TN 10 (02-15)
PS 01810.006 California
A. PS 15-072 SSI Resource Issue: Foreign Property
DATE: January 22, 2015
This RCC examines whether ownership of Chinese real property constitutes a resource for supplemental security income (SSI) eligibility purposes, where the individual claims that such property is not freely transferable. Individuals cannot privately own land in China, but may obtain transferrable land-use rights. The individual submitted a certificate to SSA that lists him as the sole owner of a house in China and lists the State as the owner of the land, and also indicates that the land-use right has been assigned. Chinese law permits individuals to privately own residential houses and apartments built on state-owned land. Based on the documents he submitted to the agency, the individual owns a house and has been assigned a renewable land-use right to the underlying land. Because his property interest is freely transferable and may be converted to cash, it constitutes a resource for purposes of SSI.
You asked whether X~’s ownership of Chinese real property constitutes a resource for supplemental security income (SSI) eligibility purposes, where X~ claims that such property is not freely transferable.
Yes. X~ is able to sell or otherwise transfer his ownership interest in Chinese real property. Accordingly, that property constitutes a resource for purposes of SSI eligibility.
On January 12, 2012, X~ and Y~ applied for SSI as a married couple. X~ and Y~ were both born in China, but currently reside in California and are naturalized United States Citizens. On July 10, 2012, the agency denied X~ and Y~’s application for SSI, finding that their total resources exceeded the statutory Limit. Specifically, X~ admitted that his father transferred ownership of a house to him in 1985. X~ stated that the house’s value was approximately $16,000. X~ and Y~ testified that they do not intend to return to China to live in the house.
On September 5, 2012, X~ requested reconsideration. On October 31, 2012, X~ submitted additional information. Specifically, in an October 31, 2012 statement, X~ claimed that his eight siblings were co-owners of the house his father transferred to him in 1985. He identified the address of the house as ~~ ~~~, Nansha Residential Committee, Jun’An Town, Shunde District, Foshan City, China. Additionally, X~ submitted September 5, 2012 statements from his mother and sister. X~’s mother, then 95 years old and Living in the house, asserted that all nine of her children are co-owners of the property located at ~~~ ~~~. Likewise, X~’s sister represented that she has an ownership and residential right in the property.
X~ also provided a certificate issued by the Nansha Community Residential Committee, dated November 16, 2011. According to the certificate, X~ was the original resident of the house located at ~~~ ~~~ . The certificate also stated that X~’s parents and siblings have lived in the house permanently, and X~ is prohibited from selling this house to others. On November 26, 2012, the agency denied X~’s request for reconsideration and he requested a hearing on January 8, 2013. The ALJ held a hearing on February 21, 2014. An attorney represented the couple at the administrative hearing and X~ testified on his own behalf.
On August 27, 2014, in response to your request, X~ submitted a Property Rights Certificate with a registration date of January 17, 2006, showing that he owns property at ~~~ ~~, Nansha Residential Committee, Jun’An Town, Shunde District, Foshan City, China. X~ made no prior mention to this official property record, nor did he explain his failure to produce this record prior to the agency’s request. The certificate lists X~ as the sole owner of the house. The certificate lists the State as the owner of the land, and indicates that the land-use right has been assigned.
To be eligible for SSI payments, claimants must prove they are at least 65 years of age, or blind, or disabled with limited income and limited resources and legally residing in one of the 50 states, the District of Columbia, or the Northern Mariana Islands. See Social Security Act §§ 1602, 1611; 20 C.F.R. § 416.202.
A resource, for SSI purposes, includes assets that an individual owns and could convert to cash and use for food or shelter, including real property. See Social Security Act § 1613; 20 C.F.R § 416.1201(a). If the individual has the right or power to liquidate the property or his share of the property, it is a resource. See 20 C.F.R. § 416.1201(a)(1). If an individual disposes of his or her resource for less than fair market value, he or she becomes ineligible for SSI benefits for 36 months. See Social Security Act § 1613(c)(1)(A); Program Operations Manual System (POMS) SI 01150.001.C.3; SI 01150.003. The limit for countable resources is $2,000 for an individual and $3,000 for a couple. See Social Security Act § 1611(a)(3); 20 C.F.R. § 416.1205; POMS SI 01110.003.A.2.
