PS 01810.016 Illinois
A. PS 08-149 SSI - Illinois: Blocked Account; Your Reference: S2D5G6 (G~, Jesus); Our Reference: 08-0139
DATE: July 7, 2008
This decision reaffirms the principle that blocked accounts or conservatorship accounts are generally countable resources because the restrictions of a local judge cannot contradict the requirement of availability created by State statute. Conserved funds must be made available if the recipient needs food or shelter or any other basic need and the parents are unable to provide them.
You asked for a legal opinion regarding whether the funds in Jesus G~, Jr.'s blocked account are a resource for purposes of Jesus' SSI eligibility. For the reasons discussed below, we conclude that the account should be considered a resource.
The materials you provided to us include your own February 2008 memorandum to the District Manager of the Chicago South office, concluding that Jesus' blocked account should be considered a resource. In your memorandum, you noted that on May 20, 2004, the Probate Division of the Circuit Court of Cook County ordered that the proceeds of Jesus' personal injury settlement be placed in an account in his name and be held subject to further court order or to be released to Jesus upon his eighteenth birthday. Subsequently, $12,121.00 in settlement proceeds were placed in a certificate of deposit at LaSalle Bank, entitled, "Jesus G~, Minor, Subject to Order Circuit Court Cook County Probate Division or Until Minor Attains Majority on 5/22/2017."
In April 2008, two months after your February memorandum, Kathleen M~, Cook County Circuit Court Probate Division Judge, issued a letter "To Whom It May Concern," specifying that only petitions for withdrawal of funds for "extraordinary and not day to day expenses" would be approved. Further, in an accompanying Order, Judge M~ directed that the account not be taken into consideration for purposes of determining Jesus' income for purposes of eligibility for Social Security benefits since it cannot be accessed without a court order or until Jesus turns 18. Several months earlier, Judge M~ also issued a general notice, stating that a minor's funds "are not to be used for normal expenses that a parent is responsible for, I.e., food, clothes, shelter, etc."
A. Presumption of Blocked Account as a Resource
As you write in your February memorandum, "[i]f state law requires that funds in a blocked 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" (citing POMS SI 01140.215, CHI01140.215) (emphasis added). Illinois law does indeed require such funds to be available for support and maintenance, warranting your conclusion in February that Jesus' account would be a resource. See 755 ILL. COMP. STAT. ANN. ("ILCS") 5/11-13(b) (2008) ("the guardian or other representative of the ward's estate . . . shall apply the income and principal of the estate so far as necessary for the comfort and suitable support and education of the ward"); In re Estate of Berger, 520 N.E.2d 690, 697 (Ill. App. Ct. 1987), appeal denied Goodman v. Berger, 530 N.E.2d 244 (1988).
At the time of your opinion, however, there was essentially no potential "evidence to contrary" that the blocked account was not accessible for purposes of Jesus' support and maintenance; that is, you had not yet received Judge M~'s April letter and Order explaining that the funds are supposed to be used only for "extraordinary and not day to day expenses," and directing that the account not be considered in determining Jesus' SSI benefits eligibility. The question, then, is whether these statements from Judge M~ alone are enough to overcome the presumption that the account is a resource. We believe they are not.
B. Effects of Judge M~'s Letter and Order
Under the POMS, in determining whether there is evidence contrary to the presumption that funds should be considered a resource, the Agency will consider such evidence as: (1) any restrictive language in the court order that established the account or in a subsequent court order; (2) state and local procedural rules for withdrawal of funds from the account; and (3) local court practices regarding withdrawal of funds. See POMS SI 01140.215(B)(2). Here, the original court order that established the blocked account did not indicate that the funds should not be used for Jesus' support and maintenance, and, as you note in your memo and as we have previously advised, Illinois law provides that such funds should be used for Jesus' comfort, support, maintenance and education. See 755 ILCS 5/13-11; POMS SI CHI01140.215; POMS PS 01825.016 (PS 00-180 Blocked Account in Illinois as SSI Resource: Duane P. C~, Jr., Dec. 7, 1990).
