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).

 

• •

  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.

This issue is whether a House Lease agreement for life would be considered a life estate under Ohio law. The landlord agreed to lease a house to an SSI individual for life. Under the agreement, the individual pays the landlord monthly rent until the individual's death. Under Ohio law the lease constitutes an estate rather than a contractual interest. The individual has an ownership interest in the property for so long as she continues to live on the property under the agreement.

You asked whether Ms. L~ interest in a House Lease would be considered a life estate under Ohio law. For the reasons discussed below, we conclude that the lease constitutes an estate in the property, although it is not clear that the estate is for life.

BACKGROUND

On December 23, 2004, Sharon S~ (the landlord) and Bertha L~ (the tenant) entered into a "House Lease." Under the terms of the lease, the landlord agreed to lease the Ms. L~ a private house, to be used only as a private residence, beginning January 1, 2005, until Ms. L~ death. Under the agreement, Ms. L~ must pay rent in monthly installments. She can assign or sublet her right to possession of the premises with the written consent of the landlord.

DISCUSSION

To be eligible for Supplemental Social Security Income (SSI) benefits, an individual must have limited income and resources. See 42 U.S.C. § 1381a. An individual's home generally is excluded when determining the individual's resources. See 42 U.S.C. § 1382b; 20 C.F.R. § 416.1212; POMS SI 01110.210(B), SI 01130.100. However, for the home exclusion to apply, the individual must have an ownership interest in the property. See 20 C.F.R. § 416.1212(a); POMS SI 01130.100, POMS SI 01140.110(A). If an individual merely leases the property, this usually would not create a right of ownership which would trigger the home exclusion. See generally POMS SI 01110.500(B)(4), SI 01110.520. However, the POMS instructs that, when an individual has a lease for life, state law may construe the arrangement as a life estate, rather than a lease. See POMS SI 01110.520(B)(1), SI 01140.110(B)(3). You asked whether Ohio law would construe the lease in this case as an estate in the property. Our research indicates that it would.

The Ohio Supreme Court has held that any lease of real property for consideration (i.e., rent) constitutes the sale or conveyance of an estate in the property, rather than a mere contract. See Heritage Hills v. Deacon, 551 N.E. 2d 125, 127 (Ohio 1990); Brenner v. Spiegle, 157 N.E. 491 (Ohio 1927). State statutes also provide:

When a registered owner desires to transfer to another a lesser estate than fee [i.e., less than full title], as an estate for life, for years, or other term, or any other kind of lesser estate than fee, he may do so be executing to the transferee a deed, lease, or other proper instrument of conveyance or transfer of such estate.

Ohio Rev. Code Ann. § 5309.42 (West 2006). This provision also seems to assume that a lease conveys an estate in land. Therefore, the lease in this case would seem to convey an estate-i.e., an ownership interest-rather than a mere contractual interest.

However, to be valid under Ohio law, a lease for more than three years must be signed by both the lessor/landlord and lessee/tenant and must also be acknowledged by a state official, such as a judge, clerk of a court, or notary public. Ohio Rev. Code Ann. §§ 5301.01(A), 5301.08 (West 2006). The copy of the lease we were provided was signed by the lessor/landlord and lessee/tenant. However, the documents do not include an acknowledgement by a state official. If a lease is not acknowledged by a state official, the lease is generally invalid and does not convey the estate or term of leasehold it purports to convey. Delfino v. Paul Davies Chevrolet, 209 N.E. 2d 194, 196 (Ohio 1965). Rather, such a lease agreement, if it provides for monthly rent, creates a tenancy from month to month. Id. It is not clear whether a life lease must comply with the statutory requirements since it may end before three years. However, even assuming the statutory requirements apply and even if the lease in this case was not acknowledged and is valid only as a month-to-month lease, rather than a life lease, the Ohio Supreme Court would apparently still treat the lease as an estate in the real property, rather than a mere contractual interest. See Brenner, 157 N.E. 491 (suggesting that even an "at will" lease creates an estate, rather than a mere contract interest). Therefore, under the lease agreement, Ms. L~ has an ownership interest in the property for so long as she continues to live in the home under the lease agreement.

