PS 01810.055 Wisconsin

A. PS 04-344 SSI-Wisconsin- Review of Life Insurance Funded Burial Trust for Marilyn B. U~ Your Ref: SI-2-1-4 WI (U~) Our ref: 04 P 020

DATE: September 21, 2004

1. SYLLABUS

The issue is whether a Life Insurance Funded Burial Contract (LIFBC) is a resource for SSI or if such a contract establishes a trust that is a resource for SSI.

In this case, an irrevocable life insurance policy was used to purchase a pre-need burial contract. The life insurance policy had a "Thirty Day Right to Examine the Policy" clause giving the individual the right to return the policy for a full refund of her payment during the 30-day examination period. The life insurance policy was irrevocably assigned to a third party with the funeral home sufficiently identified as the beneficiary.

Based on the facts of the case the resource determination for the four potential resources are as follows:

The pre-need burial contract is a resource with no value because we assume that such agreements, when purchased with a life insurance policy, have no resource value and are not salable.

The irrevocable life insurance policy is a resource for the first 30-days because the policy holder has the unrestricted right to return the policy used to fund the pre-need burial contract for a full refund of her money. After the 30-day period, the policy is no longer a resource to the policy holder because it is irrevocable and assigned to a third party.

The facts of the case establish that the policy holder did establish an irrevocable trust when she assigned the life insurance policy to a third party with the funeral home as beneficiary. Since the policy holder "(A) irrevocably contracted with a provider of funeral services and (B) pre-paid and (C) established an irrevocable trust naming the funeral home as a beneficiary we conclude that the funeral home established the trust for Federal law purposes." The established trust is not considered a resource for SSI purposes.

Legally, Ms. U~ could sell her equitable interest in the trust (as there is nothing in the trust or contract prohibiting such a sale); but, because the trust is funded with a life insurance policy on Ms. U~'s life, such that the funds can only become available on her death, Ms. U~'s equitable interest in the trust has no discernable market value.

In conclusion, the only resource that is countable and has a value is the life insurance policy only during the 30-day examination period.

OPINION

You have asked for our assistance in determining whether the burial trust is a countable resource to Marilyn U~ for SSI purposes. We have concluded that the life insurance policy was a resource for the first thirty days it was in effect. After that, however, the life insurance policy is not a resource and the life insurance policy to which the trust was assigned, might be a resource, but has no market value.

BACKGROUND

The materials that you sent to us consist of a "Single Premium Whole Life Policy" that Ronald U~ purchased on May 9, 2003. The policy identifies Marilyn U~ as the "covered person" and it identifies Ronald U~ as its owner. The policy has a face value amount of $3,688.00 and a death benefit of $3,688.00.

The materials also include a pre-need funeral arrangement contract ("Contract") between Ronald U~, for Marilyn U~, listed as the Purchaser, and the Church & Chapel Funeral Service of New Berlin, Wisconsin. The contract specifically identifies Ronald U~ as the "Purchaser" of the policy and Church & Chapel Funeral Service as the "Provider." A licensed funeral director signed this form, as did Ronald U~.

The Contract contains a section entitled "Assignment of Policy Ownership" on page four. This section states, in part, that the Purchaser has assigned ownership rights of the insurance policy to the Great Western Funeral Trust and that the Contract is financed by the insurance policy. The purpose of the assignment is to assure that ownership rights of the insurance policy are transferred in order to fund the Contract for Marilyn U~'s burial services. Mr. U~ initialed a line that purported to make this assignment "irrevocable." According to the document, the Purchaser thereby could not surrender the policy for cash or obtain a policy loan. In addition, by initialing the agreement, Ronald U~ warranted that the proceeds paid under the insurance policy would be used solely for the purpose of funding the funeral merchandise and burial services selected in the Contract. Irrevocably assigning ownership of the policy required that all of the funds had to be used for the burial expenses, but the Purchaser retained the right to designate a new funeral provider.

The Contract specified funeral provider services of $1010.00 ($835.00 for the basic professional services and $175.00 for graveside service), and merchandise of $1670.00 ($896.00 for the casket, $750.00 for the outer burial container, and $24.00 for prayer cards). In addition, the agreement listed cash advance items (death certificate, the cost of opening and closing the grave, an honorarium, and flowers) of $898.00. Altogether, these items constituted a total pre-need cost of $3578.00, the initial purchase price of the policy.

On August 15, 2003, the Waukesha, Wisconsin district office indicated that this "claim" was denied due to "disposal of assets." The district office expressed concern that Marilyn U~ was not the owner of this policy.

On November 25, 2003, Mr. U~ asked the Agency to reconsider the denial decision in light of some changes made and some additional documentation that he supplied. A Report of Contact explained that Mr. U~, Marilyn U~'s brother, had intended to purchase the policy as Marilyn's legal guardian. Mr. U~ submitted a court document, Letters of Guardianship, indicating that, in 1995, a Wisconsin court had appointed him as the guardian of Marilyn U~'s estate and as the guardian of her person. Mr. U~ also submitted a revised policy, which identified Marilyn U~ as the "Insured," or covered person and the "Insured" as the owner. All other items on the policy remain the same as before.

DISCUSSION

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash to be used for her support and maintenance. See 20 C.F.R. § 416.1201(a). If the individual has the right, authority, or power to liquidate property, it is a resource. Id. A life insurance policy constitutes a resource if the individual can surrender it for cash or recover premiums paid. See 20 C.F.R. § 416.1230. A prepaid burial contract is a resource if it is revocable or salable. POMS SI 001130.42. Trusts can also constitute a resource with specific statutory provisions addressing trusts created after January 1, 2000. See 42 U.S.C. § 1382b(e).

A life insurance funded burial contract involves an individual purchasing a life insurance policy in her name and then assigning, revocably or irrevocably, the ownership of that policy to a third party, generally, a funeral provider. The purpose of such an assignment is to fund a prearranged burial contract. POMS § SI 01130.425(A)(1). Here, Marilyn U~ (through her guardian) purchased a life insurance policy which she irrevocably assigned to a trust as part of a pre-need funeral agreement. In the same transaction, Ms. U~ agreed that policy proceeds could be used only for funeral and burial services. This arrangement raises three issues that we address in turn: (1) is the pre-paid burial agreement a resource; (2) is the life insurance policy a resource; and (3) is the trust to which Ms. U~ assigned the policy a resource?

The first question is easily answered. When a pre-paid burial agreement is funded by a life insurance policy, we assume that the burial contract itself has no resource value and is not salable. POMS SI 01130.425(B)(1). Thus, the prepaid burial agreement is not a resource.

Turning to the life insurance policy, if the Life Insurance Funded Burial Contract is not valid under state law, the value of the life insurance policy is a resource. POMS SI CHI 01130.426(A). Wisconsin law provides that if an individual pays money to fund a prearranged funeral contract, the money is considered to be held in trust and the trust can be made irrevocable only up to $3,000.00. Wisconsin Statutes Annotated (W.S.A.) § 445.125(1) (a)(1). Wisconsin law also expressly allows the assignment of proceeds of a life insurance policy to fund a pre-need funeral arrangement. W.S.A. § 632.415(2), formerly W.S.A. § 632.41(2) became effective June 1, 1997. But this law does not limit the ability to irrevocably assign the proceeds of a life insurance policy to fund a pre-need funeral agreement, so long as the policy holder can designate a different beneficiary and designate a different funeral director or operator of a funeral home to receive the assignment of proceeds. W.S.A. § 632.415(2)-(3). Here, the terms of the assignment specifically state that Ms. U~ has retained the right to change the assignee to another funeral home. And the policy further indicates that the owner may change the beneficiary by notifying the insurance company in writing, although it recognizes that where the Contract is used to fund a pre-need funeral arrangement contract, excess proceeds would go to the insurance beneficiary or her estate. Thus, Ms. U~'s Life Insurance Funded Burial Contract is valid under Wisconsin law.

The life insurance policy will be a resource for the first thirty days after issuance. Under Wisconsin law, a policy holder has the unrestricted right to return a life insurance policy used to fund a pre-need funeral agreement within 30 days after the policy holder receives the policy. If the policy holder returns the policy, the insurance contract is void and all payments made must be refunded directly to the policy holder. Wis. Admin. Code § Ins. 23.20(1)(e). This right should be conspicuously printed on the front of the policy and would, presumably, remain with the insured who purchased the policy even after that policy has been assigned to the funeral provider. The policy purchased by Ms. U~ has the "Thirty Day Right to Examine the Policy" very conspicuously printed on its cover page. Thus, this policy would constitute a resource to Ms. U~ for the first thirty days after it was issued.

After the 30-day period during which a life insurance policy issued for a burial agreement is revocable, such policy would not be a resource if: (1) the policy holder has irrevocably assigned the proceeds of the policy while retaining the right to designate a different funeral director or operator of a funeral establishment according to the statutory scheme; (2) the policy holder has the right to change the beneficiary; (3) the policy holder has either irrevocably assigned or waived the right to obtain the cash surrender value of the policy; (4) the policy holder has submitted to the insurance company the irrevocable assignment of proceeds and the assignment or waiver of the right to obtain the cash surrender value; and (5) the individual has entered into a valid burial agreement. See POMS SI CHI 01130.426 (C). The "Assignment of Policy Ownership" section of the Guaranteed Pre-need Funeral Arrangement Contract appears to address the first four of these concerns. Mr. U~ initialed the section entitled Irrevocable Assignment. Paragraph four under the Irrevocable Assignment section specifies that the Purchaser retains the right to designate a new funeral provider; paragraph two specifies that the Purchaser has waived all rights to surrender the policy for cash; and paragraph three specifies that proceeds paid under the insurance policy may be used only for the funding of funeral merchandise. In addition, Ms. U~ has entered into a valid burial agreement because: (a) it identified the agent selling the agreement and it identified the funeral establishment with which that agent is affiliated; (b) it indicated that the agreement is being funded by a life insurance policy; (c) it identified the funeral establishment that would perform the services; (d) it has listed the funeral services selected; and (e) it indicated that the prices for the funeral services and the merchandise were guaranteed. See POMS SI CHI 01130.426(c)(5). As such, the life insurance policy is not a resource (after the first thirty days). (Although the life insurance policy is not a resource, it does offset the burial funds exclusion. POMS SI 01130.425(c)(2)).

Turning to the Trust to which the policy was assigned, a trust established by an individual with her own assets on or after January 1, 2000, will generally be considered a resource under federal law if it is revocable, or even if it is irrevocable, to the extent that payments to the trust could be made to or for the benefit of the individual. 42 U.S.C. § 1382b(e)(3)(B); POMS SI 01120.201(D)(1)-(2). This rule applies if payments can be made for the benefit of the individual "under any circumstances, no matter how unlikely or distant in the future." POMS SI 011020.201(D)(2)(b).

These provisions, however, do not apply to burial trusts where (A) the individual irrevocably contracts with a provider of funeral goods and services; (B) funds the contract by pre-paying for the goods and services and (C) either (1) the funeral provider subsequently places the funds in trust, or (2) the individual establishes an irrevocable trust naming the funeral home as a beneficiary. POMS SI 01120.201(H)(1). Under these circumstances, the funeral provider is considered, for federal law purposes, to have established the trust with the provider's own funds. See Memorandum from Associate General Counsel, Office of Program Law, to Associate Commissioner Legislative Development, Exclusion of Certain Burial Trusts from Section 205 of Public Law Number (Pub. L. No.) 106-169, (Aug. 29, 2000).

We conclude that Ms. U~ irrevocably contracted with a provider of funeral goods and services for a funeral, because as part of the Pre-Need Burial Contract, she irrevocably assigned ownership of the life insurance policy to a trust, indicating that the proceeds could be used only for funding funeral services. Ms. U~ also prepaid for the goods and services by funding the contract with the Life Insurance Policy. The third prong of the trust analysis requires determining whether the funeral provider placed the funds in trust, or whether Ms. U~ "established an irrevocable trust naming the funeral provider as the beneficiary." POMS SI 01120.201(H)(1). Because the funeral provider did not place the funds in trust, the question is whether Ms. U~ has established an irrevocable trust that names the funeral home (or provider) as the beneficiary.

In the Assignment of Policy Ownership, Marilyn U~ (through her guardian), irrevocably assigned ownership of the insurance policy to the Great Western Funeral Trust. The specific assignment language provides that the assignment was permanent and that the assignment could not be changed by the Purchaser. Ms. U~ also waived all rights to change the policy ownership, surrender the policy for cash, receive a loan based on the policy, or receive any refund for premiums paid. Ms. U~ also instructed that all proceeds paid under the insurance policy could be used solely for the purpose of funding the funeral merchandise selected in the Contract. The Assignment of Policy Ownership further acknowledges that policy holders can irrevocably assign their ownership rights to a life insurance policy. In addition, the Great Western Funeral Trust document acknowledges acceptance of such an irrevocable assignment in Paragraph 1 of the document.

However, regardless of trust language to the contrary, a trust is revocable under Utah law, which governs the Great Western Funeral Trust, if an individual is both the grantor and the sole beneficiary of the trust. In Clayton v. Behle, 565 P.2d 1132, 1133 (Utah 1977) the Utah Supreme Court held that "where the settlor is the sole beneficiary by the weight of the evidence, he can terminate the trust at any time and compel the trustee to re-convey the property to him. This is true even if the purposes of the Trust have not been fully accomplished."

Here, there is no question that Ms. U~ is the settlor of the trust, because her life insurance policy funded the trust. Under these circumstances, however, we believe that a court would conclude that Ms. U~ is not the sole beneficiary of the trust, because the Church & Chapel Funeral Service would be considered an intended beneficiary. In general, when an individual creates a trust that will pay a debt, and transfer to the trust was not made in connection with an agreement with the creditor, the creditor is not an intended beneficiary of the trust. Instead, the trust is intended only for the benefit of the debtor, who can revoke the trust at any time. See Restatement (Second) of Trusts § 330 comment h (4th ed. 1987). However, where transfer to the trust is made pursuant to an agreement with the creditor, the creditor will be considered a beneficiary of the trust. Id. Here, Ms. U~ assigned her life insurance policy to the Great Western Funeral Trust as part of an agreement with Church & Chapel Funeral Service and in consideration for the funeral service's agreement to provide funeral services for her upon her death. Under such circumstances, we believe that a court would likely find that Church & Chapel Funeral Service is an intended beneficiary of the Great Western Trust under Utah law. Thus, the funeral provider's consent would be required in order to revoke the trust. In keeping with the clear intent of the parties, we believe that a Utah court would find that Ms. U~ effectively established an irrevocable trust, and sufficiently named the funeral provider as a beneficiary of that trust under Utah law. Thus, because Ms. U~ has (A) irrevocably contracted with a provider of funeral services and (B) pre-paid and (C) established an irrevocable trust naming the funeral home as a beneficiary we conclude that the funeral home established the trust for Federal law purposes. POMS SI 011201 (H)(I). The trust therefore would not be considered a resource under 42 U.S.C. § 1382b(e)(3)(B) and our trust rules. Id.

A final consideration is whether Ms. U~ retains an equitable interest in the trust established in effect by the funeral home provider. We assume that Ms. U~ retains an equitable interest but that her interest has no resource value under the rules for trusts established by third parties. See POMS SI 01130.200. The trust is irrevocable, and Ms. U~ cannot direct the trustee to make disbursements for her support and maintenance. Legally, Ms. U~ could sell her interest in the trust (as there is nothing in the trust or contract prohibiting such a sale); but, because the trust is funded with a life insurance policy on Ms. U~'s life, such that the funds can only become available on her death, Ms. U~'s equitable interest in the trust has no discernable market value. Cf. POMS SI 01130.420(B)(2) ("If a burial contract cannot be … sold without significant hardship, it is not a resource."). Thus, if Ms. U~'s interest in the trust is a resource it has no market value. POMS SI 01140.044.

Lastly, because the funeral provider's future interest in the trust is contingent upon providing the contracted for funeral services, we considered whether the possibility that Ms. U~ could never have a funeral would make the trust arrangement void under the common law Rule Against Perpetuities. However, Utah does not follow the common law Rule Against Perpetuities and has instead, enacted a statutory "wait and see" rule to determine the validity of contingent future interests. Ut. St. 75-2-1203. Under Utah's statutory Rule Against Perpetuities, a contingent or future interest only becomes invalid if it does not vest from within 1,000 years after the interest is created. Thus, the current trust arrangement is valid notwithstanding the contingent future interest.

CONCLUSION

For the foregoing reasons, we conclude that the life insurance policy, purchased by Ronald U~ in his role as guardian for Marilyn U~, was a resource to Ms. U~ for the first thirty (30) days that the policy was in effect, because Ms. U~ had the right to cancel the policy during that time and obtain a refund of premiums paid. Thereafter, because the assignment to the Great Western Funeral Trust was irrevocable, pursuant to the Guaranteed Pre-Need Funeral Arrangement Contract, and because Church & Chapel Funeral Service was sufficiently named as a beneficiary of the Trust under Utah law and the life insurance policy and the Contract are not a resource, and the Trust to which the policy was assigned has no market value, even if it is a resource. (However, the LIFBC does offset the burial funds exclusion).

B. PS 04-306 Subchapter 11 Bankruptcy - Ben and Eleanor W~

DATE: December 4, 2001

1. SYLLABUS

This 1997 opinion concludes that a life insurance-funded burial trust arrangement is not a countable resource for SSI purposes. Under this pre 1/1/2000 arrangement, the eligible individual irrevocably transferred ownership of a life insurance policy to the Forethought Trust. By doing this, she gave all rights to this policy and it is not a resource. The opinion further concludes that the Forethought Trust meets the requirements to be considered valid under Wisconsin State law which requires that ownership of the policy must be assigned to a person or entity other than a funeral home.

2. OPINION

This is in response to your inquiry concerning a Forethought Life Insurance Funded Burial Trust (LIFBT) for Marcella P~. You asked if the LIFBT in question is valid under Wisconsin state law and, if the LIFBT is not valid, whether the cash surrender value of the life insurance policy could be excluded since it has been irrevocably assigned to the Forethought Trust. We believe that the Forethought LIFBT in question is valid and should therefore not be counted as a resource for SSI purposes.

FACTS

In July 1996, Ms. P~ bought a life insurance policy from the Forethought Life Insurance Company. Ms. P~ did not name a beneficiary. Later that month, she irrevocably transferred ownership of the policy to the Forethought Trust, giving up her right to control the policy, surrender it for cash or obtain a loan against it, and specifying only that the proceeds of the policy were to be used to fund burial expenses.

DISCUSSION

A resource, for SSI purposes, includes assets that the individual owns and could convert to cash to be used for her own support and maintenance. See 20 C.F.R. § 416.1201(a). If the individual has the right, authority, or power to liquidate the property, it is a resource. Id. Trust assets are a resource if the individual can use the trust assets to meet her needs for food, clothing, and shelter. POMS SI 01120.105(A)(1), 01120.200(D)(1)-(3).

If an individual neither owns nor has the legal right to direct the use of trust assets to meet his or her support and maintenance needs and if state law allows a revocably assigned life insurance policy that funds a funeral contract to be placed irrevocably in trust, the LIFBT is not a resource for SSI purposes. POMS SI 01130.425D.2.E.

After purchasing the Forethought life insurance policy, Ms. P~ irrevocably transferred ownership of the policy to the Forethought Trust. This was a valid transfer in which Ms. P~ relinquished the right to control the policy, to surrender it for cash, or to obtain a loan against it. Thus, the remaining question is whether this Forethought LIFBT package is valid under Wisconsin law.

We have previously advised that this particular Forethought LIFBT package is valid under Wisconsin law. Wisconsin Forethought Life Insurance Funded Burial Contract for Phillip Honer, OGC V (Miller) to Kayser, SSA-V (6/9/97). For a LIFBT to be valid under Wisconsin law, there are several requirements: (1) a funeral provider cannot be named as a beneficiary of the insurance policy that is issued; (2) ownership of the life insurance policy must be assigned to a person or entity other than the funeral home; and (3) the assignee must be free to select any funeral provider to fund the client's funeral needs at the time of death. Wisconsin Life-Insurance Funded Burial Agreements, OGC-V (Michaelson) to Panama, ARC, SSA-V (10/28/92).

We note that, following a statutory amendment effective May 10, 1996, Wisconsin statute §632.41(2)(b) now permits the assignment of the proceeds of the policy to a funeral provider, if certain requirements are met. Nonetheless, the statute preserves the requirement that a life insurance policy sold under the act shall permit the policyholder to designate a different beneficiary and a different funeral provider to receive the assignment of proceeds. W.S. § 632.41(2)(b)(3). Wisconsin Forethought Life Insurance Funded Burial Contract for Phillip Honer, OGC V (Miller) to Kayser, SSA-V (6/9/97).

Although Ms. P~ did not name a beneficiary, this does not defeat the validity of the LIFBT, since the statute does not require that the purchaser of a LIFBT name a beneficiary. It is necessary, however, that she assign ownership of the life insurance policy to a person or entity other than the funeral home, and that the assignee must be free to select any funeral provider to fund the client's funeral needs at the time of death.

As stated above, Ms. P~ has irrevocably divested herself of ownership of the policy, and of the right to control the policy, to surrender it for cash, or to obtain a loan against it. The document transferring ownership of the policy to the Forethought Trust specifies that the proceeds of the policy will be used to fund Ms. P~'s burial costs. The Forethought Trust is not a funeral provider--it appears to be a creation of the Forethought Life Insurance Company, whose name appears on the Forethought Trust forms and which shares the same Batesville, Indiana address. And lastly, there is apparently no pre-need agreement with any funeral home, indicating that the assignee remains free to select any funeral provider at the time of the claimant's death.

For these reasons, we believe that the Forethought LIFBT is valid under Wisconsin law and should not be counted as a resource for SSI purposes. If upon further inquiry into the matter you have additional questions, please let us know if we can be of assistance.

Thomas W. C~
Chief Counsel, Region V

By: ________________________
Myriam Miller
Assistant Regional Counsel

C. PS 04-277 SSI - Wisconsin- Review of the Blocked Account of Benjamin B~, SSN: ~- 9737-Action Your Reference: SI 2-1-2 WI (B~) Our Ref.:04P071

DATE: June 28, 2004

1. SYLLABUS

Wisconsin law requires a guardian to use an individual's funds for their support and maintenance. "In the case of a minor, however, the court may restrict the use of funds to those uses judged reasonable as directed by the court."

In this case, the court issued an order on 02/16/2004 precluding the withdrawal or fund from the account for any reason until the minor's 18th birthday. The court issued a second order on 05/14/2004 to replace the 02/16/2004 directive. In the second order, the court instructed that the funds in the account were "not to be used for the support and maintenance of the minor child" and could not be withdrawn by the minor or anyone on the minor's behalf. An intervening period between the orders did not occur.

Even though the 05/14/2004 order replaced the 02/16/2004 order, all access to the funds in the account was precluded by a court order effective 02/16/2004. The blocked or conservatorship account is an excludable resource effective 02/16/2004 because the funds have not been available for the care and maintenance of an individual.

OPINION

You asked whether the referenced blocked account is a countable resource for the purpose of determining Benjamin B~'s SSI eligibility. Assuming the account is not a resource, you asked us whether its non-resource status was in effect as of the first court order (February 2004) or as of the second court order (May 2004). We have reviewed the account documents and, for the following reasons, we conclude that the blocked account should not be considered a resource, effective as of the February 16, 2004 court order.

BACKGROUND

Benjamin B~, a minor, was assaulted on a school bus in March 2002. On February 16, 2004, Judge Dennis M~ of the Circuit Court of Milwaukee County approved a settlement of personal injury claims by Benjamin, in the amount of $18,093.86. See 2/16/04 Order Precluding Withdrawal of Funds From Account of Benjamin B~ ("2/04 Order"), 2. On that same date, Judge M~ appointed attorney Patrick Miller guardian ad litem for Benjamin. See 2/16/04 Order Appointing Patrick C. Miller Guardian Ad Litem. Pursuant to the February 16, 2004 court order, the funds approved in settlement on behalf of Benjamin, in the amount of $18,093.96, were to be deposited into an interest-bearing account at M&I Marshall & Ilsley Bank. 2/04 Order, 1. The February 2004 order provides that the funds in the account were for the sole benefit of Benjamin. 2/04 Order, 1. Additionally, the February 2004 order stated that no withdrawals from this account were to be permitted by the bank "for any reason, except by order of this court, or until Benjamin B~' 18th birthday, which will occur on July 26, 2011." 2/04 Order, 2.

On May 14, 2004, Judge M~ entered a second order. 5/14/04 Order Precluding Withdrawal of Funds from Account of Benjamin B~ ("5/04 Order"). The second order acknowledged that the funds approved in settlement, in the amount of $18,093.96 (plus any interest accrued since February 16, 2004), had been deposited into an interest-bearing account. 5/04 Order, 1. The second order further stated:" This order. . .shall replace the previous order, dated February 16, 2004, entitled 'Order Precluding Withdrawal of Funds from Account of Benjamin B~[.]'" 5/04 Order, 2. According to the second order, the funds from the account "shall not be used by any person or entity for any reason until Benjamin B~'s 18th birthday, which will occur on July 26, 2011." 5/04 Order, 3. Paragraph 3 additionally provides:

Specifically, the funds in this account are not to be used for the support and maintenance of Benjamin B~ by his mother and guardian, Cleopatra B~, or anyone else. All support and maintenance obligations of Benjamin B~ must be provided by his guardian through use of all other funds available to her, but not these funds. Pursuant to Wisconsin law and this order, these funds of Benjamin B~, which are his funds and his funds only pursuant to the bodily injury settlement, cannot be withdrawn by Benjamin B~ or anyone else until Benjamin B~ is 18-years old. These funds are not available for Benjamin B~' support or maintenance and are, therefore, not Benjamin B~' individual resources available to him, until he is 18-years old, at which time these funds will be available to him[.]

5/04 Order, 3 (emphasis in original).

Paragraph 4 of the May order states: "The funds in this account have not been available to Benjamin B~ or anyone else, for support and maintenance of Benjamin B~, or for any other reason, from February 1, 2004, until the date this order is signed[.]" 5/04 Order, 4. The Order states that the bank "shall not permit any withdrawals to be made from this account for any reason until Benjamin B~' 18th birthday. . . ." 5/04 Order, 5.

DISCUSSION

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. Under this program, if the value of an individual's resources exceeds a resource limitation, that person is not eligible for SSI benefits. 20 C.F.R. §§ 416.110(a), 416.1205 (resource limit for SSI became $2,000 as of Jan. 1, 1989).

For SSI purposes, a resource includes assets that an individual owns and could convert to cash to be used for his support and maintenance. 20 C.F.R. § 416.1201(a). When a fiduciary (such as a guardian or conservator) manages and controls funds owned by an SSI recipient, those funds are considered to be available to the recipient for the recipient's support and maintenance, absent a legal restriction on the use of or access to the funds. Program Operations Manual System (POMS) SI 01140.215. The funds in this case are held in a conservatorship account, also known as a "blocked" account, in that the funds held in the account are restricted by the court order approving the settlement agreement and providing for disposition of the proceeds. See POMS SI 01140.215(A)(1).

The regulations provide that funds held in a financial institution account are counted as a resource if the individual owns the account and can use the funds for his support and maintenance. 20 C.F.R. § 416.1208(a). Although neither the Social Security Act nor the implementing regulations specifically address the issue of conservatorship accounts, SSA's POMS describes the circumstances under which the Agency will consider funds in a conservatorship account to be an individual's resource. POMS SI 01120.010(C)(3); POMS SI 01140.215. These POMS sections provide that the Agency should consider State law, and the sections establish the following policy for determining whether the account is a resource:

If State law requires that funds in a conservatorship 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.

POMS SI 01140.215(B)(1) (emphasis added).

The funds in the blocked account will not be a resource if there is evidence that the funds are not available for the individual's support and maintenance. POMS SI 01140.215(B)(2). This may occur if there is restrictive language in the court order or if the court has indicated or demonstrated that it will deny all requests for funds for the minor's support and maintenance. POMS SI 01140.215(B)(2) (one example of "evidence to the contrary" is restrictive language in the court order establishing the account or in a subsequent court order).

Pursuant to § 880.21(1) of the Wisconsin statutes: "Every guardian shall apply the personal property or the income therefrom or from the real estate, as far as may be necessary for the suitable education, maintenance, and support of the ward. . . . " Wisc. Stat. § 880.21(1); see also In Re Guardianship of Kordecki, 95 Wis.2d 275, 280-81l; 290 N.W. 2d 693, 696 (1980). Additionally, the Wisconsin statutes provide that, if the minor has property which is sufficient for his maintenance and education in a manner more expensive than his parents can reasonably afford, the court may, as judged reasonable, direct the expenses of the minor's education and maintenance to be defrayed out of the minor's property in whole or in part. Wisc. Stat. § 880.21(2). Since the guardian of a minor is responsible for the minor's support, and is required to spend the minor's funds for his support where parental support is unavailable, we presume (absent evidence to the contrary) that funds held in a conservatorship account will be available for the minor's support and maintenance. Thus, funds held in a Wisconsin account are generally considered a resource for SSI purposes. POMS SI 01140.215(B)(1).

In this case, however, there appears to be "evidence to the contrary," indicating that the settlement funds are not available for Benjamin's support and maintenance. In the May 2004 Order, which replaces the February 2004 Order, Judge M~ clarified his intent to prohibit the release of any of the deposited funds to any person or entity for any reason until Benjamin B~'s 18th birthday, and specifically stated that the funds in this account were not to be used for the support and maintenance of Benjamin B~ by his mother and guardian, Cleopatra B~, or anyone else. 5/04 Order, 2, 3. The Order additionally provided that the bank "shall not permit any withdrawals to be made from this account for any reason until Benjamin B~' 18th birthday. . . ." 5/04 Order, 5. No exceptions of any kind, such as for medical, educational, or living expenses, were allowed. In light of the express prohibitions in the May 2004 order, it is unlikely that Benjamin would prevail in seeking to have his funds released for support and/or maintenance. We therefore conclude that, because there is "evidence to the contrary" here, indicating that the blocked account does not contemplate or allow a petition for withdrawal of funds for Benjamin's support and maintenance, the blocked account should not be considered a resource for SSI purposes.

We further conclude that the effective date of the account as a non-resource is February 16, 2004, the date of the court's initial order. Paragraph 4 of the May 2004 order states: "The funds in this account have not been available to Benjamin B~ or anyone else, for support and maintenance of Benjamin B~, or for any other reason, from February 1, 2004, until the date this order is signed[.]" 5/04 Order, 4. Judge M~ thus clarified that, even under the restrictive language of the previous order, the funds in the account were not accessible for support and maintenance of Benjamin B~ at any time. The county court's interpretation of the restrictions on the account should be accorded deference. See Kordecki, 290 N.W.2d at 696 (Wisconsin Supreme Court held that county court was responsible for determination of whether use of funds from a guardianship account would have been authorized for minor's support); see also POMS SI CHI 01140.215 (discussing that, in Wisconsin, the court may restrict the use of funds, in the case of a minor, to those uses judged reasonable as directed by the court).

CONCLUSION

In sum, we conclude that, pursuant to the restrictive language in the court orders, and, effective as of the February 2004 court order, the blocked account is not available for Benjamin's support and maintenance and should not be considered a resource for purposes of SSI eligibility prior to his 18th birthday (July 26, 2011).

D. PS 04-247 Wisconsin Pre-Nuptial Marital Property Agreement for Debra W~ (T~); SSN: ~

DATE: June 11, 1997

1. SYLLABUS

The issue is whether property described in a pre-nuptial agreement is a resource for a spouse living in a separate household.

In Wisconsin a spouse must have ownership interest in the other spouse's property before it is countable for SSI purposes. The pre-nuptial agreement between the members of this married couple complies with Wisconsin law. The agreement specifies that the wife only has ownership interest in $5000.00 payable upon the husband's death or any proceeds deposited into any joint accounts.

In this case the husband is not deceased and no proceeds from his property have been deposited into a joint account. The husband and wife do not live in the same residence. None of the husband's resources are countable for the wife because she has no ownership interest. The husband's resources cannot be deemed to the wife since are not members of the same household.

Based on the facts of this case, the wife's eligibility for SSI payments is not affected by her husband's resources.

You have asked for our assistance in determining what, if any, property of Ronald Lee W~ (Mr. W~), described in the "Pre-Nuptial Marital Property Agreement," can be considered a resource of his wife, Supplemental Security Income (SSI) claimant, Debra W~ (Mrs. W~).

