BASIC (01-05)

PS 01805.055 Wisconsin

A. PS 07-163 SSI - Review of the Annuity for Joshua B~, SSN: ~ - REPLY Our Ref.: 07-0265 Your Ref.: S2D5G6, SI 2-1 WI (B~)

DATE: June 27, 2007

1. SYLLABUS

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.

2. OPINION

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

B. PS 05-003 SSI-Regional Supplement on the Validity of Loans for Minors in Region V States (Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin) Your Reference Number: SI-2-1-10 Our Reference Number: 04S041

DATE: September 28, 2004

1. SYLLABUS

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.

2. OPINION

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.

C. PS 04-255 Uniform Transfers To Minors Act (UTMA) Transmittal

DATE: November 5, 1996

1. SYLLABUS

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.

2. OPINION

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

D. PS 04-254 Wisconsin Uniform Transfers To Minors Act (UTMA)

DATE: July 3, 1996

1. SYLLABUS

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.

2. OPINION

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

E. PS 00-360 Wisconsin Forethought Life Insurance Funded Burial Trust for Marcella L. P~, SSN ~

DATE: June 24, 1997

1. SYLLABUS

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.

2. OPINION

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.

F. PS 00-317 Wisconsin Life Insurance Funded Burial Contract — United Family Life Insurance Company (Your November 9, 1994 Request) (Your ref: S2D5B51, SI 2-1-4)

DATE: March 21, 1995

1. SYLLABUS

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.

2. OPINION

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.

G. PS 00-301 Ownership of Decedent's Property - Wisconsin - John K~ (SSN: ~); Heather K~ (SSN: ~)

DATE: January 7, 1992

1. SYLLABUS

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.

2. OPINION

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.

H. PS 00-265 Wisconsin Forethought Life Insurance Funded Burial Contract for Phillip H~, SSN ~

DATE: June 9, 1997

1. SYLLABUS

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.

2. OPINION

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.


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