TN 2 (06-06)
PS 01810.037 North Dakota
A. PS 06-149 Authority to Sell or Assign Interest in a Limited Partnership (Henrietta B~)
DATE: May 31, 2006
This opinion discusses whether an SSI beneficiary's interest in a limited partnership is a countable resource for SSI purposes. North Dakota has adopted the Uniform Limited Partnership Act (ULPA) governing the assignability of an interest in a limited partnership. Under the terms described in the ULPA a transfer of the right to receive distributions is permissible, and the transferring partner has the option of terminating all rights in the partnership through disassociation. The terms of the limited partnership in this case permit transfer of one partner's interest to a member of the immediate family and, effectively, disassociation resulting in termination of all partnership rights. Since the SSI beneficiary's interest is assignable she retains the ability to convert her transferable interest to cash for use in meeting support and maintenance needs. As such, the beneficiary's interest in the familial limited partnership is a countable resource for purposes of determining SSI eligibility.
You requested an opinion as to whether a supplemental security income (SSI) recipient who is a limited partner in her family's business has the authority to assign, e.g., sell, her interest in the limited partnership to another person.
Pursuant to the Partnership Agreement (Agreement) and Certificate of Limited Partnership (Certificate) that you provided, and consistent with North Dakota state law, we believe the SSI recipient in question has the authority to assign her interest in the partnership to a member of her immediate family. If she does not assign her interest, the interest counts as a resource for purposes of determining her eligibility for SSI benefits. If, however, the SSI recipient does assign her interest, thus terminating all of her rights to the partnership according to the Agreement, the interest would no longer be a resource and would not affect her SSI eligibility.
Background and Facts
In November 2005, North Dakota claims representative Becky Broer sent an e-mail to Denver Regional Office program specialist Diane Barton regarding supplemental security income (SSI) recipient Henrietta B~. Ms. Broer indicated that the Agency recently learned that Ms. B~ was a limited partner in her family's business. As an SSI recipient, Ms. B~ is subject to income and resource limits because SSI is a need-based program, and her interest in the limited partnership could affect her eligibility, depending on its value.
Documents you provided indicate that the Agency awarded Ms. B~, a North Dakota resident, SSI disability benefits as of June 2001. In 2005, the Agency learned that Ms. B~ and her family previously established a limited partnership (S.S.B. Partnership) in 1982.
According to the Certificate, dated December 31, 1982, the purpose of S.S.B. Partnership was "to purchase, lease and sell real estate, including farm and ranch properties, and to engage in the business of ranching and farming." Ms. B~'s brother, A.J. S~, is the general partner of S.S.B. Partnership. The limited partners are Adeline S~, Ed S~, T.J. S~, Christine S~, and Ms. B~.
The documents accompanying your opinion request indicate that Mr. A.J. S~ does not believe Ms. B~ has the right to sell or assign her interest to anyone else.
The Certificate contains the following provision regarding the transfer of partnership interests:
Subject to the provision of the [Agreement], each limited partner has the right to sell or assign his or her interest to any member of his or her immediate family, who shall then be entitled to be admitted as a limited partner for the percentage interest equal to the amount of the interest transferred, which shall reduce the percentage of the limited partner so selling, transferring, giving, or assigning. Other than as specified herein, the partners do not have the right to admit additional partners, nor the right to substitute an assignee as contributor in his or her place.
The Agreement, in turn, contains the following relevant provisions:
N. RESTRICTIONS ON THE TRANSFER OF PARTNERSHIP INTERESTS
1. No  Partner, General or Limited, may assign or otherwise transfer his interest nor voluntarily withdraw or otherwise terminate his participation in this partnership, except as provided in Section O. An "assignment or other transfer" for this purpose includes, but is not limited to, a sale, exchange, hypothecation, collateral assignment, or subjection to a security interest.
O. TERMINATION OF PARTNERSHIP INTERESTS
1. The termination of the interest of a General or Limited Partner shall occur upon the death, incapacity, bankruptcy, or withdrawal of the Partner or the assignment of his interest in the Partnership as provided in Section N.
3. . . . . In the event that the Partnership is unable to obtain financing, then and in that event, all restrictions upon the transfer of an interest . . . shall be deemed waived . . . .