CONCLUSION

In sum, we conclude that the lease in this case may not be valid insofar as it purports to convey the lease for the duration of Ms. L~ life. However, the lease appears to be a valid conveyance at least of a month-to-month lease, which would convey an estate in the property under Ohio law. Thus, Ms. L~ has an ownership interest in the property for so long as she continues to live on the property under the agreement.

The issue is whether a land installment contract for sale of property is a resource to the SSI beneficiary (the vendor) and whether payments made by the purchaser (the vendee) are income to the SSI beneficiary.

The SSI beneficiary and his wife entered into a contract to sell property to the vendee. The property was encumbered by a mortgage. The vendee was to pay $8,994.49 upon signing the contract and was to assume the mortgage of $45,285. The $8,994.49 represents conversion of a resource. Because the beneficiary and his wife were divorced at the time, and assuming they previously owned the property in equal shares, only half of the $8,994.49 ($4,497.25) is a resource to the beneficiary. Any installment payments made by the vender to the mortgage company on the assumed mortgage are not income to the SSI beneficiary.

You asked whether a land installment contract for sale of property is a resource to SSI beneficiary Robert K~ and whether payments made by the Vendee, Lorin S~, are income to Robert K~. For the following reasons, we conclude that the land installment contract is a countable resource to Robert K~ for the purposes of determining Robert K~'s SSI entitlement. In addition, we conclude that the installment payments made by the Vendee would not constitute income to Robert K~.

BACKGROUND

According to the facts provided, Robert K~ was married to Gail K~, and lived. Subsequently, Robert and Gail K~ divorced (date uncertain), and Gail K~ stayed at the property in question. Sometime later, Gail K~ left the property.

Subsequently, on July 30, 2001, Robert and Gail K~ executed a land installment contract to sell the property. At the time of the sale, the property was encumbered by a mortgage from Greentree Financial, which appears to have been later assigned to Conseco Financial Services.

According to the terms of the land installment contract, the Vendee (Lorin S~), agrees to pay the Vendor (Robert and Gail K~) $8,994.49 ($5,000 cash and $3,994.49 in closing costs/tax payments/ loan payments) upon signing the contract. In addition, the contract appears to indicate that there is to be an assumption of the mortgage to Conseco and a principal balance of $45,285.00, in care of the Lender (Conseco Financial Services), is owed. The latter amount bears interest at the rate of "note" percent per annum, and the principal and interest is payable in consecutive monthly installments of $296.98 beginning on August 10, 2001. According to the agreement, the Vendor agrees to furnish, as soon as the same can reasonably be procured, upon payment, guarantee of title, or such evidence of title, which shows marketable title to the said property, free and clear from all encumbrances except the first mortgage to Greentree Financial, which was assigned to Conseco Financial Services.

The contract states that if the Vendor defaults on any mortgage on the property, the Vendee may pay on said mortgage and receive credit on payments due under the contract. The contract provides that, should Vendee fail to make an installment payment within thirty days after it is due, the Vendor may initiate forfeiture of the interest of the Vendee in default, as provided by law. The contract also provides that the Vendee will maintain and insure all improvements on the property and pay taxes on the property. Upon fulfillment of Vendee's obligations under the terms of the contract, the Vendor agrees to convey said property to Vendee by deed of general warranty.

Also included in the provided materials was a Settlement Statement from Tower City Title Agency, LLC, dated July 9, 2003. According to that document, it appears that Lorin S~ obtained a loan from Argent Mortgage Company LLC, and paid off the outstanding amount owed pursuant to the land installment contract. According to the Settlement Statement, there were no additional liens on the noted property in question.

