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.

A personal injury settlement was awarded to an SSI eligible minor child in January, 2005. The settlement was to be held in an annuity and comprised of two periodic payments to be issued in 2010 and 2015, respectively. The minor child's guardian has maintained possession of the annuity in a conservatorship account since March, 2005. This opinion finds that a clarifying order dated April, 2007 provides that the annuity has not been, and is not, a countable resource due to a spendthrift clause preventing selling or anticipation of the periodic payments. The clarifying order had retroactive application effective January, 2005 and specifically precluded the eligible individual from selling any portion of the future annuity payments. This restriction is interpreted to provide sufficient “evidence to the contrary” of the general SSI assumption pertaining to the liquidity of conservatorship accounts. Furthermore, Wisconsin state law allows, in the case of a minor, that the court may restrict use of the funds held in a conservatorship account to those uses judged reasonable. In sum, the annuity and the conservatorship account in which it is currently held are not a resource as of the date of the initial order.

You previously forwarded a “Qualified Assignment, Release and Pledge Agreement” for our review. Since then, the Circuit Court of Dane County, State of Wisconsin, on April 12, 2007, issued an “Order Clarifying the Order Approving Minor Settlement Dated January 18, 2005." You have asked whether the annuity still constitutes a resource to Joshua B~, a minor, in view of the clarifying order. In addition, assuming the account is not a resource, you have asked whether its non-resource status was in effect as of the initial court order (January 2005) or the clarifying order (April 2007). For the following reasons, we conclude that the annuity should not be considered a resource as of the initial order date, January 18, 2005.

BACKGROUND

On March 8, 2005, a “Qualified Assignment, Release and Pledge Agreement” was entered into by Grinnell Mutual Reinsurance Company (the Assignor), Allstate Assignment Company (the Assignee-Debtor), and Joshua B~ (the Claimant-Secured Party). As a minor, Joshua was represented by Donald J. M~, a guardian ad litem. Through the Agreement, the Assignee-Debtor assumed all of the Assignor's liability to make the Periodic Payments described in Addendum No. 1. The addendum specified that $17,996.03 will be payable to Joshua on August 18, 2010, and $24,143.97 will be payable on August 18, 2015. The Periodic Payments constitute “damages on account of personal injury or sickness in a case involving physical injury or physical sickness.” Agreement at C.2.

As initially written, the Agreement precludes the Claimant-Secured Party from selling or assigning any of the Periodic Payments. Agreement at C.3 and C.12. However, Addendum No. 1 allows the Claimant-Secured Party to “anticipate, sell, assign, pledge, or encumber future payments if approved in advance by [] a 'Qualified Order' under the provisions of 26 U.S.C. Section 5891 (b)(2) and otherwise complies with applicable state law, including without any limitation any applicable state structured settlement protection statute.” Add. No. 1. The Qualified Order is defined, under the referenced statute, as “a final judgment, or decree which … does not contravene any Federal or State statute or the order of any court or responsible administrative authority,” and “is in the best interest of the payee.” 26 U.S.C. § 5891(b)(2).

On April 12, 2007, the Circuit Court of Dane County, State of Wisconsin, issued an “Order Clarifying The Order Approving Minor Settlement Dated January 18, 2005.” The April 2007 order specifies that it merely clarifies the original “Order Approving Minor Settlement” and has retroactive application effective as of the initial order date, January 18, 2005. 4/07 Order, 1. It then provides that Joshua “has no right to liquidate, encumber, or convert to cash any portion of the annuity, at any time, for any purpose.” 4/07 Order, 2. Further, by order of the court, Joshua is “specifically precluded from selling any portion, in full or in part, or his rights to the future annuity payments, at any time or for any purpose, including but not limited to his support, maintenance, food or shelter.” 4/07 Order, 2.