The pertinent facts reveal that on July 25, 1996, Mr. and Mrs. W~ executed a "Pre-Nuptial Marital Property Agreement," which designated that "[a]ll property of whatsoever nature or description, whether real or personal, and wherever situated, which either of them now owns or hereafter acquires, shall be marital property...," except for (1) certain individually owned real and personal property described in "Schedule A," (2) $5,000 from the proceeds of the sale of Mr. W~'s residence, to be paid upon his death to Mrs. W~ in recognition of her "labor and monies which she invested in that residence," (3) any proceeds from the transfer of the individually owned properties, unless such funds are deposited into a joint or common account, in which case, the monies would become marital property, and (4) monies from the individually owned property contributed toward the acquisition of a joint residence. The next day, July 26, 1996, Mr. and Mrs. W~ married. They do not live together, and they maintain separate residences.

To qualify for SSI benefits, a claimant must show that her income, both earned and unearned, is below the statutory maximum. 42 U.S.C. § 1382(a)(1). Income is anything a claimant receives in cash or in kind. 20 C.F.R. § 416.1102 (1996). Under the regulations, "resources" that are countable as income 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.

(1) 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).

See 20 C.F.R. § 416.1201(a)(emphasis added).

Mr. W~'s resources could constitute those of his wife only if she has an ownership interest in that property, and not merely access to, or a legal right to use that property. Program Operation Manual System (POMS) SI 01120.010.B.1. The POMS provide that:

[o]wnership interests in property, real or personal, can occur in various types and forms. Since the type and form of ownership may affect the value of property and even its status as a resource, they are significant in determining resource eligibility.

POMS SI 01110.500.A. The agency's operating policy with respect to determining ownership interests is subject to state law. POMS SI 01110.500.C. Thus, in this case, Mrs. W~ must have an ownership interest in her husband's property, in accordance with Wisconsin state law, in order for that property to constitute a resource for purposes of entitlement to SSI.

Wisconsin has adopted the Uniform Marital Property Act, codified at Wis. Stat. Ann., §§ 766.001-766.97, which enables married persons, who are domiciled in the state, to enter into marital property agreements. With these agreements, married couples may designate property, real or personal, as "marital property," property which is owned jointly by the married couple, and/or as the individual property of the owning spouse. Wis. Stat. Ann. §§ 766.01(12), 755.01(15), 766.58, and 766.587.

The "Pre-Nuptial Marital Property Agreement" in question complies with the requirements of Wis. Stat. Ann. §§ 766.01(12), 766.58, and 766.587. In particular, the "Pre-Nuptial Marital Property Agreement" designates all property as "marital property, except for that property, clearly described in "Schedule A" and in § 1(a)-(d), which is to remain individually owned by Mr. and Mrs. W~. It is our opinion that all "marital property" under the "Pre-Nuptial Marital Property Agreement" constitutes resources of Mrs. W~ since she jointly owns with her husband such property. With respect to Mr. W~'s individually owned property, Ms. W~ has ownership interests only in (1) any income from Mr. W~'s properties that is deposited into a joint or common account and (2) $5,000 from the proceeds of the sale of his residence, payable to Mrs. W~ upon her husband's death. The facts do not, however, indicate that any such income has been deposited into a joint or common account and/or that Mr. W~ has died. Absent such events, it appears that none of the property designated in "Schedule A" as belonging to Mr. W~ can be considered a resource of Mrs. W~.

Although a claimant's resources may be "deemed" to include certain resources of her spouse, the regulations and POMS make clear that the claimant must reside in the same "household" with her spouse in order for the "deeming" provision to apply. See 20 C.F.R. § 416.1202(a)("an individual who is living with a person not eligible under this part and who is considered to be the husband or wife of such individual...such individual's resources shall be deemed to include any resources...of such spouse whether or not such resources are available to such individual"); 20 C.F.R. § 416.1802(a)(2) ("If you are married to someone who is not eligible for SSI benefits and are living in the same household as that person, we will count the value of that person's resources...as yours when we determine your eligibility."); POMS SI 01110.530.B.1 ("The resources of an individual include those of a spouse, and the applicable resource limit is that for a couple, provided that the spouse:. . .if ineligible, lives in the same household as the individual...") (emphasis in the original); see also 20 C.F.R. § 416.1132(c)(1) (a claimant is considered to live in her "own household" if she (or her spouse who lives with her) has an ownership or life estate interest in the home). Because Mrs. W~ individually owns her own residence, and facts indicate that she does not live with her husband, her resources cannot be "deemed" to include those of her husband under the regulations and POMS.

Accordingly, assuming that the information contained in the "Pre-Nuptial Marital Property Agreement" is accurate and assuming that Mr. and Mrs W~ are not living together, we conclude, for the foregoing reasons, that none of the resources described in the "Pre-Nuptial Marital Property Agreement" as belonging to Mr. W~ can be considered a resource of Mrs. W~.

Sincerely,
Thomas W. C~
Chief Counsel, Region V

By:_______________________
Grace M. K~
Assistant Regional Counsel

E. PS 04-073 SSI-Wisconsin-Review of the Marital Settlement Agreement for Donald R~ and Sylvia R~ and the Sylvia A. R~ Special Needs Trust, ~ Your Ref: S2D5G6, SI 2-1-3 WI Our Ref: 03P086 Social Security No. ~,

DATE: 2/02/04

1. SYLLABUS

The SSI beneficiary was divorced from her spouse and was awarded a marital settlement that was ordered to be paid into a Special Needs Trust created for her benefit. Wisconsin law permits an individual to make spousal payments into a trust and Wisconsin law also permits an individual to irrevocably assign spousal support payments to a trust. If the trust is not a resource for SSI purposes, then the payments are not considered income. However, if the trust is a countable resource for SSI purposes, then the payments are income regardless of assignment.

2. OPINION

You asked whether the spousal support payments being deposited into the trust are countable income for Sylvia R~ for Supplemental Security Income (SSI) purposes. We conclude that the spousal monthly payments are legally assignable to the trust, and that the assignment is irrevocable, so that the payments should not be considered income to Ms. R~, if the trust is not a resource. If the trust is a resource, the payments are income. Whether amounts held in trust are a resource depends on the Agency's policy interpretation of the Medicaid payback trust exceptions to counting trusts as resources under the statute.

BACKGROUND

Sylvia R~ is disabled and receives SSI. On June 26, 2003, the Circuit Court of Outagamie County, Wisconsin, entered an Order modifying a judgment of divorce and supplemental judgment between Ms. R~ and Donald R~ which incorporated the parties' Stipulation dated April 30 and May 7, 2003. Stipulation and Order (Stipulation). The Stipulation set forth the distribution of $186, 462.62, the net sale proceeds from jointly held real estate. The Stipulation provides that each party is entitled to one-half of the net sale proceeds (Stipulation and Order, 1). The Stipulation further provided that a number of items would be deducted from Mr. R~'s half of the net proceeds, including $30,000 to be placed in an account of Mr. R~'s choosing from which monthly payments would be made to the trust account of Ms. R~ (Stipulation and Order, s 2.b, 5).

On June 26, 2003, the same date that the court entered the Stipulation and Order, Ms. R~'s attorney filed a Petition to Establish Trust and for Approval of transfer of Funds to Trust (Petition to Establish Trust and For Approval of Transfer of Funds to Trust (Petition)). Ms. R~'s attorney stated that Ms. R~ was entitled to receive funds from assets to be distributed from proceeds from the sale of investments and monthly payments from Mr. R~ in the amounts set forth in the Stipulation and Order; that she was permanently disabled, but that she had needs that were not provided for under public benefits; that it would be in Ms. R~'s best interest to have the funds and proceeds used for her care under a Special Needs Trust, as provided for under § 42 U.S.C. 1396p(d)(4) and §49.454(4), Wis. Stats. (Petition, 3-7)). On the same date, June 26, 2003, the Court ordered the establishment of the Sylvia A. R~ Irrevocable Special Needs Trust attached as Exhibit B and the transfer of funds to the trust as set forth in Exhibit A, including Ms. R~'s half share of the net sale proceeds. Order to Establish Trust and for Approval of Transfer of Funds to Trust (Order) ; see also Exhibits A and B.

The Stipulation and Order

The Stipulation provides that each party is entitled to one-half of $186, 462.62, the net sale proceeds of jointly-held real estate (Stipulation and Order, 1). The Stipulation provides that a number of items would be deducted from Mr. R~'s half of the net proceeds, including $30,000, which he was directed to place in an account out of which monthly payments would be made into a trust account established by Ms. R~. (Stipulation and Order, 2. a; 5). The Stipulation required that Mr. R~ place $30,000 into an account of his own choosing; that the account established by Mr. R~ make monthly payments into a trust account to be established by Ms. R~; that in no event shall any payments be made directly to Ms. R~; that the payments be in the amount of $419 per month for five years from May 2003 through April 2008; that at the end of five years, beginning in May 2008, Mr. R~'s account must pay the sum of $219 per month to Ms. R~'s trust account for as long as there are funds in Mr. R~'s account (Stipulation and Order, 5). The Stipulation further provided that if the funds ran out before Ms. R~'s death, she would have no entitlement to further payments form Mr. R~ under any circumstances; that jurisdiction as to maintenance to Ms. R~ shall terminated at that time; and Ms. R~ shall not be entitled for any further maintenance payments from Mr. R~. (Stipulation and Order, 5). If Ms. R~ died while funds remained in the account, such funds reverted to Mr. R~ (Id.). Finally, the Stipulation provided that once Mr. R~ funded the account with the $30,000, so long as the account was fully insured, his maintenance obligation to Ms. R~ was terminated. (Id.).

Sylvia A. R~ Irrevocable Special Needs Trust

Pursuant to the Petition of Ms. R~'s attorney, the court created a trust for the benefit of Ms. R~ called the SYLVIA A. R~ IRREVOCABLE SPECIAL NEEDS TRUST dated June 25, 2002. The trust states that it will be funded with assets to be distributed to Ms. R~ as set forth in Schedule A, such as her half of the net sale proceeds, and from other assets owned by Ms. R~ and that the Trustee may, in her or his discretion accept additions from any other source. (Trust, Art. I B). It states that it is governed by the laws of the State of Wisconsin (Trust, Art. III A) and that it is establish in accordance with 42 U.S.C. § 1396p(d)(4)(A) and § 49.454(4), Wis. Stats. (Trust, Art. III, B). The trust, therefore, purports to be a Medicaid payback trust pursuant to 42 U.S.C. § 136p(d)(4)(A). The trust is established for the benefit of Ms. R~ who has serious and permanent disabilities (Trust, Art. II, A). Its "primary" purpose is to give Ms. R~ the opportunity to enjoy the most pleasant, comfortable and happy life as is possible. (Id.). The trust also states that because trust assets are not sufficient to ensure adequate and appropriate care for Ms. R~ throughout her lifetime, another purpose of the trust, therefore, " is to provide funds to supplement the essential, primary support, services and medical care provided by public assistance in order to ensure [Ms. R~'s] care, comfort and happiness, not to replace essential, primary support, services and medical care provided by public assistance to which [Ms. R~] may be entitled" (Trust, Art. II B).

The trust states that the trustee may use trust income and principal for Ms. R~'s benefit at such times and in such amounts as the Trustee, in her or his sole and absolute discretion, determines are consistent with the purposes of the trust (Trust, Art. IV, A). The trustee may investigate any and all public sources of support, services or benefits available to Ms. R~ and must consider the effect of any distribution to or for Ms. R~'s benefit on her eligibility for such support, services or benefits (Trust, Art. IV, B). The trust includes a non-exclusive list of expenses or costs for which the trustee may make distributions, most involving the purchase of goods and services (Trust, Art. IV C).

The Trustee has the authority, if the trustee deems it advisable, to initiate or pay the expenses of another party to initiate an action to enforce Ms. R~'s right to public assistance should such public assistance be denied, suspended, reduced or terminated for any reason whatsoever (Trust, Art. IV D). The trustee my employ legal counsel or pay the expenses of legal counsel employed by another party to determine Ms. R~'s eligibility for any public assistance or the effect of any distribution or other action on public assistance Ms. R~ receives or is entitled to receive (Id.). The trustee has no duty to preserve principal if she or he considers its current use in Ms. R~'s best interest; Ms. R~'s care, comfort, and happiness shall be the sole consideration in the trustee's exercise of discretion to make or withhold distributions; the trustee shall have no liability for any good faith exercise of her or his power to make or withhold distributions of income or principal; the trustee may consider other resources available to Ms. R~, including her eligibility for public assistance (Trust, Art. IV, E). The trust states that at no time shall Ms. R~ obtain a vested interest in Trust income or principal, that the trustee may terminate all distributions of income and principal to or for the benefit of Ms. R~ if the trustee considers it likely that such continued distributions will result in a reduction of public assistance to her; and that at all times the trust is meant to be interpreted to come within the provisions of Wisconsin Statute 701.06(5m), which exempts the trust assets from the claims of the State of Wisconsin or its agencies (Trust, Art. IV, G). The trust further provides that distribution of the income and principal of the trust is solely in the trustee's discretion and is not subject to any order of any court under sec. 701.13, Wis. Stats., or any other statute or legal or equitable doctrine (Trust, Art. IV, G). It also states that the trustee "may be arbitrary and unreasonable in exercising her or his discretion" (Id.).

The trust states that it is irrevocable; that it can be amended only in a manner consistent with the purposes of the trust and "only by an appropriate Court upon petition of the Trustee, for any reasons sufficient to the Court, including changes in the law relating to public assistance" (Trust, Art. VIII s A, B). It also provides that the trustee is authorized, with or without court approval, to make administrative or ministerial modifications to the provisions of the trust for the purpose of conforming to law or factual and economic circumstances (Trust, Art. VIII, C(3); Art. IX, T).

The trust provides that after the death of the beneficiary of the trust, Ms. R~, distribution after payment of trust fees and expenses, the trustee "shall, to the extent required by law, distribute such assets of the trust as shall be required to reimburse the State of Wisconsin for the medical assistance benefits paid on behalf of [Ms. R~] which, if not reimbursable by the terms of this Trust, would cause assets held by this Trust to disqualify [Ms. R~] for benefits during her lifetime" (Trust Art. V, A(1)). After these payments, the trustee may in his or her discretion, pay Ms. R~'s funeral, burial and related expenses, (Trust V, A(2)); and pay, indirectly or directly, income, gift, death, inheritance or estate taxes (Trust, V, A(3)). If any assets remain after these payments, Trustee shall distribute such assets to Ms. R~'s heirs-at-law, in equal shares, or to their issue per tirpes, pursuant to the intestacy provisions of Wisconsin statutes then in effect (Trust, Art. V A(4)).

DISCUSSION

1. Monthly Payments Made to Trust Are Not Income to Ms. R~, unless the Trust is a Resource.

Wisconsin law expressly gives family courts the discretion to order spousal maintenance payments to be placed in trust. Wis. Stat. Ann. §767.31 (West 2003); see also In re Paternity of Tucker M.O., 544 N.W.2d 417, 421 (Wis. 1996) (court properly ordered support payments to be placed in trust fund). Wisconsin law states that:

The court may appoint a trustee, when deemed expedient, to receive any payments ordered, to invest and pay over the income for the maintenance of the spouse entitled thereto . . . or to pay over the principal sum in such proportions and at such times as the court directs.

Wis. Stat. Ann. § 767.31 (West 2003). Here, the court ordered the trustee to receive assets, including additions from any source which would appear to include the monthly payments to the trust. Upon the petition of Ms. R~'s attorney, the court appointed a trustee to receive the transfer of assets listed as well as to receive other assets owned by Ms. R~, and to receive, in the trustee's discretion, additions from any other source. See Order; Trust, I(B); see also Petition, 3 (stating that Ms. R~ is entitled to receive funds from the sale of investments and monthly payments from Mr. R~ as set forth in the Stipulation). The court appointed a trustee to receive "any payments ordered" which appear to include the monthly payments from Mr. R~ to the trust. Even though the trustee is not required to pay over the monthly payments for the maintenance of Ms. R~, the monthly payments to the trust, appear to be proper under Wisconsin law._11 The Supreme Court of Wisconsin seems open to settlement terms that modify statutory provisions, at least where the statute does not prohibit such deviations. See Nichols v. Nichols, 469 N.W.2d 619, 623 (Wis. 1991).

However, while Wisconsin law permits a court to order a trustee to receive any payments ordered, including spousal support payments, they may still constitute unearned income to the spouse who receives the payments. Under both Wisconsin and federal law, spousal maintenance payments ordinarily constitute unearned income attributable to the spouse who receives the payments. 20 C.F.R. § 416.1121(b); Wis. Stat. Ann. §§71.03(1), 71.52(6) (West 2003); POMS SI 00830.418. A legally assignable payment that is assigned to a trust, however, is not considered income for SSI purposes, but only if the assignment is irrevocable. See POMS SI 01120.200(G)(d). If the assignment is revocable, the payment is income to the individual legally entitled to receive it. Id.

Here, the monthly payments are deposited into the trust from an account established by Mr. R~ over which Ms. R~ has no control. See Stipulation; Trust. While Ms. R~'s attorney petitioned the Court to establish the trust, she cannot control any disbursements from the trust income or principal (Trust, s IV(A), (G)). Nor is there any language in either the Stipulation or the Trust state indicating that the monthly payments to Ms. R~ shall continue "until further order of the Court." Rather, under the terms of the trust, only the trustee can petition the court to modify the trust (Trust, VIII(B)).

The parties, then, agreed to non-modifiable monthly payment amounts and a non-modifiable termination of the payment amounts: Mr. R~ was to establish an account of his own choosing, fund it with $30,000 out of his share of the net sale proceeds; pay a non-modifiable monthly amount of $419 into Ms. R~'s trust for a non-modifiable term of five years from May 2003 through April 2008; and thereafter, a non-modifiable amount of $219 until the funds in the account ran out or until Ms. R~ died. In the former case, Ms. R~ agreed that she would be entitled to no further maintenance; in the latter, she agreed that any remaining funds would revert to Mr. R~. Moreover, the parties agreed that the payments were to be made to the trust account and that "(i)n no event shall any payments be made directly to" Ms. R~ (Stipulation, 5). Thus, it appears that the parties inteneded that Ms. R~ could not ask to modify the agreement to revoke the transfer to the trust and receive the maintenance payments herself.

These provisions are more restrictive than Wisconsin law, which provides that after any judgment of divorce providing for maintenance or creating a trust, the Court retains the discretion to hear motions from either party to revise or modify the order with respect to the amount or payment of maintenance, "and may make any judgment or order respecting any of the matters that such court might have made in the original action." Wis. Stat. Ann. § 767.32 (West 2003). However, a court can modify the amount of maintenance or the time period over which it must be paid only if there is a substantial change in circumstances. See Wis. Stat. Ann. § 767.32(1)(a); Whitford v. Whitford, 232 Wis.2d, 38, 41; 606 N.W.2d 563, 567 (Wis. 1999); Nichols v. Nichols, 469 N.W.2d 619, 622 (Wis. 1991).

Moreover, under Wisconsin law, parties may establish non-modifiable settlement terms, and, in certain circumstances, the parties may be estopped from requesting modification of these terms, notwithstanding general statutory provisions of Wisconsin Statute §767.32, which generally allows for modifications. Nichols, 162 Wis. 2d at 105, 469 N.W.2d at 622; Whitford v. Whitford, 232 Wis. 2d 38, 44-45, 606 N.W.2d 563, 568 (Wis. Ct. App. 1999). Estoppel applies when (1) both parties entered a stipulation to the agreement freely and knowingly; (2) the overall settlement is fair and equitable; (3) the settlement, including the maintenance agreement, is not against public policy; and (4) the non-modifiable term must be one that the court could not have ordered without the parties' agreement. The case law also indicates that because the parties are giving up the statutory right to modification, their agreement must be clear and unequivocal. Id., 232 Wis.2d at 44, 606 N.W.2d at 568.

Here, the stipulation meets this four-part test. The non-modifiable terms in the stipulation could not have been ordered by the court without the parties' agreement. There is no suggestion that both parties did not enter the stipulation freely and knowingly. The overall settlement was not against public policy. See Nichols, 162 Wis.2d 96, 106-07 (holding that a provision in a divorce judgment providing that the amount of maintenance cannot be modified does not violate public policy). The stipulation was fair and equitable. In agreeing to non-modifiable monthly payments only to the trust, it appears that the parties agreed on this amount of maintenance and the payment only to the trust based on the assumption that the trust would allow Ms. R~ to continue receiving public benefits, including SSI. In addition, both parties gained other benefits: Mr. R~ agreed to reduce his half of the net proceeds from the sale of jointly held real estate by, among other things, paying off the mortgage debt, in exchange for a fixed maintenance obligation; Ms. R~ gave up the option to modify the monthly payments in exchange for receiving her half of the net proceeds and for continuing eligibility for SSI. See Nichols, 162 Wis.2d 96, 108-115, 469 N.W.2d 619, 624-27; Whitford, 232 N. Wisc.2d 38, 49-51, 606 N.W. 2d 563, 570-72 (Wisc. 1999). It therefore appears that the conditions of estoppel apply here to preclude Ms. R~ from seeking modification of these non-modifiable terms. Thus, the assignment of the monthly payments to the trust is irrevocable and should not be considered income to Ms. R~, if the trust is not a resource. However, if the trust is a resource, the payments would be income. POMS 01120.201(J)(3)(b).

2. Assets Held in the Trust May or May Not Be Resources to Ms. R~

We next address whether the trust assets, including the payments actually made to and held in the trust, should be considered a resource to Ms. R~. Under the Social Security Act, trusts created on or after January1, 2000, from the assets of an SSI claimant or beneficiary will be considered a resource to the extent that the trust is revocable or to the extent that any payments can be made from the trust for the benefit of the individual. See 42 U.S.C. § 1382b(e); POMS SI 01120.201. This rule applies unless the trust satisfies the statutory requirements of a Medicaid payback trust. See 42 U.S.C. §1382b(e)(5); POMS SI 01120.203. When the statutory trust provisions do not apply, regular resource rules still apply. POMS SI 01120.200; POMS SI 01120.203(B)(1). Under the regular resource provisions, a trust is a resource if it is unilaterally revocable, if the SSI beneficiary can direct the trustee to provide for her support and maintenance, or if the SSI beneficiary can sell her beneficial interest in the trust. POMS SI 01120.200(D)(1).

The trust was established with Ms. R~'s assets, including the her share of the proceeds of the net sale of investment property. The trust was created after January 1, 2000, and the trustee has discretion to expend all of the trust assets for Ms. R~'s benefit. Thus, the trust will be a resource under the statute, unless the Medicaid payback trust exception applies. It appears that the Medicaid payback exception may apply to counting the trust under the statute, depending on how the Agency interprets that provision. If the Agency determines that the exception applies to counting the trust as a resource under the statute, the trust would not be a resource under regular resource rules

a. The Medicaid Payback Exception May Apply to Countingthe Trust as a Resource Under Statutory Provisions.

The Medicaid payback exception to counting the trust as a resource under the statute applies where the trust is (1) established with the assets of an individual under the age of 65 who is disabled; (2) established for the benefit of such individual by a parent, grandparent, legal guardian or a court; and (3) provides that, on the death of the individual, any funds remaining in the trust will be used to reimburse the appropriate state for Medicaid payments made for the benefit of the individual during her lifetime. See 42 U.S.C. § 1396p(d)(4)(A); POMS SI 01120.203(B)(1).

Here, the first and third requirements are met. Ms. R~ is under age 65 and is disabled. And, the trust provides that, upon Ms. R~'s death, any remaining funds would first be used to reimburse that state of Medicaid payments made for her benefit during her lifetime.

The second requirement, however, may be problematic. The court established the trust, but it did so at the request of Ms. R~'s attorney, and presumably could not have done so without her consent. The Office of the General Counsel previously has advised that the Medicaid payback exception in 42 U.S.C. § 1396p(d)(4)(A), is best interpreted to require that the trust be established by parents, grandparents, legal guardians and courts for disabled children and disabled incompetent adults, or by a court where the individual is not exercising any discretion in the creation of the trust. See Memorandum from Associate General Counsel for Program Law to Acting Associate Comm. for Program Benefits, Questions Related to Implementation of Section 205 of the Foster Care Independence Act of 1999, Pub. L. No. 106169 (Feb. 7, 2002). If the Agency were to adopt a policy based on this interpretation of the statute, the trust in this case would not be "established by" the court for purposes of 42 U.S.C. § 1396p(d)(4)(A), and therefore would not qualify for the Medicaid payback trust exception to counting the trust as a resource under the statute. It would be counted as a resource under 42 U.S.C. § 1382b(e) and POMS 01120.201.

However, if the Agency considers this trust, as a matter of Agency policy, to be established by the court under these circumstances, the trust would otherwise qualify for the Medicaid payback trust exception to counting the trust as a resource under 42 U.S.C. §1382b(e). If the Agency determines that the exception applies to counting the trust under the statute, the regular resource rules would apply to determine whether the trust is a resource. See POMS SI 1120.200; POMS SI 01120.203(B)(1).

b. The Trust Is Not a Resource Under the Regular Resource Rules.

Under regular resource rules, assets are a resource for SSI purposes if the individual owns them and can convert them to cash to be used for his support and 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. Id. at (1). Thus, trust assets are a resource to an individual if she can revoke the trust and use the assets to meet her individual needs for food, clothing, and shelter; if the individual can direct the use of the trust assets for her support and maintenance under the terms of the trust; or if the individual can sell her beneficial interest in the trust. See POMS SI 01120.200(D)(1).

Whether the claimant can revoke or terminate the trust or direct use of the assets depends upon the terms of the trust agreement and applicable state law. See POMS SI 01120.200(D)(2). Wisconsin Law provides that, after a judgment providing for maintenance, the court may, at any time, on petition of either party, revise and alter the judgment "respecting the appropriation of a payment of the principal and income of the property so held in trust, and may make any judgment or order respecting any of the matters that such court might have made in the original judgment . . . ." Wis. Stat. Ann. § 767.32(1)(a) (West 2003). This statute requires a showing of a change in circumstance in order to make revisions or modifications to the amount of or length of time for paying maintenance, but we found no such limitation on changing the entity to whom the payments would be made. Wis. Stat. Ann. § 767.32(1)(a); Whitford v. Whitford, 232 Wis.2d, 38; 606 N.W.2d 563 (Wis. 1999); Nichols v. Nichols, 469 N.W.2d 619 (Wis. 1991). Thus, under the statute, it would appear that Ms. R~ could ask the court at any time to amend or revise the trust to pay income or principal for her support and maintenance.

As explained above, however, the Supreme Court of Wisconsin has recognized that parties may establish non-modifiable settlement terms, and that, in such circumstances, the parties may be estopped from requesting modification of these terms, notwithstanding general statutory provisions of Wisconsin Statute §767.32, which generally allows for modifications. Nichols, 162 Wis. 2d at 105, 469 N.W.2d at 622; Whitford v. Whitford, 232 Wis. 2d 38, 44-45, 606 N.W.2d 563, 568 (Wis. Ct. App. 1999). As discussed, we believe that estoppel applies here to prevent Ms. R~ from asking for any modification in the monthly payments. For the same reasons, we also believe that under these circumstances, a court would conclude that Ms. R~ intended the terms of the trust to be non-modifiable, so that funds from any of the assets held in the trust could not be paid, even on order of the court, except in the trustee's discretion. The trust itself states that "Distribution of the income and principal of this Trust is solely in the Trustee's discretion and is not subject to any order of any court under Section 701.13, Stats., or any other statute or legal or equitable doctrine." (Trust Art. IV, G). We conclude that a court would most likely conclude that the provisions are sufficiently clear and unequivocal to establish a non-modifiable provision regarding the appropriation and payment of the principal and income of the property held in trust pursuant to the divorce decree.

As discussed, the other elements of estoppel appear to exist, as well. Both parties appear to have entered the agreement freely and knowingly; the overall settlement seems fair and equitable; the settlement, including the provision in question, do not seem patently against public policy, since both state and federal law allow these types of trusts for indigent disabled individuals; and the non-modifiable terms are ones that the court could not have ordered without the parties' agreement.

We note that, even if Ms. R~ could not ask the court to revise the trust under Section 767.32, she still could revoke the trust if she were the grantor and sole beneficiary of the trust. See Wis. Stat. Ann. §701.12(1) (West 2003) (absent express language providing a right of revocation, modification, or termination, a trust cannot be revoked or modified unless the grantor or settlor and all of the beneficiaries agree). Here, however, Ms. R~ could not revoke the trust unilaterally because the trust names other contingent beneficiaries of the trust, including Ms. R~'s heirs, whose consent would be necessary to revoke the trust. See Wis. Stat. Ann. § 854.22 (West 2003) (designation of "heirs" generally assumed to create a beneficial interest in those that would inherit).

Furthermore, the trust would not otherwise be a resource under the regular resource rules because Ms. R~ cannot direct the trustee to make payments for her support and maintenance, and presumably could not sell her beneficial interest in the discretionary trust for her benefit. See POMS SI 01120.200(D)(1)(a); (Trust Art. II G); Restatement (Third) of Trusts, §60, comment f (2003).

Finally, we note that, even if the trust is not a resource, any distributions made directly to Ms. R~ or paid for her support and maintenance, will be income to her. See 20 C.F.R. §416.1102; POMS SI 01120.200(E)(1)(a)-(b). Similarly, if the trustee terminates the trust, due to insubstantial assets, and pays Ms. R~ any remaining funds after reimbursing the State for medical assistance, any assets she receives would be income to her. (Trust Art. I, C(2)).

CONCLUSION

In summary, we conclude that Wisconsin law permits Mr. R~ to make spousal support payments into trust. Under Wisconsin law, and by agreement of the parties, Ms. R~ has irrevocably assigned the monthly payments to the trust and the payments should not be considered income, if the trust is not a resource. It it is a resource, the payments are income regardless of the assignment.

The assets in the trust, including any maintenance payments actually assigned to and held in the trust, may be resources, depending on whether the Agency adopts the position that the trust cannot be considered to be established by the court where the SSI claimant is a competent adult and requested that the court establish the trust. If the Agency determines that, under such circumstances, the trust was established by the individual, rather than the court, then the trust would be a resource under the statutory provisions because it would not meet the Medicaid payback exception to counting the trust. If, however, the Agency decides that, under these facts, the trust is considered to be established by the court, the trust otherwise meets the requirements for the Medicaid payback exception to counting it under the statute. The trust also would not be a resource under the regular resource rules. The trust is irrevocable; Ms. R~ cannot compel the trustee to pay for her support and maintenance; and she cannot sell her beneficial interest in the trust. However, any payments from the trust to Ms. R~ or for her support and maintenance would be income to her.

_11It should be noted that none of the documents provided to us specifically designate the monthly payments from Mr. R~'s account into the trust as maintenance payments nor require that they be used for her maintenance. See Stipulation, Petition, Order, and Trust. Nor does the Stipulation recognize that the payments be included as income on Ms. R~'s income tax returns. Nevertheless, the Stipulation states that Mr. R~'s obligation with respect to maintenance ends once he deposits the $30,000 into an account established by him, as long as it is properly insured account, and that the court's jurisdiction with respect to maintenance to Ms. R~ shall terminate when the funds run out. Stipulation, 5. Thus, while the pertinent documents do not specifically designate the monthly payments as maintenance payments, the Stipulation contains language indicating that the payments are related to the maintenance obligations of Mr. R~ and the right of Ms. R~ to receive maintenance.

F. PR 04-051 SSI - Minnesota - Review of the Interest of David H~ in the H~ Revocable Living Trust, ~-ACTION Your Ref: S2D5G6, SI 2-1-3 MN Our Ref: 3P091

DATE: December 22, 2003

1. SYLLABUS

This opinion concerns a living trust in the State of Wisconsin. The trust agreement created 3 separate trusts. The SSI beneficiary is the grantor and beneficiary of one of the 3 trusts. The trust was established in 1983, so it was evaluated under the SSI trust rules in effect prior to the 1/1/2000 change in the law. The SSI beneficiary's trust is not revocable and the beneficiary cannot direct the use of the trust, so that trust not a resource for SSI purposes. However, the beneficiary does have access to the trust income which is kept in a separate account. Therefore, the income generated by the trust is unearned income for SSI purposes and, if retained, is a countable resource.