The materials you provided to us do not indicate whether the K~s owned the property in question as tenants in common, tenants in the entirety, or joint tenants with a right of survivorship. See POMS SI CHI 01110.510. Thus, you may want to ascertain whether Robert and Gail K~ previously owned the property in equal shares. For purposes of this memorandum, we presume that Robert and Gail K~ had equal ownership in the property. We also presume that the resource exclusion for funds from the sale of a home if reinvested timely in a replacement home, POMS SI 01110.210B, does not apply.

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. For SSI purposes, the value of a resource is the amount of the individual's equity in that resource. POMS SI 01110.400A.2.

An Ohio statute defines a "land installment contract" as "an executory agreement which by its terms is not required to be fully performed by one or more of the parties to the agreement within one year of the date of the agreement and under which the vendor agrees to convey title in real property located in this state to the vendee and the vendee agrees to pay the purchase price in installment payments, while the vendor retains title to the property as security for the vendee's obligation." Ohio Revised Code (ORC) § 5313.01(A). The land installment contract at issue appears to comply with all statutory requirements for a land installment contract, see ORC § 5313.02, except that it does not include the current mailing addresses of all the parties to the contract. ORC § 5313.02(A)(1). This omission, however, is not sufficient to remove the contract from the statutory classification of a land installment contract. See Shimko v. Marks, 632 N.E.2d 990, 992 (Ohio Ct. App. 1993) (substantial compliance with statutory requirements is sufficient). Therefore the land installment contract appears to be valid under Ohio law.

When parties enter into a land installment contract in Ohio, the seller retains legal title to the property, but the buyer has equitable ownership of the property with the rights and risks incident to possession. Blue Ash Building & Loan Co. v. Hahn, 484 N.E.2d 186, 189 (Ohio Ct. App. 1984). In effect, it is as if the seller holds the property in trust for the buyer. Id. The seller, in equity, becomes the owner of the purchase money and the buyer becomes the equitable owner of the property. Wood v. Donohue, 736 N.E.2d 556, 558 (Ohio Ct. App. 1999).

The land installment contract at issue is comprised of two components - 1) $8,994.49, payable to the K~s, and 2) $45,285.00, payable care of the Lendor, which is the mortgage assigned to Conseco Financial Services. According to POMS SI 01140.300C.1, the K~s' land contract is a resource to the extent of any principal payments paid to the seller. (The land contract does not provide for any future payments to the K~s, beyond the $8,994.49 that has already been paid.) The $8,994.49, which was the selling price of the property less the balance of the mortgage owed ($54,279.49 - $45,285.00) represents equity/principal, and thus constitutes conversion of a resource. See POMS SI 01140.300C.1. Moreover, because Robert K~ and Gail K~ are divorced, and assuming that Robert K~ and Gail K~ previously owned the property in equal shares, only half of this amount or $4,497.25, would constitute a resource to Robert K~.

You also asked whether the installment payments by the Vendee are income to Robert K~. Income is anything you receive in cash or in kind that you can use to meet your needs for food, clothing, and shelter. 20 C.F.R. § 416.1102; POMS SI 00810.005A.1. According to the land contract, the Vendee agreed to "assume" the Conseco mortgage and to pay monthly installments of $296.98 to the Vendor, in the care of the Lendor (Conseco Financial Services), until the $45,285.00 outstanding mortgage is paid off. As the installment payments of $296.98 apparently went directly to the Lendor in order to pay off the K~s' mortgage, such would not constitute income to Robert K~. POMS SI 01140.300C (only payments received by seller are considered when determining receipt of income).

CONCLUSION

We conclude that the land installment contract is a resource to Robert K~, which likely has a value of $4,497.25. However, the payments of $296.98 would not constitute income to Mr. K~ because the payments are payable to the K~s in care of the Lendor in order to pay off the K~s' outstanding mortgage.

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.

The issue is when an inheritance is received: at the person's death or when the person's will is entered into probate.