DISCUSSION

The primary purpose of the Supplemental Security Income (SSI) program is to assure a minimal level of income to low-income aged, blind, and disabled persons who have income and resources below an amount established by the Federal government. 20 C.F.R. § 416.110. Under this program, if the value of an individual's resources exceeds a resource limitation, that person is not eligible for SSI benefits. 20 C.F.R. §§ 416.110(a), 416.1205 (resource limit for SSI became $2,000 as of Jan. 1, 1989). For SSI purposes, a resource includes assets that an individual owns and could convert to cash to be used for his support and maintenance. 20 C.F.R. § 416.1201(a).

The funds in this case are held in an annuity, purchased, apparently, as part of a structured settlement of a personal injury case for a minor, Joshua B~, and it appears that Joshua's guardian has possession of the annuity. The Social Security Administration's Program Operations Manual System (POMS) describes the circumstances under which the Agency will consider funds in a conservatorship account to be an individual's resource. POMS SI 01120.010(C)(3); POMS SI 01140.215. These POMS sections provide that the Agency should consider State law, and the sections establish the following policy for determining whether the account is a resource:

If State law requires that funds in a conservatorship account be made available for the care and maintenance of an individual, we assume, absent evidence to the contrary, that funds in such an account are available for the individual's support and maintenance and are, therefore, that individual's resource.

POMS SI 01140.215(B)(1) (emphasis added).

The funds in the conservatorship account will not be a resource if there is evidence that the funds are not available for the individual's support and maintenance. POMS SI 01140.215(B)(2). This may occur if there is restrictive language in the court order that established the account or in a subsequent court order, or if the court has indicated or demonstrated that it will deny all requests for funds for the minor's support and maintenance. POMS SI 01140.215(B)(2) (one example of “evidence to the contrary” is restrictive language in the court order establishing the account or in a subsequent court order).

POMS SI CHI01140.215(B)(6) instructs:

Wisconsin law requires the guardian to use an individual's funds for their support and maintenance. Therefore, funds held by a guardian in a “blocked” account should be presumed accessible to the ward and counted as a resource for SSI, with one exception. EXCEPTION: In the case of a minor, the court may restrict the use of the funds to those uses judged reasonable as directed by the court. The court order should be reviewed to determine if any restrictions apply.

We previously found that, absent any restrictive court order, the settlement funds appeared to be available for Joshua's support and maintenance, because there was no language in the Agreement precluding the sale of the annuity for its present cash value to be used for Joshua's benefit. Indeed, Addendum No. 1 expressly allowed the Claimant-Secured Party to anticipate, sell, assign, pledge, or encumber future payments. The addendum provides a qualification, “if approved in advance by [] a 'Qualified Order' under the provisions of 26 U.S.C. Section 5891 (b)(2) and otherwise complies with applicable state law, including without any limitation any applicable state structured settlement protection statute.” Add. No. 1. Section 5891(b)(2) defines a qualified order as “a final order, judgment, or degree which … does not contravene any Federal or State statute or the order of any court or responsible administrative authority, and … is in the best interest of the payee, and … is issued … under the authority of an applicable State statute by an applicable State court ….” 28 U.S.C. § 5891(b)(2).

We did not find a structured settlement protection statute in Wisconsin. In addition, Wisconsin's statutory provisions on guardians and wards encourage the use of funds for the ward's support and maintenance. Cf. Memorandum from Reg. Chief Counsel, Chicago, to Ass't Reg. Comm.-MOS, Chicago, SSI: Review of the Annuity Contract for Magnum Daniel Napier Scott, at 3 (Mar. 28, 2005) (observing that "the annuity contract ha[d] an express restriction that prevent[ed] the annuity payments from being accelerated, deferred, increased, decreased, anticipated, sold, assigned, or encumbered."). Finally, absent a court order indicating that it would not be in Joshua's best interest to sell the annuity, we saw no reason why the guardian could not secure a Qualified Order permitting the sale of the annuity.

