Issue
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.
Short Answer
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.
(Emphasis added.)
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.
Legal Analysis
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.
Conclusion
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
By:__________
Dorrelyn K. D~
Assistant Regional Counsel