PS 01810.018 Iowa

A. PS 01-023 Proper Valuation of Inherited Property When Such Assets are Part of an Estate and the Heir Seeks SSI Entitlement

DATE: August 2, 1999

1. SYLLABUS

This opinion contains a State-by-State synopsis for the Kansas City Region of when inherited property or property in an unprobated estate is income or a resource to the heir for SSI purposes.

2. OPINION

You requested a legal opinion reviewing Kansas state law on inheritances. Specifically, you sought an explanation as to when title to personal property passes to an heir when an estate is in probate so as to determine eligibility for SSI benefits and if any statutory or common law changes had taken place since 1994 if this response was contrary to earlier advice. You asked for a review of the state laws in Iowa, Missouri, and Nebraska in regard to when title to real and personal property passes to an heir. You further asked if crops could be added to the list of examples of personal property in Kansas. Below is our response to the specific issues raised.

Your request was occasioned by a letter from an attorney who represented an SSI recipient. The recipient's benefits had been withheld when it was learned that she was the beneficiary of her mother's estate, the proceeds of which were later placed in a special needs trust in the interest of the recipient. In his letter, the attorney stated that the Agency's action denying benefits was in error because the SSI recipient did not have a possessory interest in the personal property of her mother's estate before such estate was probated. The attorney stated that Kansas law holds that the personal representative takes title to personal property of the estate of a deceased person. He also stated that unharvested crops were personal property under Kansas law.

Background

Generally, a resource, for SSI purposes, includes assets that an individual owns and could convert to cash to be used for his or her support. See 20 C.F.R. § 404.1201(a) (1998). If the individual has the right, authority, or power to liquidate the property (or his or her share of the property), it is a resource.

See id. Under the Program Operations Manual (POMS), an individual is deemed to have an ownership interest in an unprobated estate when documents such as a will or court records indicate that the individual is an heir to the property of a decedent, or the individual has use of the property or receives income from it, or the individual is related to the decedent such that he or she is entitled to a share of the property under state intestacy laws, and the inheritance, use of income, and distributions are uncontested. POMS SI 01120.215B(2). The interest in an unprobated estate is not considered a resource, however, until the month following the month in which it meets the definition of income. POMS SI 01120.215B(3).

An inheritance is considered income when it is received. See POMS SI 00830.550; see generally 20 C.F.R. § 416.1123(a). Inheritance is generally assumed to be received, absent regional instructions regarding state law to the contrary, at the earliest of either the date the individual alleges receiving the inheritance, or the date the estate is closed. See POMS SI 0083.55B(B)(2).

Iowa Law

Iowa law provides that:

Except as otherwise provided in this Code, when a person dies, the title to his property, real and personal, passes to the person to whom it is devised by his last will, or, in the absence of such disposition, to the persons who succeed to his estate as provided in this Code, but all of his property shall be subject to the possession of the personal representative as provided in section 633.351 and to the control of the court for the purposes of administration, sale, or other disposition under the provisions of law, and such property, except homestead and other exempt property, shall be chargeable with the payment of debts and charges against his estate. . . .

Iowa Code Ann. § 633.350 (West 1964). Interests in Iowa real estate by reason of a deceased's will pass immediately at the time of death and are not dependent on the probating of the wills. See DeLong v. Scott, 217 N.W.2d 635, 637 (Iowa 1974); Palmer v. Evans, 124 N.W.2d 856, 862 (Iowa 1963). Iowa law does not prohibit heirs from disposing of their ownership interest in real or personal property while an estate is in probate. Reichard v. Chicago, B. & Q. R. Co., 1 N.W.2d 721 (Iowa 1942) Even though real or personal property may be in the custody of personal representative, equitable title to the property is in the heirs, subject to the claims of creditors. In re M~'s Estate, 254 N.W. 84, 85 (Iowa 1934). When an heir receives less than 100 hundred percent interest in the property, he or she and the other heirs take the property as tenants in common. Porter v. Tracey, 162 N.W. 800 (Iowa 1917). A co-tenant may sell, convey, lease, mortgage, or encumber his undivided interest in personal or real property, just as any other property he or she owns, without the consent of other co-tenants. Frederick v. Shorman, 147 N.W.2d 478, 484 (Iowa 1966); In re S~'s Estate, 36 N.W.2d 815, 822 (Iowa 1949). In Reichard v. Chicago, B. & Q. R. Co., the Iowa Supreme Court stated:

Under the decisions of this court, an assignment or conveyance of an executory interest, or a naked possibility of a property right, or an expectancy of heirship or testamentary gift, is valid, if fairly made and free from any unconscionable advantage, and is enforceable when it has ripened.

1 N.W.2d at 730 (citations omitted). See also Bogenrief v. Law, 271 N. W. 229, 233 (Iowa 1937); Johnson v. Coler, 174 N.W. 654, 656 (Iowa 1919). In Fischer v. Klink, 14 N.W.2d 695 (Iowa 1944), the court held that an heir under a will, who was entitled to 1/12 of the proceeds of a sale of land when sold, had an interest subject to assignment. Id. at 698.