The clarifying order dated April 12, 2007, however, contains restrictive language. In the April 2007 order, the court clarifies its initial order approving the settlement, dated January 18, 2005. It provides that Joshua "has no right to liquidate, encumber, or convert to cash any portion of the annuity, at any time, for any purpose." 4/07 Order, 2. Further, by order of the court, Joshua is "specifically precluded from selling any portion, in full or in part, or his rights to the future annuity payments, at any time or for any purpose, including but not limited to his support, maintenance, food or shelter." 4/07 Order, 2. The court specifies that this clarification has retroactive application effective as of the initial order date, January 18, 2005. 4/07 Order, 1.

In light of the express prohibition in the clarifying order, it is unlikely that Joshua would prevail in seeking to have his funds released for support and/or maintenance. Furthermore, at all times relevant, Joshua was a minor and subject to a guardian ad litem, and there is no evidence that he previously sought to obtain funds pursuant to a Qualified Order. We therefore conclude that, because there is "evidence to the contrary" here, indicating that the annuity does not contemplate or allow a withdrawal of funds for Joshua's support and maintenance, the annuity should not be considered a resource for SSI purposes.

We further conclude that the effective date of the annuity as a non-resource is January 18, 2005, the date of the court's initial order. The clarifying order specifies that its restriction has retroactive application effective as of the initial order date, January 18, 2005. 4/07 Order, 1. The circuit court thus clarified that, even under the previous order, the funds in the annuity were not accessible for support and maintenance of Joshua B~ at any time. The circuit court's interpretation of the restrictions on the annuity should be accorded deference. In Re Guardianship of Kordecki, 95 Wis.2d 275, 281, 290 N.W. 2d 693, 696 (1980) (Wisconsin Supreme Court held that county court was responsible for determination of whether use of funds from a guardianship account would have been authorized for minor's support); POMS SI CHI 01140.215 (discussing that, in Wisconsin, the court may restrict the use of funds, in the case of a minor, to those uses judged reasonable as directed by the court); see also Memorandum from Reg. Chief Counsel, Chicago, to Ass't Reg. Comm.-MOS, Chicago, SSI: Review of the Blocked Account of Benjamin Banks, at 4 (June 28, 2004) (observing that the later order of the county court reinforced restrictive language as of the date of the initial order).

CONCLUSION

In sum, we conclude that, pursuant to the restrictive language of the April 12, 2007 order of the Circuit Court of Dane County, State of Wisconsin, the annuity purchased as part of Joshua B~'s structured settlement was not a resource as of the date of the initial order, January 18, 2005.

Donna L. C~

Regional Chief Counsel, Region V

By: _________

Marc M~

Assistant Regional Counsel

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

The issue is the age of majority under Wisconsin's Uniform Transfers to Minors Act (UTMA) provisions. Section 880.705 of UTMA provides that the custodian shall transfer in an appropriate manner to the minor or to the minor's estate upon the earlier of:

(1) The minor's attainment of 21 years of age with respect to custodial property transferred under section 880.625 (transferred by gift or power of appointment) or 880.63 (transferred by a will or trust);

(2) The minor's attainment of 18 years of age with respect to custodial property transferred under section 880.635 (held pursuant to other transfers by fiduciaries) or 880.64 (transfers by obligors); or

(3) The minor's death.

This is with reference to your inquiry regarding the age of majority under Wisconsin's Uniform Transfers to Minors Act (UTMA) provisions. Wis. Stat. Ann. §§ 880.61 to 880.72 (West 1991 & Supp. 1995). Many states, including Wisconsin, substantially revised their versions of the Uniform Gifts to Minors Act (UGMA) in order to expand the kinds of property that could be made the subject of a gift under the Act. In 1988, Wisconsin repealed its UGMA, with 1987 Act 191, § 4, and enacted its UTMA.

Your cover memorandum appears to correctly analyze the UTMA provisions and set forth the correct age at which custodial property must be turned over to the minor depending upon how the custodial property was originally transferred. Section 880.705 provides:

The custodian shall transfer in an appropriate manner to the minor or to the minor's estate upon the earlier of:

(1) The minor's attainment of 21 years of age with respect to custodial property transferred under s. 880.625 or 880.63;(2) The minor's attainment of 18 years of age with respect to custodial property transferred under s. 880.635 or 880.64; or

(3) The minor's death.