Ohio law is not clear. Although the house did not vest until probate, it related back to the date of it's owner's death, giving the inheritor the right to use the house, or to lease, sell or otherwise encumber her interest therein from the date of the prior owner's death. The Ohio statutes provide that no will is effectual to pass real or personal estate until it has been admitted to probate. However, Ohio courts have held that once a will has been admitted to probate, title vests immediately and relates back to the date of the testator's death. The "relation back" rule has been described as the "generally prevailing" rule. It has been cited as inferentially supporting a divisee's right to use, sell, or otherwise encumber her interests in devised real property at the moment of the testator's death, subject to the administrator's right to retrieve the property to satisfy debts or administration expenses of the estate.

Thus, under Ohio law, the inheritance was reeived at the testator's death.

You have asked us to determine whether Minnie V~, the mother of SSI recipient Rhonda V~, received her inheritance, a house devised by her aunt, on April 17, 1989 when the aunt died or on June 14, 1989 when the aunt's will was admitted to probate. / Rhonda, a child, is subject to having her mother's income and resources deemed available to her. 20 C.F.R. §§ 416.1160(a)(2), 416.1165 (1991). An inheritance can constitute (unearned) income. 20 C.F.R. § 416.1121(g); POMS SI 00830.550A. However, for an inheritance to constitute income (or resources), it must have a value to the heir, that is, the heir must be able to use the inheritance to meet his need for food, clothing, or shelter. 20 C.F.R. § 416.1102; POMS SI 00830.550A.2.NOTE. / The more precise question, therefore, is when Minnie's inheritance first acquired a value for her, that is, when could Minnie legally take possession of the house, lease or sell it, or otherwise use the house to meet her need for food, clothing or shelter.

Ohio law is not entirely clear but, in our opinion, the better view is that although Minnie's title in the house did not vest until probate, it related back to the date of her aunt's death giving Minnie the right to use the house or to lease, sell or otherwise encumber her interest therein from April 17, 1989, subject to the administrator's right to use the property, if necessary, to pay administration costs or debts of the estate.

The Ohio statutes provide, "Unless it has been admitted to probate, no will is effectual to pass real or personal estate ... ." Ohio (1990). The Ohio courts have construed this statute (and its precursors) to mean that a devisee's legal title to real property devised under a will does not vest until the will is admitted to probate. E.g. Woodbridge v. Banning, 14 Ohio St. 328, 331 (1863); Carpenter v. Denoon, 29 Ohio St. 379, 395 (1876). However, the Ohio courts also have held that once a will is admitted to probate, title vests immediately and relates back to the date of the testator's death. E.g. Carpenter v. Denoon, 29 Ohio St. 379, 395 (1876); Miller v. Douglass, 110 Ohio C.C. (n.s.) 205 (Ohio Cir. Ct. 1908), rev'g Douglass v. Miller, 30 N.P., 220, 4 Ohio Dec. 414 (Ohio C.P. 1896); / Union Savings Bank and Trust Co. v. Baltimore and Ohio Southwestern R.R. Co., 70 Ohio N.P. (n.s.) 497, 508 (Insolvency Ct., Hamilton County 1908). / Accord Poole v. Lessee of Fleeger, 36 U.S. 185, 211 (1837). See also Braun v. Central Trust Co., 109 N.E. 2d 476 (Ohio Ct. App. 1952); Central Nat'l Bank v. Gilchrist, 154 N.E. 811, 812 (Ohio Ct. App. 1926); Olds v. Morse, 129 N.E.2d 644, 646 (Ohio Ct. App. Summit County 1954).

The "relation back" rule has been described as the "generally prevailing" rule, 80 Am. Jur. 2d Wills § 1068 (1975). The rule also has been cited as inferentially supporting a devisee's right to use, lease, sell or otherwise encumber his interests in devised real property at the moment of the testator's death, subject to the administrator's right to retrieve the property to satisfy debts or administration expenses of the estate. 79 Am. Jur. 2d Wills § 828 (1975). In Miller, the appellate court applied the "relation back" rule to uphold a deed of devised land, executed by the devisee after the testator's death but prior to probate, against an attempt to execute against the property by the devisee's post-probate creditors. The Carpenter and Union Savings Bank cases are consistent. In those cases, the courts applied the "relation back" rule to validate acts done before probate which could be done thereafter.

