer of real property does not affect the status of the transfer. It appears, however, that there may be a family trust involved that may affect ownership of the property. We recommend that the Agency obtain a copy of the family trust. If the Agency obtains a copy of the trust, we would be willing to evaluate if and how the trust affects the transfer.

Thomas W. C~

Regional Chief Counsel

By_________

Charles R. G~

Assistant Regional Counsel