Wis. Stat. Ann. § 880.705 (West 1991 & Supp. 1995).

The import of this provision is that upon the minor's attainment of 21 years of age, a custodian shall transfer to him/her custodial property transferred by gift or exercise of power of appointment (s. 880.625) and custodial property transferred by will or trust (s. 880.63). Upon the minor's attainment of 18 years of age, the custodian shall transfer to him/her custodial property held pursuant to other transfers by fiduciaries (s. 880.635) or transfers by obligors (s. 880.64).*/

We are unaware of any change to the ages at which custodial property must be transferred since Wisconsin enacted the UTMA.

Sincerely,

Thomas W. C~

Counsel, Region V

By_____________

Marc M~

Assistant Regional Counsel

A properly executed assignment of a life insurance policy to the Forethought Trust is valid in Wisconsin and would not be a resource for SSI purposes. Because of a change in the Social Security Act, this precedent may only be applicable to a trust established by an individual before 01/01/00.

This is in response to your inquiry concerning a Forethought Life Insurance Funded Burial Trust (LIFBT) for Marcella P~. You asked if the LIFBT in question is valid under Wisconsin state law and, if the LIFBT is not valid, whether the cash surrender value of the life insurance policy could be excluded since it has been irrevocably assigned to the Forethought Trust. We believe that the Forethought LIFBT in question is valid and should therefore not be counted as a resource for SSI purposes.

FACTS

In July 1996, Ms. P~ bought a life insurance policy from the Forethought Life Insurance Company. Ms. P~ did not name a beneficiary. Later that month, she irrevocably transferred ownership of the policy to the Forethought Trust, giving up her right to control the policy, surrender it for cash or obtain a loan against it, and specifying only that the proceeds of the policy were to be used to fund burial expenses.

DISCUSSION

A resource, for SSI purposes, includes assets that the individual owns and could convert to cash to be used for her own support and maintenance. See 20 C.F.R. § 416.1201(a). If the individual has the right, authority, or power to liquidate the property, it is a resource. Id. Trust assets are a resource if the individual can use the trust assets to meet her needs for food, clothing, and shelter. POMS SI 01120.105(A)(1), 01120.200(D)(1)-(3).

If an individual neither owns nor has the legal right to direct the use of trust assets to meet his or her support and maintenance needs and if state law allows a revocably assigned life insurance policy that funds a funeral contract to be placed irrevocably in trust, the LIFBT is not a resource for SSI purposes. POMS SI 01130.425D.2.E.

After purchasing the Forethought life insurance policy, Ms. P~ irrevocably transferred ownership of the policy to the Forethought Trust. This was a valid transfer in which Ms. P~ relinquished the right to control the policy, to surrender it for cash, or to obtain a loan against it. Thus, the remaining question is whether this Forethought LIFBT package is valid under Wisconsin law.

We have previously advised that this particular Forethought LIFBT package is valid under Wisconsin law. Wisconsin Forethought Life Insurance Funded Burial Contract for Phillip H~, OGC V (M~) to K~, SSA-V (6/9/97). For a LIFBT to be valid under Wisconsin law, there are several requirements: (1) a funeral provider cannot be named as a beneficiary of the insurance policy that is issued; (2) ownership of the life insurance policy must be assigned to a person or entity other than the funeral home; and (3) the assignee must be free to select any funeral provider to fund the client's funeral needs at the time of death. Wisconsin Life-Insurance Funded Burial Agreements, OGC-V (M~) to P~, ARC, SSA-V (10/28/92).

We note that, following a statutory amendment effective May 10, 1996, Wisconsin statute §632.41(2)(b) now permits the assignment of the proceeds of the policy to a funeral provider, if certain requirements are met. Nonetheless, the statute preserves the requirement that a life insurance policy sold under the act shall permit the policyholder to designate a different beneficiary and a different funeral provider to receive the assignment of proceeds. W.S. § 632.41(2)(b)(3). Wisconsin Forethought Life Insurance Funded Burial Contract for Phillip H~, OGC V (M~) to K~, SSA-V (6/9/97).