(Emphasis added.) In sum, Section N defines "assignments" and indicates that partners may assign their interests pursuant to Section O. Section O indicates that a partner's interest in the partnership is terminated if she assigns her interest via the methods set forth in section N (sale, exchange, etc.). Section O goes on to state that if the partnership is unable to obtain financing, the partner may assign his or her interest free of any restrictions
Applicable Law and Policy
1. Federal Law
"The basic purpose underlying the [SSI] program is to assure a minimum level of income for people who are age 65 or over, or who are blind or disabled and do not have sufficient income and resources to maintain a standard of living at the established Federal minimum income level." 20 C.F.R. § 416.110 (2005).
In order to be eligible for SSI, the individual must not have income or resources that exceed the limits set forth in the regulations. Id. at §§ 416.202(c-d); 416.1201 et seq. (resources and exclusions). "Resources" are defined as:
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. If a property right cannot be liquidated, the property will not be considered a resource of the individual (or spouse).
Id. at § 416.1201(a-b).
2. Agency Policy
For purposes of entitlement to SSI benefits, the POMS specifies that "[o]wnership interests . . . can occur in various types and forms . . . [and] are significant in determining resource eligibility." POMS SI 01110.500.
The POMS tracks the regulations and classifies resources as "cash and any other personal property, as well as any real property, that an individual . . . owns; has the right, authority, or power to convert to cash (if not already cash); and is not legally restricted from using for his/her support and maintenance." Id. SI 01110.100. "Real property is land, including buildings or immovable objects attached permanently to the land. . . . Personal property is any property that is not real property. The term encompasses such things as cash, jewelry, household goods, tools, life insurance policies, and automobiles." Id.
3. State Law
North Dakota has adopted the Uniform Limited Partnership Act (ULPA). The ULPA specifies that the statute applies, "except as the partners otherwise elect in the manner provided in the partnership agreement . . . ." 45 N.D. Cent. Code at § 45-10.2-03(4) (2005).
The ULPA states:
A transfer, in whole or in part, of the transferable interest of a partner:
a. Is permissible;
b. Does not by itself cause the dissociation of a partner or a dissolution and winding up of the activities of the limited partnership; and
c. Does not, as against the other partners of the limited partnership, entitle the transferee:
(1) To participate in the management or conduct of the activities of the limited partnership;
(2) To require access to information concerning the transactions of the limited partnership . . .; or
(3) To inspect or copy the required information or the other records of the limited partnership.
(Emphasis added.) Id. at § 45-10.2-63(1).
"Transfer" is defined as "an assignment, conveyance, deed, bill of sale, lease, mortgage, security interest, encumbrance, gift, and transfer by operation of law." Id. at § 45-10.2-02(43).
The ULPA indicates that "[t]he only interest of a partner that is transferable is the transferable interest of the partner." Id. at § 45-10.2-62. "'Transferable interest'" means the right of a partner to receive distributions." Id. at § 45-10.2-02(44). Moreover, the transferable interest, i.e., the partner's right to receive distributions, is considered personal property. Id. at § 45-10.2-62.
The ULPA indicates that when a transfer, i.e., an assignment, is made, "the transferor retains the rights of a partner other than . . . [the right to the] distributions transferred . . . ." Id. at § 45-10.2-63(4).
There is a statutory exception to this retention of rights in the partnership where a limited partner "dissociates" from the partnership. The effect of dissociation is that the person "does not have further rights as a limited partner." Id. at § 45-10.2-56(1)(a). While the ULPA provision on dissociation initially states that a person does not have the right to dissociate as a limited partner before the termination of the limited partnership (Id. at 45-10.2-55(1)), the provision goes on to indicate that dissociation may occur in a number of ways. For example, "[a] person is dissociated from a limited partnership as a limited partner upon the occurrence of . . . an event agreed to in the partnership agreement as causing the dissociation of a person as the limited partner. . . ." Id. at § 45-10.2-55(2)(b). Thus, a partner can dissociate from a partnership prior to the termination of the partnership, to the extent the Agreement allows it.
1. Whether Ms. B~ Can Assign Her Interest in the Partnership
To determine whether Ms. B~ can sell or otherwise assign her interest in S.S.B. Partnership, we must look not only at the State law, in this case the ULPA, but also at the specific terms of the Agreement and its accompanying Certificate.
The ULPA provides that a limited partner may generally transfer (e.g., assign) her transferable interest, that is, she may give someone else her right to receive profit distributions, except as otherwise provided in the Agreement. See 45 N.D. Cent Code §§ 45-10.2.62 (ULPA applies except as partners designate otherwise in Agreement), 45-10.2.63(1)(a) (transfers of transferable interests are permissible), 45-10.2-02(44) ("transferable interest" means right to receive distributions), 45-10.2-02(43) (transfers include assignments, sales, etc.)