Although the agency considers real property a resource, an individual’s principle place of residence, regardless of value, is an excluded resource (the home exclusion). See Social Security Act § 1613(a)(1); 20 C.F.R. §§ 416.1210(a), 416.1212; POMS SI 01130.100. Property ceases to be the principle place of residence as of the date that the individual left it with no intention of returning. See 20 C.F.R. § 416.1212(c); POMS SI 01130.100.B.
Similar to the home exclusion exception, the agency also excludes the value of an individual’s ownership interest in jointly owned real property if the sale of the property would cause undue hardship, due to loss of housing, to a co-owner (the undue hardship exception). See Social Security Act § 1613(b)(2)(A); POMS SI 01130.130.
The People’s Republic of China The People’s Republic of China (PRC or China) provides for the protection of private property in its 1982 Constitution and 2004 amendments. See Zhang, Laney, China: Real Property Law, the Law library of Congress, Global Legal Research Center (October 2014), 1-2. Article 13 of the PRC Constitution provides that “[c]itizens’ lawful private property is inviolable.” Id. at 1.
The PRC Property Rights Law, which became effective on October 1, 2007, addresses the establishment, alteration, transfer, and elimination of property-related ownership rights, and the registration and delivery of movable and real property rights. Id. at 2.
According to the PRC Constitution and Property Rights Law, individuals cannot privately own land and natural resources in China. Id. at 3. Instead, the state owns urban land and collectives own rural and suburban land. Id. However, individuals can obtain a right to use land. The land-use right allows the right-holder to legally possess, use, and benefit from property owned by another (whether the state or a collective). Id.
In urban areas, the state grants or allocates land-use rights to land users. Id. For granted land-use rights, land users pay the state granting fees for a certain number of years. Id. Currently, land may be used for residential purposes for up to seventy years. Id. at 4. When the term for the right to use land for residential purposes expires, the term automatically renews. Id. If the land owner dies prior to the expiration of the seventy year or renewal term, the land-use right passes to the owner’s heirs. China’s Assignment Regulations provide that land users may transfer their land-use rights to others through sale, exchange, gift, mortgage, or lease. Id. at 4. When transferred, the land-use right and the right to structures on top of the land (home ownership) transfer simultaneously. Id.
In transferring real estate rights, the new owner obtains the land-use rights only for the period equivalent to the original assigned term minus the number of years the original owner has used the land. Id. at 5. However, as discussed above, a residential land-use right term will automatically renew upon expiration. Id.
According to the 2006 Property Rights Certificate, X~ owns a house located at ~~~ ~~in Foshan City, China, identified as an urban area. Although X~ does not own the land upon which the house is situated, it appears that the State has assigned him land-use rights, which renew automatically every 70 years. Per the PRC Constitution and Property Rights Law, X~ may sell or otherwise legally transfer these property rights. Thus, because X~ has an ownership interest in real property, which he could sell or otherwise convert into cash, that property is a countable resource. See 20 C.F.R. § 416.1201(a); POMS SI 01110.100.B.1.
Furthermore, the property does not qualify as an excluded resource under the home exclusion rule because the house is not currently X~’s principle place of residence nor does he intend on returning to it.
Although X~, his family, and the Nansha Community Residential Committee claim that, per cultural tradition, X~’s siblings and parents are co-owners of the property, they fail to provide any legal documents to confirm this claim. Moreover, the Property Rights Law provides that land-use rights must be registered with local government land authorities at or above the county level; these authorities issue certificates to affirm these rights. See Zhang, Laney, China: Real Property Law, at 5. Thus, the Property Rights Certificate, identifying X~ as the sole owner, appears to be dispositive.
Despite their allegations to the contrary, the agency has not received evidence showing that X~’s family members have any registered legal interest in the property, and Chinese law does not recognize family ownership arising from cultural traditions of an “ancestral home.” Moreover, X~’s failure to produce the property rights certificate prior to August 2014 suggests that his prior allegations of co-ownership may have merely been an attempt for X~ to evade the implications of sole ownership. Therefore, because the 2006 Property Rights Certificate lists X~ as sole owner of the property, the property’s sale cannot cause any undue hardship on co-owners, and the undue hardship exception does not apply.