Although Ms. P~ did not name a beneficiary, this does not defeat the validity of the LIFBT, since the statute does not require that the purchaser of a LIFBT name a beneficiary. It is necessary, however, that she assign ownership of the life insurance policy to a person or entity other than the funeral home, and that the assignee must be free to select any funeral provider to fund the client's funeral needs at the time of death.

As stated above, Ms. P~ has irrevocably divested herself of ownership of the policy, and of the right to control the policy, to surrender it for cash, or to obtain a loan against it. The document transferring ownership of the policy to the Forethought Trust specifies that the proceeds of the policy will be used to fund Ms. P~'s burial costs. The Forethought Trust is not a funeral provider—it appears to be a creation of the Forethought Life Insurance Company, whose name appears on the Forethought Trust forms and which shares the same Batesville, Indiana address. And lastly, there is apparently no pre-need agreement with any funeral home, indicating that the assignee remains free to select any funeral provider at the time of the claimant's death.

For these reasons, we believe that the Forethought LIFBT is valid under Wisconsin law and should not be counted as a resource for SSI purposes.

A life insurance funded burial arrangement produced by the United Family Life Insurance Company of Athens, Georgia, that is being marketed in Wisconsin, is legal under Wisconsin law. The plan is similar in all critical aspects to the American Legacy and Gold Key plans that are marketed in Wisconsin. Thus, it is not a resource for SSI purposes.

On November 9, 1994, you asked us to review a life insurance funded burial arrangement produced by the United Family Life Insurance Company of Atlanta, Georgia, that is being marketed in Wisconsin. Specifically, you asked us to determine: (1) if the plan is legal under Wisconsin law; and (2) if so, does it constitute a countable resource for Supplemental Security Income (SSI) purposes. With your November 9, 1994 request you included the documentation we had previously requested in order to enable us to issue a precedential opinion.

In our opinion, it would be an appropriate policy choice for SSA to find that the United Family Life Insurance Company Plan is valid under Wisconsin law. Absent other considerations, the package should therefore not be counted as a resource for SSI purposes.

DISCUSSION

Based on the documents you submitted to us, it appears to us that the United Family Plan is similar in all critical respects to the American Legacy and Gold Key marketed in Wisconsin. Under the United Family Plan, a funeral provider is not named beneficiary of the life insurance policy. In the documents you sent us, the insured's daughter was named beneficiary of the life insurance policy. The insured irrevocably assigned ownership of the policy to a trustee that is not a funeral provider. In the documents you sent us, ownership was assigned to Shrum Risk Management Company of Ackworth, Georgia, as trustee of the Pre-Thana Arrangement Trust. The assigned owner and/or beneficiaries, as well as the original beneficiary, agree to use the policy proceeds solely toward the cost of funeral services and merchandise on the death of the insured. Further, the insured, any beneficiary, and any assignee are permitted to designate a different funeral home at any time prior to the funeral; thus, the insured, any beneficiary, and any assignee are not required to engage the funeral home named in the plan at the time of death.

Therefore, under all three plans:

(1) a funeral provider is not named as a beneficiary of the insurance policy that is issued;

(2) the insured makes a subsequent assignment of the policy to a person or entity that is not the funeral provider; and

(3) the assignee is free to select any funeral provider to fund the client's funeral needs at the time of death.

We advised you on October 28, 1992 that, based on an October 15, 1992 opinion by the Wisconsin Department of Justice regarding the Gold Key and National Security Memorial (Monumental Life Insurance) Plans, it was permissible to conclude that those plans did not violate W.S.A. 632.41(2), and were therefore legal under Wisconsin law. / OGC-V (M~) to ARC-POS (W~), "Wisconsin Life-Insurance-Funded Burial Agreements," October 28, 1992. We gave the same advice regarding the American Legacy Plan on December 10, 1993. OGC-V (M~) to Acting ARC-POS, "American Legacy Plan - Life-Insurance-Funded Burial Package Sold in Wisconsin," December 10, 1993.