2. OPINION

You have asked us whether the interest of David in the H~ Revocable Living Trust is a countable resource to him for purposes of SSI. For the reasons discussed below, we conclude that the trust principal is not a countable resource, but that the trust income, if any, may be a countable resource.

FACTS

On September 15, 1983, Leroy, Susan, and David created the H~ Revocable Living Trust. The trust was funded with real estate located in Rock County, Wisconsin, which the three individuals received undivided interests under the will of their grandfather. The purpose of the trust is to develop the trust property as a business asset. Trust § 1.1.

The trust agreement created three separate trusts. The first trust was established with Leroy's undivided one-half interest in the real estate and was for his benefit. The second trust was established with Susan's undivided one-fourth interest in the real estate and was for her benefit. The third trust was established with David's undivided one-fourth interest in the real estate and was for his benefit. Trust § 1.2. Thus, David is the grantor and primary beneficiary with respect to his trust. As of June 30, 2003, David's trust was valued at $295,070.50.

According to the trust agreement, any trust may be amended or revoked when any two of the three grantors do so in writing. Trust § 7.1. In addition, a grantor has the right to withdraw any income accrued to his/her account at any time. Trust § 1.4. Upon termination of any trust, the remaining assets are to be distributed first to the respective grantor, if living; then in accord with the grantor's will; and if there is no valid will, to the grantor's "heirs-at-law." Trust § 1.5.

The trustees generally have the right to make distributions in cash or in kind or partly in each as they see fit. Trust § 8.1(c). The trust agreement also states that the trustees have sole discretion to distribute any portion of the net income of each grantor's trust for the health care, education, and maintenance and support of the grantor. Trust § 1.3. Any income may be accumulated in a separate income account for each beneficiary. Id.

The trust agreement also contains a spendthrift provision, which prohibits the assignment or anticipatory transfer of the beneficiaries' interests in their respective trusts. Trust § 8.1(r).

DISCUSSION

For SSI purposes, a resource is defined 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 support and maintenance. See 20 C.F.R. § 416.1201(a) (2003). If the individual has the right, authority, or power to liquidate the property, it is a resource. See id. Trust assets are a resource if the individual can (1) revoke or terminate the trust and use the assets to meet his needs for food, clothing, or shelter, (2) direct the use of the trust assets for his support and maintenance under the terms of the trust, or (3) sell his beneficial interest in the trust. See POMS SI 01120.200(D)(1)(a).

Initially, we note that, although David lives in Minnesota, Wisconsin law governs in this case. The trust agreement specifies that all questions concerning the trust are to be determined in accordance with Wisconsin state law. Trust § 6.8.

We first determine whether David has the legal authority to revoke his trust. The trust agreement provides that any two of the three grantors may amend or revoke any trust. Trust § 7.1. Since David cannot revoke his trust on his own, but would need the consent of at least one other grantor, we do not consider the trust revocable by David for purposes of determining whether it is a countable resource.

Wisconsin law also provides that a trust may be revoked by written consent of the grantor and all beneficiaries. See W.S.A. § 701.12. As stated above, David is the grantor and beneficiary of his trust. However, David is not the sole beneficiary, since residual beneficiaries are also named in the trust agreement. The trust agreement states that, upon David's death, the remaining assets are to be distributed in accord with his will, or there is no valid will, to his "heirs-at-law." Trust § 1.5. Under current Wisconsin law, a future interest in one's "heirs at law" or similar language generally creates residual beneficiaries, unless a contrary intent is indicated. See W.S.A.§§ 700.11, 854.22._11] This is consistent with the general trust principle which presumes that "language expressing an apparent intention to create a remainder in someone's heirs is so intended and is to be given that effect." Restatement (Third) of Trusts § 49, comment a(1). Since there are residual beneficiaries, David cannot revoke his trust without their consent. Therefore, we again do not consider the trust revocable for purposes of determining whether it is a countable resource. See Memorandum from Reg. Chief Counsel, Chicago, to Ass't Reg. Comm.-MOS, Chicago, SSI - Update on the Law Regarding Grantor Trusts, at 3-4 (July 23, 2003).

Next, we determine whether David has the power to direct the use of the trust assets for his support and maintenance. The trust language on this issue is less than clear. Section 8.1(c) of the trust agreement states that the trustees have discretion to make distributions as they see fit. And under § 1.3, the trustees have sole discretion to make distributions of the net income of the trust for the grantor's health care, education, and maintenance and support. However, § 1.4 provides that the grantor has the right to withdraw any accumulated and undistributed trust income at any time. Thus, under the terms of the trust, David does not have the power to direct the use of the trust principal for his support and maintenance. However, it appears that David has full access to the trust income, which is kept in a separate income account. Accordingly, any generated trust income would be considered unearned income in the month it is accrued and credited to David's account, and a countable resource in subsequent months if it is not withdrawn._22] See 20 C.F.R. §§ 416.1102, 416.1121, 416.1123; POMS SI 00810.005, SI 00810.015, 01110.600.

Lastly, we determine whether David has the power to sell his beneficial interest in his trust. Although the trust agreement contains a spendthrift provision, it cannot be given effect, because a grantor is not permitted to create a spendthrift trust for his own benefit. See W.S.A. § 701.06; Restatement (Third) of Trusts § 58(2) & comment e. David's interest in the trust principal would not have significant market value, as it may be unlikely that anyone would purchase an undivided one-fourth interest in the property with no right to unilaterally revoke the trust. David would, however, be able to sell his interest in future trust income, which may be withdrawn unilaterally at any time.

CONCLUSION

In sum, the principal of David's trust is not a countable resource. Although the trust is revocable under its terms, we do not consider it revocable for purposes of SSI because David cannot revoke the trust on his own. Moreover, David cannot direct the use of the trust principal for his maintenance and support, or sell his beneficial interest in the trust principal. The accrued trust income, however, is considered unearned income in the month it is acquired by the trust. In subsequent months, if the trust income remains in the income account, it is considered a countable resource, because David has the right to withdraw the full amount of the accumulated trust income at any time, and the spendthrift provision does not prevent him from selling his interest in future trust income.

Sincerely,

Kim Leslie B~
Acting Regional Chief Counsel, Region V

By:
Cristine H. K~
Assistant Regional Counsel

_11This law took effect on May 12, 1998, and applies to deaths occurring on or after January 1, 1999, except with respect to irrevocable governing instruments executed before that date. The new law applies in David's case because his death will occur after January 1, 1999, and his trust is revocable.

_22The information provided does not indicate whether the trust has generated any income.

G. PS 03-102 SSI - Wisconsin - Review of Life Insurance Funded Burial Trust for Barbara, ~

DATE: March 5, 2003

1. SYLLABUS

In this opinion, OGC found that an insurance policy assigned to a trust was a resource for SSI purposes because the owner retained the power to revoke the agreement and could convert the policy to cash which she could use for her support and maintenance. While the trust established by the funeral provider was irrevocable, the assignment of the insurance proceeds to fund the trust was revocable. Therefore, OGC concluded that the beneficiary rather than the funeral provider established the trust. Finally, OGC opined that the undue hardship provision explained at SI 01120.203E. should be considered in this case because the trust would be viewed by a Georgia court as irrevocable. This is an interesting case because it serves as a reminder to field offices that State law from more than one jurisdiction may have to be considered when rendering a determination. In the instant case, Wisconsin law applies to the transactions at hand, but Georgia law determines whether the trust is irrevocable for purposes of applying the undue hardship provision for trusts.

2. OPINION

You have asked for our opinion regarding Barbara irrevocable assignment of her right to change the beneficiary of her life insurance policy to a Funeral Home and Pre-Thana Trust. We do not reach the issue of the beneficiary assignment because we conclude that the pre-need burial agreement Ms. K~ entered into is revocable; thus the trust to which she assigned her insurance policy is a resource under federal law. However, the Agency may want to consider whether the undue hardship exception may apply to counting Ms. K~ trust as a resource.

BACKGROUND

On March 27, 2002, Ms. K~ sister Jeanette, applied for a life insurance policy with the Fortis Benefits Insurance Company for Ms. K~. The policy was issued on April 7, 2002. It is to be paid by quarterly premiums of $247.14. No beneficiary is designated on the application.

The file also contains a “Pre-need Agreement/Assignment.” The front page of the assignment indicates that the agreement is being funded by a life insurance policy; that the prices of some funeral goods and services are guaranteed and some will be determined at the time of need; identifies Janet V~ as the sales agent and indicates that a sales commission is being paid to her; identifies the Schmutzler-Vick Funeral Home and is signed by the funeral home's “authorized person”; the assignment also indicates that it is irrevocable. The irrevocability clause indicates that, in exchange for the promise of the funeral home specified in the document to provide the specified goods and services, the purchaser irrevocably assigns all incidents of ownership including the right to change the beneficiary, obtain a loan against the policy, surrender it for cash or change the owner. The funeral home in turn agrees to immediately transfer its ownership rights in the policy to the Pre-Thana Trust, which then holds the policy as agent for Ms. K~.

The funeral home and the purchaser agree that after Ms. K~ death, the trustee will pay the policy proceeds to the funeral home if it provides the goods and services and to another funeral home if it provides the goods and services. The back page of the Pre-need Agreement/Assignment contains additional terms. Among them is a termination provision, which indicates that the purchaser may cancel the agreement at any time before the funeral home furnishes the goods and services. The termination provision further indicates that termination would not cancel the insurance policy, which is governed by the terms of the policy itself; nor does termination of the agreement cancel any transfer of ownership of the policy to the Pre-Thana Trust.

DISCUSSION

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash to be used for her support and maintenance. 20 C.F.R. § 416.1201(a). A life insurance policy can be a resource if the individual can surrender it for cash or recover the premiums paid. 20 C.F.R. § 416.1230. Here, the life insurance policy was a resource for the first thirty days after it was issued because Ms. K~ had the unrestricted right to cancel the policy and recover the full amount of the premiums paid. Wis. Admin. Code § Ins 23.30 (giving purchasers of life insurance policies thirty days to cancel the policy and recover premiums paid). Ms. K~ policy was to be paid by quarterly amounts of $247.14; thus, the value of the policy during the first thirty days was most likely $247.14.

After the first thirty days, we must determine whether the trust to which the policy was assigned is a resource. A trust established by an individual on or after January 1, 2000, as this one is, generally will be considered a resource, under federal law, if it is revocable, or, even if it is irrevocable, to the extent that payments from the trust could be made to or for the benefit of the individual. 42 U.S.C. § 1382b(e)(3)(B); POMS SI 01120.201(D)(1)-(2). This rule applies if payments can be made for the benefit of the individual “under any circumstance, no matter how unlikely or distant in the future.” POMS SI 01120.201D.2.b.

These provisions do not apply to burial trusts where the individual irrevocably contracts with a provider of funeral goods and services and either (1) the funeral provider subsequently places the funds in a trust, or (2) the individual establishes an irrevocable trust naming the funeral provider as the beneficiary. POMS SI 01120.201H.1. Under these circumstances, the funeral home is considered, for federal law purposes, to have established the trust. See Exclusion of Certain Burial Trusts from Section 205 of Public Law Number (Pub. L. No.) 106-169, Associate General Counsel Office of Program Law to Associate Commissioner for Legislative Development (Aug. 29, 2000). The statutory provisions at 42 U.S.C. § 1382b(e)(3)(B), however, will apply where an individual establishes a burial trust with his or her own assets but does not enter into a pre-need funeral contract with a funeral provider; or the individual enters into an irrevocable funeral contract with a funeral provider, but establishes a revocable trust to fund the contract; or the individual enters into a revocable funeral contract with a funeral provider, even if the funeral provider places the money in a trust. POMS SI 01120.201H.2. In these circumstances, the individual, rather than the funeral home, is considered, for federal law purposes, to have established the trust.

In this case, Ms. K~ burial agreement is revocable; thus, the trust to which the insurance policy was assigned is a resource even though the funeral home placed the funds in trust. POMS SI 01120.201H.2. As noted, the Pre-need Agreement/Assignment contains a termination provision. The termination provision states that the purchaser, i.e., Ms. K~, “may cancel this Agreement at any time, if the cancellation is in writing and received before the Funeral Home furnishes the funeral goods and services.” The provision further indicates that “[c]ancellation releases all parties from their obligations under this Agreement.”

We note that the language in the Pre-Need Agreement/Assignment is confusing. For example, the irrevocable assignment clause initialed by Ms. K~ guardian, which appears on the front page, indicates that “ownership” has been assigned to a “Funeral Home and Pre-Thana Trust.” Yet, the clause later indicates that the “Purchaser hereby irrevocably assigns all incidents of ownership of Policy to the Funeral Home,” and then that “The Funeral Home agrees to immediately transfer its ownership rights . . . to the Pre-Thana Trust, which will hold the Policy as agent for [Ms. K~].” The termination provision in the Pre-Need Agreement/Assignment indicates that cancellation “would not cancel any transfer of ownership of the Policy to the Pre-Thana Trust.” In any event, because the agreement with the funeral home is revocable, the trust to which Ms. K~ insurance policy may have been assigned is a resource under 42 U.S.C. § 1382b(e)(3)(B). POMS SI 01120.201H.2. The value of the resource is the cash surrender value of the life insurance policy, which depends on how long Ms. K~ has held the policy.

SSA, however, may waive application of the statutory trust counting provisions if the individual is ineligible for benefits due to counting an irrevocable trust as a resource, and if the individual meets the criteria for undue hardship. 42 U.S.C. § 1382b(e)(4); POMS SI 01120.203C.2.a.; Exclusion of Certain Burial Trusts from Section 205 of Public Law Number (Pub. L. No.) 106-169, Associate General Counsel Office of Program Law to Associate Commissioner for Legislative Development (Aug. 29, 2000); Memorandum from Regional Chief Counsel, Chicago, to Ass't Reg. Comm. - MOS, Chicago, SSI-Wisconsin-Review of Wisconsin Life Insurance Funded Burial Trust for Betty N~, at 3-4 (October 29, 2002) (hereinafter, N~ memo). When the Agency evaluates whether an individual has established undue hardship, assets in an irrevocable trust are not considered to be available funds. N~ memo at 4; Exclusion of Certain Burial Trusts from Section 205 of Public Law Number (Pub. L. No.) 106-169, Associate General Counsel Office of Program Law to Associate Commissioner for Legislative Development (Aug. 29, 2000). As explained below, Ms. K~ trust is irrevocable.

In determining whether the trust is irrevocable, for undue hardship purposes, we turn to the terms of the trust and applicable state law. The documents submitted suggest that the parties intended the assignment to trust to be irrevocable. However, the trust also should be evaluated under Georgia law, which governs the trust by the trust's own provisions, to determine whether the trust may be revoked under state law. We have previously verified with Region IV OGC that, under Georgia law, an identical trust would not be considered revocable. N~ memo at 4.

As we explained in N~, Georgia previously followed the general trust rule that a grantor who is also the sole beneficiary of a trust can revoke a trust even though the trust states that it is irrevocable. N~ memo at 4, citing M~ v. First Nat'l Bank & Trust, 130 S.E.2d 718 (1963). However, the Georgia Supreme Court acknowledged that the state legislature nullified the holding in M~, for trusts created after 1973, by passing a statute providing that no trust that purported to be irrevocable could be terminated in whole or in part. N~ memo at 4, citing Woodruff v. Trust Co., 210 S.E.2d 321, 323-25 (Ga. 1974). The current Georgia statute states that “[a] settlor shall have no power to modify or revoke a trust in the absence of an express reservation of such power.” N~ memo at 4, citing Ga. Stat. Ann. § 53-12-150 (2002). Thus, it appears that a Georgia court would not allow Ms. K~ to revoke the trust because she did not expressly reserve the right to revoke the trust.

CONCLUSION

In sum, we conclude that Ms. K~ life insurance policy was a minimal resource for the first thirty days after it was issued because Ms. K~ retained the unrestricted right to cancel the policy and recover the $247.14 premium she had paid. After the first thirty days, the policy was still a resource, with a value equal to its cash surrender value. This is because the trust to which she assigned the insurance policy would be considered a resource under the provisions of the Social Security Act. The statutory provisions apply because the policy was assigned to trust pursuant to a revocable contract with a funeral provider; therefore, Ms. K~ is considered to have established the trust. However, because the trust is irrevocable, the Agency may wish to consider whether the undue hardship provisions may apply in this case.

Sincerely,

Donna L. C~
Acting Regional Chief Counsel, Region V
Social Security Administration

By:
Elizabeth F~
Assistant Regional Counsel

H. PS 03-081 SSI - Wisconsin - Review of Burial Trust for Mary M. G~, ~ Your Reference No.: SI-2-1-3 Our Reference No.: 03P006

DATE: January 23, 2003

1. SYLLABUS

In this opinion, the individual entered into an irrevocable contract for $5,116.18 for funeral and burial services which was subsequently placed in an irrevocable trust by the funeral director. This trust is considered to be established with the assets of the funeral director. Under Wisconsin law burial agreement funds must be held in trust but the trust can be made irrevocable only up to $2,500. Therefore, SI 01130.420C.5.b. was followed to determine that, after applying all appropriate exclusions, the resource value of this burial arrangement is $1,000.

2. OPINION

You have asked whether Mary $5,116.18 burial trust is a resource for the purposes of SSI. We conclude that after applying Wisconsin's $2,500.00 statutory limit on the irrevocability of burial trusts, and SSA's burial space and burial fund exclusions, Mary is left with $1,000.00 which is a countable resource for SSI purposes.

BACKGROUND

The file contains an informational memorandum from the Wisconsin Department of Workforce Development (DWD), explaining how to treat the Wisconsin Funeral Directors Association (WFDA) master funeral trust agreement for determining an individual's eligibility for Medicaid. The memorandum indicates that the agreement between the purchaser and the funeral home constitutes a purchase, and it is not an installment burial contract, an insurance funded burial contract or divestment. In explaining how to calculate how much of the burial trust can be excluded, the memorandum references Wis. Stat. § 445.125(1) - which directs that burial agreements funded by trusts may be made irrevocable up to $2,500.00.

The file indicates that Ms. G~ entered into an irrevocable contract with the O'Flaherty-Erickson Funeral Home. Ms. G~ contracted for $1,485.00 worth of “basic services” of the funeral director and staff; $450.00 for embalming; $355.00 for the funeral ceremony; $210.00 to transfer her remains to the funeral home; $1,694.18 for a casket and $922.00 for an outer burial container. Her total price for services and merchandise was $5,116.18, which she apparently paid in full. The money Ms. G~ paid is being held in the master trust.

DISCUSSION

A trust created on or after January 1, 2000, even an irrevocable trust, is considered to be a resource “if there are any circumstances under which payment from the trust could be made to or for the benefit of the individual.” 42 U.S.C. § 1382b(e)(3)(B); POMS SI 01120.201D.2. As in this case, however, when an individual signs an irrevocable, non-assignable agreement with a funeral home, pre-pays for the goods and services, and the funeral home places the funds in an irrevocable trust, SSA considers the trust to have been established with the assets of the funeral director. POMS SI 01120.201H.1. In such instances, SSA applies its regular resource rules rather than its rules for trusts. Id.

A burial contract that cannot be revoked or sold without significant hardship is not a resource. POMS SI 01130.420B.2. State law determines the revocability of a burial contract. POMS SI 01130.420B.3. As the Wisconsin DWD memorandum indicates, Ms. G~ burial trust/agreement is not a life insurance funded burial contract. Accordingly, Wis. Stat. Ann. § 445.125(1) applies. Wisconsin requires burial agreement funds to be held in trust, however, the trust can be made irrevocable only up to $2,500.00. Wis. Stat. Ann. § 445.125(1). The statute also excludes certain items, such as outer burial containers, which are considered revocable. Wis. Stat. Ann. §§ 445.125(4)(b), 701.12. In addition to applying state law, SSA applies its own rules in excluding burial spaces and burial funds. POMS SI 01130.400; SI 01130.410; SI 01130.420. Although the Wisconsin statute indicates that the $922.00 for the outer burial container is revocable, SSA includes this in the burial space exclusion, which does not have a monetary limit; the $922.00 is thus excludable. POMS SI 01130.400A.1.

After initially deducting the $922.00 outer burial container from Ms. G~ $5,116.18 trust we are left with $4,194.18 subject to the statutory limit. This remaining trust amount includes both burial space (the $1,694.18 casket) and burial service items (embalming, transportation and ceremony services totaling $2,500.00). POMS SI 01130.400B.1.; POMS SI 01130.410B.2.a. The $2,500.00 statutory limit is first applied to the burial space portion - Ms. G~ $1,694.18 casket. POMS SI 01130.420C.5.b. Such application leaves $806.00 of the statutory $2,500.00 to apply to the $2,500.00 worth of burial services. After such application, Ms. G~ is left with $1,694.00 of burial services beyond Wisconsin's statutory limit, which is revocable under state law. However, our calculations do not end there. Ms. G~ still has $694.00 of SSA's $1,500.00 burial funds exclusion - $1,500.00 minus the $806.00 already applied - which can be applied to the $1,694.00 remainder. POMS SI 01130.420C.5.b. This additional calculation leaves $1,000.00, which is a countable resource.

CONCLUSION

$1,000.00 worth of burial services in Ms. G~ burial trust is beyond Wisconsin's statutory limit for irrevocable burial contracts and is also beyond SSA's $1,500.00 burial funds exclusion. The amount is thus a resource for SSI purposes.

Sincerely,

Donna L. C~
Acting Regional Chief Counsel, Region V
Social Security Administration

By:
Elizabeth F~
Assistant Regional Counsel

I. PS 03-072 SSI - Wisconsin - Review of the Wisconsin Life Insurance Funded Burial Contract for Kathleen F. S~, ~ Your Reference No.: S2DG6, SI-2-1-8 Our Reference No.: 02 P098

DATE: December 30, 2002

1. SYLLABUS

In this opinion an insurance funded burial contract is excluded from counting as a resource for SSI purposes. The individual irrevocably assigned ownership and proceeds of a life insurance policy to her sister on the condition that the policy's proceeds may only be used to pay for funeral expenses. The sister signed an agreement with a funeral home for a funeral but did not assign the ownership of the insurance to the funeral home. However the sister, acting with power of attorney, signed a “public assistance” caveat that the individual was irrevocably renouncing the power to control the policy and irrevocably waived all rights to surrender the policy for cash, and irrevocably assigned the policy for payment of funeral expenses. Based on these facts the individual does not appear to have the right to surrender her policy for its cash value. In addition, the individual's assignment of the proceeds to her sister is akin to a trust agreement since she assigned her legal ownership to the sister and retained a beneficial right which can only be used for funeral expenses. This assignment agreement was established prior to 1/1/2000 and meets the pre-1/1/2000 requirements for a trust to be excluded from resource counting.

2. OPINION

You have asked us whether a life insurance funded burial contract set up on behalf of Kathleen F. S~ is a resource for the purposes of SSI. We conclude that the insurance policy is not a resource after the initial twenty days in which Kathleen S~ had the right to revoke the insurance policy, because Kathleen S~ irrevocably waived her right to recover the cash surrender value or to recover the premium paid on the policy.

FACTS

The documents you have provided include a February 16, 1996, “Application for Insurance/Annuity” from Prairie States Life Insurance Company (Prairie States); the application indicates that the policy is a single premium policy, and the initial benefit of the policy is $6,838.00. The application indicates that $6,804.26 was paid upon application. The file contains three checks equaling the paid premium amount. Two checks, dated February 12, 1996, are made out directly to the Borgwardt Funeral home. The other check, dated February 19, 1996, appears to be made out to Prairie States “for the benefit of” (FBO) Kathleen S~; this check also indicates that Kathleen S~ is the remitter and references an irrevocable funeral trust agreement with “F. J. Borgwardt Sons, Inc.” The application for life insurance identifies Kathleen S~ as the proposed insured and the owner, and her sister, Dorothy Z~, as the irrevocable beneficiary. Dorothy Z~ is also identified as having power of attorney (P.O.A.). The application indicates that the beneficiary designation is irrevocable. The application identifies the Borgwardt Funeral Home in a section entitled “Agent's Report”; nothing else on the document indicates the insurance policy is intended to fund funeral services. The application is signed by Dorothy Z~, not by Kathleen S~. However, the file also contains a February 16, 1996, “Signature Statement” from Prairie States upon which Kathleen S~ (by Dorothy Z~'s signature) is identified as the applicant and/or prospective owner of a life insurance policy on the life of Kathleen S~ and that due to “mental incompetency,” Kathleen S~ is incapable of signing the application. Dorothy Z~ signed the statement as the “owner” and indicated that her relationship to the insured was a sister.

Additionally, the file contains an “Irrevocable Assignment of Ownership and Beneficiary Designation and Agreement to Apply Proceeds for Burial” signed on February 16, 1996, by Dorothy Z~ as the insured. This assignment indicates that “as owner and insured” of the “above insurance policy,” the right, title and interest in the policy is irrevocably assigned to the beneficiary named above - Dorothy Z~ - on the condition that the beneficiary agrees to use the total policy proceeds towards the cost of funeral services and merchandise upon the death of the owner. The assignment further indicates that the heirs of the insured and the beneficiary are also irrevocably bound to the agreement.

The file also contains a February 16, 1996, “Pre-need Disclosure Statement”; it identifies Dorothy Z~ as the beneficiary and is signed by Dorothy Z~ as the “purchaser.” The statement contains a preamble in which it is noted that the Federal Trade Commission requires certain disclosures to prohibit misrepresentation. The statement lists disclosures pertaining to the price of funeral and burial services and indicates that certain services may or may not be required under the law. The file references a “Guaranteed Funeral Trust.” The file contains a disclosure statement that, in relevant part, indicates that the pre-need funeral guarantee was being offered by a licensed funeral director; that a copy of the Wisconsin Buyers Guide to Life Insurance was provided; that the insurance policy offered as a funding vehicle was being offered by a licensed insurance agent; that the purchaser had twenty days to cancel the insurance policy and receive a full refund; that if an “Irrevocable Assignment of Ownership and Beneficiary Designation and Agreement to Apply Proceeds for Burial” was executed, the entire proceeds of the insurance policy must be used for funeral expenses, and any excess amount will be used for additional funeral services or donated to charity and in no event would the excess amount be refunded to the deceased's estate or to any other persons; and that the “cash advance items” identified in the gratuitous pre-need funeral guarantee were estimates only, and that “since they are provided by others that [sic] the funeral home of your choice are not absolute and may vary and can not be guaranteed by the funeral home of your choice.”

Finally, the file contains an “Option for At Need Funeral Services” signed on February 16, 1996, by Dorothy Z~ as the policy owner. The “at need” option identifies the Borgwardt Funeral Home and identifies Dorothy Z~ as the beneficiary. The option indicates which services have been selected; the total amount of services equals $6,804.26. Signing the form indicates that the policy owner acknowledged and understood that the option was not a “pre-need” funeral service contract; the option did not involve an assignment of insurance proceeds prior to the death of the insured, the family, next of kin or authorized agent was not obligated to exercise the option and the option did not involve the purchase or sale of any goods or services. Dorothy Z~ also signed after a caveat reserved to recipients of public assistance. The caveat indicated that the undersigned acknowledged, understood and confirmed that by signing she was irrevocably renouncing the power to control the policy; irrevocably waived all rights to surrender the policy for cash or obtain a loan against it; did not assign the rights waived to any other person; irrevocably committed the use of the policy to the payment of funeral services and merchandise provided for the insured.

DISCUSSION

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash to be used for his/her support and maintenance. 20 C.F.R. § 416.1201(a) (2001). If the individual has the right, authority or power to liquidate the property, it is a resource. Id. A life insurance policy can be a resource if the individual can surrender it for cash or recover the premiums paid. 20 C.F.R. § 416.1230.

Here, Kathleen S~ purchased a life insurance policy on which she has (1) identified an irrevocable beneficiary - her sister and (2) irrevocably assigned the proceeds of her insurance policy to the same beneficiary with an agreement that the proceeds from the policy be used to fund Kathleen S~'s funeral. The policy was irrevocably assigned to a trust. The file also contains an option for at need funeral services.

The Insurance Policy

Under current Wisconsin law, Kathleen S~'s insurance policy would be a resource for the first thirty days after it was issued because, during that time period, she could cancel it and receive the full amount of any premiums paid. Wis. Adm. Code § Ins 23.30; Memorandum from Regional Chief Counsel, Chicago, to Ass't Reg. Comm. - MOS, Chicago, SSI-Wisconsin-Review of Wisconsin Life Insurance Funded Burial Contract (LIFBC) for Donna Walker, at 2 (December 13, 1999). Kathleen S~'s policy indicates that she could return it for a refund during the first twenty days of issue. We can assume that the twenty day limit was the law at the time Kathleen S~'s policy was issued. Moreover, unless Kathleen S~ applied for SSI benefits in 1996, the revocability period should not be relevant to her current eligibility for SSI benefits.

Beyond the initial twenty-day period, Kathleen S~ most likely cannot get the cash surrender value without the consent of any irrevocable beneficiary. We do not have the actual policy, but this is a standard provision. Kathleen S~ also irrevocably assigned her right, title and interest in the insurance policy to the beneficiary on the condition that the beneficiary use the total policy proceeds towards the cost of funeral services and merchandise. Also as part of that transaction, Kathleen S~ agreed that any excess proceeds from the policy would not revert to her estate or to any other person. Based on these facts, Kathleen S~ does not appear to have the right to surrender her insurance policy for its cash value.

The Trust

Kathleen S~'s assignment of the proceeds of her life insurance policy to her sister is akin to a trust agreement, since Kathleen S~ assigned her legal ownership interest and retained a beneficial right, which can only be used for her funeral. Because the trust in this case was created prior to January 1, 2000, it will be considered a resource if: (1) Kathleen S~ can revoke or terminate the trust and recover the assets; (2) she can direct the trustee to use the trust assets to provide for her support and maintenance; or (3) she can sell her beneficial interest in the trust. POMS SI 01120.200(D)(1). The second and third prongs of this analysis are not problematic since the trust assets are available for the benefit of Kathleen S~ only upon her death and can be used only to pay for her funeral, not for her support and maintenance, and no one is likely to purchase Kathleen S~'s beneficial interest in the trust since it is tied to her life insurance policy which is available only when she dies.

With respect to the first prong of the trust analysis, we believe that the trust is irrevocable, because if the option contract is valid (which we believe it is as explained in more detail in the following section) and irrevocable, the funeral provider who issued the option contract could be considered a beneficiary to the trust whose consent would be required in order to revoke the assignment and recover the case surrender value. The assignment of the insurance policy to Dorothy Z~ to pay for Kathleen S~'s funeral was done as part of the same set of transactions with the funeral home that provided the option contract; the option contract assumes that the policy will be assigned to a relative to be used to pay for the funeral services if Kathleen S~ or her relatives exercise it. Therefore, it appears that the policy was assigned to Dorothy Z~ with the agreement of the funeral home to protect the assets so that they would be available in order to exercise the option contract. Under these circumstances, the funeral home may be considered a beneficiary to the trust whose consent would be required in order to revoke and recover the cash surrender value. See Restatement (Second) of Trusts, § 330, commnt. h (1957); Austin Wakeman S~, The Law of Trusts, § 330.6 (4th ed. 1987).

The Option Contract with the Funeral Home

We believe that the option contract was intended to be irrevocable. Although Kathleen S~ or her next of kin is not required to exercise the option with the identified funeral home, it is apparent that Kathleen S~ has agreed to irrevocably set aside her life insurance policy in order to ensure that the option contract will be exercisable at her death. For example, on the contract, Kathleen S~ indicated that she acknowledged, understood and confirmed that by signing she was irrevocably renouncing the power to control the policy; irrevocably waived all rights to surrender the policy for cash or obtain a loan against it; did not assign the rights waived to any other person; irrevocably committed the use of the policy to the payment of funeral services and merchandise provided for the insured.

We note that subsequent to the time Kathleen S~ entered into her life insurance funded burial agreement, Wisconsin law on the subject changed significantly. See Memorandum from Regional Chief Counsel, Chicago, to Ass't Reg. Comm. - MOS, Chicago, SSI-Wisconsin-Review of Wisconsin Life Insurance Funded Burial Trust for Bernice Mae Erickson (December 9, 2002). While the statutory distinction between burial agreements funded by trusts and by life insurance policies - Wis. Stat. § 445.125(3m) - was created in 1995 (1995 Wis. Act 295), the Wisconsin Administrative Code provisions specifying the manner in which the insurance policies or the burial agreements should be structured, were not in effect until October 1, 1997 (Wis. Adm. Code § Ins 23.30) and November 1, 1998 (Wis. Adm. Code § FD 6.07). Additionally, Wis. Stat. § 632.415 was not created until 1999 and was not effective until July 1, 2000. 1999 Wis. Act 191. All of the documents relevant to this case were signed in February 1996; consequently, they may not be fully compliant with current Wisconsin law.