In summary, heirs have an ownership interest in real or personal property effective upon the death of a decedent. They have a right to sell real or personal property and this right is not suspended during the probate of the will unless the terms of a will are being contested. See Matter of Estate of Franzkowiak, 290 N.W.2d 1, 4 (Iowa 1980).

Valuation Problems

Some problems may arise when the agency tries to appraise the fair market value of personal property that is held in probate. It should be remembered by anyone appraising such property that the fair market value of such items is reduced by the fact that the heir has only an equitable interest in such property. True fair market value can only be measured when an heir has legal title to transfer such property.

Determining the fair market value of that interest prior to the distribution of the estate may be difficult in some cases, however, since personal and real property may be sold or the interest in the estate may be expended to cover the obligations of the estate. If the estate has little or no debt, the heir's interest may be fairly easily determinable at the date of death. If the estate is heavily indebted or the amount of indebtedness is unknown, the heir's interest may be so speculative as to render it without any fair market value. Should assistance be required in properly evaluating the value of an estate, you may refer any relevant information to our office for an opinion.

Crops as Personal Property

In Kansas, crops growing on land at the time of death of a decedent pass to the personal representative as part of the personal property of the estate. Lindholm v. Nelson, 264 P. 50 (Kan. 1928). Unharvested crops are also considered personal property in Iowa, Jones v. Hughes, et al., 506 N.W.2d 810 (Iowa Ct. App. 1993), Missouri, Davis v. Cramer, 176 S.W. 85 (Mo. App. 1915) and Nebraska, In re M~'s Estate v. Knicely, et al., 287 N.W. 760 (Neb. 1939). Therefore, POMS SI 01110.100C should include crops as personal property for all four states in Region VII.

Summary

In all states in our region, you may assume that an individual has an alienable property interest in an estate as of the date of death of the testate or intestate. Therefore, an interest would be received and constitute income or a resource as of the date of death.

If the individual has attempted to disclaim his or her interest, or if there are any other unresolved issues that prevent you from determining the income or resource status of an inheritance, we suggest that you refer any relevant information to our office for an opinion.

B. PS 00-463 Proper Valuation of Inherited Property When Such Assets are Part of an Estate and the Heir Seeks SSI Entitlement

DATE: August 2, 1999

1. SYLLABUS

This opinion summarizes the inheritance laws for the four States of Region VII. In all four States an heir is considered to have received an ownership interest in an estate as of the date of death of the decedent. This is true even if the estate's property is in probate. For SSI purposes, receipt of ownership interest in an estate counts as income in the month of death and the ownership interest counts as a resource in the following month. In addition, unharvested crops are considered part of the personal property of the estate in all four States in Region VII.

2. OPINION

You requested a legal opinion reviewing Kansas state law on inheritances. Specifically, you sought an explanation as to when title to personal property passes to an heir when an estate is in probate so as to determine eligibility for SSI benefits and if any statutory or common law changes had taken place since 1994 if this response was contrary to earlier advice. You asked for a review of the state laws in Iowa, Missouri, and Nebraska in regard to when title to real and personal property passes to an heir. You further asked if crops could be added to the list of examples of personal property in Kansas. Below is our response to the specific issues raised.

Your request was occasioned by a letter from an attorney who represented an SSI recipient. The recipient's benefits had been withheld when it was learned that she was the beneficiary of her mother's estate, the proceeds of which were later placed in a special needs trust in the interest of the recipient. In his letter, the attorney stated that the Agency's action denying benefits was in error because the SSI recipient did not have a possessory interest in the personal property of her mother's estate before such estate was probated. The attorney stated that Kansas law holds that the personal representative takes title to personal property of the estate of a deceased person. He also stated that unharvested crops were personal property under Kansas law.

Background

Generally, a resource, for SSI purposes, includes assets that an individual owns and could convert to cash to be used for his or her support. See 20 C.F.R. § 404.1201(a) (1998). If the individual has the right, authority, or power to liquidate the property (or his or her share of the property), it is a resource.

See id. Under the Program Operations Manual (POMS), an individual is deemed to have an ownership interest in an unprobated estate when documents such as a will or court records indicate that the individual is an heir to the property of a decedent, or the individual has use of the property or receives income from it, or the individual is related to the decedent such that he or she is entitled to a share of the property under state intestacy laws, and the inheritance, use of income, and distributions are uncontested. POMS SI 01120.215B(2). The interest in an unprobated estate is not considered a resource, however, until the month following the month in which it meets the definition of income. POMS SI 01120.215B(3).

An inheritance is considered income when it is received. See POMS SI 00830.550; see generally 20 C.F.R. § 416.1123(a). Inheritance is generally assumed to be received, absent regional instructions regarding state law to the contrary, at the earliest of either the date the individual alleges receiving the inheritance, or the date the estate is closed. See POMS SI 0083.55B(B)(2).