Related Illinois case law also supports the presumption that the funds are a resource. In Fitzpatrick v. Dep't of Public Aid, 287 N.E. 2d 666, 668 (1972), the Illinois Supreme Court examined the Aid to Families with Dependent Children Program, which also has income and resource limitations for eligibility. The Court recognized that "it does not appear that it was the intention of Congress or the General Assembly that a minor's recovery for a personal injury claim should be excluded from 'any other income or resources of the child' in determining need for public aid." See also, In re Estate of Hickey, 635 N.E.2d 853 (Ill. App. 1994) (appellate court upheld a Cook County circuit court's decision to deny approval for a minor's settlement where the parties had attempted to place the funds in a trust in a manner specifically designed to exempt the funds from being part of a calculation of repayment of public aid). The Fitzpatrick Court recognized that courts had some discretion to determine that it may be in a child's best interest not to permit withdrawals to meet a child's needs. Nevertheless, because the Fitzpatrick guardian had not petitioned for funds or established that the probate court had refused to release any funds for support, the Court held that it was appropriate for the Illinois Department of Public Aid to deny benefits.
The Fitzpatrick Court's reasoning is in line with the POMS, which directs the Agency to consider any history of requests for release of funds in determining whether funds are indeed available for support and maintenance:
Denial by the court of a request for withdrawal of funds does not necessarily mean that funds in the account are unavailable for the individual's support and maintenance. If the court approves requests to withdraw funds in order to provide support and maintenance, and only disapproves requests for non-essential items, the funds are considered available and a resource for SSI purposes. The [field office] adjudicator should review the history of petitions for (and approvals and denials of) withdrawal of funds. If a denial by the court appears to be an exception rather than the rule, the funds may be determined to be a resource for SSI purposes.
POMS SI 01140.215(B)(3) (emphasis in original). Here, though, as in Fitzpatrick, there is no record of petitions for funds that have either been granted or denied. Rather, there is only Judge M~'s letter and accompanying Order explaining that the funds are to be used only for "extraordinary and not day to day expenses," and ordering that they not be considered income for purposes of Jesus' SSI eligibility.
One might infer that by "extraordinary and not day to day expenses" Judge M~ means "not for support and maintenance." But it does not appear that Judge M~ necessarily meant to rule out all forms of support and maintenance. In the general notice she issued last summer regarding the court's responsibility to preserve the estates of minors, Judge M~ explained that funds are not to be used for "normal expenses that a parent is responsible for, I.e., food, clothes, shelter, etc." In this notice, however, she did not address a situation where a parent(s) may be financially unable to provide for the child's support and maintenance. In addition, given Illinois statutory law requiring the representative of a ward's estate to provide for the support and maintenance of wards, it is questionable whether Judge M~ could even issue a blanket order denying the release of funds for any and all forms of support and maintenance. Again, section 5/11-13(b) of the Illinois Probate Code imposes upon a representative of a ward's estate a duty to "apply the income and principal of the estate so far as necessary for the comfort and suitable support and education of the ward." 755 ILCS 5/11-13(b). Thus, to the extent that Judge M~'s letter and Order were intended to block all access for support and maintenance, they would appear to conflict with Illinois law.
We also note that Judge M~ does not have authority to direct that the Agency not take this account into consideration when determining Jesus' income, despite the fact that the account can be accessed only through court order. See Hercules Inc. v. United States, 516 U.S. 417, 422-23 (1996) (citing United States v. Testan, 424 U.S. 392, 399 (1977) and United States v. Sherwood, 312 U.S. 584, 586 (1941)). In any event, the Agency is not considering the account to be income, but a resource. And the reason Judge M~ gives (that a court order is needed to access the money) is insufficient, under Agency policy, for the Agency to discount the funds as a resource.