We believe, however, that the option contract/burial agreement is valid in spite of the change in Wisconsin law. We believe that Wisconsin courts would not find that the current statutory and regulatory provisions regarding life insurance funded burial agreements apply to this matter. In In re Estate of Nottingham, 175 N.W.2d 640, 643 (Wis. 1965), the court held that art. 1, § 10 of the Wisconsin Constitution barred retroactive application of a statute if it “substantially lessens the value of a pre-existing contract.” In so finding, the court noted that Wisconsin had long held this view of statutory retroactivity. Citing Pawlowski v. Eskofski, 244 N.W. 611 (Wis. 1932), the Nottingham court noted that Wisconsin relied on Supreme Court precedent for its construction of art. 1, § 10: “That court long ago held that any statute, whether remedial or not, that operated to deprive a party to a contract antedating the enactment of the statute of any valuable right secured to him by that contract is void as to that contract.” Pawlowski, 244 N.W. at 613, citing Edwards v. Kearzey, 96 U.S. 595. In this case, a retroactive application of Wis. Stats. §§ 445.125(3m), 632.415, would operate to deprive Kathleen S~ of a vested property interest she had under the prior law - her burial contract.

Finally, we note that the option contract could be a resource if Kathleen S~ could sell it. SI 01110.100(B)(1); see also Williston on Contracts, § 412 at 47, (3d ed. 1951) (rights under contract are assignable); Federal Deposit Ins. Corp. v. First Mortg. Investors, 250 N.W.2d 362, 368 (Wis. 1977) “unless expressly restricted an option is freely transferable.” Here, however, the option is not transferable - and thus not a resource - because it is inextricably tied to the insurance policy on Kathleen S~'s life.

CONCLUSION

In sum, it is our opinion that, because the documents in the file indicate that Kathleen S~'s burial agreement is irrevocable, and she may not obtain the cash surrender value of her life insurance policy or use the trust to which it was assigned for her support and maintenance, Kathleen S~'s life insurance funded burial agreement is not a resource for the purposes of SSI except during the twenty-day period after February 16, 1996, when Kathleen S~ could have canceled the policy and received a refund of her premium.

Sincerely,

Gary A. S~
Acting Regional Chief Counsel, Region V
Social Security Administration

By:
Elizabeth F~
Assistant Regional Counsel

J. PS 03-070 Review of Land Owned by John N~ II. Refer to: SI 2-1 WI; Our Reference: 03PO12

DATE: December 20, 2002

1. SYLLABUS

In this opinion, an individual and his 4 siblings own a life estate in 12 acres of wooded land. Their parents gave the 5 children the estate with a stipulation that the land can be used but can never be sold, and must be passed along to the siblings' own children. It was determined that this life estate is not countable as a resource for SSI purposes because the individual's ownership interest in this life estate cannot be sold and, under Wisconsin law, such a restriction is not prohibited.

2. OPINION

You asked us whether the claimant's interest in twelve acres of wood property is a resource for purposes of determining the claimant's eligibility for Supplemental Security Income (“SSI”). For the reasons discussed below, we conclude that the claimant has a life estate in the land, but that the land is not a resource for purposes of determining his eligibility for SSI.

FACTS

Following an agreement made with his parents, the claimant, John N~ II, and his four siblings each acquired a life estate in twelve acres of wooded property in the State of Wisconsin. The claimant's parents, O. H. N~ I and Joyce L. N~, gave their five children life estates in the twelve acres of wood stipulating that:

As each of your families grow and become legal age adults, you will pass on to them these same rights and responsibilities to the property. As each of the original five children pass away, your voices and responsibilities to this 12 acres will be passed down to each of your children to share. As they become adults, they will each be able to have a voice and share in the cost of the taxes and the land. As will generations to follow.

In addition, the instrument creating the life estate placed certain restrictions on the rights of the life estate owner. Specifically, the instrument provided that “[a]t NO time are you allowed to sell to each other or any other person this property. It is NOT to be used to borrow against or traded or sold.” (emphasis in original).

DISCUSSION

A resource for purposes of determining SSI eligibility is “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 and maintenance.” 20 C.F.R. § 416.1201(a). “If a property right cannot be liquidated, the property will not be considered a resource.” 20 C.F.R. § 416.1201(a)(1). Here, Mr. N~ appears to have a life estate in the real estate at issue. See Meinert v. Roeglin, 173 N.W. 224 (Wis. 1919) (A will devising land to a son to have and to hold same to himself and his heir forever, with a proviso that he shall not sell, but the land shall go to his heirs after his death, gives him a life estate only with remainder to his heirs.).

Under POMS SI 01140.110 and SI 01110.515, because the holder of a life estate is generally able to sell his interest in the land, the value of the life estate should be counted as a resource for SSI purposes. However, in some cases, the owner of a life estate may not have the right to sell his life estate because the instrument creating the life estate has placed restrictions on the rights of the life estate owner. POMS SI 01140.110, SI 01110.515. Here, Mr. N~'s parents have stated: “At NO time are you allowed to sell to each other or any other person this property. It is NOT to be used to borrow against or traded or sold.” (emphasis in original). Based on this language, Mr. N~ cannot sell his interest in the land (his life estate). We found nothing in Wisconsin law that would prohibit such a restriction. Compare Meinert v. Roeglin, 173 N.W. 224 (1919) (accepting at face value a will devising land to the person's son with the proviso that the son could not sell the land during his lifetime); compare also Wis. Stat. Ann. § 700.16 (allowing for some suspension of the power of alienation of property for limited periods of time).

Consequently, the property should not be considered a resource under 20 C.F.R. § 416.1201(1).

CONCLUSION

For these reasons, Mr. N~'s life estate interest is not a resource for SSI purposes.

Sincerely,

Gary A. S~
Acting Regional Chief Counsel, Region V
Social Security Administration

By:
Alfred C. S~
Assistant Regional Counsel

K. PS 03-061 SSI - Wisconsin - Review of the Life Insurance Funded Burial Trust for Jennifer P~ - REPLY Your Ref: S2D5G6, SI 2-1-3 WI Our Ref: 03P002

DATE: December 5, 2002

1. SYLLABUS

In this Wisconsin opinion, ownership of a life insurance policy was irrevocably assigned to a life insurance trust whose proceeds are to be used for the funeral expenses of insured individual. This trust is a resource for SSI purposes because it was created on or after January 1, 2000 with the individual's own assets and there are circumstances under which payment from the trust could be made for the benefit of the individual, i.e., it will pay the individual's funeral expenses. This trust also would be a resource because it is revocable under Wisconsin law. It is revocable because the SSI applicant is both the grantor and the sole beneficiary of the trust.

2. OPINION

You asked whether a life insurance burial trust established for Jennifer P~ is a resource for SSI purposes. We have reviewed the materials you sent, and have concluded that the life insurance policy assigned to the trust is a resource. Furthermore, because the trust is revocable, the Agency need not consider whether counting this resource results in an undue hardship.

Background

Ms. P~ purchased a life insurance policy with a single premium of $1,930. The policy has a face value of $2000. Ms. P~ applied for the policy on February 27, 2002, and the policy was issued on March 11, 2002. The policy provides that Ms. P~ had 20 days after receipt of the policy to cancel the policy and recover the premium paid. The policy also has a cash surrender value that increases over time.

In her application for the insurance policy, Ms. P~ names the Jennifer S. P~ Trust as the beneficiary of the policy and states that the policy is being irrevocably assigned to an irrevocable life insurance trust. Ms. P~ also signed a document entitled “Irrevocable Life Insurance Trust Agreement,” which is dated February 27, 2002. The agreement indicates that the life insurance policy will be held by the trust, which will use the proceeds at Ms. P~'s death to provide for her funeral. The trust states that, if any funds are remaining after these expenses are paid, the remainder will be paid to the secondary beneficiary named in the trust document. The trust document names the “Estate of the Insured” as the secondary beneficiary.

On March 25, 2002, Ms. P~'s guardian executed an Amendment of Application, which apparently also is signed by an agent of the insurance company. The amendment states that the application for the life insurance policy was amended to read that it was “[i]ssued with Date of Trust being February 27, 2002.”

Discussion

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash to be used for his support and maintenance. See 20 C.F.R. § 416.1201(a). A life insurance policy can be a resource if the individual can surrender it for cash or recover the premiums paid. See 20 C.F.R. § 416.1230.

This policy has a cancellation period of twenty days after it was issued, during which time Ms. P~ had the right to cancel the policy and recover the premium paid. We believe that the date the policy actually was issued, on March 11, 2002, should control in determining the time period during which Ms. P~ still could recover her premium. Ms. P~'s guardian apparently attempted, on March 25, 2002, to amend the application for the policy to reflect that the policy was issued with the date of the trust, i.e., February 27, 2002. However, unless Ms. P~ produces reliable evidence that the insurance company would not have allowed her to recover her premium at any time through the twenty day time period following March 11, 2002, we believe it would be appropriate to consider the $1,930 premium to be a resource during that time.

After that time period, the policy will be a resource if Ms. P~ could surrender the policy for cash. Here, Ms. P~ has assigned the policy to trust. Therefore, the policy will be a resource to her if the trust is a resource. A trust created on or after January 1, 2000, generally is considered a resource, under Section 1613(e) of the Social Security Act, even if the trust is irrevocable, to the extent that “there are any circumstances under which payment from the trust could be made to or for the benefit of the individual.” 42 U.S.C. § 1382b(e)(3)(B); see also POMS SI 01120.201D.2. Ordinarily, if an individual establishes an irrevocable burial trust with his or her assets, Section 1613(e) of the Act applies and the trust is considered a resource. See POMS SI 01120.201H.2.; Exclusion of Certain Burial Trusts from Section 205 of Public Law Number (Pub. L. No.) 106-169, Associate General Counsel Office of Program Law to Associate Commissioner for Legislative Development (Aug. 29, 2000). The Agency may consider waiving application of Section 1613(e) of the Act if counting an irrevocable trust as a resource results in the individual's ineligibility for SSI due to excess resources and other criteria for undue hardship are alleged. POMS SI 01120.203C.2.a.; see generally 42 U.S.C. § 382b(4).

Here, Ms. P~'s trust would be a resource under federal law, even if it were revocable, because the assets will be used to provide for her funeral. Furthermore, the Agency need not consider whether to waive application of the law under the undue hardship provisions because the trust is revocable.

Under Wisconsin law, a trust is revocable, despite any trust language to the contrary, when the individual is both the settlor (or “grantor”) and the sole beneficiary of a trust. See Wis. Stat. Ann. § 701.12. Wisconsin law states that “[b]y written consent of the settlor and all beneficiaries of a trust or any part thereof, such trust of part thereof may be revoked, modified or terminated ....” Wis. Stat. Ann. § 701.12(1). Thus, if Ms. P~ is the sole beneficiary of the trust, she could unilaterally revoke the trust. Here, the trust names no other beneficiaries. Indeed, the trust names Ms. P~'s own estate as the secondary beneficiary to receive any remaining assets after providing for Ms. P~'s funeral.

Conclusion

In sum, we conclude that, unless Ms. P~ produces reliable evidence to the contrary from the insurance company, the Agency should assume that Ms. P~ could recover the $1930 premium she paid for her life insurance policy until twenty days after the policy actually was issued on March 11, 2002. After that time, the cash surrender value of the policy would be a resource because the policy was assigned to a trust that was to be used for Ms. P~'s benefit. Because the trust is revocable, the Agency need not consider whether application of federal law would constitute undue hardship

Sincerely,

Donna C~
Acting Regional Chief Counsel,
Region V

By:_______________________
Suzanne E. D~
Supervisory Counsel

L. PS 03-058 SSI - Wisconsin - Review of the Life Insurance Funded Burial Trust for Tab H~, ~ - REPLY Your Ref: S2D5G6, SI 2-1-3 WI Our Ref: 03P003

DATE: December 6, 2002

1. SYLLABUS

In this Wisconsin opinion, ownership of a life insurance policy was irrevocably assigned to a life insurance trust which is to be used for the funeral expenses of the insured person. This trust is a resource because it was created on or after January 1, 2000 with the individual's own assets and there are circumstances under which payment from the trust could be made for the benefit of the individual, i.e., it will pay the individual's funeral expenses. This trust also would be a resource because it is revocable under Wisconsin law because the SSI applicant is both the grantor and the sole beneficiary of the trust. The trust document has a space for naming a residual beneficiary but none was named.

2. OPINION

You asked whether a life insurance burial trust established for Tad H~ is a resource for SSI purposes. We have reviewed the materials you sent, and have concluded that the trust is a resource. Furthermore, because the trust is revocable, the Agency need not consider whether counting this resource results in an undue hardship.

Background

Mr. H~ apparently has a life insurance policy which, as of August 30, 2002, had a face value of $3,632.62. A letter from the insurance company suggests that the policy may have had a higher face value before that time, but we do not have a copy of the insurance policy or any other documents that indicate when the policy was issued or the original value of the policy.

On August 26, 2002, Mr. H~ signed an irrevocable assignment of his life insurance policy to the Tab R. H~ Irrevocable Trust. He also has signed an Irrevocable Life Insurance Trust Agreement which indicates that the life insurance policy will be held by the trust, which will use the proceeds at Mr. H~'s death to provide for his funeral. The trust states that, if any funds are remaining after these expenses are paid, the remainder will be paid to the secondary beneficiary named in the trust document. The trust document has a space for naming a secondary beneficiary to the trust. However, that space was left blank.

Discussion

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash to be used for his support and maintenance. See 20 C.F.R. § 416.1201(a). A life insurance policy can be a resource if the individual can surrender it for cash or recover the premiums paid. See 20 C.F.R. § 416.1230. We do not have a copy of the life insurance policy to determine whether the policy had any period during which the policy can be cancelled or what any cash surrender value may be.

In any event, because Mr. H~ has assigned the policy to trust, the policy will be a resource if the trust is a resource. A trust created on or after January 1, 2000, generally is considered a resource, under Section 1613(e) of the Social Security Act, even if the trust is irrevocable, to the extent that “there are any circumstances under which payment from the trust could be made to or for the benefit of the individual.” 42 U.S.C. § 1382b(e)(3)(B); see also POMS SI 01120.201D.2. Ordinarily, if an individual establishes an irrevocable burial trust with his or her assets, Section 1613(e) of the Act applies and the trust is considered a resource. See POMS SI 01120.201H.2.; Exclusion of Certain Burial Trusts from Section 205 of Public Law Number (Pub. L. No.) 106-169, Associate General Counsel Office of Program Law to Associate Commissioner for Legislative Development (Aug. 29, 2000). The Agency may consider waiving application of Section 1613(e) of the Act if counting an irrevocable trust as a resource results in the individual's ineligibility for SSI due to excess resources, and if other criteria for undue hardship are alleged. POMS SI 01120.203C.2.a.; see generally 42 U.S.C. § 382b(4).

Here, Mr. H~'s trust would be a resource under federal law, even if it were revocable, because the assets will be used to provide for his funeral. Furthermore, the Agency need not consider whether to waive application of the law under the undue hardship provisions because the trust is revocable.

Under Wisconsin law, a trust is revocable, despite any trust language to the contrary, when the individual is both the settlor (or "grantor") and the sole beneficiary of a trust. See Wis. Stat. Ann. § 701.12. Wisconsin law states that "[b]y written consent of the settlor and all beneficiaries of a trust or any part thereof, such trust of part thereof may be revoked, modified or terminated ...." Wis. Stat. Ann. § 701.12(1). Thus, if Mr. H~ is the sole beneficiary of the trust, he could revoke the trust unilaterally. Here, the trust names no other beneficiaries. Indeed, the space for naming a secondary beneficiary has been left blank.

Conclusion

In sum, we conclude that Mr. H~'s life insurance policy is a resource under federal law because it is assigned to a trust that will be used for his benefit. Because the trust is revocable, the Agency need not consider whether application of this federal law constitutes an undue hardship.

Sincerely,

Donna L. C~
Acting Regional Chief Counsel,
Region V

By:_______________________
Suzanne E. D~
Supervisory Counsel

M. PS 03-057 SSI - Wisconsin - Review of Life Insurance Funded Burial Trust of Bernice Mae E~, ~ Our Reference No.: 02PO57

DATE: December 9, 2002

1. SYLLABUS

In this case, the ownership of a Forethought Life Insurance policy was irrevocably assigned to a funeral director. The funeral director subsequently assigned the ownership of the policy to a Forethought Trust which will pay for the funeral services. This opinion finds that the irrevocable assignment of the life insurance policy to the funeral director substantially complies with the Wisconsin law that governs prepaid burial contracts and this individual can be considered to have an irrevocable prepaid burial contract under Wisconsin law. Therefore, this burial contract/trust arrangement meets the POMS requirements in SI 01120.210H.1. i.e., this transaction constitutes a purchase of goods and services by the individual and trust is considered purchased with the funeral director's funds, not the individual's. Therefore, the life insurance policy and the trust are not resources for SSI purposes.

2. OPINION

You have asked us whether a life insurance funded burial contract set up on behalf of Bernice Mae E~ is a resource for the purposes of SSI. We conclude that, assuming a burial agreement, which substantially complies with Wisconsin law, has been established with the funeral firm of Bernice E~'s choice, the life insurance policy is a prepayment for funeral services and would not be a resource after the first thirty days during which Bernice E~ had the unrestricted right to revoke the insurance policy.

BACKGROUND

The file contains an application to the Forethought Life Insurance Company for a single premium policy with an initial payment of $6,000.00. The application was signed by Bernice E~ on March 27, 2000. The file also contains an “Irrevocable Assignment of Ownership to a Funeral Firm” signed by Bernice E~ on the same day. The irrevocable assignment identifies Downs Funeral Home as the funeral firm to which ownership of the policy is to be transferred, contingent upon delivery of funeral services and merchandise. By signing the irrevocable assignment, Bernice E~ acknowledged that she understood that the assignment was permanent and irrevocable, and except for retaining the right to change the designated funeral firm and beneficiary, she renounced her power to control the policy. Bernice E~ further acknowledged that she understood that ownership of the policy would be transferred by the funeral firm to the Forethought Trust, which would assure payment to the designated funeral firm for the purpose of funeral services and merchandise. Bernice E~ also waived all rights to surrender the policy for cash or to obtain a loan against it, and represented that she did not assign these rights to any other person.

DISCUSSION

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash to be used for his/her support and maintenance. 20 C.F.R. § 416.1201(a) (2001). If the individual has the right, authority or power to liquidate the property, it is a resource. Id. A life insurance policy can be a resource if the individual can surrender it for cash or recover the premiums paid. 20 C.F.R. § 416.1230.

In Wisconsin, a life insurance policy sold as a funeral policy must contain the “unrestricted right to return the policy or certificate within 30 days of the date it is received” whereupon “the insurance contract is void and all payments made under it must be refunded directly to the policyholder.” Wis. Adm. Code § 23.30 (1)(d). This provision must be conspicuously printed on the front of the policy or attached thereto. Wis. Adm. Code § Ins 23.30(1)(e). Accordingly, Bernice E~'s life insurance policy was a resource for the first thirty days after it was issued because under Wisconsin law, she had the unrestricted right to cancel the policy and recover the full premium of $6,000.00. Thus, the value of the policy for the first thirty days was $6,000.00.

Beyond the first thirty days, we must determine whether the trust to which the policy was assigned is a resource. A trust established by an individual on or after January 1, 2000, generally will be considered a resource under federal law, if it is revocable or, even if it is revocable, to the extent that payments from the trust could be made to or for the benefit of the individual. 42 U.S.C. § 1382b(e)(3)(B); POMS SI 01120.201D.1.-SI 01120.201D.2. This rule applies if payments can be made for the benefit of the individual “under any circumstance, no matter how unlikely or distant in the future.” POMS SI 01120.201D.2.b.

These provisions do not apply to burial trusts where the individual irrevocably contracts with a provider of funeral goods and/or services and either (1) the funeral provider subsequently places the funds in a trust or (2) the individual establishes an irrevocable trust naming the funeral provider as the beneficiary. POMS SI 01120.201H.1. Under these circumstances, the funeral home is considered, for federal law purposes, to have established the trust. Exclusion of Certain Burial trusts from Section 205 of Public Law Number (Pub. L. No. 106-169, Associate General Counsel Office of Program Law to Associate Commissioner for Legislative Development (Aug. 29, 2000).

However, the statutory provisions at 42 U.S.C. § 1382b(e)(3)(B) will apply where an individual establishes a burial trust with his or her own assets but does not enter into a pre-need funeral contract with a funeral provider; the individual enters into an irrevocable funeral contract with a funeral provider, but establishes a revocable trust to fund the contract; or the individual enters into a revocable funeral contract with a funeral provider even if the funeral provider places the money in a trust. POMS SI 01120.201H.2. In these circumstances, the individual rather than the funeral provider is considered, for federal law purposes, to have established the trust.

Here, the funeral establishment placed the funds in trust so the trust will be considered to have been established by the funeral establishment, for federal law purposes, if Bernice E~ has an irrevocable contract with the funeral home for funeral goods and services. We do not have an actual contract with the funeral home, but it appears from the assignment of the insurance policy that Bernice E~ intended to irrevocably assign ownership of the policy in exchange for the funeral provider's promise to provide funeral services and merchandise. This would appear to be sufficient to show there had been an irrevocable contract for funeral goods and services as long as the assignment is valid under state law.

Wisconsin law expressly provides that a life insurance policy may provide for the assignment of the policy proceeds to a funeral director or operator of a funeral establishment if the insurance intermediary selling the policy is not an agent of the funeral director or operator of the funeral establishment or “if the assignment of proceeds is contingent on the provision of funeral merchandise or funeral services as provided for in a burial agreement that satisfies the requirements of [Wis. Stat. §] 445.125(3m) and rules promulgated by the funeral directors examining board under [Wis. Stat. §] 445.125(3m)(j)1. b.” Wis. Stat. Ann. § 632.415(2) (established in 1999, 1999 Wis. Act 191). A life insurance policy sold with the intent to provide funeral services also “shall permit the policyholder to designate a different beneficiary, upon written notice to the insurer, and a different funeral director or operator of a funeral establishment that is to receive the assignment of proceeds, after written notice to the current funeral director or operator of the funeral establishment.” Wis. Stat. Ann. § 632.415(3). The law does not appear to limit the ability to irrevocably assign the proceeds of such a life insurance policy either in amount or in terms of who may be the beneficiary. In this case, Bernice E~ irrevocably assigned her rights in the life insurance policy, but retained the right to designate a different beneficiary and funeral establishment. Accordingly, as long as the burial agreement she has entered into substantially complies with the law, the assignment of the proceeds of Bernice E~'s life insurance policy is valid under Wisconsin law.

The Wisconsin insurance code provides that an insurance policy that violates a statute or rule is nonetheless enforceable against the insurer as if it conformed to the statute or rule. Wis. Stat. § 631.15(3m); Brunson v. Ward, 629 N.W.2d 140 (Wis. 2001) (when uninsured motorist coverage on policy was below the statutory requirement, statutory level of coverage was read into policy even though it was not reflected in the premium paid). Accordingly, it is our belief that the life insurance policy sold to fund a burial agreement might contain errors and still be enforceable as though it adhered to the law. For example, if the policy does not contain on its face the caveat that it is entirely revocable for the first thirty days after issuance, should the purchaser seek to revoke it in that time, Wisconsin courts would allow the revocation during that time.

Wisconsin Stat. § 445.125(3m) provides that a “burial agreement” means a written agreement between an operator of a funeral establishment or funeral director and “a person in which the operator of the funeral establishment or funeral director agrees to provide to a person, after that person is deceased, funeral merchandise or funeral services.” Wis. Stat. § 445.125(3m) (established in 1995, 1995 Wis. Act 295). Burial agreements must comport with the statute and with the rules established by the Funeral Directors Examining Board. Wis. Stat. § 445.125(3m)(b). The statute and the code provision contain overlapping directions. Based on these authorities, we have determined that the following provisions should be included in a burial agreement:

  1. (a) 

    the identity of the funeral establishment and the insurer or insurers the agent selling the policy and agreement represents and whether sales commission or other form of compensation is being paid to the agent;

  2. (b) 

    the identity of the funeral establishment that will be used to provide the services and merchandise;

  3. (c) 

    an indication that a life insurance policy is being used to fund the agreement as well as the type of insurance;

  4. (d) 

    the nature and extent of any price guarantees;

  5. (e) 

    a list of the funeral services and merchandise selected and the price of each item, including a statement as to whether the prices are guaranteed at the time the agreement is arranged or at the time of need; if the services and merchandise are to be provided at the time of need, they may not exceed the prices set forth in the funeral establishments general price list required under industry practice and Federal Trade Commission regulations;

  6. (f) 

    the effect on the burial agreement of changing the life insurance policy, including changing the assignment of proceeds, the beneficiary or changing the use of the proceeds;

  7. (g) 

    any penalties incurred by the policy holder as a result of failing to make premium payments or incurred upon cancellation or surrender of the life insurance policy as well as any money received upon cancellation or surrender;

  8. (h) 

    all information concerning what is to be done and whether any entitlements arise in the event of a difference between the proceeds of the life insurance policy and the amount actually needed to fund the burial agreement;

  9. (i) 

    any restrictions or penalties relating to the delivery of services under the agreement including the inability of the operator of the funeral establishment to perform;

  10. (j) 

    this statement in not less than 12-point boldface type “Burial agreements are regulated by the Wisconsin Funeral Directors Examining Board. Should you have a complaint, please contact the Board at 1400 East Washington Avenue, P.O. Box 8935, Madison, Wisconsin 53708 or by telephone at (608) 266-5511.”

We note, however, that the failure of the burial agreement to exactly comport with the statutory and regulatory standards does not render the life insurance funded burial agreement void and thus make the insurance policy a resource. We believe that Wisconsin courts would require only substantial and not strict compliance with Wis. Stat. § 445.125(3m) and its accompanying regulations. The ultimate question in a court's determination of whether the doctrine of substantial compliance applies to a statue is whether the statutory provisions not strictly complied were so essential that the failure of compliance results in the invalidity of the contract. Bechthold v. City of Wauwatosa, 277 N.W.2d 657, 660 (Wis. 1938). Wisconsin has recognized that substantial compliance with even a mandatory statute may be legally sufficient. Midwest Mutual Ins. Co. v. Nicolazzi, 405 N.W.2d 732, 735 (Wis. App. 1987). Factors considered with respect to the substantial compliance doctrine include the objectives sought to be accomplished by the statute, the consequences of non-compliance set forth in the statute, whether a penalty is imposed for non-compliance and whether dereliction is beyond the direct control of those whose rights are at stake. Id. at 735-36. The doctrine contemplates “actual compliance in respect to the substance essential to every reasonable objective of the statute.” Id. at 736 quoting Sutherland Statutory Construction, § 57.26 (internal quotation omitted).

We believe that the intent of Wisconsin's burial agreement statute is to ensure that an individual entering into a burial agreement funded with the proceeds of a life insurance policy is fully informed and aware that an agent of a funeral establishment may be involved in and profit from the sale of the life insurance policy and that the cost of funeral services and merchandise cannot be inflated because they are being funded with the proceeds of a life insurance policy. Additionally, Wis. Stat. § 445.125(3m) does not set forth any penalties or consequences if the provisions are not strictly adhered to. Moreover, because it is the funeral directors and their agents who draft the burial agreements, compliance with the statute is beyond the direct control of the parties whose rights it is intended to safeguard. All of these factors lead us to conclude that Wis. Stat. § 445.125(3m) is directory rather than mandatory and Wisconsin courts would not void a burial agreement if it did not strictly comply with Wis. Stat. § 445.125(3m). Thus, notwithstanding the eleven points enumerated above, we believe that in order to substantially comply with Wis. Stat. § 445.125(3m) a burial agreement should:

  1. (a) 

    specify the identity of the agent and the funeral establishment with which he or she is affiliated

  2. (b) 

    indicate that the agreement is being funded by a life insurance policy;

  3. (c) 

    identify the funeral establishment that will provide the services;

  4. (d) 

    list the funeral services and merchandise selected; and

  5. (e) 

    indicate whether prices for funeral merchandise and services are guaranteed.

We stress that the key element in determining whether a life insurance policy intended to fund a burial is a resource is whether the individual can utilize the policy for maintenance and support. 20 C.F.R. § 416.1230. Accordingly, in Wisconsin, after the 30 day period during which a life insurance policy issued for a burial agreement is revocable, such a policy could be assigned to a funeral provider to fund a burial agreement and generally would not be a resource if: (1) the policyholder irrevocably assigns the proceeds of the policy while retaining the right to designate a different funeral director or operator of a funeral establishment according to the statutory scheme; (2) the policy holder has the right to change the beneficiary; (3) the policyholder has either irrevocably assigned or waived the right to obtain the cash surrender value of the policy; (4) the policy holder has submitted to the insurance company the irrevocable assignment of proceeds and the assignment or waiver of the right to obtain the cash surrender value; and (5) the policy holder has entered into a burial agreement with a specific funeral provider. POMS SI 01120.201H.2.; Wis. Stat. §§ 445.125(3m), 632.415.

Assuming Bernice E~ has entered into a burial agreement (contract) that substantially complies with Wisconsin law, we believe that the life insurance policy constitutes a prepayment for funeral services and is thus not a resource. POMS SI 01120.201H.1. Additionally, the “Irrevocable Assignment of Ownership to Funeral Firm” document appears to satisfy Wisconsin's requirements that the policyholder the policy holder has the right to change the beneficiary, has irrevocably assigned the right to obtain the cash surrender value of the policy and has submitted the irrevocable assignment of proceeds and the assignment or waiver of the right to obtain the cash surrender value to the insurance company. Accordingly, after the initial thirty days during which a life insurance policy intended to fund a burial agreement is revocable in Wisconsin, the insurance policy would not be a resource for the purposes of SSI.

CONCLUSION

In sum, Bernice E~'s life insurance policy was a resource valued at $6,000.00 for the first thirty days after it was issued since she had the right to cancel it during that time. As long as Bernice E~ has contracted with a funeral services provider for funeral services, the life insurance policy is not a resource after the first thirty days.

Sincerely,

Donna L. C~
Acting Regional Chief Counsel, Region V
Social Security Administration

By: /s/
Elizabeth F~
Assistant Regional Counsel

N. PS 03-023 SSI-Wisconsin--Review of the Life Insurance Policy and Funeral Trusts of Marion P~, ~

DATE: October 16, 2002

1. SYLLABUS

This opinion clarifies State law regarding prepaid burial agreements in Wisconsin. The beneficiary possesses a burial trust, a casket trust and a life insurance policy. The burial trust is not a resource to the beneficiary because it is irrevocable. The initial deposit to fund the trust was $1,500 when the trust was established in 1986. At that time, State law permitted the irrevocable treatment of the first $1,500 of a burial agreement funded by a trust. NOTE: The current amount allowed per Wisconsin law is $2,500; effective 07/01/03, the allowable amount will increase to $3,000. See Wis. Stat. Ann. §445.125(a)(2)-(3). The beneficiary's assignment of her life insurance policy to a funeral home also met the statutory requirements for burial agreements funded by life insurance policies and could be excluded. Finally, however, the casket trust could not be excluded because it was deemed revocable. Although the trust was termed “irrevocable,” the statutory limit for irrevocable burial agreements in effect when the casket trust was established would have been exceeded since we already recognized, as irrevocable, the $1,500 burial trust. OGC opined that it was doubtful a State court would recognize a second irrevocable trust under the statute.

2. OPINION

You have requested our opinion on whether Marion P~'s life insurance policy, funeral trust, and casket trust would be a resource for SSI purposes. We conclude that, the funeral trust complies with Wisconsin law concerning trust-funded burial agreements, and that it would not be a resource to Ms. P~ because it is irrevocable. Ms. P~'s casket trust, however, would be a countable resource. Although the trust purports to be irrevocable, when the amount in the casket trust is combined with the amount in the pre-existing funeral trust, the funds would exceed the Wisconsin statutory limit for irrevocable burial agreements in effect at that time. Consequently, Wisconsin's general trust law provisions would apply, and the trust would be a resource because Ms. P~ could revoke the trust unilaterally.