Therefore, for the same reasons stated in our October 28, 1992 and December 10, 1993 memoranda, SSA should treat the United Family Plan the same way it treats the American Legacy and Gold Key Plans.

The result is consistent with the proposed Regional POMS Supplement to SI R01130.425, titled (WI) Resource Exclusions—Life Insurance Funded Burial Contracts (LIFBC) we sent you on December 10, 1993.

CONCLUSION

For the foregoing reasons, the United Family package would appear to be valid. In such case, as with the American Legacy and Gold Key packages, you could then find that the LIFBC is valid under Wisconsin law. Absent other considerations, the package should therefore not be counted as a resource for SSI purposes.

Ownership interest in deceased's property.

Under Wisconsin law, ownership interest in a deceased estate automatically transfers from the decedent to the personal representative of the estate. In this case, the deceased's son is the personal representative and the sole heir of the estate.

This is with reference to your memorandum inquiring whether the claimant's father, Mark K~, has inherited his father's house. We conclude that, based on statutory amendment, Mark K~ automatically obtained title to the house upon his becoming personal representative of the estate.

FACTS:

The facts may be briefly summarized: On August 16, 1990, the claimant's grandfather died, leaving the claimant's father as the sole heir and legal representative of the estate. The estate, which is in probate, consisted solely of the grandfather's house.

In February, 1991 the claimant and his father moved into the house.

DISCUSSION:

In 1985, the Wisconsin legislature amended the sections of its probate code that deal with personal representatives. With the amendment of Section 857.01, ownership interests now transfer automatically from the decedent to the personal representative of the estate. This section states in relevant part, "Upon his or her letters being issued by the court, the personal representative succeeds to the interest of the decedent in all property of the decedent." (emphasis added). Wis. Stat. Ann. § 857.01 (West 1991). The phrase "succeeds to the interest of the decedent" replaced the original phrase "has title to" so that it would be clear that the personal representative has an ownership interest in the decedent's property. (Legislative Council Committee Supplemental Notes Relating to Section 857.01.)

Even before Section 857.01 was amended in 1985, the personal representative, beginning in 1971, automatically obtained title to both real and personal property. This rule was made clear in In Re Estate of Peterson where the Supreme Court of Wisconsin stated unequivocally that the "personal representative is vested with the title to all property of the decedent." 225 N.W. 2d 644, 646 (Wis. 1975). Before this change, a personal representative had title to personal property but not to real property.

In the present situation, Mark K~ is the personal representative and sole heir of the estate. As personal representative, he has automatically succeeded to the interests of the decedent in all property of the decedent. In other words, he is now the owner of the house. As sole heir of the estate, Mark will succeed to the interest of the personal representative once the estate is probated. Consequently, Mark's ownership will not be broken, and he is now and will be the owner of the house. Thus, Mark has been the owner of the house ever since the probate court issued his letters of personal representative. Therefore, in order to find out the exact date that Mark succeeded to the interests of his father, you must find out when the court issued his letters.

NOTE: This opinion is valid only to trusts established before January 1, 2000.

This opinion outlines the requirements for a valid life insurance funded burial agreement in the State of Wisconsin where the life insurance policy is placed in a trust.

This is in response to your inquiry concerning a Forethought Life Insurance Funded Burial Contract (LIFBC) for Phillip H~. You asked if the LIFBC in question is valid under Wisconsin State Law and, if the LIFBC is not valid, whether the cash surrender value of the life insurance policy could be excluded since it has been irrevocably assigned to the Forethought Trust. We believe that the Forethought LIFBC in question is valid and should therefore not be counted as a resource for SSI purposes.

FACTS:

In May 1996, Mr. H~ purchased a life insurance policy from the Forethought Life Insurance Company for the purpose of funding his burial expenses. Mr. H~ named his father, John H~, beneficiary. John H~ signed an affidavit attesting to his understanding that the proceeds of the life insurance were to be used for Mr. H~'s funeral costs. Mr. H~ then transferred ownership of the life insurance policy to the Forethought Trust, giving up his right to control the policy, surrender it for cash or obtain a loan against it.