Under Illinois law, blocked accounts are presumed to be available for a minor's support and maintenance and are, consequently, also presumed to be resources for purposes of SSI eligibility. This resource presumption, though, may be overcome by contrary evidence, such as multiple court orders denying access to the funds. Here, while there is a letter that purports to restrict use of such funds to extraordinary and not day to day expenses, this evidence, without more-such as a specific order denying access to the account for Jesus' support and maintenance-is probably not sufficient to nullify the presumption. We therefore conclude that the funds should be considered available for Jesus' support and maintenance and should be counted as a resource for SSI eligibility purposes.
Donna L. C~
Regional Chief Counsel, Region V
Assistant Regional Counsel
B. PS 05-152 Fred K~-SSI-Review of Property Held in Joint Tenancy with Medicaid Lien-Reply Your Ref.: S2D5G6, SI 2-1 IL (K~) Our Ref.: 05-0060
DATE: May 2, 2005
This opinion discusses real estate encumbered by a public aid lien and held in joint tenancy by an SSI beneficiary. Two tracts of land named the SSI beneficiary as holding joint tenancy. The first tract (Tract 1) initially named the beneficiary as having a 1/2 remainder interest in a life estate. Upon the death of the survivor holding the life estate the remainder interest was converted to an ownership interest. Under Illinois law, a joint tenant holds the option of conveying his interest in the property without consent of the other joint tenants. For this reason, Tract 1 is a countable resource. The second tract reserved a 5 acre portion as a life estate for a relative and left the remaining 15 acres unencumbered by the life estate. The SSI beneficiary holds a remainder interest in the life estate and a 1/3 interest in the remaining property. Until the relative holding the life estate passes away, the interest in the 5 acre portion is considered a resource with limited value since a purchaser's right to possession could not be realized. The 1/3 interest in the 15 acre portion is a countable resource provided that the sale of his interest would not cause undue hardship on the relative residing on the property. The public aid lien currently imposed on the property due to debt accumulated by another joint tenant does not affect the value of the beneficiary's interest in the property. Under Illinois law, a lien against one joint tenant's interest in property is not enforceable against another joint tenant as long as they were not involved in the transaction that resulted in the lien. Since the SSI beneficiary was not involved in the transaction resulting in the lien the value of his interest in the property is not reduced by the encumbrance.
You asked us whether interests in two parcels of real estate held in joint tenancy by Fred K~ and several other individuals was a resource to Fred K~ for SSI purposes. You also asked how the equity value of the properties should be computed in light of a lien encumbering both properties that was filed by the Clay County Office of Public Aid for assistance paid to another joint tenant. For the reasons set forth below, we believe that both parcels give rise to resources for Fred K~.
In 1967, Clarence and Lenora M. K~ executed a quit claim deed to a six-acre parcel of land in Flora, Illinois, subject to a life estate reserved for themselves, transferring the property to Fred and Orvil K~ as joint tenants and not tenants in common ("Tract 1").
On the same day, C.E. K~ and Lenora M. K~, executed a quit claim deed to a twenty-acre parcel of land in Flora, Illinois, transferring the property to Leslie K~, Fred K~ and Orvil K~ as joint tenants and not tenants in common ("Tract 2). The transfer of Tract 2 was subject to a prior conveyance of a life estate in a five-acre tract of the property from C.E. K~ and Lenora M. K~ to Leslie K~.
Clarence and Lenora K~ are now deceased.
Orvil K~ is now residing in Flora Healthcare Center and is receiving Social Security benefits. In 1996, the Clay County Department of Public Aid filed liens against Orvil K~'s interests in both properties for all assistance paid to on behalf of Orvil K~, under Article III and/or Article V of the Illinois Public Assistance Code. According to Linda R~, an employee of the Public Aid office, the amount of the lien has continued to accrue since 1996. Ms. R~ indicated that the group care costs, which exceeded $132,000 in December 2004, exceed the value of the properties. The amount of the lien will continue to accrue until Orvil K~ passes away or leaves the nursing home.
Leslie K~ continues to reside on Tract 2 and has been paying all the taxes on that property. Megan P~, a Claims Representative from the Effingham, Illinois, Field Office, interviewed Fred K~'s guardian, Robert K~, and determined that sale of Tract 2 would cause a hardship for Leslie K~ because the property was his principal place of residence and he had no other place to live.