Ms. P~'s assignment of her life insurance policy to Hansen Funeral Home appears to comport with most of the Wisconsin statutory requirements for burial agreements funded by a life insurance policy. Therefore, for the reasons stated below, we conclude that the life insurance policy would be considered a resource for the first thirty days after it was issued since, during that time, she could return the policy for a refund of the premium paid. After that thirty-day period, if you can confirm that Ms. P~ had the right to change the beneficiary of the insurance policy and that she has the right to name a different funeral firm to receive the proceeds, the policy would not be a resource because she could no longer return the policy for a refund of the premiums, and could not surrender the policy for cash without the consent of the funeral provider.

BACKGROUND

In 1986, Ms. P~ entered into an “Irrevocable Funeral Trust Agreement” with Hansen Funeral Home “to set forth in advance some arrangements of a funeral service.” The agreement indicates that Ms. P~ deposited $1,500 with Marshfield Savings and Loan for such expenses. The agreement provides that, in accordance with Section 445.125 of the Wisconsin statutes, the first $1,500 is designated as an irrevocable trust fund, “which must be used for the funeral and final disposition of [Ms. P~].” The agreement further states that any dividends and/or interest earned on the $1,500.00 are irrevocable and can never be withdrawn by the depositor. The funeral trust is currently valued at $3,358.51.

On October 25, 1989, Marion P~ entered into a Casket Trust Agreement with Batesville Casket Company to pay for her burial casket. The agreement indicates that Ms. P~ deposited $1,000 with Marshfield Savings Bank for future payment of the cost of a burial casket. The agreement states that the $1,000 deposit plus interest and accruals “shall constitute an irrevocable trust fund established pursuant to Section 445.125 of the Wisconsin statutes.” The agreement further states that the “casket trust account shall constitute an irrevocable trust fund which shall be considered a grantor trust pursuant to Section 677 of the Internal Revenue Code,” and that interest payable on her deposit would be made a part of the Irrevocable Trust Fund. The casket trust is currently valued at $1,966.30.

Finally, in April 2001, Ms. P~ signed a document agreeing to assign and transfer to Hansen Funeral Home her rights to receive death benefits from Prudential Life Insurance Company. The funeral home's right to receive death benefits was contingent on their providing funeral goods and services as provided by “prearranged or at-need funeral agreements.” The cash value of the policy was $4,012.60; the death benefit was $4,655.82. In November 2001, Prudential Financial advised the Agency that Ms. P~ could only surrender the policy or access the dividends if both she and a representative from the funeral home signed the request form. In January 2002, Prudential Financial reported that Marion P~ owned the life insurance policy, cash surrender value, and the accumulations on the policy, and that the only restriction on her cashing in the policy was that, in addition to her signature, she needed to obtain the signature of a representative from Hansen Funeral Home.

DISCUSSION

Casket and Funeral Trusts

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash to be used for his/her support and maintenance. 20 C.F.R. § 416.1201(a) (2002). Since the trusts at issue here were established prior to January 1, 2000, the trust assets would be a resource if, under applicable law, Ms. P~ could (1) revoke the trust, (2) direct the use of the trust funds for her own support and maintenance or sell her beneficial interest in the trust. POMS SI 01120.200(D)(1).

We conclude that the funeral trust at issue here is irrevocable. Consistent with Wisconsin law in 1986 (when Ms. P~ entered into the agreement), the funeral trust designated Ms. P~'s $1,500.00 deposit plus any dividends or interests earned as irrevocable. Wis. Stat. Ann. § 445.125(1)(b)-(c) (1985) (noting that burial agreements funded by trusts can be made irrevocable as to the first $1,500 of the funds paid under the agreement by the depositor, and that any interest or dividends accruing to the trust fund can be made irrevocable) (current version at Wis. Stat. Ann. § 445.125(1)(a)(2)-(3) (West 2002)). Because the amount in the funeral trust does not exceed the $1,500 statutory limit in effect in 1986 and is designated as irrevocable, Ms. P~ does not have the legal authority to revoke the trust and the trust fund is not a countable resource for SSI purposes. POMS SI 01120.200(D)(2).

Ms. P~'s casket trust, however, would be a countable resource. Although the trust similarly designates Ms. P~'s $1,000.00 deposit plus any interests and accruals earned as irrevocable pursuant to Wis. Stat. Ann. § 445.125, as discussed in the preceding paragraph, Ms. P~ had already established an irrevocable funeral trust up to the $1,500.00 statutory limit. Therefore, we do not believe a Wisconsin state court would recognize a second irrevocable trust under that statute. Consequently, the $1,000.00 casket trust would be subject to the general trust provisions of Wis. Stat. Ann. § 701.12(1), which states that, notwithstanding any language to the contrary, a trust can be revoked if the grantor and all beneficiaries agree. Since Ms. P~ provided the funds for the trust and is the sole beneficiary, she could revoke the trust unilaterally, despite purporting to make the trust irrevocable, and the exception in Wis. Stat. Ann. § 445.125 would not apply.

Life Insurance Policy

A life insurance policy can be a resource if an individual can surrender it for cash or recover the premiums paid. 20 C.F.R. § 416.1230. A life insurance funded burial contract involves an individual purchasing a life insurance policy in her name and then assigning, revocably or irrevocably, either the proceeds or ownership of the policy to a third party, generally a funeral provider. The purpose of the assignment is to fund a prearranged burial contract. POMS § SI 01130.425(A)(1). Assuming the policy allowed Ms. P~ to assign ownership, ownership of Ms. P~'s life insurance policy was assigned to Hansen Funeral Home in April 2001 to provide previously arranged funeral goods and services.

Wisconsin law expressly provides that “[a] life insurance policy may provide for the assignment of the proceeds of the policy to a funeral director or operator of a funeral establishment. . . .” Wis. Stat. Ann. § 632.415(2). This law does not appear to limit the ability to irrevocably assign the proceeds of a life insurance policy to fund a preneed funeral agreement. However, the policyholder must be able to designate a different beneficiary after written notice to the insurer, and the policyholder must be able to designate a different funeral director or operator of a funeral establishment to receive the assignment of proceeds, after written notice to the current designated funeral director or operator of a funeral establishment. Wis. Stat. Ann. § 632.415(3).

Further, under Wisconsin law, a policyholder has the unrestricted right to return a life insurance policy used to fund a pre-arranged funeral agreement within 30 days after the policyholder receives the policy. Wis. Admin. Code § Ins. 23.30(1)(d) (2002). This provision must be conspicuously printed on the front of the policy or attached thereto. Id. at 23.30(1)(e). If the policyholder returns the policy, the insurance contract is void and all premiums paid must be refunded directly to the policyholder. Id. at 23.30(1)(d).

Therefore, as we have previously advised, you can generally assume that, in Wisconsin, a life insurance policy used to fund a preneed burial contract is a resource for the first thirty days after it is issued, since the policyholder should have the right to cancel the policy during that time and recover any premiums paid. After thirty days, the policy will not be a resource if:

  1. (a) 

    the individual has irrevocably assigned the policy or policy proceeds to a funeral firm, with the right to name a different funeral firm to receive the proceeds;

  2. (b) 

    the individual had the right to change the beneficiary of the insurance policy;

  3. (c) 

    the individual has either irrevocably assigned or waived the right to obtain the cash surrender value of the policy; and

  4. (d) 

    the individual has submitted to the insurance company the irrevocable assignment of proceeds and the assignment or waiver of the right to obtain the cash surrender value.

See Memorandum from Regional Chief Counsel, Chicago, to Assistant Regional Commissioner-MOS, Chicago, Review of Wisconsin Life Insurance Funded Burial Contract (LIFBC) for Donna Walker, Dec. 13, 1999).

In this case, if you can verify that Ms. P~ had the right to change the beneficiary of the insurance policy and that she has the right to name a different funeral firm to receive the proceeds, then the agreement would appear to satisfy these requirements. 20 C.F.R. § 416.1230. Ms. P~ assigned her right to receive death benefits from her life insurance policy to Hansen Funeral Home and crossed out language in the assignment which would have allowed her to revoke the agreement during her lifetime. Furthermore, the insurance company has recorded the assignment and has indicated that it would require both Ms. P~'s signature and the signature of a representative from the funeral home in order for Ms. P~ to obtain the cash surrender value. Thus, she cannot obtain the cash surrender value of the policy unilaterally.

If you cannot confirm that Ms. P~ had the right to change the beneficiary of the insurance policy and that she has the right to name a different funeral firm to receive the proceeds, then this case should be referred to our office for further guidance. In that case, we would request that you provide a copy of the burial agreement and/or life insurance policy, including any named beneficiaries.

CONCLUSION

For the foregoing reasons, we conclude that the funeral trust is not a countable resource because it is irrevocable. However, the casket trust was a resource because it was revocable and because the exception in Wis. Stat. Ann. § 445.125 would not apply. The life insurance policy was a resource for the first thirty days after it was issued (since Ms. P~ could cancel the policy and recover the premium paid during that time). After that time, however, the policy would not be a countable resource, if Ms. P~ had the right to change the beneficiary of the insurance policy, and the right to name a different funeral firm to receive the proceeds.

If you have questions regarding this memorandum, please contact the undersigned at (312) 353-8244.

Thomas W. C~
Regional Chief Counsel

By:___________________________
Kathryn A. B~
Assistant Regional Counsel

O. PS 03-006 SSI - Wisconsin - Supplemental Trust for Elizabeth M. H~, SSN ~, Your Reference: S2D5G6

DATE: October 3, 2002

1. SYLLABUS

This opinion concerns a trust established by a grandmother with her own funds for her mentally disabled granddaughter. This trust, established with the assets of a third party, is not a resource for SSI purposes because the granddaughter cannot direct the use of the assets, cannot terminate or revoke the trust and use the assets for her support and maintenance, and cannot sell her beneficial interest in the trust.

2. OPINION

FACTS

It appears that Mary L. N~, Elizabeth H~'s grandmother, wishes to establish the “Elizabeth M. H~ Supplemental Trust.” Elizabeth H~ is mentally handicapped. The trust names Mary N~ as both the donor of the trust assets and the trustee of the trust. The trust is to be funded with the property listed in Schedule A, but the materials you submitted do not list any property in Schedule A. The trust provides that during Mary N~'s lifetime, it is to be held for her benefit, and that she can amend or revoke the trust, in whole or in part, at any time.

Upon the death of Mary N~, if Elizabeth H~ survives her, the trustees may in their discretion, expend trust income or principal to provide for Elizabeth's comforts, amenities, services, and experiences over and above the benefits she otherwise receives as a result of her mental handicap from any governmental or private source. The trust property is not to be used to provide for Elizabeth's primary care or support. The trust also states that during Elizabeth's lifetime, the trustees may from time to time, at their discretion, pay or distribute such part of the income or principal of the trust, as may be appropriate, to any one or more then living of Mary's issue.

The trust contains a spendthrift provision that prohibits Elizabeth from transferring, voluntarily or involuntarily, any trust income or principal. The trust income or principal cannot be subject to the claims of creditors, or the claims of Elizabeth's spouse or former spouse. In the event that the trustee has notice or believes that Elizabeth's interest in any part of the trust income or principal has been or may be diverted for these purposes, the trustee shall not pay out such trust income or principal to Elizabeth.

Upon Elizabeth's death, or upon Mary's death if Elizabeth predeceases Mary, the amount remaining in the trust will be paid and distributed as follows: (1) the trust property will be divided equally among Elizabeth's children, with the share of any deceased child divided equally to such child's issue, and (2) if Elizabeth leaves no issue, the trust property will be divided equally among her surviving brothers and sisters, with the share of any deceased brother and sister divided equally among that brother's and sister's issue; or, if Elizabeth has no surviving brothers or sisters, or there are no surviving issue of any then deceased brothers and sisters, the trust property will be divided equally among the surviving issue of Elizabeth's nearest ascendant, who is Mary's descendant; or, if there are no such surviving issue, then the trust property will be divided equally to Mary's surviving issue. If after Mary's death there are no beneficiaries eligible to receive the trust property, the trust property will be distributed to persons then living who would inherited Mary's estate if she had then died intestate.

DISCUSSION

To qualify for SSI benefits, a claimant must show that her resources are below a statutory maximum. 42 U.S.C. 1382(a); 20 C.F.R. 416.202, 416.1205. 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 her support and maintenance. 20 C.F.R. 416.1201(a). If the individual has the right, authority or power to liquidate the property or her share of the property, it is considered a resource. 20 C.F.R. 416.1201(a)(1). A trust created by a third party with the third party's funds is a resource if the individual can direct the use of the assets, if the individual can terminate the trust and use the trust assets for her support and maintenance, or if the individual can sell her beneficial interest in the trust. POMS SI 01120.200D.1. Whether the individual can terminate the trust, direct the use of the trust assets, or sell her beneficial interest depends on the terms of the trust agreement and applicable state law. POMS SI 01120.200D.2. Here, the trust is not a resource to Elizabeth under any of these methods.

The trust gives Mary, as the grantor of the trust who is donating he assets of the trust, the power to revoke or terminate the trust. Elizabeth, however, is not given the power to terminate the trust and obtain the assets. Elizabeth may be entitled to receive the trust assets upon Mary's death, if she survives Mary. However, Elizabeth could not direct the trustee to pay over cash or to make payments for her support and maintenance. Article II of the trust makes clear that this is a “discretionary” trust, or one in which the trustee has full discretion to make distributions from the trust income and principal, and that the beneficiary has no control over the trust. POMS SI 01120.200B.10. The trust specifies that the trustee may from time to time, in the trustees' absolute discretion, pay or distribute to or for Elizabeth's benefit, part or all of the net trust income or principal that may be appropriate to supplement, but not replace, the public or private assistance which Elizabeth qualifies for and receives. The Supplemental Trust also provides that the trustee is not authorized to make payments from the trust for Elizabeth's primary care or support. This is a related rule that applies to grantor trust, where the grantor is also the beneficiary.

The trust also contains a spendthrift provision that prohibits Elizabeth from transferring, voluntarily or involuntarily, any trust income or principal. Spendthrift provisions generally are valid where the interest protested is that of a beneficiary other than the grantor herself. Such provisions generally provide that a beneficial interest shall not be transferable by the beneficiary or subject to claims of the beneficiary's creditor's. Restatement (Second) of Trusts 152, 153, 156, 157; Restatement (Third) of Trusts 58(1) (Tentative Draft No. 2 Mar. 10, 1999). Elizabeth would not retain the right to voluntarily transfer her interest in the trust income and principal.

CONCLUSION

We conclude that the supplemental trust is not a resource to Elizabeth for purposes of determining her eligibility for SSI

Thomas W. C~,
Regional Chief Counsel

By:_______________________
Henry S. K~
Assistant Regional Counsel

P. PS 02-067 Jean M. B~ Trust, Wisconsin SSN ~

DATE: April 9, 2002

1. SYLLABUS

This opinion concerns 2 grantor trusts established in Wisconsin and funded by life insurance policies. Both were established prior to 1/1/2000. The trusts are not countable as resources for SSI purposes because the beneficiary does not have the legal authority to revoke the trusts or direct the use of the trusts' assets for her own support. Because of a change in the Social Security Act, this precedent is only applicable to a trust established before 1/1/2000.

2. OPINION

Jean M. B~ (Ms. B~) has established two trusts with directions to pay her funeral expenses with the proceeds of two life insurance policies used to establish the trusts. You have asked whether these trusts should be considered countable resources to Ms. B~ for purposes of SSI eligibility. For the reasons discussed below, we believe that neither of the trusts should be considered a countable resource.

Background

Ms. B~ created both trusts at issue, using life insurance policies written by the Medico Life Insurance Company. The trusts explain that, at Ms. B~'s death, the proceeds are to be distributed to the trust to be used for Ms. B~'s burial expenses. To the extent that the funds are greater than burial costs, secondary beneficiaries have been named for each trust.

The first trust was created July 3, 1997, based on life insurance policy number ~, with Good Shepherd Lutheran Church as the secondary beneficiary. The second trust, based on life insurance policy number ~, was created March 11, 1998, with Ms. B~'s great nieces and nephews as secondary beneficiaries. The face value is $1,036 for each policy ($2,072 total) and the cash surrender value at January 1, 2001 was approximately $465 for each policy ($930 total). Discussion

For purposes of determining SSI eligibility, a resource is any cash or other liquid assets or any real or personal property that an individual owns and can convert to cash to be used for her support and maintenance. See 20 C.F.R. 416.1201(a). If the individual has the right, authority or power to liquidate the property, it is a resource. Id. Accordingly, trust assets are resources if the individual can revoke the trust and use the funds to meet her needs for food, clothing and shelter. See Program Operations Manual System (POMS) SI 01120.200 (D)(1). However, if an individual does not have the legal authority to revoke the trust or direct the use of the trust funds for her own support and maintenance, then the trust principal is not a resource for SSI purposes. See POMS SI 01120.200(D)(2).

In this case, Ms. B~ does not have the right to terminate the trust. In Wisconsin, a trust can be revoked with the consent of the grantor and all beneficiaries. Wis. Stat. Ann. 701.12(1). Under Wisconsin law, the person who directly or indirectly creates a trust, or adds property to an existing trust, is the grantor. Wis. Stat. Ann. 701.01(5). This is consistent with the general trust theory that the grantor of a trust is the person who provides the consideration for the trust. 76 Am. Jur. 2d 55 (1992); POMS SI 01120.200(B)(2). In this case, Ms. B~ is the grantor of the trust because she provided the life insurance policies that formed the basis of the trusts. Ms. B~ is a beneficiary because the trust proceeds will be used to pay her funeral expenses. However, she is not the sole beneficiary because each Trust Agreement lists secondary beneficiaries. In order to revoke either trust, all of the secondary beneficiaries would have to agree to revoke and Ms. B~ cannot, by herself, revoke the trust.

Trust assets are also a resource if the individual could "direct the use" of the trust. In this case, the direction was given at the establishment of the trust (to pay for Ms. B~'s funeral and give the remainder to the secondary beneficiaries) and Ms. B~ does not have the authority to require that any funds be paid to her prior to the funeral. Also, even though it is possible, in theory, that Ms. B~ could sell her interest in the trust, given the terms of the trust (to pay for Ms. B~'s funeral) it is unlikely to be marketable. Therefore, the trust assets are not a resource to Ms. B~ under this theory either.

We also considered whether the trusts were invalid because they violate the Rule Against Perpetuities, since it is possible that Ms. B~ may never have a funeral. However, Wisconsin has abolished the Rule Against Perpetuities. Wis. Stat. Ann. 700.16(5). Under Wisconsin law, a future interest or trust will be void only if it suspends the power of alienation of property for longer than a life or lives in being plus a period of thirty years. Wis. Stat. Ann. 701.19(1) ("In the absence of contrary or limiting provisions . . . a trustee has complete power to sell, mortgage or lease trust property without notice, hearing or order."). We were able to conclude that, in Wisconsin, this rule did not make the trusts invalid.

Conclusion

You have indicated that Ms. B~ would not have excess funds even if the life insurance policies were considered countable resources and that, in any event, the policies could be excluded under the burial fund exclusion. However, for future reference, you asked whether, in this situation, the policies would be considered a countable resource. We conclude that neither Trust Agreement, each of which was created prior to January 1, 2000, is a countable resource because the life insurance policies were assigned irrevocably to a trust and Ms. B~ cannot obtain the cash surrender value of the policies to be used for her own support and maintenance.

Q. PS 01-190 SSI - Wisconsin - Review of Pekin Life Insurance Assignment To Funeral Home, Prepared by Pekin Life Insurance Co.

DATE: July 2, 2001

1. SYLLABUS

This opinion concerns an assignment form submitted by the Pekin Life Insurance Company applicable to life insurance funded burial contracts in Wisconsin. The company asked SSA to evaluate whether a transaction using this form would be countable as a resource for SSI purposes. Under this assignment form, the policyholder irrevocably assigns the policy to the funeral director who then must re-assign the policy to a trust. In this case the life insurance funded funeral arrangement would be a resource for SSI purposes for the first thirty days. This is because under Wisconsin law, the policy holder has the right to return a policy used to fund a funeral arrangement within thirty days of receiving it. After thirty days, the policy would no longer be a resource for SSI purposes because it is then irrevocable.

2. OPINION

INTRODUCTION

Michele G. V~, of the Pekin Life Insurance Company, has submitted an assignment form applicable to life insurance funded burial contracts and asked us for our opinion as to whether a policy assigned in this manner would be a resource for SSI purposes. We are enclosing a copy of Ms. V~' letter and the assignment form so that you may contact Ms. V~ and advise her of our opinion. For reasons stated below, we conclude that, for the first thirty days after such a policy is issued, the policy would be a resource because the policyholder could cancel the policy and recover the premium. After that thirty-day period, however, the policy would not be a resource because the policyholder irrevocably assigns the ownership of the policy and waives the right to obtain the cash surrender value.

FACTS

Pekin Life Insurance Company submitted an assignment form applicable to life insurance funded burial contracts (see attached form), and requested the legal opinion of the Social Security Administration's Office of the General Counsel as to whether the contract complies with Wisconsin law and whether such a contract would constitute a resource for SSI purposes. The assignment form assigns the policyholder's ownership of the life insurance or annuity policy to a funeral home in return for the funeral home's promise to immediately transfer ownership of the policy to a trust (the Pekin Life Insurance Trust). The funeral home irrevocably assigns the ownership rights and the rights to policy proceeds to the trust. The policyholder waives the right to surrender the policy for cash, to obtain a loan or advance on the policy, and to pledge or assign the policy as collateral. The funeral home also acknowledges that any right to receive any of the proceeds of the policy is contingent on delivering funeral services and merchandise. The policyholder, however, retains the right to choose a different funeral home to provide funeral services and merchandise and receive the policy proceeds.

DISCUSSION

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash to be used for his or her support and maintenance. See 20 C.F.R. 416.1201(a). If the individual has the right, authority, or power to liquidate the property, it is a resource. See id. A life insurance policy can be a resource if the individual can surrender it for cash or recover the premiums paid. See 20 C.F.R. 416.1230.

Wisconsin law expressly provides that "[a] life insurance policy may provide for the assignment of the proceeds of the policy to a funeral director or operator of a funeral establishment. . . ." W.S.A. 632.415(2). This law does not appear to limit the ability to irrevocably assign the proceeds of a life insurance policy to fund a preneed funeral agreement. However, the policyholder must be able to designate a different beneficiary after written notice to the current beneficiary, and the policyholder must be able to designate a different funeral director or operator of a funeral establishment to receive the assignment of proceeds, after written notice to the current designated funeral director or operator of a funeral establishment. W.S.A. 632.415(3). We believe that a life insurance policy would not be a resource if an individual irrevocably assigns the ownership or proceeds of the policy in this manner and if the individual irrevocably assigns or waives the right to obtain the cash surrender value.

Further, under Wisconsin law, a policyholder has the unrestricted right to return a life insurance policy used to fund a pre-arranged funeral agreement within 30 days after the policyholder receives the policy. If the policyholder returns the policy, the insurance contract is void and all premiums paid must be refunded directly to the policyholder. Wis. Admin. Code Ins. 23.30(1)(d).

As we have previously advised you, you can generally assume that, in Wisconsin, a life insurance policy used to fund a preneed burial contract is a resource for the first thirty days after it is issued, since the policyholder should have the right to cancel the policy during that time and recover any premiums paid. After thirty days, the policy will not be a resource if:

(1) the individual has irrevocably assigned the policy or policy proceeds to a funeral firm, with the right to name a different funeral firm to receive the proceeds;

(2) the individual has the right to change the beneficiary of the insurance policy;

(3) the individual has either irrevocably assigned or waived the right to obtain the cash surrender value of the policy; and

(4) the individual has submitted to the insurance company the irrevocable assignment of proceeds and the assignment or waiver of the right to obtain the cash surrender value.

See Memorandum from Regional Chief Counsel, Chicago, to Assistant Regional Commissioner-MOS, Chicago, Review of Wisconsin Life Insurance Funded Burial Contract (LIFBC) for Donna W~, Dec. 13, 1999).

Applying these rules, the contract submitted by Pekin Life Insurance Company would constitute a resource to the policyholder for the first thirty days after such a policy is issued. After the initial thirty days, however, the policy would not constitute a resource. Although the assignment to the funeral home requires that the funeral home re-assign the policy to a trust, we believe that the trust provisions are secondary to the assignment of the policy to the funeral home. The funeral home must reassign the policy to a trust to safeguard the policy so that it will be available to carry out the main agreement for the funeral services. However, the main intent of the parties is to irrevocably assign the policy to the funeral home, as permitted by state law. Therefore, state law provisions regarding irrevocable assignment to the funeral home control. See Donna W~ Memorandum, supra, at 4.

We conclude that the life insurance funded burial contracts submitted by Pekin Life Insurance Company would constitute a resource to the policyholder for the first thirty days after such a policy is issued, but not thereafter. The value of the resource during the first thirty days would be the amount of premiums paid. After thirty days, the policy would no longer be a resource because the policyholder irrevocably assigns the policy and waives the right to obtain the cash surrender value of the policy. Consistent with Wisconsin law, the policyholder retains the right to change the beneficiary of the policy and to designate another funeral home or provider to receive the proceeds of the policy. Thus, the assignment seems to conform with state law requirements.

R. PS 01-100 SSI-Wisconsin-Review of a Trust for Jesse Scott B~, ~; Your ref: S2D5G3

DATE: March 7, 2001

1. SYLLABUS

This opinion concerns a grantor trust in Wisconsin. In this case the grantor is not the sole beneficiary because the trust created 2 beneficiaries. Because there is an additional beneficiary, the grantor cannot revoke the trust. And because the trustee has full discretion to distribute the assets, the grantor cannot direct the use of the assets. Therefore, the trust is not a resource of the grantor for SSI purposes. However, each month the trust disburses a cash payment to the grantor's guardian for the grantor. Although the guardian does not use the disbursements for the grantor's food and shelter, the disbursement is considered cash income to the grantor for SSI purposes.

NOTE: Because of a change in the Social Security Act, this precedent may be applicable only to trusts established before 1/1/00.

2. OPINION

You asked us to review a trust agreement created by the Circuit Court of Sheboygan County, Wisconsin, for the benefit of Jesse Scott B~ to determine whether the funds placed in the trust constitute a countable resource to Mr. B~ for Supplemental Security Income (SSI) purposes. You also asked us to determine whether distributions made from the trust would be income to Mr. B~ or his mother, Ellen P~. For the reasons set forth below, we believe that the trust is irrevocable and the trust principal is not a countable resource to Mr. B~. Some distributions to Mr. B~ may, however, constitute unearned income. The distributions made to Ellen P~ constitute unearned income to Ms. P~ or Mr. B~ depending on whether the distributions were made to her for her own benefit, or as guardian for Mr. B~.

FACTS

On March 8, 1991, in settlement of a medical malpractice claim brought on behalf of Jesse Scott B~, a trust was created for the benefit of Mr. B~ and his mother. Trust, Art. I.

Pursuant to the trust agreement, the trustee retains full discretion to distribute trust assets or income to Mr. B~ and his descendants for their "health, support in the accustomed manner of living, maintenance and education." Trust, Art. V, B. In addition, the trustee has absolute discretion to distribute any part of the trust assets and income, up to sixty thousand dollars ($60,000), to Mr. B~'s mother. Trust, Art. V, C. However, if any beneficiary becomes eligible for supplemental security income or other public assistance, the trustee may in his discretion limit distributions to supplement public assistance and other resources. Trust, Art. V, B, C. The trustee further retains the discretion to terminate any distributions of income or principle to any beneficiary if such distribution is likely to result in reduced government benefits or support. Trust, Art. V, B, C.

The trust agreement further provides that no beneficiary has the right to anticipate any income or principal of the trust, to sell, transfer, mortgage, or pledge the trust assets or income. Trust, Art. VI, D. This is commonly known as a spendthrift provision.

ANALYSIS

Under the regulations, "resources" are "[c]ash or other liquid assets or any other 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." 20 C.F.R. 416.1201(a). If an individual has the right, authority or power to liquidate the property it is considered a resource. 20 C.F.R. 416.1201(a)(1).

Generally, a beneficiary does not have the right or power to liquidate the assets of an irrevocable trust. Thus, the assets contained in an irrevocable trust are not considered a countable resource for SSI purposes. POMS SI 01120.200(D)(2). However, if the grantor is the sole beneficiary of a trust, the trust is revocable regardless of language to the contrary and thus would be considered a countable resource to the beneficiary. POMS SI 01120.200(D)(3).

The instant trust purports to be irrevocable. However, Mr. B~ is the grantor of the trust, since the trust was established with the proceeds of the settlement of a lawsuit brought on his behalf. See POMS SI 01120.200(B)(2). Thus, we must determine whether Mr. B~ retains the power to revoke the trust under applicable state law. POMS SI 01120.200(D)(1)(b).

Under Wisconsin law, a trust may be revoked, terminated or modified by written consent of the grantor and all the beneficiaries. See Wisc. Stat. Ann 701.12. Although the trust sometimes refers to Jesse Scott B~ as "the Beneficiary" the trust was created "for the benefit of" Mr. B~ and his mother. Trust, Art. I. See In re Estate of Steck, 275 Wis. 290, 298 81 N.W.2d 729, 734 (1957) (a person for whose benefit a trust is created is a trust beneficiary). In addition, the trustee is permitted to distribute trust principal and income to or for the benefit of Mr. B~'s descendants, including all children and grandchildren. Trust, Art. V, B. We do not assume that Mr. B~ will be able to obtain the consent of his existing offspring, if any, or unascertainable beneficiaries to revoke or terminate the trust. See Supplemental Security Income - Wisconsin Trust - Michael G~ (~), OGC-V (Kleinman) to Mukogawa, ARC-MOS (February 23, 2000) at 3. Thus, there is at least one additional beneficiary to the trust and Mr. B~ does not retain the power to revoke the trust on his own.

Even when a trust is not revocable, trust assets may be considered a countable resource if the beneficiary has the right or power to direct that the funds be used for his support and maintenance, or to sell his interest in the trust and use the proceeds for his support and maintenance. 20 C.F.R. 416.1201(a)(1); POMS SI 01120.200(D)(1)(b). Here, the trustee has the full discretion to distribute or withhold trust assets and income. Trust, Art. V, B, C. Therefore, Mr. B~ cannot direct the use of the trust assets for his support and maintenance. Nor can he sell his interest in the trust. The spendthrift provision of the trust would not prevent Mr. B~ from selling his beneficial interest in the trust, since he is also the grantor of the trust. POMS SI 01120.200(B)(16); Restatement (Second) of Trusts 156(a). However, we generally conclude that a beneficial interest in a discretionary trust is essentially unsellable. See Walton ;Restatement (Third) Trusts 60 comment f (tentative draft no. 21 March 10, 1999). Thus, the trust property is not a countable resource for SSI purposes. 20 C.F.R. 416.1201(a)(1).

Although the trust principal is not considered a countable resource, certain distributions may be considered income. For example, any disbursements of cash made directly to Mr. B~ are considered unearned income for SSI purposes. POMS SI 01120.200(E)(1)(a). In addition, any disbursements made to a third party, including Mr. B~'s mother, resulting in Mr. B~'s receipt of food, clothing or shelter are considered income in the form of in-kind support and maintenance. POMS SI 01120.200(E)(1)(b).

An August 25, 1998, report of contact included in the file indicates that each month a check is issued to Ms. P~ for Jesse B~. Thus, Ms. P~ apparently received trust distributions as Mr. B~'s legal guardian acting on his behalf. Your notes also indicate that Ms. P~ understands that trust distributions may not be used for food, shelter, or clothing and therefore are not used for such purposes. Nevertheless, Ms. P~ is receiving cash distributions. Therefore, if she is receiving them in her capacity as Mr. B~'s guardian, as the report of contact reflects, the funds are considered Mr. B~'s "unearned income" for SSI purposes. 01120.200(E)(1)(a). If, on the other hand, Ms. P~ is receiving distributions in her capacity as a beneficiary, the funds should be counted as Ms. P~'s "unearned income." See 42 U.S.C. 1382c(f)(2); Social Security Ruling 81-21; POMS SI 01330.200(A).