Individuals cannot privately own land in China but may obtain transferable land-use rights. In addition, Chinese law permits individuals to privately own residential houses and apartments built on state-owned land. Based on the documents he submitted to the agency, X~ owns a house and has been assigned a renewable land-use right to the underlying land. Because X~’s property interest is freely transferable and may be converted to cash, it constitutes a resource for purposes of SSI.
B. PS 07-003 Appeal of SSI Denial Due to Excess Resources, Number Holder (NH) M~
DATE: October 31, 2006
This issue is whether life insurance purchased as a viatical investment, and the individually-held account set up as part of the investment, and any withdrawals made from that account are treated as income or resources to the claimant for SSI purposes.
In this case, the claimant invested $25,000 in a life settlement contract. Of this total, $17,606.00 is not accessible to the claimant. This part of the claimant's investment is not a resource. The death benefit will not be paid until the insured dies and there is no established secondary market for viatical investments. When the viator dies, the claimant will receive the death benefit, which may be considered unearned income.
The claimant elected monthly payments from the trust account. The claimant can withdraw any or all funds from this trust account and use them for her support or maintenance. Therefore, the account is a countable resource for SSI purposes
The claimant filed a claim for Supplemental Security Income (SSI) payments. More than a year before she filed the claim, she invested in a life settlement investment (or viatical investment) with a monthly income option. You requested information about viatical investments and guidance on how to treat the individually-held account set up as part of the investment and any withdrawals made from that account. We will first explain viatical investments and then discuss the specifics of the claimant's investment.
In a typical viatical investment, the viator assigns his or her life insurance policy to a viatical settlement broker in exchange for a lump-sum cash payment in an amount less than the death benefit. An investor purchases the viatical settlement based on the estimated life expectancy of the viator, who usually has a life-threatening or catastrophic illness or condition that prompts the need for immediate cash. In essence, the investor puts up the money that is paid to the viator. The investor also becomes an irrevocable beneficiary on the permanent records for that death benefit, and receives the death benefit when the viator dies. The death benefit should be more than just the investment principal. If the viator lives beyond his or her estimated life-expectancy, the investor may have to pay additional premiums to maintain the policy.
Another key feature of the viatical investment is the fixed rate of return the investor will receive on his or her total investment. If the investor elects to receive a monthly income option, this will yield a lower return; no monthly income option will yield a higher return. See, e.g., <http://www.sec.gov/ answers/viaticalsettle.htm>; http:/www.insurance.ca.gov/0100-consumers/0100-insurance-guides/0200-life-series/viatical.
Here, the claimant invested $25,000 in a life settlement contract with a 48-monthly income option through Nationwide Consultants, Inc. Of her total investment, $17,606.00 was "invested" in a 36-month life expectancy policy. The claimant is the irrevocable beneficiary on this policy, and is expected to receive her investment principal of $25,000 upon the death of the insured person (who was not named in the agreement). Premiums on this life expectancy policy will be paid by an escrow company for the estimated life expectancy (36 months) plus 12 months.
According to the Monthly Income Agreement, the claimant elected the monthly income option, which will provide her a 7.6% fixed rate return. Using the remaining investment amount ($7,394.00), Nationwide Consultants established the monthly income option by depositing an amount equal to 48 payments of $158.33 into a trust account at Ford Motor Credit/Northern Trust Company. Each month for 48 months, $158.33 is paid out of the trust account to the claimant, and these payments will continue even if the viator dies before the full 48-monthly income option is satisfied. The claimant is allowed to withdraw funds from this trust account "in any increments, up to the entire balance, without penalty or surrender charges."
Assuming that monthly payments specified in the Monthly Income Agreement have been paid to the claimant on the first of each month since April 2005, there have been at most eighteen payments of $158.33, totaling $2,849.94. Assuming she has not withdrawn any additional amounts from the trust account, the remaining balance in the trust account is $4,544.06.