The regulations provide that:
resources means cash or other liquid assets or any real or personal property that an individual (or spouse, if any) owns and could convert to cash to be used for his or her support and maintenance.
If the individual has the right, authority or power to liquidate the property or his or her share of the property, it is considered a resource . . . .
20 C.F.R. § 416.1201(a). Therefore, if an individual is able to obtain funds or convert property to cash to be used for his support and maintenance, such funds or property are to be included as resources for purposes of SSI eligibility determinations. Further, the sale or exchange of a resource does not result in income to a claimant. Rather, it is considered a different form of resource. POMS SI 01110.600(B)(4) ("If an individual sells, exchanges, or replaces a resource, what he/she receives in return is not income. It is a different form of resource.").
In determining whether an individual has a right, authority or power to liquidate the property, we must first ascertain the interest the individual holds in the property.
1. Tract 1
In this case, because Clarence K~ and Lenora K~ retained a life estate in Tract 1, the deed transferring this property initially gave Fred K~ and Orvil K~ a joint tenancy in the remainder interest in Tract 1. Upon the death of the survivor of Clarence K~ and Lenora K~, Fred K~'s and Orvil K~'s interest in the property was no longer subject to a life estate; their interest was converted to an ownership interest in the property as joint tenants. Accordingly, we must determine whether a joint tenant has to right to liquidate his property.
Joint tenancy means Fred K~ and Orvil K~ share an undivided interest in the entire property. See Minonk State Bank v. Grassman, 432 N.E. 2d 386, 388 (Ill. App. Ct. 1982). Another feature of the joint tenancy is the right of the survivor of the joint tenants to take the entire estate upon the death of a joint tenant. See Harms v. Sprague, 473 N.E. 2d 930, 934 (Ill. 1985). In Illinois, it is well established that a joint tenant can unilaterally sever the joint tenancy by conveying his interest in the property, with or without the consent or permission of other joint tenants. See e.g. Harms, 473 N.E. 2d at 932; Olney Trust Bank v. Pitts, 558 N.E.2d 398, 400-01 (Ill. App. Ct. 1990); Minonk, 432 N.E. 2d at 390. Thus, because Fred K~ retains the right to sell his interest in Tract 1 with or without the consent of Orvil K~, it is a resource. 20 C.F.R. § 416.1201(a)(1).
2. Tract 2
The deed transferring title to Tract 2 reserved a life estate in a five-acre tract of the property (Tract 2a) for Leslie K~, leaving Leslie K~, Fred K~ and Orvil K~ a joint tenancy in the remainder interest. While Fred K~ retains the right to sell his remainder interest in Tract 2a, any purchaser's right to possession will not be realized until Leslie K~ passes. This interest in Tract 2a is a resource, but should be valued accordingly.
The remaining fifteen-acre parcel of Tract 2 (Tract 2b) is not subject to a life estate. Thus, Leslie K~, Fred K~ and Orvil K~ share an undivided interest in Tract 2b. As explained above, Fred K~ retains the right to sell his one-third interest in Tract 2b with or without the consent of Leslie K~ or Orvil K~, and it is a resource. 20 C.F.R. § 416.1201(a)(1).
B. Excludable Resources
The POMS provides that jointly held property that cannot be sold without undue hardship will be excluded from an individual's countable resources for SSI purposes. See POMS SI 01110.210.B. Undue hardship results if a co-owner (1) uses the property as his principal place of residence; (2) would have to move if the property were sold; and (3) has no other readily available housing. POMS SI 01130.130.A.2.
Claims representative Megan P~ ascertained that Leslie K~, who is now eighty-two years old, has been residing on the "west part" of Tract 2 for several years, that this is his principal place of residence, that he has no other place to live, and that selling the property would force him to move. Thus, he appears to meet the undue hardship requirements, and the property on which Leslie resides should be excluded as a countable resource to Fred K~ for as long as Leslie continues to live on the property. Id.