CONCLUSION

The trust principal is not a countable resource for Mr. B~. Cash distributions from the trust directly to Mr. B~ may be considered unearned income. Distributions to Ms. P~ are considered unearned income to Ms. P~ or Mr. B~, depending on whether the distributions were made to her as a beneficiary of the trust or were made to her as Mr. B~'s guardian to be used for his benefit.

S. PS 00-397 Wisconsin Life Insurance Funded Burial Contract (LIFBC) for Leona S~, ~ (your reference number s2d5b51)

DATE: May 16, 1997

1. SYLLABUS

The issue is whether the SecuraLife Insurance Plan (a Wisconsin Life Insurance Funded Burial Contract) is legal under Wisconsin law, and, if so, does it constitute a countable resource for SSI purposes.

The SecuraLife Insurance Plan is valid under Wisconsin law. However, the insurance plan fund would not be a countable resource to the SSI eligible individual because her son bought the insurance policy, is the owner of the policy, and is the sole beneficiary. The SSI eligible individual has no ownership rights in the policy, therefore, it would not be a countable resource to her.

2. OPINION

On November 15, 1996, you asked for a legal opinion regarding the SecuraLife Insurance Plan, for Leona S~, that funds a burial agreement. You asked us: (1) is the plan legal under Wisconsin law; and (2) if so, does it constitute a countable resource for SSI purposes.

In our opinion, it would be appropriate for SSA to find that the SecuraLife Insurance Plan is valid under Wisconsin law. The insurance plan-fund would not be a countable resource to Leona S~ because her son, Ralph S~, bought the insurance policy, is the owner of the policy, and is the sole beneficiary. Leona S~ has no ownership rights in the policy; therefore, this policy would not be a countable resource for her.

Discussion

Prior to May 10, 1996, W.S.A. § 632.41(2) stated that "No contract in which the insurer agrees to pay for any of the incidents of burial or other disposition of the body of a deceased may provide that the benefits are payable to the funeral director or any other person doing business related to burials." The Wisconsin Assistant Attorney General determined that some LIFBCs were valid under state law. Under Wisconsin law, the Wisconsin Assistant Attorney General noted the relevant considerations in determining a LIFBC's legality as to whom the life insurance policy ownership and proceeds (i.e., death benefit) were assigned, the revocability of these assignments, and the designated beneficiary under the life insurance policy. As prior memoranda from our office indicated, the plans which were found valid by the Wisconsin Assistant Attorney General included three key elements (1) a funeral provider was not named as a beneficiary of the insurance policy that was issued; (2) a subsequent assignment of ownership was not made to a funeral provider; and (3) the assignee was free to select any funeral provider to fund the funeral needs at the time of death.

Effective May 10, 1996, W.S.A. § 632.41(2) was amended to include an exception. That exception, W.S.A. § 632.41(2)(b), reads:

1. A life insurance policy may provide for the assignment of the proceeds of the policy to a funeral director or operator of a funeral establishment if the insurance intermediary who sells or solicits the sale of the policy is not an agent of the funeral director or operator of the funeral establishment or the assignment of proceeds is contingent on the provision of funeral merchandise or funeral services as provided for in a burial agreement that satisfies the requirements of § 445.125 (3m) and rules promulgated by the funeral directors examining board under § 445.125 (3m) (j) 1.b.

2. Subject to subd, 3., the commissioner shall by rule establish minimum standards for benefits, claims payments, marketing practices, compensation arrangements and reporting practices for life insurance policies sold under subd. 1.

3. A life insurance policy sold under subd. 1. shall permit the policy holder to designate a different beneficiary, after written notice to the current beneficiary, and a different funeral director or operator of a funeral establishment that is to receive the assignment of proceeds, after written notice to the current funeral director or operator of the funeral establishment.

This new provision appears to generally incorporate the substance of the aforementioned Wisconsin Attorney General opinions. W.S.A. § 632(2)(b)1 indicates that an individual may assign the proceeds of his or her policy to a funeral director or operator of a funeral establishment if (1) the insurance intermediary who sold the policy to the individual is not an agent of the funeral director of the operator of the funeral establishment to whom the individual assigns his or her life insurance proceeds; or (2) if the intermediary is such an individual, the assignment of proceeds complies with W.S.A. § 445.125 (3m). As the information we have does not indicate that the insurance intermediary who sold this policy had such a direct linkage to a funeral establishment, W.S.A. § 445.125 (3m) would not be at issue.

In addition, this policy also appears to comply with W.S.A. § 632.41(2)(b) which directs that the policyholder must be able to designate a different beneficiary and a different funeral home that is to receive the assignment of benefits. Thus, with the information provided, it appears that the SecuraLife policy would be valid under W.S.A. § 632.41(2).

Although valid under state law, Ralph S~ purchased this policy, is the owner of this policy, and is sole beneficiary. Leona S~ is merely named as the insured and has no ownership rights, such as surrendering the policy for cash value. Hence, this policy would not be a countable resource for Leona S~.

Sincerely yours,
Thomas W. C~
Chief Counsel, Region V
by:_____________________
Julie F~ Assistant Regional Counsel

T. PS 00-346 Wisconsin Review of an NGL American Preplanning Life Insurance Funded Burial Arrangement for Andrew M. P~, ~; Your Ref.: S2D5G3

DATE: September 11, 1998

1. SYLLABUS

The individual purchased a life insurance policy to fund a funeral contract and irrevocably assigned the insurance policy proceeds to the funeral home. However, he retained the right to surrender the insurance policy for its cash surrender value. There is a 30-day right to cancel the policy. The insurance policy is a resource during the 30-day cancellation period in the full amount paid. Thereafter, it is a resource to the extent of its cash surrender value.

2. OPINION

You asked whether the life insurance policy issued in conjunction with the NGL American (NGL) Preplanning Life Insurance Funded Burial Arrangement for Andrew M. P~ would be a resource. We conclude that the policy was a resource for the first thirty days if it provided the right to cancel the policy for the first thirty days, and it is a resource if it has a cash surrender value.

Background

Mr. P~ apparently purchased a life insurance policy with a one-time premium payment of $8,240, the amount of the estimated cost of funeral goods and services he selected with the Proko-Wall Funeral Home and Crematory, Inc. We do not have a copy of the insurance policy only the application for the policy.

On a separate form, Mr. P~ attempted to irrevocably assign the death benefits proceeds of the policy to the Proko-Wall Funeral Home, subject to the separate funeral service agreement. The form also has a section that would allow the individual to transfer ownership irrevocably to a third party, but Mr. P~ did not complete that portion of the form.

Discussion

Assets are a resource for SSI purposes if the individual owns them and can convert them to cash to be used for his or her support and maintenance. See 20 C.F.R. § 416.1201(a). If the individual has the right, authority, or power to liquidate the property, it is a resource. See id.

A life insurance policy is a resource if the individual can recover the premiums paid or surrender the policy for cash. See 20 C.F.R. § 416.1230. We do not have a copy of the actual life insurance policy in this case. However, based on previous information you sent to our office for review, it appears that NGL routinely includes a provision in policies that will be used to fund a pre-need funeral contract that allows the policyholder to cancel the policy by returning the policy before midnight of the thirtieth day after receipt of the policy, in which case the insurance company will return all payments made. Memorandum, "Review of NGL American Preplanning Funeral Funded Arrangements," OGC-V (Duman) to Mukogawa, ARC-MOS (Sept. 11, 1998). NGL apparently included this provision because Wisconsin law requires that a life insurance policy used to fund a pre-arranged funeral agreement must provide the unrestricted right to return the policy within 30 days of the date it is received by the policyholder; if the policy is returned, the insurance contract is void and all payments made must be refunded directly to the policyholder. Wis. Admin. Code § Ins. 23.30(1)(e). This right presumably would remain with the insured who purchased the policy even if the insured had transferred ownership. If Mr. P~'s policy contains this provision, the policy would have been a resource, with a value of any premiums he had paid, for the first thirty days after he purchased the policy.

If the policy also has a cash surrender value (as did the sample sent to us), the policy still would be a resource even after this thirty days with a value equal to the cash surrender value. Although Mr. P~ has attempted to assign the death benefit proceeds of the policy, he has not transferred ownership of the policy or the right to surrender the policy for its cash surrender value. Therefore, he presumably still has the right to surrender the policy for its cash value.

As you pointed out, the POMS states that "[w]e are not aware of insurance companies that permit irrevocable assignment of policy proceeds without requiring the irrevocable assignment of ownership. Contact your regional office should you encounter this type of policy." POMS SI 01130.425(D)(2). We have been in contact with Baltimore and have been informed that, at the time those POMS provisions were prepared, the agency had not encountered a policy that provided for the transfer of proceeds without also providing for the assignment of ownership. Indeed, the NGL forms appear to contemplate that the insured will irrevocably transfer both the proceeds and ownership of the policy.

In this case, it is not necessary to determine whether Mr. P~ should have been permitted to assign the proceeds without also assigning the ownership rights, or whether the assignment of proceeds was valid. Regardless of whether Mr. P~ effectively assigned the proceeds of the policy, he did not intend to assign the ownership rights, including the right to obtain the cash surrender value, and he still retains that right.

Conclusion

In sum, we conclude that the life insurance policy was a resource for the first thirty days to the extent of any premiums paid, assuming it provides for a right to cancel the policy within thirty days. We further conclude that the policy remains a resource even after the right to cancel has expired to the extent of any cash surrender value.

U. PS 00-337 Supplemental Security Income - Wisconsin Trust - Christopher J. M~, Jr., SSN ~; Your Reference: S2D5G3

DATE: June 9, 1999

1. SYLLABUS

This opinion involves an Irrevocable Supplemental Trust established on February 19, 1999. The trust assets are not considered a countable resource for SSI purposes since the settlor (the SSI recipient) is not the sole beneficiary of the trust and he cannot direct use of the trust assets for his support and maintenance.

CAUTION: Because of a change in the Social Security Act, this precedent may only be applicable to trusts established before 1/1/00.

2. OPINION

You inquired whether the assets held under the terms of the Christopher J. M~, Jr. Irrevocable Supplemental Trust, established February 19, 1999, should be treated as a countable resource for SSI purposes for the beneficiary of the trust, Christopher J. M~ Jr. After reviewing the documents you provided, we conclude that the trust assets should not be considered a countable resource under 20 C.F.R. 416.1201(a)(1).

FACTS

SSI recipient, Christopher J. M~, Jr. (Chris), was a beneficiary of his uncle's estate, which was closed in December 1998. On February 19, 1999, Chris' inheritance became available to him when his grandfather was appointed guardian to receive the inheritance on Chris' behalf. The inheritance consisted of an IRA account, a bank account balance, and a mortgage note, valued at a total of $53,028.09. Waeffler letter of March 3, 1999. Also on February 19, 1999, Chris' guardian established the Christopher J. M~, Jr. Irrevocable Supplemental Trust (Trust), naming himself and the U.S. Bank National Association as Trustees and Chris as the beneficiary. Trust Declaration at 1. On February 26, 1999, the guardian transferred the assets Chris had inherited from the guardianship estate into the Trust. Waeffler letter of March 3, 1999. Although the Trust Declaration allows the Trustees to accept additions to the Trust from other sources, there is no indication in the materials you provided to us that the Trust contains any assets other than those from Chris' inheritance. Trust Declaration at 1.

The primary purpose of the Trust is to provide for Chris' secondary and post-secondary education. Trust Declaration at 1. A secondary purpose is to supplement the support, services, and medical care provided to Chris by federal, state or local government programs. Trust Declaration at 2, 5. The terms of the Trust are to be construed under Wisconsin law in effect when the Trust was created and in a manner that will not disqualify Chris from receiving SSI or other public benefits. Trust Declaration at 2.

The Trustees have absolute discretion to make disbursements for Chris' benefit consistent with the purposes of the Trust, including disbursements for the following expenses: education, medical services not otherwise available through governmental programs, housekeeping services, child care, companions, legal representation, vacations, transportation, entertainment, furniture, household goods, personal items, living quarters, funeral expenses, and tax obligations. Trust Declaration at 3-4.

The Trustees also have discretion to "terminate all distributions of income and principal" if they think that continued distributions will result in a reduction in governmental assistance to Chris. Trust Declaration at 5. In addition, there is a provision that Chris cannot assign his interest in income or principal to anyone else. Trust Declaration at 7.

The Trust terminates under either of two conditions. First, the Trust terminates and the principle and income must be distributed to Chris if (a) Chris has attained the age of 21, (b) SSA has determined that he is no longer disabled, and (c) the Trustees determine that he is not eligible or likely to become eligible for any public benefits. Trust Declaration at 6. This provision complies with Wisconsin law allowing a guardian of a minor to place a ward's assets into a trust under certain conditions and with court approval. Wis. Stat. Ann. 880.175 (West 1991). Second, if the Trust is still in existence when Chris dies, the residue must be distributed to whomever Chris has appointed by will or by trust (after reimbursement to the state for medical assistance benefits and, in the Trustees' discretion, payment of funeral expenses and death, inheritance, and estate taxes). If Chris dies without exercising a valid power of appointment, the residue of the Trust passes to his "issue by right of representation" or, if no issue, to his "heirs at law" under Wisconsin intestacy laws. Trust Declaration at 6.

Under Section VIII of the Trust Declaration, the Trust is irrevocable, although it can be amended by the Trustees with court approval in a manner consistent with the purposes of the Trust. Trust Declaration at 8. Section X of the Trust Declaration, however, gives the Trustees power to terminate the Trust, in whole or in part, and distribute the assets to Chris if, in the Trustees' absolute discretion, termination would be in Chris' best interests. Trust Declaration at 14.

DISCUSSION

1. The Inheritance Was Income in February 1999.

The pertinent SSI regulation provides that resources include cash or other liquid assets or any real or personal property that a person owns and can convert to cash to be used for the person's support and maintenance. 20 C.F.R. 416.1201(a). If the person has the right or power to liquidate the property, or his share of the property, it is a resource. Id.

An inheritance is not a resource until it has value, i.e., it can be used to meet the distributee's needs for food, clothing, or shelter. See POMS SI 00810.005(A). Under Wisconsin law, a guardian must apply a ward's personal property, or income from personal property or real estate, as far as may be necessary for the ward's education, maintenance, and support. Wis. Stat. Ann. 880.21 (West 1991 Supp. 1998). Therefore, Chris' inheritance was income in February when it became available to him. See Wisconsin Family Community Trust for the Disabled, Maybelle T~ (Freburg) to Mukogawa, ARC-MOS, SSA V (January 13, 1999) at 1.

2. The Trust Is Not a Resource

We turn to the question of whether the principal and any accumulated income in the Trust constitute a resource for SSI purposes. Trust assets are a resource if, under the terms of the trust, the individual can direct use of the trust assets for his support and maintenance. POMS SI 01120.200(D)(1)(a). Trust assets are also a resource if the individual has the power to revoke the trust and then use the funds to meet his food, clothing, or shelter needs. Id. A trust may be revocable because the trust document allows for revocation, or it may be revocable through application of state law. POMS SI 01120.200(D)(2).

The Trust Declaration gives the Trustees absolute discretion over disbursements, subject to the limitation that they can make disbursements only for expenses over and above those covered by government programs and only to the extent that such disbursements will not disqualify Chris from receipt of SSI or other government benefits. In addition, there is a clause that prohibits Chris from assigning any interest he may have to anyone else, including his creditors. Thus, under the terms of the Trust Declaration, Chris does not have the power to direct use of the trust assets for his support and maintenance.

The Trust Declaration is ambiguous as to whether or not the Trust is revocable. See Trust Declaration at 8, 14. We need not resolve that issue, however, since, even if we were to assume that Section X, paragraph R of the Trust Declaration is controlling, that paragraph allows for termination of the Trust only in the absolute discretion of the Trustees. Trust Declaration at 14. The Trust Declaration gives Chris no power to revoke the Trust or to direct the Trustees to revoke the Trust.

Nor does Wisconsin trust law give Chris the power to revoke the Trust. Under Wisconsin law, the person who directly, or indirectly, creates a trust or adds property to an existing trust is the settlor. Wis. Stat. Ann. 701.01(5) (West 1981 Supp. 1998). This is consistent with the general trust law principle that the true settlor of a trust is the person who provides the consideration for the trust, even if another person nominally creates the trust. 76 Am. Jur. 55; POMS SI 01120.200(b)(2); POMS SI 01120.200(J)(2)(a). Here, although Chris' guardian was named as the settlor, Chris is the true settlor of the Trust because the Trust was funded with Chris' inheritance.

Consistent with general trust principles, Wisconsin law provides that a Trust that is not revocable by its terms may nevertheless be revoked upon written consent of the settlor and all beneficiaries. Wis. Stat. Ann. 701.12 (West 1981). See Restatement (Second) of Trusts 330-31. Since Chris is the settlor of the Trust, he has the power to revoke the Trust only if he is also the Trust's sole beneficiary. If however, there are other beneficiaries, including contingent beneficiaries, he cannot revoke the Trust without their consent. Under the terms of the Trust Declaration, Chris is the sole beneficiary during his lifetime. The question is whether there are contingent beneficiaries with a remainder interest at Chris' death who would be required to consent to revocation of the Trust. If so, we do not consider the Trust revocable by Chris for purposes of determining whether the assets are a countable resource.

Chris has a general power to appoint the person or persons who will receive the residue of the Trust upon his death. Trust Declaration at 6. Under general trust law, a general power of appointment does not create a remainder interest in those to be named by will, since the person who has power of appointment could fail to execute a will, fail to exercise the power of appointment in a will, or revoke the will. We found no Wisconsin statutes or caselaw to the contrary. Therefore, if the general power of appointment were the only provision for the Trust residue, the Trust would be Chris' resource because he could compel the Trustees to terminate the Trust and re-convey the assets to him. See Restatement (Second) of Trusts 330, comment e. See also Clarification of Regional SSA Program Circular 94-05 (Koven) to Lewis, Acting ARC, SSA V, at 3 (May 24, 1995).

However, the Trust Declaration also provides that, in the event Chris does not execute a valid appointment pursuant to his general power, the assets in the Trust when Chris dies are to be distributed to Chris' "issue." Trust Declaration at 6. This provision precludes Chris from terminating the trust because it creates a remainder interest in Chris' children as contingent beneficiaries. See Boyle v. Kempkin, 9 N.W.2d 589, 592 (Wis. 1943) (creation of remainder interest in trust to "children" created vested equitable interest); Restatement (Second) of Trusts 127, comment b (if beneficial interest is limited to settlor for life and on his death the remainder goes to his children, issue, or descendants, an interest in the remainder is created in the children, issue, or descendants, and the settlor is not the sole beneficiary). See also McGovern, et al., Wills Trusts and Estates 353 (West 1988), citing Levy v. Crocker Citizens National Bank, 14 Cal. App. 3d 102 (1971) (consent of children required for revocation, even if children take only in default of testamentary power of appointment retained by settlor). Thus, Chris does not have the power to revoke the Trust.

That we cannot presently ascertain who will be Chris' issue at the time of his death, or even whether such issue will exist, does not change the result. Wisconsin law provides that a court may consent to revocation on behalf of unascertained or unborn beneficiaries after a hearing where a guardian ad litem represented their interests. Wis. Stat. Ann. 701.12(2)(West 1981). See also Restatement (Second) of Trusts 127 and comment b, 339 and comment b; 76 Am. Jur. 95; Review of the Joseph B~ Trust, OGC-V (Baxi) to Mukogawa, ARC, SSA-V, at 5 (January 12, 1999).

Where a beneficiary does not have the power to direct use of the trust for his support and maintenance and does not have the power to revoke the trust on his own, the trust assets may still be a resource for SSI purposes if the beneficiary can sell his interest in the trust and use the proceeds for his support and maintenance. 20 C.F.R. 416.1201(a)(1). In theory, Chris could enter into an agreement to exercise his general power of appointment in favor of a creditor or other person for payment. See Wis. Stat. Ann. 702.01(3) (West Supp. 1998) (general power of appointment may be exercised in favor of donee's creditors if exercisable during lifetime and in favor of creditors of estate if exercisable by will). It is unlikely, however, that Chris' power of appointment would have any real market value. We think it unlikely that anyone would purchase the right to take the contingent remainder of the Trust upon Chris' death, since there is no certainty as to the amount, if any, that would remain in the Trust at the time of Chris' death.

Since Chris cannot direct use of the trust assets for his support and maintenance, revoke the Trust, or sell his interest in the Trust, the Trust assets do not constitute a countable resource for purposes of Chris' entitlement to SSI. We note, however, that any amounts actually distributed to Chris from the Trust would be income to him and any disbursement to a third party in exchange for food, shelter, or clothing for Chris would be in-kind income to Chris. POMS SI 01120.200(E)(1)(a)-(b).

CONCLUSION

Under the terms of the Trust Declaration, all disbursements are at the discretion of the Trustees who are limited to making disbursements for Chris' supplemental needs only. Chris cannot direct use of the Trust assets for his support and maintenance. The Trust Declaration does not give Chris the power to revoke the Trust, nor does he have such power under Wisconsin law. Although he is the true settlor of the Trust, he is not the sole beneficiary because the Trust Declaration creates contingent interests in Chris' "issue." Finally, it is unlikely that anyone would pay for the right to have Chris exercise his general power of appointment in his/her favor, since the value of the remainder at Chris' death is uncertain. Therefore, the Trust assets should not be considered Chris' countable resources for SSI purposes.

V. PS 00-318 Forethought Life Insurance Funded Burial Contract in Wisconsin Viola L. K~, ~ (Your November 18, 1994 Request) (Your ref: S2D5B51, SI 2-1-8)

DATE: March 21, 1995

1. SYLLABUS

This opinion concerns a life insurance-funded burial contract in Wisconsin. In this case the life insurance policy has been assigned to the funeral home. However, a life insurance-funded burial contract must be assigned to a person or entity other than the funeral home to be considered valid under Wisconsin law. Therefore this policy is not valid and the ownership has not been irrevocably assigned. Therefore, the purchaser is still considered the owner of the policy for SSI purposes.

2. OPINION

On November 18, 1994, you asked us to review a Forethought life insurance funded burial arrangement that was marketed in Wisconsin to Viola L. K~, ~. Specifically, you asked us to determine: (1) if the plan is legal under Wisconsin law; and (2) if so, does it constitute a countable resource for Supplemental Security Income (SSI) purposes. With your November 18, 1994 request you included: (1) the application to Forethought Life Insurance Company for a life insurance policy by the individual with a power-of-attorney to act for the insured; (2) the life insurance policy; and (3) the irrevocable assignment of policy ownership to a funeral home. You did not submit to us a pre-need funeral agreement between the insured and the funeral home.

As we have previously advised you, for a life-insurance-funded burial contract to be valid under Wisconsin law, ownership of the life insurance policy must be assigned to a person or entity other than the funeral home. / In the package you submitted for our review, however, ownership of the life insurance policy has been assigned to a funeral home. We presume that the same funeral home has made pre-need funeral arrangements with the insured. Therefore, based on the information we currently have, we do not think SSA should find that the Forethought package is valid under Wisconsin law.

Should the insured attempt to cure the deficiency by irrevocably assigning the life insurance policy to a person or entity other than the funeral home, please resubmit the entire package to us for our review. In order for us to issue a definitive opinion, we will also need to see the pre-need funeral agreement between the insured and the funeral home at that time.

Should the insured make no effort to cure the deficiency, it would appear that the purported irrevocable assignment of policy ownership to a funeral home was not valid under Wisconsin law. Therefore, in our opinion the policy ownership has not effectively been irrevocably assigned. The balance of the package, however, would appear to be valid. For that reason, you should treat the purchaser as the owner of the life insurance policy for SSI purposes, subject to any exclusions for life insurance or burial funds that otherwise apply.

W. PS 00-307 Supplemental Security Income - Wisconsin Trust - Matthew T. K~, SSN ~, Your Reference: S2D5G3

DATE: September 18, 2000

1. SYLLABUS

This opinion concerns an Irrevocable Family Trust established in December 1992. For reasons explained below, the trust is not countable as a resource.

In Wisconsin, a trust can only be revoked with the consent of the grantor and all beneficiaries. The grantor of the trust is the SSI recipient's mother. In addition to the SSI recipient, there are other beneficiaries named.

Therefore, since the SSI recipient is not the grantor or sole beneficiary of the trust it is not a countable resource to him. However, any payments from the trust fund should be considered in assessing the SSI recipient's eligibility for SSI benefits.

CAUTION: Because of a change in the Social Security Act, this precedent may only be applicable to trusts established before 1/1/00.

2. OPINION

You asked that we review the "Cynthia L. K~ Irrevocable Family Trust" to determine whether it is a countable resource for Matthew T. K~ (Matthew), a Supplemental Security Income (SSI) recipient. For the reasons stated below, we conclude that the funds in the trust should not be considered a countable resource to Matthew. The disbursements to Matthew from that trust fund should, however, be considered income in assessing Matthew's eligibility for SSI benefits.

FACTS

In December 1992, Cynthia L. K~ (Cynthia), Matthew's mother, established the Cynthia L. K~ Irrevocable Family Trust (the trust). The trust was funded with $10.00 and a million dollar whole life insurance policy on Cynthia's life. It appears that Cynthia contributes about $8,000.00 each year into the trust. The trust assets have now been changed over to an annuity. We do not know any of the terms of the terms of the annuity. The trust names Cynthia as the grantor and Thomas E. S~ as the trustee. The trust provides that it may not be amended or revoked.

The trust states that the trustee shall hold, administer, and distribute the trust estate as enumerated in the trust. The trust provides that prior to Cynthia's death, for a period of thirty days following any contribution to the trust, each living child of Cynthia shall have the right to withdraw from the trust an amount not exceeding the lesser of: (a) $10,000 as described in the Internal Revenue Code as a gift for federal gift tax purposes, or (b) his proportionate share of the contribution.

The trust further provides that at least quarterly, the trustee shall pay the net trust income equally, to or for the benefit of Cynthia's children. If Cynthia's children are then not living, the income shall be added to the principal. The trust also states that the term "children" includes all children and descendants, whether born or adopted before or after the trust instrument was executed. We do not know how many children Cynthia has.

DISCUSSION

To qualify for SSI benefits, a claimant must show that his resources are below a statutory maximum. 42 U.S.C. 1382(a); 20 C.F.R. 416.202, 416.1205. 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 support and maintenance. 20 C.F.R. 416.1201(a). If the individual has the right, authority or power to liquidate the property or his share of the property, it is considered a resource. 20 C.F.R. 416.1201(a)(1). Trust assets are a resource if the individual has access to the trust assets, or can direct the use of the assets, or can terminate the trust and use the trust assets for his support and maintenance. POMS SI 01120.200(D)(1). Whether the individual can terminate the trust or direct the use of the trust assets depends on the terms of the trust agreement and applicable state law. POMS SI 01120.200(D)(2).

In this case, Matthew does not have the right to terminate the trust. In Wisconsin, a trust can be revoked with the consent of the grantor and all beneficiaries. Wis. Stat. Ann. 701.12(1) (West 1981 Supp. 1999); 76 Am. Jur. 2d 94 (1992). This is true even if the trust document specifically states that it may not be revoked. Id.

Under Wisconsin law, the person who directly or indirectly creates a trust or adds property to an existing trust is the grantor. Wis. Stat. Ann 701.01(5) (West 1981 Supp. 1999). This is consistent with general trust principal that the grantor of a trust is the person who provides the consideration for the trust. 76 Am. Jur. 2d 55 (1992); POMS SI 01120.200(B)(2). In this case, Cynthia, Matthew's mother, is the grantor of the trust because she provided funds to establish the trust, and continues to add funds to the trust.

Matthew is a beneficiary, but not the sole beneficiary of the trust. As noted above, under Wisconsin law, a trust can be revoked with the consent of the settlor and all beneficiaries. Wis. Stat. Ann. 701.12(1) (West 1981 Supp. 1999); 76 Am. Jur. 2d 94 (1992). During Cynthia's lifetime, it appears that the beneficiaries of the trust include Matthew and Cynthia's other children, whether born or adopted before or after the trust instrument was executed.

Although the trust principal is not a resource for Matthew, disbursements from the trust under certain circumstances would be income for determining Matthew's SSI eligibility and level of benefits. During Cynthia's lifetime, for thirty days following her annual $8,000.00 contribution to the trust, Matthew has the right to withdraw from the trust an amount not exceeding the lesser of: (a) $10,000 as described in the Internal Revenue Code as a gift for federal gift tax purposes, or (b) his proportionate share of the contribution. In this case, he would have the right to withdraw from the trust his proportionate share of the approximate $8,000.00 annual contribution. At the start of the thirty-day period, this share is income to Matthew. If the thirty days pass into another calendar month, this share is Matthew's resource. If he does not exercise his right to obtain the funds, they cease to be a resource when the thirty-day period ends. The trustee is authorized to disburse this cash from the trust directly to Matthew, and such a disbursement would be income for SSI purposes. See 20 C.F.R. 416.1102; POMS SI 01120.200(E)(1)(a),(b).

In addition, during Cynthia's lifetime, the trustee is directed to disburse to Matthew or for his benefit, at least quarterly, his proportionate share of the net income from the trust. Matthew's right to obtain these payments would also be income for SSI purposes. See 20 C.F.R. 416.1102; POMS SI 01120.200(E)(1)(a),(b). We do not, however, know if the trust has generated any income. This will depend on the terms of the annuity.

CONCLUSION

Thus, we conclude that the funds held in the trust do not constitute a countable resource for purposes of determining Matthew's SSI eligibility because Matthew does not have the right to revoke the trust. Matthew's right to obtain payments from the trust fund, whether Matthew's proportionate share of the approximate $8,000.00 annual contribution by Cynthia, or his quarterly proportionate share of the net income from the trust should be considered as income in assessing his eligibility for SSI benefits.

X. PS 00-297 SSI-Wisconsin-Review of a Purchase of Indian Tribal Lands from Leona H~

DATE: June 30, 2000

1. SYLLABUS

Cash received from the sale of an individual's interest in Indian lands held in trust (an excluded resource) are not income. They represent conversion of a resource. Any cash received from the sale would be a countable resource as of the first moment of the month following the month in which it was received.

2. OPINION

You asked us whether payments received from the sale of an individual's interest in Indian lands held in trust were countable income for purposes of determining the individual's eligibility for Supplemental Security Income (SSI). For the reasons discussed below, we conclude that the proceeds are not income at all, but rather represent the conversion of a resource.

The cash received from the sale would be a countable resource as of the first moment of the month following the month in which it was received.

FACTS

Until recently, Leona H~, an SSI beneficiary and a member of the Bad River Tribe, owned an interest in several pieces of tribal land that were held in trust for her by the federal government. See 25 U.S.C. § 465. Federal law excluded this land from being considered a resource for SSI purposes. 25 U.S.C. § 1408; see POMS SI 01130.150.

In 1998, Congress approved a pilot project empowering the Bureau of Indian Affairs to purchase for the tribe an individual's fractional interest in Indian land. Pub. L. No. 105-277, 112 Stat. 2681, 2681-248 (1998). The Bad River Tribe was included in this pilot program. The BIA offered Ms. H~ $10,854 for her fractional interest. Ms. H~ accepted the offer, and on August 10, 1999, she received a check for $10,854.

DISCUSSION

As a general rule, property received by a person is income for SSI purposes. 20 C.F.R. § 416.1102 (1999). However, property that an individual receives from the sale or trade of property he or she already owns is not income, it is the conversion of a resource. See 20 C.F.R. § 416.1207(e); POMS SI 00815.200. This same rule applies when the resource is excluded. See POMS SI 00815.200. Even though the proceeds from the sale of the excluded resource are not income, the proceeds are a resource if retained in the month after receipt. See POMS SI 01110.600(B)(4).

Here, Ms. H~ had an excluded resource: her interest in the Indian lands held in trust. She converted her resource to another form, cash. The cash is not income to her, but to the extent that she retained it in the next month, it is a countable resource.

In a letter, Brian H. Zygo, an attorney with Wisconsin Judicare, Inc., reported Ms. H~'s sale of the property and stated that "[i]t is our position that this transaction should not make Ms. Hole ineligible for SSI." He did not, however, provide any authority as support for his position. We have not found any authority excluding from countable resources funds received from the sale of Indian lands.

CONCLUSION

For these reasons, the proceeds Ms. H~ received from the sale of her excluded land was not income countable to her, but was a resource to the extent that she retained it into the next month.