We have considered whether the Ohio Supreme Court decision in Woodbridge which also was relied upon by the lower court in the Miller case, precludes applying the relation back rule to find that Minnie had an interest in the house such that she could legally enter into possession of the house or lease or sell it prior to probate. We have concluded that it does not. In Woodbridge, the Ohio Supreme Court held that a judgement partitioning land entered after the death of the testator but before probate of his will, and over the objections of a devisee under the will, could not bar the devisee from asserting his title to the partitioned property after probate. Citing a precursor statute to Ohio Rev. Code § 2107.61, the court stated:

This statute is express and clear. It seems to us that neither construction nor comment can make it more so. By virtue of its provisions the estate did not pass to the devisee under the will until probate. Until then, whatever other title he may or may not have had, he had none as devisee under the will. And wherever the title may in the meantime have vested, or whether the same may have been in abeyance, and whatever effect the doctrine of relation may have on the rights and liabilities of parties after the vesting of his title as devisee, can have no effect against the express provision of the statute.

14 Ohio St. at 331. While this language is somewhat troublesome, we have concluded that it does not preclude finding a pre-probate interest which is legally enforceable under the "relation back" rule for reasons explained in the following paragraph.

In a subsequent decision, Walker v. Hall, 15 Ohio St. 355, 363 (1864), the Ohio Supreme Court stated that had it been aware of the common law doctrine of implied warranty between co-partitioners when it decided Woodbridge, it would have reached the same result but would have used different reasoning. This suggests that the court was attempting to limit its decision in Woodbridge to the extent that it might be read as precluding use of the "relation back" doctrine in appropriate cases. In Woodbridge, the court found that it need not consider the effect of the "relation back" rule given the plain language of the statute. Yet, despite the fact that Supreme court decisions are binding on lower courts of the state (to the extent they cannot be distinguished), we have found no decision, except for the lower court decision in the Miller case (which was reversed on appeal) which has read Woodbridge as precluding application of the "relation back" rule. There also was a practical reason for the court's reluctance to consider the "relation back" rule in Woodbridge. The purpose of the rule is to effectuate the testator's intent and protect the interests of innocent devisees. Application of the rule in Woodbridge would have been what the Union Savings Bank court called a "violent misapplication of the doctrine", defeating the innocent devisee's clear rights under the will. 7 Ohio N.P. (n.s.) at 508. Woodbridge involved an involuntary conveyance of the devisee's property rights through court ordered partition. Had Minnie conveyed her property rights in the devised house before probate, she would have done so voluntarily, like the devisee in Miller.

In conclusion, we believe you would be justified in finding that under Ohio law, Minnie had a valuable interest in the house prior to probate and specifically in April, 1989 immediately after her aunt's death. In this regard, we note that Minnie's lawyer stated that Minnie moved into the house in "early" June, 1989. Since he does not give a precise date, it is possible that Minnie took possession of the house prior to June 14, 1989, the date the will was admitted to probate. If so, then one might infer that Minnie, in fact, was aware that she had valuable rights in the property before probate. As a practical matter, you might find it difficult to place a fair value on Minnie's inheritance in April inasmuch as under the "relation back" rule, anyone buying or leasing the house prior to its release from probate in July, 1989, would have done so subject to the executor's right to use the property to satisfy debts or administration expenses of the estate. / Thus, although the house was valued at approximately $19,500 in probate, its actual value prior to the order releasing the estate from administration might have been considerably less.

Donna M. W~

Regional Chief Counsel, Region VIII

By:___________________________

Sheila H. S~

Assistant Regional Counsel