However, because it is unclear whether Leslie K~ is residing on all of Tract 2 or only the five acres described herein as Tract 2a, before determining which tract of land is an excludable resource, the Agency should seek to clarify this information. If it is only the five acres, Fred's remainder interest in Tract 2a and his one-third interest in Tract 2b would be a resource. If Leslie is residing on some other portion of the twenty acres, then a determination must be made whether severance of the joint tenancy in Tract 2b followed by a partitioning into thirds would work an undue hardship on Leslie. If not, then Fred's one-third interest in tract 2b and his one-third remainder interest in Tract 2a are resources. If so, then only Fred's one-third remainder interest in Tract 2a would be a resource.
C. The Public Aid Lien
We do not believe that the public aid lien encumbering Orvil K~'s interest in the properties affects the value of Fred K~'s interest in the property. Under Illinois law, a lien or mortgage encumbering one joint tenant's interest in the property cannot be enforced against a second joint tenant's interest in the property if the second joint tenant was not a party to the transaction creating the lien. See Harms, 473 N.E. 2d at 934 ("the property right of the mortgaging joint tenant is extinguished at the moment of his death. While John H~ was alive, the mortgage existed as a lien on his interest in the joint tenancy"). Although Illinois cases do not appear to address whether liens created pursuant to public aid statute would likewise be restricted to the property interest of the joint tenant/debtor, the relevant state statute governing public aid liens indicates that such liens would generally not attach to property that would not remain in the estate of the debtor after his death. See 305 Ill. Comp. Stat. 5/5-13 (public aid lien may be enforced against property remaining in "estate" of public aid recipient).
Given these considerations, in computing the equity value of Fred K~'s interest in the property, the Agency need not take into consideration the public aid lien encumbering Orvil K~'s interest in the property.
For these reasons, we believe that Fred K~ has a present salable ownership interest as a joint tenant in Tract 1 that constitutes a resource for SSI purposes.
We also believe that Fred K~ has a present salable ownership interest as a joint tenant in Tract 2b. His interest in Tract 2a consists of a remainder shared jointly with Orvil K~ and Leslie K~ that Fred K~, and this is a resource. Whether Fred K~'s interest in Tract 2b is considered an excludable resource depends Leslie's living situation, as discussed above.
C. PS 00-366 Information Pertaining to the Illinois Conservatorship Account of George W. P~, Jr.; SSN: ~
DATE: November 21, 1991
Under Illinois law, the funds in a conservatorship account are considered available for the individual's support. Thus, they are considered a resource for SSI purpose.
The Social Security Administration ("SSA") has asked whether, under Illinois law, it may count the funds in the conservatorship account of George W. P~, Jr., as Mr. P~'s "resource" in determining whether he is eligible for Supplemental Security Income benefits ("SSI"). Based on the facts as we understand them, we conclude that the funds are available for Mr. P~'s care and maintenance and, thus, may be considered his resource.
I. Facts of the Case
On November 4, 1987, the Circuit Court of Cook County, Illinois, Probate Division, appointed the South Holland Trust and Savings Bank ("South Holland Bank") as the plenary guardian of the estate of George W. P~, Jr., a mentally disabled individual. The court authorized South Holland Bank "to have the care, management and investment of the ward's estate and [sic] to do all acts required by law." The total value of Mr. P~'s estate is about $60,000, and SSA has determined that South Holland Bank placed these funds in a conservatorship account.
The claims folder contained one statement by South Holland Bank of disbursements from the conservatorship account. This statement was for the period from January 1, 1991 through May 10, 1991, and it showed that South Holland Bank made distributions for court costs ($15) and annual trustee fees ($500), but no distributions were made for the support of Mr. P~. According to South Holland Bank, it made these distributions with the approval of the probate court. The claims folder contained no further information about disbursements from the account.
II. Discussion of the Law and Related Materials
The primary purpose of the Supplemental Security Income 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 (1991). Under this program, if the value of an individual's resources exceed the resource limitation established by the Federal government, that person is not eligible for SSI benefits. 20 C.F.R. § 416.110(a) (1991); see also, e.g., 42 U.S.C §§ 1381a, 1382-1382j.