An aged, blind, or disabled individual with no eligible spouse is eligible for SSI payments if his or her nonexcludable resources do not exceed $2,000 after January 1, 1989, and all other eligibility requirements are met. 20 C.F.R. §§ 416.1205(a) and (c). The regulations define resources as cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for his or her support or maintenance. 20 C.F.R. § 416.1201(a). If the individual has the right, authority or power to liquidate the property, it is considered a resource. 20 C.F.R. § 416.1201(a). If a property right cannot be liquidated, the property will not be considered a resource. Id.
Liquid resources are cash or other property that generally can be converted to cash within 20 days. Examples of resources that are ordinarily liquid are stocks, bonds, mutual fund shares, promissory notes, mortgages, life insurance policies, financial institution accounts (including savings, checking, and time deposits, also known as certificates of deposit) and similar items. Liquid resources, other than cash, are evaluated according to the individual's equity in the resources. 20 C.F.R. § 416.1201(b); Program Operations Manual System (POMS) SI 01110.300(A).
The portion of the claimant's investment that established the 36-month life expectancy policy ($17,606.00) is not accessible to the claimant. The death benefit on that policy will not be paid until the insured dies, and there is no established secondary market for viatical investments. See NASAA Guidelines Regarding Viatical Investments, 12A Blue Sky Law Appendix H § VIII.C.2.i. Accordingly, this part of the claimant's investment is not a countable resource. When the viator dies, the claimant will receive the death benefit, which may be considered unearned income. 20 C.F.R. § 416.1121(e).
The Monthly Income Agreement gives claimant the right to withdraw at any time the entire balance of the trust account established for purposes of the monthly income option. Because she can withdraw from this account and use the funds for her support or maintenance, the account is a countable resource. See 20 C.F.R. § 416.1208 (funds held in financial institution accounts are countable resources); POMS SI 01140.200(A)(5). Because the monthly payments of $158.33 come from the trust account, which is a countable resource, any portion of such payments that the claimant has retained is also a countable resource. See 20 C.F.R.§ 416.1103(c).
C. PS 03-164 OPINION: The Validity of Protective Deposit - J~
DATE: August 8, 2003
On September 27, 2002, the Superior Court of California issued an order authorizing a protective deposit in the form of an attorney trust for funds owned by the claimant. The funds were deposited into the account to pay for legal expenses that the claimant might incur and to speed up her approval for Medi-Cal. If challenged, the court order is not enforceable because of the State Bar of California, Rule 4-100 that states money placed into an attorney trust account belongs to the client until the attorney has an undisputed interest in part or all of the funds. In addition, it was improper for the court to order that the funds be placed into an attorney trust account and to prohibit the client from recovering any funds that where not used toward attorney expenses incurred by the client. At this time, the claimant's attorney does not have any claim to the funds in the account. Hence, the funds in the account are available for the claimant's support and maintenance and are thereby a resource to the claimant.
You asked for an opinion relating to a “protective deposit” ordered by the Superior Court of California. Specifically, you want to know whether money deposited into an attorney trust account would shelter the money of a Supplemental Security Income (SSI) claimant from being counted as a resource in determining her eligibility for SSI. If the claimant does not have access to the money in the trust account, you also want to know if the transfer of funds to the account would be considered a transfer of resources without fair market compensation.
It is our opinion that, notwithstanding the protective deposit order, the money transferred to the attorney trust account is still available to the claimant to the extent that she has not incurred legitimate attorney or conservator fees. Because of this, it is unnecessary to answer the second question.
SUMMARY OF EVIDENCE
J~ is a claimant for SSI. The Jewish Family Service of Los Angeles (JFS) has been appointed as the conservator of the person and estate of J~. JFS is represented by R~, attorney at law, for legal matters relating to J~. In August 2002, J~ had approximately $26,000 in savings which would have made her ineligible for SSI based on excessive resources. On August 21, 2002, JFS filed a petition with the Superior Court of California, County of Los Angeles seeking a permission for a protective deposit to deposit $10,000 of J~'s money in an attorney trust fund for two purposes: the payment of conservator's fees and attorney's fees and to speed up the time it would take J~ to qualify for Medi-Cal. On September 27, 2002, the Superior Court of California issued an Order Authorizing Protective Deposit.