Y. PS 00-287 States Named as Beneficiary to a Trust; Your Reference No. SI-2-1-3

DATE: June 24, 1997

1. SYLLABUS

This opinion states that if a trust is excluded from resources for Medicaid eligibility purposes, it may still be a resource for SSI purposes. Additionally, providing for reimbursement to the State for Medicaid expenditures on behalf of the beneficiary does not make the State a residual beneficiary of the trust. Because of a change in the Social Security Act, this precedent may only be applicable to a trust established by an individual before 01/01/00.

2. OPINION

You asked for state-by-state evaluation of how trusts created under the Omnibus Reconciliation Act (OBRA) of 1993, P.L. 103-66, 13611(b) (codified at 42 U.S.C. 1396p(d)(4)), to shelter money for Medicaid purposes should be treated when determining whether the trust assets are a resource for SSI purposes. We conclude that, for any state, the mere fact that a trust may comply with the OBRA 1993 provisions is irrelevant to determining whether the trust assets are a resource for SSI purposes.

Discussion

In the OBRA 1993, Congress established an exception to the resource guidelines for the Medicaid program. See P.L. 103-66, 13611(b). Under this provision, when determining an individual's eligibility for, or amount of benefits to be paid under Medicaid, trust assets and income from that trust will not be considered as resources and income if the trust meets certain guidelines. To meet these requirements the trusts must, among other things, provide that, on the death of the individual, the State will receive all remaining trust assets up to an amount equal to the total medical assistance paid on behalf of the individual under the State's Medicaid program. See 42 U.S.C. 1396p(d)(4).

Congress limited the applicability of this provision, however, to the Medicaid program and did not make a similar provision for the SSI program. Therefore, even if a trust is consistent with the provisions of the OBRA 1993 and state statutes that implement that provision, the trust assets still may be a countable resource for SSI purposes. See Illinois OBRA '93 Trust for Dominick J. G~, ~, OGC-V (Duman) to Gerald Kayser, Center Director, SSA-V (Apr. 14, 1997); Revocability of Wisconsin Trust for Clayton D. B~, ~, OGC-V (Duman) to Gloria J. Panama, ARC-POS (Oct. 28, 1994) at 4, n.7; cf. POMS SI 00601.060.H.1 (some trusts that are not resources for SSI purposes may affect Medicaid eligibility).

Furthermore, no residual beneficiary is created merely because the OBRA 1993 trust requires that, on the death of the individual, the state be reimbursed for Medicaid assistance paid on behalf of the individual. See Supplemental Security Income - Wisconsin Trust - Michelle J. L~, ~, OGC-V (Mates) to Gloria J. Panama, ARC-MOS (June 9, 1997); Illinois OBRA '93 Trust for Dominick J. G~, ~, supra. The Restatement (Second) of Trusts 3(4) defines a beneficiary as "[t]he person for whose benefit property is held in trust." None of the trust property in an OBRA 1993 trust is held for the "benefit" of the state. Rather, any amounts paid to the state after the individual's death are reimbursements for amounts the state paid for the benefit of the individual.

Conclusion

In summary, although some of our prior opinions may have suggested otherwise, on further consideration, we feel the better approach is to treat OBRA 1993 trusts the same as any other trust, for SSI purposes. Although trust assets may not be considered a resource for Medicaid purposes under the OBRA 1993 provisions, this does not affect how the trust is treated under the SSI program. Furthermore, no residual beneficiary is created merely because the trust requires that any sums remaining in the trust at the death of the individual be paid first to the state to reimburse it for any benefits paid on that person's behalf. Therefore, this provision would not affect the individual's ability to revoke the trust if he or she is the grantor and sole beneficiary of the trust. If you have any further questions, please contact the undersigned at (312) 353-5818.

Z. PS 00-270 State of Wisconsin - Irrevocable Funeral Trust Agreement for Walter E. J~

DATE: August 10, 1995

1. SYLLABUS

This opinion concerns a funeral trust in the State of Wisconsin. The individual deposited a total of $4,800 into the trust. Consistent with Wisconsin State law, $2,000 is designated by the trust as irrevocable. Under the trust, the individual retains the authority to revoke or liquidate the remaining $2,800. Therefore, $2,000 in the trust is not countable as a resource. But, $2,800 is countable as a resource for SSI purposes. CAUTION: Because of a change in the Social Security Act, this precedent may only be applicable to trusts established before 1/1/00.

2. OPINION

You have asked for our assistance in determining (1) whether the "Irrevocable Funeral Trust Agreement" in question satisfies the requirements of Wis. Stat. Ann. 445.125 (West 1994) even though certain sections of the agreement have not been completed and (2) how much, if any, of the funds deposited pursuant to the agreement constitute a countable resource to a Supplemental Security Income (SSI) recipient, Walter E. J~. To qualify for SSI benefits, an applicant must show that his income, both earned and unearned, is below the statutory maximum. 42 U.S.C. 1382(a)(1). Income is anything a claimant receives in cash or in kind. 20 C.F.R. 416.1102 (1994).

Under the applicable regulation, "resources" that are countable as income 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 support and maintenance. If the individual has the right, authority or power to liquidate the property, or his 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).

See 20 C.F.R. 416.1201. The Program Operation Manual System (POMS) addresses the circumstances under which specifically trust funds are considered a resource to an SSI recipient:

If an individual does not have the legal authority to revoke the trust or direct the use of the trust assets for his/her own support and maintenance, the trust principal is not the individual's resource for SSI purposes. POMS SI 01120.200D.2 (emphasis in the original). Thus, in this case, to constitute a countable resource as described in the regulations and POMS, Mr. J~ must have the right, authority, or power to liquidate the funds of the funeral trust agreement in question and apply them to meet his support and maintenance needs.

The pertinent facts reveal that on April 26, 1995, Mr. J~ (the Depositor) entered into a funeral trust agreement with Bob P~, the funeral director of the Metcalfe Kuenster Page Funeral Home (the Funeral Home). The funeral trust agreement states in pertinent part that:

The First $2000 of funds deposited under [the] agreement must be used for the funeral of the Depositor. . .

The intent of the Depositor is to designate the first $2000 of the funds deposited pursuant in this agreement as an irrevocable funeral trust fund, which must be used for the funeral and final disposition of the Depositor . . . The Depositor further directs that any dividends and/or interest earned on the fund shall be . . . [m]ade irrevocable and added to the minimum amount to be deposited and used for the Depositor's funeral . . . Before his/her death the Depositor, after written notice to the Funeral Home, may withdraw any portion of the principal deposited in excess of $2000, provided that no interest and/or dividends also made irrevocable is ever withdrawn by the Depositor.

The funeral trust agreement also states that the Funeral Home will provide, under the following sections: (A) "professional and staff services and facilities," (B) an "outer burial chamber," and (C) "services and merchandise." Mr. J~ did not specify the types of such items and services and/or their "estimated" costs, but noted that such items and services would be selected or added "at need." With regard to the above burial/funeral items and services, the funeral trust agreement provides that:

The actual and total cost of the services and merchandise provided by the Funeral Home ([in section] (A) only or including (B) and/or (C)) shall be determined as of the date of the Depositor's death. The Depositor reserves the right to amend this agreement subsequently in writing to change any details of the funeral and final disposition specified here provided that the Funeral Home may then adjust the cost of the funeral service accordingly.

Pursuant to this funeral trust agreement, Mr. J~ deposited $4,800.00, which was held in trust by the designated Depository, the Badger State Bank.

Notwithstanding Mr. J~'s failure to designate specific burial/funeral merchandise and services and their estimated costs in sections (A)-(C) of the agreement, we nonetheless believe that the funeral trust agreement is a valid burial agreement under Wis. Stat. Ann. 445.125, and as such, is irrevocable as to the first $2,000.00, plus all interest and/or dividends earned on the fund. Therefore, we do not believe that the first $2,000.00, plus all interest and/or dividends, is a countable resource. It is our opinion, however, that the remaining $2,800.00 under the funeral trust agreement is revocable and thus a countable resource to the SSI recipient.

Section 445.125 of the Wis. Stat., Ann.,/ which governs burial agreements such as the one in question, in pertinent part, reads:

(1)(a) Whenever a person . . . makes an agreement with another person selling or offering for sale funeral or burial merchandise or services . . . for the purchase of a casket, outer burial container not preplaced into the burial excavation of a grave, combination casket-outer burial container or other receptacle . . . for the burial or other disposition of human remains or for the furnishing of funeral or burial services, either of which is intended to be provided for the final disposition of the body of a person . . . wherein the use of such personal property or the furnishing of such services is not immediately required, all payments made under the agreement shall be and remain trust funds, including interest and dividends if any, until occurrence of the death of the potential decedent, unless the funds are sooner released upon demand to the depositor, after written notice to the beneficiary.

(b) Notwithstanding [Wis. Stat. Ann. 701.12(1)/], such agreements may be made irrevocable as to the first $2,000 of the funds paid under the agreement by each depositor.

(c) Any interest or dividends accruing to a trust fund under par.(b) may be made irrevocable.

With regard to the issue of the revocability of a trust, the POMS defers to the terms of the trust and/or State law:

The revocability of a trust and the ability to direct the use of the trust principal depends on the terms of the trust agreement and/or on State law. If a trust is irrevocable by its terms and under State law and cannot be used by an individual for support and maintenance, it is not a resource.

POMS SI 01120.200D.2 (emphasis in the original).

The funeral trust agreement in question wholly complies with the terms of Wis. Stat. Ann. 445.125. In particular, explicitly under the terms of the funeral trust agreement and in accordance with Wis. Stat. Ann. 445.125, Mr. J~ has no authority to revoke or liquidate the first $2,000.00, plus all interest and/or dividends, of the trust funds deposited under the funeral trust agreement. Mr. J~, however, has the authority to revoke or liquidate the remaining $2,800.00 in trust funds, and may use those funds to meet his food, clothing or shelter needs or direct the use of those funds for his support and maintenance.

Hence, the remaining $2,800.00 in trust funds constitutes a countable resource.

That Mr. J~ neglected to select specific burial/funeral merchandise and services and provide their estimated cost in sections (A)-(C) of the funeral trust agreement does not appear to be of any legal consequence, given that Section 445.125 does not require that such items and services necessarily be specified. Rather, Section 445.125 requires only that there be an agreement for the purchase of certain general types of burial containers and/or services. Consistent with the state statute, the funeral trust agreement in this case generally describes the burial/funeral merchandise and services that will be provided under the funeral trust agreement. Although the funeral trust agreement provides room for the Depositor to specifically describe burial/funeral merchandise and services and their costs, the fact that Mr. J~ did not do so does not appear to be a critical omission since the "actual and total" costs of such burial/funeral items and services are not determined until the Depositor's death, and since the Depositor has the "right" at any time prior to his death to "change any details of the funeral and final disposition" as long as the costs are adjusted accordingly.

AA. PS 00-265 Wisconsin Forethought Life Insurance Funded Burial Contract for Phillip H~, SSN ~

DATE: June 9, 1997

1. SYLLABUS

In Wisconsin, irrevocable assignment of a life insurance policy funding a funeral contract to the Forethought Trust is valid under State law. The policy is not a resource to the individual.

Because of a change in the Social Security Act, this opinion may only be valid to trusts established by an individual prior to 01/01/00.

2. OPINION

This is in response to your inquiry concerning a Forethought Life Insurance Funded Burial Contract (LIFBC) for Phillip H~. You asked if the LIFBC in question is valid under Wisconsin State Law and, if the LIFBC is not valid, whether the cash surrender value of the life insurance policy could be excluded since it has been irrevocably assigned to the Forethought Trust. We believe that the Forethought LIFBC in question is valid and should therefore not be counted as a resource for SSI purposes.

FACTS

In May 1996, Mr. H~ purchased a life insurance policy from the Forethought Life Insurance Company for the purpose of funding his burial expenses. Mr. H~ named his father, John H~, beneficiary. John H~ signed an affidavit attesting to his understanding that the proceeds of the life insurance were to be used for Mr. H~'s funeral costs. Mr. H~ then transferred ownership of the life insurance policy to the Forethought Trust, giving up his right to control the policy, surrender it for cash or obtain a loan against it.

DISCUSSION

A resource, for SSI purposes, includes assets that the individual owns and could convert to cash to be used for his own support and maintenance. See 20 C.F.R. 416.1201(a). If the individual has the right, authority, or power to liquidate the property, it is a resource. Id. Trust assets are a resource if the individual can revoke the trust and use the assets to meet his needs for food, clothing, and shelter. POMS SI 01120.105.A.1, 01120.200(D)(1)-(3).

Consistent with SSI's trust policy, if an individual neither owns nor has the legal right to direct the use of trust assets to meet his or her support and maintenance needs and state law allows a revocably assigned life insurance policy that funds a funeral contract to be placed irrevocably in trust, the LIFBC is not a resource for SSI purposes. POMS SI 01130.425D.2.E.

After purchasing the Forethought life insurance policy, Mr. H~ irrevocably transferred ownership of the policy to the Forethought Trust. This was a valid transfer in which Mr. H~ relinquished the right to control the policy, to surrender it for cash, or to obtain a loan against it. Thus, the remaining question is whether this Forethought LIFBC package is valid under Wisconsin law.

Prior to May 10, 1996, W.S.A. 632.41(2) provided that "No contract in which the insurer agrees to pay for any of the incidents of burial or other disposition of the body of a deceased may provide that the benefits are payable to the funeral director or any other person doing business related to burials." Accordingly, we have previously advised you that, for a LIFBC to be valid under Wisconsin law, there are several requirements: (1) a funeral provider cannot be named as a beneficiary of the insurance policy that is issued; (2) ownership of the life insurance policy must be assigned to a person or entity other than the funeral home; and (3) the assignee must be free to select any funeral provider to fund the client's funeral needs at the time of death. Forethought Life Insurance Funded Burial Contract In Wisconsin-Viola L. K~, OGC-V (Michaelson) to Panama, ARC, SSA-V (3/21/95); Wisconsin Life-Insurance Funded Burial Agreements, OGC-V (Michaelson) to Panama, ARC, SSA-V (10/28/92).

We note that, following a statutory amendment effective May 10, 1996, 632.41(2)(b) now permits the assignment of the proceeds of the policy to a funeral provider, if certain requirements are met. Nonetheless, the statute preserves the requirement that a life insurance policy sold under the act shall permit the policyholder to designate a different beneficiary and a different funeral provider that is to receive the assignment of proceeds. W.S. 632.41(2)(b)(3).

The recent amendment does not affect Mr. H~'s Forethought LIFBC, which is equally valid under either version of the statute since (1) the beneficiary of the Forethought LIFBC is Mr. H~'s father, not a funeral provider; (2) Mr. H~ then irrevocably assigned ownership of the life-insurance policy to the Forethought Trust, not a funeral provider; and (3) although the beneficiary of the insurance policy, Mr. H~'s father, signed an affidavit stating that he would use the proceeds of the fund for Mr. H~'s burial expenses, he remained free to select a different funeral provider at any time.

We note the existence of a document entitled "Funeral Purchase Contract" between Mr. H~ and the Pratt Funeral Home. However, this does not appear to be an enforceable contract, given that several essential components are missing, such as the signature of the funeral home. At most this document indicates Mr. H~'s casket preference. Furthermore, Pratt Funeral Home itself has denied the existence of a pre-need contract with Mr. H~ and has indicated that Mr. H~ is free to change funeral provider at any time.

Your letter states that the insurance company indicated that it would distribute the proceeds of the policy to the Pratt Funeral Home on the death of Mr. H~. As you correctly point out, this cannot be the case, since there is no assignment of proceeds to the funeral home, nor is there any pre-need contract between Pratt Funeral Home and Mr. H~. Moreover, the life insurance policy states clearly that absent any assignment of proceeds by the insured, Forethought will disburse the death benefit to the beneficiary of the policy.

For these reasons, we believe that the Forethought LIFBC is valid under Wisconsin law and should not be counted as a resource for SSI purposes.

BB. PS 00-257 Supplemental Security Income - Wisconsin Trust - Sarah K. H~, SSN ~, Your Reference: S2D5G3

DATE: November 10, 1997

1. SYLLABUS

The trust in the opinion is not a countable resource for the following reasons:

1) The SSI recipient named in the trust does not have the authority to direct payments from the principal of the trust for her support and maintenance. 2) The trust cannot be revoked by the SSI recipient and the principal used for her support and maintenance. and 3) The SSI recipient is not the sole beneficiary of the trust and cannot revoke the trust without consent of additional parties.

2. OPINION

You inquired whether the funds held pursuant to the terms of a trust agreement should be treated as a countable resource for purposes of SSI eligibility for Sarah K. H~, the beneficiary of the trust.

The pertinent SSI regulations provide at 20 C.F.R. 416.1201(a) that:

[R]esources means cash or other liquid asset 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. (1) 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).

Thus, if an individual is able to obtain funds or convert property to cash to be used toward her support and maintenance, such funds or property are to be included as resources for purposes of SSI eligibility determinations. Trust assets are a resource to the individual if she "has legal authority to revoke the trust and then use the funds to meet [her] food, clothing or shelter needs, or if the individual can direct the use of the trust principal for his/her support and maintenance under the terms of the trust. . . ." POMS SI 01120.200(D)(1)(a). We have reviewed the documents presented to us and, for the reasons discussed below, we conclude that this trust should not be a countable resource under 20 C.F.R. 416.1201.

FACTS

This trust was established by order of the court in In re Matter of Guardianship of Sarah Katie H~ No. 96-GN-34 (Jefferson County Circuit Court) and appears to have been funded with proceeds from a settlement between Sarah H~ and Allstate Insurance Company. The memorandum of inquiry notes that Sharon H~ is the mother and legal guardian of Sarah K. H~. The SSID attached to the request indicates that Sarah is incompetent and her mother is her legal guardian.

The trust names Sharon H~ as Grantor, and Carl H~ as Trustee. The trust contains two clauses regarding revocation of the trust. First, "[o]n the death of the beneficiary, the Trustee shall pay the expenses of the last illness, funeral and burial of the beneficiary out of the principal of the Trust Estate, unless the Trustee in his discretion determines that other provisions have been made for the payment of such expenses". H~ Trust, Article I, Section 3. Second, "[i]f at the death of Sarah Katie H~ there remains any portion of such share created for said child, after complying with paragraphs 1-3 herein, the Trustee shall terminate said Trust, and pay over to the surviving issue of Grantor said funds equally upon the same terms contained in Article II, Section 1., herein before stated." Article I, Section 4.

DISCUSSION

A trust may be a countable resource if the beneficiary can either: (1) direct the trustee to pay over trust principal for her support and maintenance; or (2) revoke the trust and then use the funds for her support or maintenance. A trust may be revocable either according to language in the trust document itself or according to law.

First, Ms. H~ does not have the authority to direct the payment of trust principal for her support and maintenance. A trust may be a resource "in the rare instance, where he/she has the authority under the trust to direct the use of the trust principal." POMS SI 01120.200(D)(1)(b). Ms. H~'s trust is not one of these rare instances. Payment of trust principal is to be at the discretion of the Trustee, Carl H~. H~ Trust, Article II, Section 1. Second, the trust provides that "[t]he determination of the Trustee with respect to the advisability of making any payments out of income or principal to the beneficiary, shall be conclusive on all persons howsoever interested in the Trust." H~ Trust, Article II, Section 3. Therefore, Ms. H~ does not have authority to demand payment from the trust, as Carl H~, Trustee, has exclusive authority over trust payments. In addition, even Mr. H~'s power to disburse trust principal is limited. Mr. H~, as Trustee, is prohibited from making any payment that will jeopardize Ms. H~'s eligibility for "state, federal, local, or other governmental subsidy or aid." H~ Trust, Article II, Section 1, 2. Therefore, Ms. H~'s access to the trust principal is restricted, and the trust principal should not be considered a countable resource for this reason.

Second, a trust may also be a countable resource if it may be revoked and trust proceeds used by the beneficiary for her support and maintenance. POMS SI 01120.200(D)(1)(a). A trust may be revocable either through the language of the trust itself or by the operation of state trust law. Ms. H~'s trust is not revocable in either manner.

Ms. H~'s trust provides for revocation only upon the death of Ms. H~ herself. H~ Trust, Article II, Sections 3 4. On Ms. H~'s death, the Trustee is to pay all expenses of the last illness, funeral, and burial, and then to terminate the trust. H~ Trust, Article II, Sections 3 4. Upon termination, the remainder of the trust principal is to be paid to "the surviving issue" of "Grantor". H~ Trust, Article II, Section 4. Neither provision empowers Sarah H~ to revoke the trust and use the trust principal for her support and maintenance, as both provide for termination only upon her death.

The next question, then, is whether Ms. H~ can revoke the trust pursuant to state trust law. Under Wisconsin law, a trust may be revoked by written consent of the grantor and all beneficiaries. Wisc. Stat. Ann. 701.12 (West 1981 Supp. 1996). It is necessary to determine, therefore, who is the grantor and who are the beneficiaries for purposes of determining the revocability of the trust.

The nominal grantor of Ms. H~'s trust is her legal guardian and mother, Sharon H~. Wisconsin law provides that the grantor of a trust is the person who, either directly or indirectly, creates the trust. Wisc. Stat. Ann. 701.01(4) (West 1981 Supp. 1996). The grantor of a trust is the person who provides the consideration for a trust, even if another is the nominal grantor. 76 Am. Jur. 55; POMS SI 01120.200(B)(2); POMS SI 01120.200(J)(2)(a). Ms. H~'s trust appears to have been funded with the proceeds of a settlement between Sarah H~ and Allstate Insurance Company. In re Guardianship of Sarah Katie H~, Case No. 96-GN-34 (Jefferson County Circuit Court, July 24, 1997). The consideration for the trust was property due to Sarah H~. Therefore, it appears that Sarah H~ is the true grantor of this trust, even though her mother, Sharon H~, has been named as the grantor. See Sara K~, ~ RA V (Dunn) to ARC-MOS 7-30-97, re: Wisconsin Trust.

The documents provided do not indicate whether the trust contains additional property that originated from a source other than Ms. H~, thus creating another grantor. If there is another grantor, his or her consent would also be required in order to revoke that aspect of the trust. In that case, the trust would not be a countable resource. Since we have determined that the trust should not be a countable resource even if Ms. H~ is the only grantor, these additional facts should not affect the opinion given.

The next issue, then, is who are the beneficiaries of the trust. A beneficiary is any person with a beneficial, or equitable ownership, interest in the trust. Wisc. Stat. Ann. 701.01(6) (West 1981 Supp. 1996); POMS SI 01120.200(B)(4). Wisconsin law appears to recognize that even unborn or unascertained contingent beneficiaries are beneficiaries for purposes of revocation by consent. See Wisc. Stat. Ann. 701.12(2) (West 1981 Supp. 1996); Restatement (Second) of Trusts 127 and Comment (b); Restatement 339 and Comment (b); 76 Am. Jur. 95. If there are any contingent beneficiaries other than Sarah H~, therefore, she cannot revoke the trust, and the trust is not a countable resource for purposes of determining SSI eligibility.

Ms. H~'s trust names as contingent beneficiaries "the surviving issue" of the "Grantor". H~ Trust, Article II, Section 4. It appears that the principles of Wisconsin trust law direct a finding that, while Sarah H~ is the grantor for purposes of determining whether the trust is revocable, Sharon H~ is defined in the trust document as "Grantor", and is presumably the person whose "issue" should be considered for purposes of determining who are the intended beneficiaries of the trust.

Wisconsin trust law provides that "[t]he paramount object of will or trust construction is the ascertainment of the testator's or [grantor's] intent." Estate of Furmanski v. Furmanski, 196 Wis. 2d 210, 215 (Wis. Ct. App. 1995). In determining the grantor's intent, one must first look to the trust document itself. Furmanski, 196 Wis.2d at 215; Estate of Barr v. Barr, 78 Wis.2d 254, 258 (Wis. Sup. Ct. 1977). If there is no ambiguity in the trust document itself, the language of the trust should control, viewed in light of the circumstances surrounding its drafting. Barr, 78 Wis.2d at 258; Furmanski, 196 Wis.2d at 568.

The language of Ms. H~'s trust is unambiguous. Sharon H~ is named as grantor, and the trust principal is to be divided equally among her surviving issue upon Sarah H~'s death. H~ Trust, Article II, Section 4. Even if we were to look further into the circumstances surrounding the creation of the trust, it is clear that Sharon and Sarah H~ intended for Sharon H~ to be the grantor. The parties could have named Sarah H~ as the sole beneficiary of her own trust, but did not do so. Therefore, the contingent beneficiaries of this trust are the issue of Sharon H~ that survive Sarah H~'s death.

The documents provided to us do not contain information regarding whether Sharon H~ currently has, or is capable of having in the future, children other than Sarah H~. If Sharon H~ currently has, or is capable of bearing children, Sarah H~ will not be able to revoke the trust. See Restatement (Second) Trusts 340 and Comments (d) (e); 76 Am. Jur. 93. Wisconsin law seems to direct the same result. Wisconsin law requires the appointment of a guardian ad litem to represent the interests of the unborn or unascertained beneficiaries of a trust when the grantor and other beneficiaries seek agreement to revoke the trust. Wisc. Stat. Ann. 701.12 (West 1981 Supp. 1996). Therefore, a trust cannot be revoked (or modified) without the approval of all beneficiaries, even the unascertained ones. See Berg v. Berg, 142 Wis.2d 935 (Wis. Ct. App. 1987).

Even if Sarah H~ is deemed the grantor for purposes of determining who are contingent beneficiaries, Ms. H~ does not appear to be the sole beneficiary. Where a grantor intends to create a contingent interest in his heirs, he may do so. See Restatement (Second) Trusts 127 and Comment (b); POMS SI 00120.200(J)(2)(b); Clarification of Regional SSA Program Circular 94-05 Concerning Trusts RA V (Williams) to ARC, Programs, 5-24-95. Therefore, even if Sarah H~ is the grantor, she has manifested an intent to name her surviving issue as contingent beneficiaries, with a remainder interest in the trust principal. In either case, Sarah H~ is not the sole beneficiary of the trust.

Since Ms. H~ is not the sole beneficiary of the trust and cannot revoke the trust without the consent of additional parties, the trust is not revocable and should not be counted as a resource for purposes of determining SSI eligibility. See Sarah L. B~, ~ RA V (Lee) to Acting ARC-MOS 6-6-97, re: Wisconsin Trust.

It should be noted, however, that any disbursements of trust principal or income to Sarah H~ may be income for SSI purposes. POMS 01120.200(E)(1). Any disbursement of cash directly to Sarah H~, or paid to a third party in exchange for food, shelter, or clothing for Ms. H~, will represent in-kind income to Sarah H~. Id. at 01120.200(E)(1)(a) (b).

CONCLUSION

For the above reasons, we believe the trust principal should not be considered a resource when determining Ms. H~'s eligibility for SSI.

CC. PS 00-247 SSI-Wisconsin-Review of a Trust for Michael G~

DATE: February 23, 2000

1. SYLLABUS

This opinion concerns a testamentary trust established for an SSI recipient by his aunt in her will. The opinion explains that the testamentary trust is not countable as a resource because the recipient has no authority to revoke the trust, sell his interest in the trust, or direct the use of the trust assets.

2. OPINION

Subject:

Michael G~, an SSI recipient, is the beneficiary of a testamentary trust created by his aunt, Lucille T~. You asked whether the funds held pursuant to the terms of the trust agreement should be treated as a countable resource to Mr. G~ for purposes of waiving an SSI overpayment. Based on our review of the documents provided, and for the reasons set out below, we believe that the assets in the trust are not a countable resource to Mr. G~.

FACTS

On June 17, 1992, Lucille T~ executed the Amendment to Lucille V. T~ Revocable Trust (hereafter "trust") in which she provided to leave, upon her death, a portion of her estate in trust (hereafter "separate trust") to her nephew, Michael G~, for the duration of his life. Trust Agreement, Article III, B, C(4). The Associated Citizens Bank is named trustee of the trust and the separate trust. Trust Agreement, Article VII, A. The trust agreement gives the trustee discretion to distribute the income and principal from the separate trust to provide for Mr. G~' "support, welfare and health," but directs that payments "shall be reduced or withheld" as necessary to preserve his "continued eligibility for Medicaid, Social Security Disability income, or any similar income or services." Trust Agreement, Article III, B, C(4). The trust agreement includes a "spendthrift" provision preventing Mr. G~ from assigning his rights. Trust Agreement, Article III, B, C(10). The separate trust may be terminated at the trustee's discretion if the fair market value of the separate trust assets does not exceed $10,000.00. Trust Agreement, Article X. Otherwise, the separate trust will terminate upon Mr. G~' death. Mr. G~ has the power to appoint the remainder of the separate trust by will. Trust Agreement, Article III, B, C(4). If he does not exercise his power to appoint, then "any remainder at his death shall be given to his brothers and sisters in equal shares or to his heirs by right of representation." Id.

DISCUSSION

I. Applicable Law

A "resource" is cash, other liquid assets, or any real or personal property that an individual owns and can convert to cash to be used for his or her support and maintenance. 20 C.F.R. 416.1201(a) (1999). If the individual has the right, authority, or power to liquidate the property, it is a resource. Id. Trust assets are a resource if the individual can direct the use of the assets to meet his need for food, clothing, and shelter, or if he can terminate or revoke the trust and obtain unrestricted access to the trust assets. Program Operations Manual System (POMS) SI 01120.105 (A)(1), 01120,200(D)(1)-(3). Whether the claimant can terminate the trust or direct use of the trust assets depends on the terms of the trust declaration and applicable state law. POMS SI 01120.200(D)(2). An individual's beneficial interest in a trust also may be a resource if the individual can sell that interest. See Supplemental Security Income - Wisconsin Trust - Christopher J. M~, Jr., (~), OGC-V (Bingamon) to Mukogawa, ARC-MOS (June 9, 1999) at 5.

II. If Ms. T~ is Alive, the Separate Trust Assets Are Not a Resource to Mr. G~.

The Trust Agreement is a living trust, executed and revocable by Ms. T~ during her lifetime. Trust Agreement, Article I, A. If Ms. T~ is still alive, she can revoke the trust. See Restatement (Second) of Trusts, 330, 332, 367. Thus, Mr. G~ has no beneficial interest in the separate trust assets while Ms. T~ is alive.

III. If Ms. T~ is Deceased, the Separate Trust Assets Are Not A Resource to Mr. G~.

A. Mr. G~ Has No Authority To Direct The Use of the Separate Trust Assets.

Upon Ms. T~'s death, the Trust Agreement becomes irrevocable, and Mr. G~ becomes the beneficiary of the separate testamentary trust. The Trust Agreement gives the trustee absolute discretion over disbursements from the separate trust, except that the trustee can make disbursements only to the extent that such disbursements will not disqualify Mr. G~ from receipt of Medicaid, SSI or other government benefits. Trust Agreement, Article III, B, C(4). Thus, under the Trust Agreement, Mr. G~ does not have the power to direct use of the separate trust assets for his support and maintenance.

B. Mr. G~ Has No Authority To Revoke the Separate Trust.

A trust may be revocable by the language of the trust or pursuant to state law. Mr. G~ may not revoke the separate trust by either manner. The Trust Agreement does not state whether the separate trust is revocable. Under the Trust Agreement, however, the separate trust may be terminated if either of two conditions are met. First, the separate trust may be terminated at the discretion of the trustee if the fair market value of the separate trust assets is less than $10,000.00. Trust Agreement, Article X. Otherwise, the separate trust will terminate upon Mr. G~' death. Trust Agreement, Article III, B, C(4). Neither provision, however, empowers Mr. G~ to revoke the separate trust and use the separate trust principal for his support and maintenance. Thus, the terms of the Trust Agreement do not indicate that the separate trust is revocable by Mr. G~.

The next issue, then, is whether Mr. G~ can revoke the separate trust pursuant to state law. Under Wisconsin law, a trust may be revoked, terminated or modified by written consent of the grantor and all beneficiaries. See Wisc. Stat. Ann. 701.12 (West 1981 Supp. 1999). Wisconsin law further provides that a grantor of a trust is the person who, either directly or indirectly, creates the trust. See Wisc. Stat. Ann. 701.01(5) (West 1981 Supp. 1999). Ms. T~ is the grantor of the trust because she executed the Trust Agreement and established the embedded separate testamentary trust. If Ms. T~ is deceased, she cannot consent to the revocation of the separate trust. Consequently, the separate trust would be irrevocable under Wisconsin law.