Although neither the Social Security Act nor the implementing regulations specifically address the issue in the instant case, the SSA Program Operations Manual ("POMS") describes the circumstances under which SSA will consider funds in a conservatorship account to be an individual's resource. POMS, § SI 01140.200(A)(4)(c) (July, 1990) (on "blocked" financial institution accounts)./ POMS provides that SSA should consider State law, and establishes the following policy for determining whether the such funds are a resource:
If State law specifically requires that funds be made available for the care and maintenance of the individual, assume, absent evidence to the contrary, that they are the individual's resource.
Id. (emphasis added); see also, e.g., POMS, § SI 01120.010C.3. (July, 1990) (also addressing "blocked" accounts).
According to POMS, SSA should presume that the funds in the conservatorship account are Mr. P~'s resource because, under Illinois law, the funds are "available" for his support. Id. The Illinois Probate Code provides that the guardian of the estate of a disabled adult — in the instant case, South Holland Bank — "shall apply the income and principal of the estate so far as necessary for the comfort and suitable support and education" of the disabled adult. Ill. Ann. Stat., ch 110 1/2 para. 11a-18 (Smith-Hurd Supp. 1991) (emphasis added). The language of this provision is mandatory, requiring that the guardian "shall apply the income and principle" for the support of the disabled adult. Id. (emphasis added). Although we found no case law or legislative history interpreting this language, we believe that a reasonable interpretation of the Illinois Probate Code is that the estate guardian must expend estate funds for the maintenance of the disabled adult. Cf. In re Estate of Berger, 520 N.E.2d 690, 697 (Ill. App. Ct. 1987) (explaining that a guardian need not obtain the court's permission before expending the ward's funds for the necessaries of the ward), appeal denied, 530 N.E.2d 244 (1988). Moreover, despite the fact that the claims folder indicates that South Holland Bank has not spent estate funds for Mr. P~'s support, the order of the probate court does not preclude South Holland Bank from using the funds for this purpose. Thus, the funds appear to be available for Mr. P~'s support and SSA should count them as his resource.
The regional POMS instructions for Illinois also support our conclusion. Region V Supplement to the Programs Operations Manual, § SI RO1120.010 (May, 1991) (interpreting Illinois law) (copy attached). Since Illinois law requires the estate guardian to distribute estate funds for the support of the disabled adult, the funds are "accessible," and therefore must be counted as the resource of the disabled adult. Id.
Finally, our conclusion comports with the purpose of SSI benefits. 20 C.F.R. § 416.110 (1991). Mr. P~ has an estate worth about $60,000. This amount greatly exceeds the program's resource limitations, and State law appears to require that it must be used for his support. 20 C.F.R. § 416.1205 (1991); Ill. Ann. Stat. ch. 110 1/2 para. 11a-18. As a result, Mr. P~ does not appear to belong to the class of low-income, disabled individuals that Congress intended to assist through the SSI program.
III. Other Considerations
It should be noted that POMS, which focuses on whether funds are available to an individual for his support,/ might be construed to deviate from the Secretary's regulations. The regulations define the term "resource" as assets or property that "an individual owns and could convert to cash to be used for is or her support or maintenance." 20 C.F.R. § 416.1201(a) (1991) (emphasis added). This language implies that an individual, himself, must have access to his property, and be able to convert it, before SSA may count the property as his resource. We believe, however, that POMS and the regulations can be read harmoniously. Since Illinois law requires an estate guardian to act in the best interests of the individual when managing his estate and, indeed, since it directs the guardian to use the estate funds for the support of the individual, no tangible distinction exists between the individual having access to his property and the guardian, who acts for him, having access. Ill. Ann. Stat. ch. 110 1/2 para. 11a-3(b), 11a-18; see also, e.g., In re Estate of Berger, 520 N.E.2d at 697. (explaining that the estate guardian is a fiduciary of a disabled