We were unable to discover very many legal references to the term “protective deposit.” Likewise, there is no legal definition of the term in Blacks Law Dictionary, Sixth Edition. Indeed, we only found two instances where California courts have referred to a protective deposit. In 1967, the California Court of Appeal concluded that courts have the authority to grant a protective deposit in an appropriate situation. See Goodson v. Bogerts, Inc., 252 Cal.App.2d 32, 60 Cal.Rptr.146 (1967). Then, in 2002, the Court of Appeal addressed the issue once more when it recognized a protective deposit made relating to an appeal of litigation. See Silver v. Los Angels County Metropolitan Transportation Authority, 94 Cal. Rptr. 2d 287 (2000). In both cases the court ordered the protective deposit to ensure that money legally due one party would be available pending the outcome of appeals to the litigation that awarded the money.
Our present situation is different from these earlier situations for two reasons. First, this protective deposit is awarded to pay future professional fees and not to secure an amount that has already been awarded. Professional fees for services not yet performed and not yet contemplated are so speculative as to be almost illusory. It is not even certain that this particular conservator and this particular attorney will be the ones who perform future services for this claimant and there can be no question that they cannot collect fees for which they perform no services.
The State Bar of California, Rules of Professional Conduct, Rule 4-100 make it clear that any money deposited in an attorney trust account belongs to the client until such time as the attorney has an undisputed interest in part or all of the funds. It is not feasible for a court to order money to be put into an attorney trust account and restrict the client from being able to recover any funds not properly expended.
There is also a public policy reason why the court order in this case cannot be enforced. Public policy is often expressed in statutes and government wide rules that express the general publics' view or obligations relevant to the situation. In this case, the Social Security Act expresses the policy of the United States regarding public welfare issues. This Act is the law of the land and supreme over state laws under the Supremacy Clause of the Constitution of the United States, Article VI. For this reason, a State Court order that attempts to shield resources from the federal SSI or Medicaid programs could not be enforced. In the SSI program, there is no exclusion from resources of money deposited in anticipation of future professional or legal services. (Contrast this with the SSI provisions that explicitly exclude certain pre-paid burial contracts and some irrevocable trust accounts.)
For the reasons cited, it is our opinion that should the claimant in this case take action to recover any remaining money in the attorney trust account, the court order would not protect the money from her ability to recover any legal balance. For this reason, this account should be considered a resource for determining her eligibility to SSI.
Janice L. Willi
Regional Chief Counsel
Assistant Regional Counsel
At the February 21, 2014 hearing, X~ explained that the Nansha Community Residential Committee is a group of individuals selected by farmers to take care of the village. He acknowledged that the Committee does not have an ownership right to the property.
X~ claims that he is prohibited from selling the property because it is his “ancestral” home and doing so would break with tradition. He claims that ancestral homes must stay within the family and remain in the name of the eldest son. We have no information to confirm or deny that this is a true cultural tradition. You have asked us not to consider this cultural claim.
X~ claims that, although the street address identified in the property rights certificate varies from the address identified in the Nansha Community Residential Committee’s November 16, 2011 statement, both documents refer to the same property. According to X~, the community changed street names after the property rights certificate was issued in January 2006. We have no information to confirm or deny this alleged change.
Laney Zhang, a Senior Foreign Law Specialist at the library of Congress, provided a report entitled China: Real Property Law, in response to OGC’s request. We relied on the information in this report in summarizing and analyzing Chinese property law.
We obtained this information in a follow-up phone call with Laney Zhang on October 15, 2014.
Should X~ die prior to the expiration of the 70-year land-use assignment, that land-use right does not terminate; rather, it transfers to X~’s heirs. Thus, the land-use right is distinct from a life estate, which typically is not countable as a resource because the owner cannot sell the life estate or transfer it upon his or her death. See POMS SI 01110.515.B; SI 01140.110.A.6 (“The owner of a life estate can sell the life estate but does not have title to the property and thus normally cannot sell it or pass it on as an inheritance.”).
In the event that X~ transfers his property right interest for less than fair market value, he would be ineligible for SSI for up to 36 months. See Social Security Act § 1613 (c)(1)(A); POMS SI 01150.001.C.3; 01150.003.
X~’s family members do not explain why their testimony should outweigh Chinese Law and the 2006 Property Rights Certificate. They also fail to explain why they waited until 2014 to submit the 2006 Property Rights Certificate to the Agency.