Here, the Certificate specifies that S.S.B. Partnership interests may be assigned only to members of the immediate family, "subject to the terms of the [Agreement]." Section N of the Agreement, in turn, specifically discusses and defines assignments. It indicates that assignments include sales. Section N also indicates that assignments are permissible under Section O. Section O holds that when a partner assigns her interest, the effect is that her partnership interest is "terminated." Section O goes on to discuss transfers of interest in other contexts, such as the waiver of restrictions on transfers if the partnership is unable to obtain financing in certain situations.
Therefore, reading the Agreement in conjunction with the Certificate, we believe that Ms. B~ has the general right to assign her transferable interest (her right to receive profit distributions) in S.S.B. Partnership to a member of her immediate family. Normally, under the ULPA, when a partner assigns her transferable interest, she retains her other rights as a partner, such as her right to engage in management of the limited partnership's activities. Id. at §§ 45-10.2-63(1)(c)(1-3), 45-10.2-63(4). However, the statute provides that when the partner dissociates from the partnership via a method set forth in the Agreement, the partner does not retain any rights in the partnership. Id. at §§ 45-10.2-55(2)(b) (methods of dissociation); 45-10.2-56(1)(a) (dissociation ends all rights as a partner). We believe the Agreement in this case sets forth just such a method for dissociation. In other words, the Agreement describes circumstances by which a partner may be relieved of all rights to the partnership, rather than just her right to receive profit distributions.
As noted above, the Agreement specifies that an assignment of an interest is one method of "terminating" the partner's interest in S.S.B. Partnership (the other methods of termination are death, incapacity, bankruptcy, or withdrawal). We interpret "termination of partnership interests" as synonymous with "dissociation" under the ULPA. Thus, we believe that if Ms. B~ assigns her S.S.B. Partnership interests to anyone, she dissociates from S.S.B. Partnership and does not retain any rights.
For the reasons set forth above, we conclude that Ms. B~ has a right to assign her interest in S.S.B. Partnership to an immediate family member, and that assigning her interest would dissociate her from the partnership and dissolve all of her rights to the partnership. We note that the evidence you provided did not indicate that Ms. B~ had already assigned her interest, or that she had any intention of doing so in the future. Thus, we assume she still owns her interest in S.S.B. Partnership and has all the rights of a limited partner.
b. Whether Ms. B~'s Interest in the Partnership Is a Resource
The next issue for determination is whether Ms. B~'s interest in S.S.B. Partnership constitutes a resource for purposes of establishing her eligibility for SSI benefits. A resource is cash, personal property, or real property that an individual owns; has the right, authority, or power to convert to cash (if not already cash); and is not legally restricted from using for her support and maintenance. POMS SI 01110.100(B) (resources defined); see also 20 C.F.R. § 416.1201(a-b).
The ULPA states that a transferable interest in a limited partnership is considered personal property, which satisfies the first prong of the resource definition. 45 N.D. Cent Code § 45-10.2-62. Assuming Ms. B~ has not yet assigned her interest to another person, she currently owns her interest in S.S.B. Partnership, which satisfies the second prong of the definition. And, as discussed above, she has the right under the ULPA and under the Agreement and Certificate to assign (e.g., sell) her interest to a member of her immediate family. Thus, she can convert her transferable interest to cash, which satisfies the third prong of the definition. We are aware of no legal restrictions that would prevent Ms. B~ from using her transferable interest for her own support and maintenance. Therefore, Ms. B~'s transferable interest in S.S.B. Partnership (assuming she has not already assigned it) constitutes a resource for purposes of SSI eligibility.
As discussed above, the Agreement specifies that an assignment terminates the partner's interests in S.S.B. Partnership, i.e., dissociates the person as a limited partner. Under the ULPA, dissociation results in a loss of all rights as a partner. Therefore, if Ms. B~ assigned her transferable interest to a family member, she would have no other rights to S.S.B. Partnership that could be appraised or counted as a resource.
Accordingly, we advise that:
Ms. B~ has the right to assign (e.g., sell) her partnership interest in S.S.B. Partnership to an immediate family member pursuant to the Limited Partnership Agreement and Certificate of Limited Partnership, and in accordance with applicable State law.
(2) Ms. B~'s interest in S.S.B. Partnership is a resource unless and until she assigns it away (thereby terminating her interest in S.S.B. partnership in accordance with the Agreement).
Deana R. E~L~
Regional Chief Counsel
Dorrelyn K. D~
Assistant Regional Counsel