Iowa Law

Iowa law provides that:

Except as otherwise provided in this Code, when a person dies, the title to his property, real and personal, passes to the person to whom it is devised by his last will, or, in the absence of such disposition, to the persons who succeed to his estate as provided in this Code, but all of his property shall be subject to the possession of the personal representative as provided in section 633.351 and to the control of the court for the purposes of administration, sale, or other disposition under the provisions of law, and such property, except homestead and other exempt property, shall be chargeable with the payment of debts and charges against his estate. . . .

Iowa Code Ann. § 633.350 (West 1964). Interests in Iowa real estate by reason of a deceased's will pass immediately at the time of death and are not dependent on the probating of the wills. See DeLong v. Scott, 217 N.W.2d 635, 637 (Iowa 1974); Palmer v. Evans, 124 N.W.2d 856, 862 (Iowa 1963). Iowa law does not prohibit heirs from disposing of their ownership interest in real or personal property while an estate is in probate. Reichard v. Chicago, B. & Q. R. Co., 1 N.W.2d 721 (Iowa 1942) Even though real or personal property may be in the custody of personal representative, equitable title to the property is in the heirs, subject to the claims of creditors. In re M~'s Estate, 254 N.W. 84, 85 (Iowa 1934). When an heir receives less than 100 hundred percent interest in the property, he or she and the other heirs take the property as tenants in common. Porter v. Tracey, 162 N.W. 800 (Iowa 1917). A co-tenant may sell, convey, lease, mortgage, or encumber his undivided interest in personal or real property, just as any other property he or she owns, without the consent of other co-tenants. Frederick v. Shorman, 147 N.W.2d 478, 484 (Iowa 1966); In re S~'s Estate, 36 N.W.2d 815, 822 (Iowa 1949). In Reichard v. Chicago, B. & Q. R. Co., the Iowa Supreme Court stated:

Under the decisions of this court, an assignment or conveyance of an executory interest, or a naked possibility of a property right, or an expectancy of heirship or testamentary gift, is valid, if fairly made and free from any unconscionable advantage, and is enforceable when it has ripened.

1 N.W.2d at 730 (citations omitted). See also Bogenrief v. Law, 271 N. W. 229, 233 (Iowa 1937); Johnson v. Coler, 174 N.W. 654, 656 (Iowa 1919). In Fischer v. Klink, 14 N.W.2d 695 (Iowa 1944), the court held that an heir under a will, who was entitled to 1/12 of the proceeds of a sale of land when sold, had an interest subject to assignment. Id. at 698.

In summary, heirs have an ownership interest in real or personal property effective upon the death of a decedent. They have a right to sell real or personal property and this right is not suspended during the probate of the will unless the terms of a will are being contested. See Matter of Estate of Franzkowiak, 290 N.W.2d 1, 4 (Iowa 1980).

Valuation Problems

Some problems may arise when the agency tries to appraise the fair market value of personal property that is held in probate. It should be remembered by anyone appraising such property that the fair market value of such items is reduced by the fact that the heir has only an equitable interest in such property. True fair market value can only be measured when an heir has legal title to transfer such property.

Determining the fair market value of that interest prior to the distribution of the estate may be difficult in some cases, however, since personal and real property may be sold or the interest in the estate may be expended to cover the obligations of the estate. If the estate has little or no debt, the heir's interest may be fairly easily determinable at the date of death. If the estate is heavily indebted or the amount of indebtedness is unknown, the heir's interest may be so speculative as to render it without any fair market value. Should assistance be required in properly evaluating the value of an estate, you may refer any relevant information to our office for an opinion.

Crops as Personal Property

In Kansas, crops growing on land at the time of death of a decedent pass to the personal representative as part of the personal property of the estate. Lindholm v. Nelson, 264 P. 50 (Kan. 1928). Unharvested crops are also considered personal property in Iowa, Jones v. Hughes, et al., 506 N.W.2d 810 (Iowa Ct. App. 1993), Missouri, Davis v. Cramer, 176 S.W. 85 (Mo. App. 1915) and Nebraska, In re M~'s Estate v. Knicely, et al., 287 N.W. 760 (Neb. 1939). Therefore, POMS SI 01110.100C should include crops as personal property for all four states in Region VII.

Summary

In all states in our region, you may assume that an individual has an alienable property interest in an estate as of the date of death of the testate or intestate. Therefore, an interest would be received and constitute income or a resource as of the date of death.

If the individual has attempted to disclaim his or her interest, or if there are any other unresolved issues that prevent you from determining the income or resource status of an inheritance, we suggest that you refer any relevant information to our office for an opinion.


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/1601810018
PS 01810.018 - Iowa - 07/01/2002
Batch run: 11/29/2012
Rev:07/01/2002