DISCUSSION

A resource, for SSI purposes, includes assets that the individual owns and could convert to cash to be used for his own support and maintenance. See 20 C.F.R. § 416.1201(a). If the individual has the right, authority, or power to liquidate the property, it is a resource. Id. Trust assets are a resource if the individual can revoke the trust and use the assets to meet his needs for food, clothing, and shelter. POMS SI 01120.105.A.1, 01120.200(D)(1)-(3).

Consistent with SSI's trust policy, if an individual neither owns nor has the legal right to direct the use of trust assets to meet his or her support and maintenance needs and state law allows a revocably assigned life insurance policy that funds a funeral contract to be placed irrevocably in trust, the LIFBC is not a resource for SSI purposes. POMS SI 01130.425D.2.E.

After purchasing the Forethought life insurance policy, Mr. H~ irrevocably transferred ownership of the policy to the Forethought Trust. This was a valid transfer in which Mr. H~ relinquished the right to control the policy, to surrender it for cash, or to obtain a loan against it. Thus, the remaining question is whether this Forethought LIFBC package is valid under Wisconsin law.

Prior to May 10, 1996, W.S.A. § 632.41(2) provided that "No contract in which the insurer agrees to pay for any of the incidents of burial or other disposition of the body of a deceased may provide that the benefits are payable to the funeral director or any other person doing business related to burials." Accordingly, we have previously advised you that, for a LIFBC to be valid under Wisconsin law, there are several requirements: (1) a funeral provider cannot be named as a beneficiary of the insurance policy that is issued; (2) ownership of the life insurance policy must be assigned to a person or entity other than the funeral home; and (3) the assignee must be free to select any funeral provider to fund the client's funeral needs at the time of death. Forethought Life Insurance Funded Burial Contract In Wisconsin-Viola L. K~, OGC-V (M~) to P~, ARC, SSA-V (3/21/95); Wisconsin Life-Insurance Funded Burial Agreements, OGC-V (Michaelson) to Panama, ARC, SSA-V (10/28/92).

We note that, following a statutory amendment effective May 10, 1996, § 632.41(2)(b) now permits the assignment of the proceeds of the policy to a funeral provider, if certain requirements are met. Nonetheless, the statute preserves the requirement that a life insurance policy sold under the act shall permit the policyholder to designate a different beneficiary and a different funeral provider that is to receive the assignment of proceeds. W.S. § 632.41(2)(b)(3).

The recent amendment does not affect Mr. H~'s Forethought LIFBC, which is equally valid under either version of the statute since (1) the beneficiary of the Forethought LIFBC is Mr. H~'s father, not a funeral provider; (2) Mr. H~ then irrevocably assigned ownership of the life-insurance policy to the Forethought Trust, not a funeral provider; and (3) although the beneficiary of the insurance policy, Mr. H~'s father, signed an affidavit stating that he would use the proceeds of the fund for Mr. H~'s burial expenses, he remained free to select a different funeral provider at any time.

We note the existence of a document entitled "Funeral Purchase Contract" between Mr. H~ and the Pratt Funeral Home. However, this does not appear to be an enforceable contract, given that several essential components are missing, such as the signature of the funeral home. At most this document indicates Mr. H~'s casket preference. Furthermore, Pratt Funeral Home itself has denied the existence of a pre-need contract with Mr. H~ and has indicated that Mr. H~ is free to change funeral provider at any time.

Your letter states that the insurance company indicated that it would distribute the proceeds of the policy to the Pratt Funeral Home on the death of Mr. H~. As you correctly point out, this cannot be the case, since there is no assignment of proceeds to the funeral home, nor is there any pre-need contract between Pratt Funeral Home and Mr. H~. Moreover, the life insurance policy states clearly that absent any assignment of proceeds by the insured, Forethought will disburse the death benefit to the beneficiary of the policy.

For these reasons, we believe that the Forethought LIFBC is valid under Wisconsin law and should not be counted as a resource for SSI purposes.