Moreover, the Trust Agreement provides that Mr. G~ has the power to "appoint the remainder of the [separate] trust by Will. In the event that he fails to exercise this power to appoint, then any remainder at his death shall be given to his brothers and sisters in equal shares or to his heirs by right of representation." Trust Agreement, Article III, B, C(4). This provision creates residual or "contingent" beneficiaries whose consent must be obtained in order for the trust to be revoked. We do not assume that they will consent to terminate the separate trust. Because Mr. G~ cannot revoke or terminate the separate trust at will, the separate trust is irrevocable.

C. Mr. G~ Has No Authority To Assign His Interest in the Separate Trust.

Where a beneficiary does not have the power to direct use of the trust for his support and maintenance and does not have the power to revoke the trust on his own, the trust assets may still be a resource for SSI purposes if the beneficiary can sell his interest in the trust and use the proceeds for his support and maintenance. 20 C.F.R. 416.1201(a)(1). The Trust Agreement contains a spendthrift clause, stating that "neither the income or principal shall be susceptible of assignment, anticipation, provocation or seizure by legal process. Trust Agreement, Article III, B, C(10). In addition, the trustee has full discretion to make or withhold disbursements from the separate trust. Trust Agreement, Article III, B, C(4). Thus, Mr. G~' interest in the separate trust would have little or no fair market value.

Since Mr. G~ cannot direct use of the separate trust assets for his support and maintenance, revoke the separate trust, or sell his interest in the separate trust, the separate trust assets do not constitute a countable resource for SSI purposes. 20 C.F.R. 416.1201; POMS SI 01120.200(D). We note, however, that any amounts actually distributed to Mr. G~ from the separate trust would be income to him, and any disbursement to a third party in exchange for food, shelter, or clothing for Mr. G~ would be in-kind income to Mr. G~. POMS SI 01120.200(E)(1)(a)-(b).

CONCLUSION

In summary, the assets of the separate trust are not countable resources because Mr. G~ cannot direct that the trustee use the trust assets for his support and maintenance; revoke or terminate the trust to obtain the assets; or sell or otherwise transfer his interest in the trust.

DD. PS 00-245 Gold Key Life Insurance-Funded Burial Agreements: Rose Ann S~, ~ (Your August 28, 1991 Request), and Lorena M~, ~ (Your October 30, 1991 Request) (Your ref: S2D5B2, SI 2-1-4)

DATE: February 24, 1992

1. SYLLABUS

The issue is whether the purchase price of a Wisconsin Gold Key Life Insurance-Funded Burial Agreement is a resource.

The Gold Key Life Insurance-Funded Burial Agreements are not valid under Wisconsin law. Thus, despite the purportedly irrevocable disposition of the policy, the purchaser can recover the money invested. Thus, the purchase price is considered a resource to the purchaser.

2. OPINION

On August 28, 1991, you asked us to review a Gold Key life insurance-funded burial agreement for Rose Ann S~, an SSI applicant. On October 30, 1991, you asked us to review a Gold Key life insurance-funded burial agreement for Lorena M~, another SSI applicant. We have reviewed the Gold Key program and are providing you one answer that responds to both inquiries.

On August 28, 1991, our office advised you that the life insurance-funded program offered by the Wisconsin Funeral Assurance Plan is not valid under Wisconsin law. In reaching this conclusion, we referred to a series of opinions issued by the Wisconsin Attorney General's Office. Because in our opinion the Plan is not valid, we advised that notwithstanding the purportedly irrevocable disposition of the policy the purchaser could recover her money. The purchase price should therefore be counted as resources of the purchaser for SSI purposes to the extent that it is not subject to any other exclusion. OGC-V (Hughes) to ARC, Programs, "Life Insurance Funded Burial Agreements in Wisconsin, Betty Uebele, ~" (August 28, 1991).

In our opinion, the Gold Key program is similar in several critical respects to the Wisconsin Funeral Assurance Plan. In his August 5, 1991 letter to SSA, Gold Key's attorney Thomas W. La Fave describes the Wisconsin Funeral Assurance Plan as "a nearly identical plan." For the same reasons on which we relied with regard to the Wisconsin Funeral Assurance Plan, we therefore conclude that the Gold Key plan is not valid under Wisconsin law.

Again, notwithstanding the purportedly irrevocable disposition of the policy, the purchaser could recover her money. The purchase price should therefore be counted as resources of the purchaser for SSI purposes to the extent that it is not subject to any other exclusion.

You have been told that the "Gold Key" and "Wisconsin Funeral Assurance" programs have been approved by the Wisconsin Commissioner of Insurance, and that they do not constitute resources for state Medicaid purposes. In addition, the Wisconsin Attorney General may have found the Wisconsin Funeral Assurance Plan to be valid even though in our opinion it violates the principles the Attorney General has articulated for evaluating such programs. We have therefore prepared for your issuance letters to the Wisconsin Attorney General and to the Wisconsin Commissioner of Insurance. These letters ask those offices to clarify this matter under Wisconsin law. Until you receive and evaluate their responses, in our opinion you should continue counting the purchase price of these policies as resources for SSI purposes.

DISCUSSION

The controlling Wisconsin statute is contained at W.S.A. 632.41(2), which states:

Burial insurance. No contract in which the insurer agrees to pay for any of the incidents of burial or other disposition of the body of a deceased may provide that the benefits are payable to a funeral director or any other person doing business related to burials.

The Wisconsin Attorney General's office has issued several opinions and letters that consider the legality of life-insurance-funded funeral arrangements under this statute.

That office concluded on November 23, 1988 that even though a funeral agreement, life insurance policy, and separate assignment of life insurance proceeds appear to be separate documents, if the assignment makes the life insurance proceeds payable to a funeral director and that assignment is an "integral part of the total package," section 632.41(2) is violated. Mr. William H. Wilker, Assistant Attorney General, to Mr. Don Cleasby, Legislative Attorney, Office of the Commissioner of Insurance (November 23, 1988).

That opinion cites an earlier opinion, which found that although certain programs contained separate documents that were executed at different times, contained no cross-references, and would independently be valid, the entire package was merely "a thinly concealed attempt to evade the proscription of section 632.41(2)" that must fail. OAG 65-87 (November 24, 1987).

In the most recent opinion, dated October 27, 1989, the Attorney General emphasized that the critical distinction between valid and invalid arrangements is "linkage." Where there is no connection between a life insurance policy and a burial agreement, these separate agreements are independently valid. However, if there exists a link, direct or indirect, between the life insurance policy and provisions for funeral or burial services, the arrangement violates Wisconsin law. OAG 35-89 (October 27, 1989).

All of the documents under the "Gold Key" plan appear to us to be linked. The program consists of several interrelated documents. The purchaser entered into a funeral purchase agreement with the funeral home, and separately bought life insurance for the same amount. Ownership of the life insurance policy was irrevocably assigned to a trustee, who in turn has agreed to use the proceeds solely to pay for a funeral. Someone other than the funeral home is named as the beneficiary of the life insurance policy, and the funeral home is not named in the assignment of ownership or proceeds.

The funeral agreement and life insurance policy are marketed as one package. For example, we have a letter from the Gold Key insurance agent transmitting both the Gold Key life insurance policy and the Guarantee and Pre-Need Agreement from Krause Funeral Home to Lorena M~, with instructions to execute all the documents and return them to the insurance agent. The insurance agent, Donna Cummings, works out of a Gold Key office at 9000 West Capitol Drive, Milwaukee — which is the same address as the Krause Funeral Home.

Although we have no other literature from the Gold Key program, Gold Key's attorney submitted to SSA the literature from the Wisconsin Funeral Assurance Plan in support of their own package.

Those materials make clear that the parties intend to create an integrated plan which assures that the life insurance proceeds go to pay for the particular funeral described in the funeral purchase agreement. The brochure describes the assignment forms by stating:

There are two assignment sections, both contained on one sheet of paper in this packet. These help assure that your Wisconsin Funeral Assurance Plan is used for the purpose you intend: paying for the funeral plans you have agreed to purchase under a separate agreement with your funeral director.

Under the principles articulated in the cited opinions issued by the Attorney General's office, in our opinion the Gold Key life insurance policy is clearly linked, even if only indirectly, to the provisions for funeral services. The arrangement thus violates section 632.41(2) of the Wisconsin statutes.

In addition, as part of the Gold Key package, the purchaser "irrevocably assign[s] . . . all of my right, title and interest in the above insurance policy" on the condition that the insurance proceeds are used toward funeral services. The insurer acknowledges assignment of ownership to the new owner-beneficiary "except as may be prohibited by Law." This appears intended to extinguish the purchaser's right to surrender the policy. However, the Gold Key life insurance policy states fairly prominently: "You [the owner] may surrender this policy for cash at any time." Although we rely on the other reasons described in this opinion to conclude that the purchaser could recover her money notwithstanding the purportedly irrevocable disposition of the policy, we nonetheless question why Gold Key has such prominent surrender provisions in a life insurance policy that is being marketed as part of an irrevocable package. In an appropriate circumstance, you may wish to pursue this matter further and, at a minimum, ascertain what both the insurance agent represented and the purchaser understood about the purchaser's ability to recover her money.

Finally, although not addressed in the opinions from the Attorney General, it appears to us that the "Gold Key" and "Wisconsin Funeral Assurance" plans may not constitute insurance at all. Instead, a strong case can be made that these plans represent an effort to create a trust while avoiding the state trust laws. The use of the term "insurance" is not determinative. State v. Dane County Mutual Benefit Association, 19 N.W.2d 303, 308 (Wis. 1945). The arrangements here involve no element of protection nor assumption of risk on the part of the "insurer." Instead, these arrangements contain all the elements of a trust: a donor (the purchaser), trust property (the premium paid plus interest), and a beneficiary (the funeral home). The insurance company simply acts as a trustee, holding and administering the deposited funds until the time of death. Under the Wisconsin statutes, the irrevocable portion of such a trust would be limited to $2000. Section 445.125(1)(b).

CONCLUSION

For the foregoing reasons, in our opinion the Gold Key life insurance funded burial agreement plan is not valid under Wisconsin law. Notwithstanding the purportedly irrevocable disposition of the policy, the purchaser could recover her money.

The purchase price should therefore be counted as resources of the purchaser for SSI purposes to the extent that it is not subject to any other exclusion.

You may wish to reconsider this matter after you receive answers to the inquiries we recommend that you send to the Wisconsin Attorney General and to the Wisconsin Commissioner of Insurance.

Attachments: Draft letter to Wisconsin Attorney General Draft letter to Wisconsin Commissioner of Insurance

Mr. James E. Doyle
Attorney General State of Wisconsin
P.O. Box 7857
Madison, WI 53707-7857

Dear Mr. Doyle:

In order to determine the entitlement of various individuals to benefits under Supplemental Security Income (SSI), the Social Security Administration has needed to assess the legality under State law of life-insurance-funded funeral arrangements. After reviewing several opinions issued by your office and consulting with our attorneys, we have concluded that two packages marketed in Wisconsin violate state law. These packages are the "Gold Key Policy", and the "Wisconsin Funeral Assurance Plan" on which it is modeled. As a consequence, premiums paid for life insurance policies issued under these packages must be counted as resources for SSI purposes.

We have nonetheless been advised that both of these programs have been approved by the Wisconsin Commissioner of Insurance, although we have not received any verification of this. We also understand that the State Department of Health and Social Services does not count these policies as resources for Medicaid purposes. We therefore seek additional clarification from your office.

The controlling Wisconsin statute is contained at W.S.A. 632.41(2), which states:

Burial insurance. No contract in which the insurer agrees to pay for any of the incidents of burial or other disposition of the body of a deceased may provide that the benefits are payable to a funeral director or any other person doing business related to burials.

Your office has issued several opinions and letters that consider the legality of life-insurance-funded funeral arrangements under this statute.

You concluded on November 23, 1988 that even though a funeral agreement, life insurance policy, and separate assignment of life insurance proceeds appear to be separate documents, if the assignment makes the life insurance proceeds payable to a funeral director and that assignment is an "integral part of the total package," section 632.41(2) is violated. Mr. William H. Wilker, Assistant Attorney General, to Mr. Don Cleasby, Legislative Attorney, Office of the Commissioner of Insurance (November 23, 1988).

That opinion cites an earlier opinion, which found that although certain programs contained separate documents that were executed at different times, contained no cross-references, and would independently be valid, the entire package was merely "a thinly concealed attempt to evade the proscription of section 632.41(2)" that must fail. OAG 65-87 (November 24, 1987).

In the most recent opinion, dated October 27, 1989, you emphasized that the critical distinction between valid and invalid arrangements is "linkage." Where there is no connection between a life insurance policy and a burial agreement, these separate agreements are independently valid. However, if there exists a link, direct or indirect, between the life insurance policy and provisions for funeral or burial services, the arrangement violates Wisconsin law. OAG 35-89 (October 27, 1989).

All of the documents under the "Gold Key" and "Wisconsin Funeral Assurance" plans appear to us to be directly and inextricably linked. The program consists of several interrelated documents. The purchaser enters into a funeral purchase agreement with the funeral home, and separately buys life insurance for the same amount. Ownership of the life insurance policy is irrevocably assigned to a trustee, who in turn agrees to use the proceeds solely to pay for a funeral. Someone other than the funeral home may be named as the beneficiary of the life insurance policy. In the Wisconsin Funeral Assurance Plan, the funeral home is named in the assignment of life insurance benefits; the funeral home is not named in the Gold Key assignment of ownership or proceeds. In the Wisconsin Funeral Assurance Plan, although the purchaser reserves the right to change the beneficiary of the life insurance policy or the funeral home, the purchaser may waive these rights in irrevocably transferring ownership of the policy to a trustee. Also in the Wisconsin Funeral Assurance Plan, the purchaser agrees that the funeral agreement governs any problem relating to insufficient funds for the funeral expenses.

The funeral agreement and life insurance policy are presented in one package and are typically executed simultaneously. For example, the Gold Key insurance agent, although purportedly operating separately from the Krause Funeral Home, is located at the same address and processes the life insurance papers and the funeral purchase agreement together. Most significantly, the advertising literature of the Wisconsin Funeral Assurance Plan makes clear that the parties intend to create an integrated plan which assures that the life insurance proceeds go to pay for the particular funeral described in the funeral purchase agreement. The brochure describes the assignment forms by stating:

There are two assignment sections, both contained on one sheet of paper in this packet. These help assure that your Wisconsin Funeral Assurance Plan is used for the purpose you intend: paying for the funeral plans you have agreed to purchase under a separate agreement with your funeral director.

Gold Key representatives gave us the literature from the Wisconsin Funeral Assurance Plan in support of their own package.

Under the principles articulated by your office, in our opinion the life insurance policies are clearly linked to the provision of funeral services. In the case of the Wisconsin Funeral Assurance plan, the link is fairly explicit; in the case of the Gold Key plan the link, even if indirect, is clear. The arrangements thus violate section 632.41(2) of the Wisconsin statutes.

As stated above, we have been advised that the "Gold Key" and "Wisconsin Funeral Assurance" programs have been approved by the Wisconsin Commissioner of Insurance, and do not constitute resources for state Medicaid purposes. In addition, your office's November 23, 1988 opinion describes a plan that appears to be the "Wisconsin Funeral Assurance Plan." The opinion concludes that the described plan does not violate the statute — even though the opinion states that "[e]xcept for the assignments of benefit and ownership, the three components of this ... plan are not contingent upon each other."

Under the principles articulated in the opinions issued by your office, it appears to us that the named plans do violate the provisions of section 632.41(2). Notwithstanding the attempts to make these arrangements irrevocable, purchasers of these policies can therefore recover their payments. Thus, those payments should be counted as resources of the individual for SSI purposes. Although you may have specifically reached a different conclusion with regard to the Wisconsin Funeral Assurance Plan, we are unable to discern the rationale, much less apply that rationale to other plans which, while similar, are not necessarily exact duplicates of the Wisconsin Funeral Assurance Plan. Specifically, we cannot reconcile the "exception" with the general principle contained in the November 23, 1988 opinion.

In addition, we note that as part of the Gold Key package, the purchaser "irrevocably assign[s] . . . all of my right, title and interest in the above insurance policy" on the condition that the insurance proceeds are used toward funeral services. The insurer acknowledges assignment of ownership to the new owner-beneficiary "except as may be prohibited by Law." This appears intended to extinguish the purchaser's right to surrender the policy. However, the Gold Key life insurance policy states fairly prominently: "You [the owner] may surrender this policy for cash at any time." We do not know why Gold Key has such prominent surrender provisions in a life insurance policy that is being marketed as part of an irrevocable package, or what the insurance agent represented and the purchaser understood about the purchaser's ability to recover her money. We therefore question whether, under Wisconsin law, the Gold Key package has in fact been made irrevocable.

Finally, although not addressed in the opinions from your office, it appears to us that the "Gold Key" and "Wisconsin Funeral Assurance" plans may not constitute insurance at all. Instead, a strong case can be made that these plans represent an effort to create a trust while avoiding the state trust laws. The use of the term "insurance" is not determinative. State v. Dane County Mutual Benefit Association, 19 N.W.2d 303, 308 (Wis. 1945). The arrangements here involve no element of protection nor assumption of risk on the part of the "insurer." Instead, these arrangements contain all the elements of a trust: a donor (the purchaser), trust property (the premium paid plus interest), and a beneficiary (the funeral home). The insurance company simply acts as a trustee, holding and administering the deposited funds until the time of death. Under the Wisconsin statutes, the irrevocable portion of such a trust would be limited to $2000. Section 445.125(1)(b).

Please provide us with additional clarification of this matter under Wisconsin law. Specifically, we need to know how the "exception" and the general principle described in the November 23, 1988 opinion can be reconciled under state law, and how to apply those principles to other life-insurance-funded funeral arrangements. We also need to ascertain which of these arrangements have, in fact, successfully been made irrevocable under state law. We intend to continue counting the purchase price of these policies as resources for SSI purposes until we receive additional guidance from either your office or from the Commissioner of Insurance regarding the status of these plans under state law. We are sending a similar request to the Commissioner of Insurance, and have asked him to seek a written opinion from you if, under W.S.A. 165.015, you are unable to provide us with a formal or informal opinion.

This is a matter of some urgency for us, since we have found individuals ineligible to receive SSI, or determined that former SSI beneficiaries have been overpaid. At least one of those individuals is challenging our determination through litigation and another has sought help from her United States Senator. In addition, the insurance companies that market the plans we have reviewed are challenging our conclusion as being inconsistent with the positions of your office and the Commissioner of Insurance.

cc: Mr. William M. Wilker Assistant Attorney General P.O. Box 7857 Madison, Wisconsin 53707-7857

Mr. Robert D. Haase
Commissioner of Insurance State of Wisconsin
P.O. Box 7873
Madison, WI 53707-7873

Dear Mr. Haase:

In order to determine the entitlement of various individuals to benefits under Supplemental Security Income (SSI), the Social Security Administration has needed to assess the legality under State law of life-insurance-funded funeral arrangements. After reviewing several opinions issued by the Wisconsin Attorney General's office and consulting with our attorneys, we have concluded that two packages marketed in Wisconsin violate state law. These packages are the "Gold Key Policy", and the "Wisconsin Funeral Assurance Plan" on which it is modeled. As a consequence, premiums paid for life insurance policies issued under these packages must be counted as resources for SSI purposes.

We have nonetheless been advised that both of these programs have been approved by your office, although we have not received any verification of this. We also understand that the State Department of Health and Social Services does not count these policies as resources for Medicaid purposes. We therefore seek additional clarification from your office.

The controlling Wisconsin statute is contained at W.S.A. 632.41(2), which states:

Burial insurance. No contract in which the insurer agrees to pay for any of the incidents of burial or other disposition of the body of a deceased may provide that the benefits are payable to a funeral director or any other person doing business related to burials.

The Attorney General's office advised your office on November 23, 1988 that even though a funeral agreement, life insurance policy, and separate assignment of life insurance proceeds appear to be separate documents, if the assignment makes the life insurance proceeds payable to a funeral director and that assignment is an "integral part of the total package," section 632.41(2) is violated. Mr. William H. Wilker, Assistant Attorney General, to Mr. Don Cleasby, Legislative Attorney, Office of the Commissioner of Insurance (November 23, 1988).

That opinion cites an earlier opinion, which found that although certain programs contained separate documents that were executed at different times, contained no cross-references, and would independently be valid, the entire package was merely "a thinly concealed attempt to evade the proscription of section 632.41(2)" that must fail. OAG 65-87 (November 24, 1987).

In the most recent opinion, dated October 27, 1989, the Attorney General emphasized that the critical distinction between valid and invalid arrangements is "linkage." Where there is no connection between a life insurance policy and a burial agreement, these separate agreements are independently valid. However, if there exists a link, direct or indirect, between the life insurance policy and provisions for funeral or burial services, the arrangement violates Wisconsin law. OAG 35-89 (October 27, 1989).

All of the documents under the "Gold Key" and "Wisconsin Funeral Assurance" plans appear to us to be directly and inextricably linked. The program consists of several interrelated documents. The purchaser enters into a funeral purchase agreement with the funeral home, and separately buys life insurance for the same amount. Ownership of the life insurance policy is irrevocably assigned to a trustee, who in turn agrees to use the proceeds solely to pay for a funeral. Someone other than the funeral home may be named as the beneficiary of the life insurance policy. In the Wisconsin Funeral Assurance Plan, the funeral home is named in the assignment of life insurance benefits; the funeral home is not named in the Gold Key assignment of ownership or proceeds. In the Wisconsin Funeral Assurance Plan, although the purchaser reserves the right to change the beneficiary of the life insurance policy or the funeral home, the purchaser may waive these rights in irrevocably transferring ownership of the policy to a trustee. Also in the Wisconsin Funeral Assurance Plan, the purchaser agrees that the funeral agreement governs any problem relating to insufficient funds for the funeral expenses.

The funeral agreement and life insurance policy are presented in one package and are typically executed simultaneously. For example, the Gold Key insurance agent, although purportedly operating separately from the Krause Funeral Home, is located at the same address and processes the life insurance papers and the funeral purchase agreement together. Most significantly, the advertising literature of the Wisconsin Funeral Assurance Plan makes clear that the parties intend to create an integrated plan which assures that the life insurance proceeds go to pay for the particular funeral described in the funeral purchase agreement. The brochure describes the assignment forms by stating:

There are two assignment sections, both contained on one sheet of paper in this packet. These help assure that your Wisconsin Funeral Assurance Plan is used for the purpose you intend: paying for the funeral plans you have agreed to purchase under a separate agreement with your funeral director.

Gold Key representatives gave us the literature from the Wisconsin Funeral Assurance Plan in support of their own package.

Under the principles articulated by your office, in our opinion the life insurance policies are clearly linked to the provision of funeral services. In the case of the Wisconsin Funeral Assurance plan, the link is fairly explicit; in the case of the Gold Key plan the link, even if indirect, is clear. The arrangements thus violate section 632.41(2) of the Wisconsin statutes.

As stated above, we have been advised that the "Gold Key" and "Wisconsin Funeral Assurance" programs have been approved by your office, and do not constitute resources for state Medicaid purposes. In addition, the Attorney's General's November 23, 1988 letter to your office describes a plan that appears to be the "Wisconsin Funeral Assurance Plan." The opinion concludes that the described plan does not violate the statute — even though the opinion states that "[e]xcept for the assignments of benefit and ownership, the three components of this ... plan are not contingent upon each other."

Under the principles articulated in the opinions issued by the Attorney General's office, it appears to us that the named plans do violate the provisions of section 632.41(2). Notwithstanding the attempts to make these arrangements irrevocable, purchasers of these policies can therefore recover their payments. Thus, those payments should be counted as resources of the individual for SSI purposes. Although you may have specifically reached a different conclusion with regard to the Wisconsin Funeral Assurance Plan, we are unable to discern the rationale, much less apply that rationale to other plans which, while similar, are not necessarily exact duplicates of the Wisconsin Funeral Assurance Plan. Specifically, we cannot reconcile the "exception" with the general principle contained in the Attorney General's November 23, 1988 letter to your office.

In addition, we note that as part of the Gold Key package, the purchaser "irrevocably assign[s] . . . all of my right, title and interest in the above insurance policy" on the condition that the insurance proceeds are used toward funeral services. The insurer acknowledges assignment of ownership to the new owner-beneficiary "except as may be prohibited by Law." This appears intended to extinguish the purchaser's right to surrender the policy. However, the Gold Key life insurance policy states fairly prominently: "You [the owner] may surrender this policy for cash at any time." We do not know why Gold Key has such prominent surrender provisions in a life insurance policy that is being marketed as part of an irrevocable package, or what the insurance agent represented and the purchaser understood about the purchaser's ability to recover her money. We therefore question whether, under Wisconsin law, the Gold Key package has in fact been made irrevocable.

Finally, although not addressed in the opinions from your office, it appears to us that the "Gold Key" and "Wisconsin Funeral Assurance" plans may not constitute insurance at all. Instead, a strong case can be made that these plans represent an effort to create a trust while avoiding the state trust laws. The use of the term "insurance" is not determinative. State v. Dane County Mutual Benefit Association, 19 N.W.2d 303, 308 (Wis. 1945). The arrangements here involve no element of protection nor assumption of risk on the part of the "insurer." Instead, these arrangements contain all the elements of a trust: a donor (the purchaser), trust property (the premium paid plus interest), and a beneficiary (the funeral home). The insurance company simply acts as a trustee, holding and administering the deposited funds until the time of death. Under the Wisconsin statutes, the irrevocable portion of such a trust would be limited to $2000. Section 445.125(1)(b).

Please provide us with additional clarification of this matter under Wisconsin law. Specifically, we need to know which plans you have approved under Wisconsin law, and the basis for your approval. We especially need to know how the "exception" and the general principle described in the November 23, 1988 opinion can be reconciled under State law, and how to apply those principles to other life-insurance-funded funeral arrangements. We also need to ascertain which of these arrangements have, in fact, successfully been made irrevocable under state law. We intend to continue counting the purchase price of these policies as resources for SSI purposes until we receive additional guidance from either your office or from the Attorney General regarding the status of these plans under state law. Although we are sending a similar request to the Attorney General, we would appreciate it if you would also ask the Attorney General for his opinion in this matter. We do not know if the Attorney General will respond to us, but under W.S.A. 165.015 he must respond in writing to your written request for an opinion.

This is a matter of some urgency for us, since we have found individuals ineligible to receive SSI, or determined that former SSI beneficiaries have been overpaid. At least one of those individuals is challenging our determination through litigation and another has sought help from her United States Senator. In addition, the insurance companies that market the plans we have reviewed are challenging our conclusion as being inconsistent with the positions of your office and the Attorney General.

Hon. Robert W. Kasten, Jr.
Room 410
517 E. Wisconsin Avenue
Milwaukee, WI 53202
Attn: Cathy Fantle

Dear Sir:

In response to your February 6, 1992 inquiry, we have reviewed our conclusion that the Gold Key life-insurance-funded funeral arrangement is illegal under Wisconsin law.

We base our conclusion on several opinions and letters issued by the Wisconsin Attorney General. The Attorney General's Office concluded on November 23, 1988 that even though a funeral agreement, life insurance policy, and separate assignment of life insurance proceeds appear to be separate documents, if the assignment makes the life insurance proceeds payable to a funeral director and that assignment is an "integral part of the total package," section 632.41(2) of the Wisconsin statutes is violated. Mr. William H. Wilker, Assistant Attorney General, to Mr. Don Cleasby, Legislative Attorney, Office of the Commissioner of Insurance (November 23, 1988). In an opinion dated Octbober 27, 1989, the Attorney General emphasized that the critical distinction between valid and invalid arrangements is "linkage." Where there is no connection between a life insurance policy and a burial agreement, these independent agreements are independently valid. However, if there exists a link, direct or indirect, between the life insurance policy and provisions for funeral or burial services, the arrangement violates Wisconsin law. OAG 35-89 (October 27, 1989).

In our opinion, the Gold Key life insurance policy is clearly linked, even if only indirectly, to the provisions for funeral services. For example, the life insurance policy and the purchase of funeral services are marketed as a single package by a representative of the life insurance company who works out of the funeral home. The arrangement thus violates section 632.41(2) of the Wisconsin statutes.

In addition, it appears to us that the Gold Key plan may not constitute insurance at all, but instead represents an effort to create a trust while avoiding the state trust laws. The arrangement here involves no element of protection nor assumption of risk on the part of the "insurer." Instead, this arrangement contains all the elements of a trust: a donor (the purchaser), trust property (the premium paid plus interest), and a beneficiary (the funeral home). The insurance company simply acts as a trustee, holding and administering the deposited funds until the time of death. Under the Wisconsin statutes, the irrevocable portion of such a trust would be limited to $2000. Sections 445.125(1)(b).

We have been advised that the Gold Key plan and others have been approved by the Wisconsin Commissioner of Insurance, but we have not received verification of this. We have therefore asked both the Commissioner of Insurance and the Attorney General to provide us with additional clarification. Until we hear from and evaluate their responses, it is our conclusion that the Gold Key package violates section 632.41(2) of the Wisconsin statutes.

EE. PS 00-200 Whether Trust Established By A Legally Incompetent Grantor That Solely Benefits Grantor And Those Whom the Grantor Might Appoint in Her Will Is A Revocable Trust Under Wisconsin Law And Hence A Countable SSI Resource; Theresa L. De G~, SSN ~

DATE: March 29, 1995

1. SYLLABUS

At issue in this opinion is if a trust established by a legally incompetent grantor who is also the sole beneficiary of the trust can be revoked by the grantor/sole beneficiary.

Wisconsin law recognizes that when the grantor of a trust is the sole beneficiary of the trust, the grantor/sole beneficiary can revoke the trust even if the trust states that it is irrevocable.

An incompetent in Wisconsin could revoke the trust for which he/she is the grantor/sole beneficiary as the court and guardian ad item would be under an obligation to act in the grantor/sole beneficiary's best interest.

2. OPINION

This is with reference to your January 26, 1995 request for advice as to whether the interest of Theresa De G~, an SSI recipient, in a trust was a countable asset for Supplemental Security Income (SSI) purposes. Your memorandum and the trust document you attached indicate that Ms. De G~, a Wisconsin resident and legal incompetent, acted through her Guardian Ad Litem to establish a trust with her proceeds from a personal injury lawsuit settlement. Her incompetency is apparently the result of the injuries she sustained in the automobile accident that led to the lawsuit./

Ms. De G~ is the grantor of the trust which provides that the trustee shall pay to Ms. De G~ during her life time so much of the income and principal as the trustee determines is desirable to supplement the other benefits she receives but that the trust's income and assets shall not be used for food, clothing or shelter. The trust states that it is irrevocable. The trust also provides that upon the death of Theresa De G~, the balance of the trust shall be divided pursuant to the terms of Ms. De G~'s last will. You attached a copy of Ms. De G~'s current will.

We conclude that trust is revocable and is, therefore, a countable resource for SSI purposes. If Ms. De G~ revokes the trust, she will have unrestricted access to the assets that had been the trust's principal and could use those assets for her support and maintenance.

While under most circumstances a trust's provisions can bar the grantor from revoking the trust, most states including Wisconsin recognize that where the grantor is the sole beneficiary of the trust, the grantor can revoke the trust. Restatement (Second) of Trusts, 339 (1959); 76 Am. Jur. 2d Trusts 96 (1975); Wis. Stat. 701.12. In Wisconsin, a trust may be revoked, modified or terminated "By written consent of the settlor [grantor] and all beneficiaries of a trust or any part thereof." Wis. Stat. 701.12(1). Accordingly, if the grantor is the sole beneficiary, the grantor alone can revoke the trust in Wisconsin.

The ability of a grantor/sole beneficiary to revoke a trust is not limited by language in the trust that purports to make the trust irrevocable nor is the power to revoke defeated if the purposes to the trust have not yet be achieved. Restatement (Second) of Trusts, 339 (1959); 76 Am. Jur. 2d Trusts 96 (1975). Therefore, the language in the De G~ trust purporting to make it irrevocable does not bar Theresa De G~ from revoking the trust if she is the sole beneficiary.

Although the trust does direct that the balance of trust assets at Theresa De G~'s death are to be "divided pursuant to the terms and conditions of the Last Will and Testament of Theresa L. De G~," Ms. De G~ is still considered the sole beneficiary of the trust under generally accepted trust law. Where no individual beneficiaries other than the grantor and no class of beneficiaries are named in the trust, the grantor is considered the sole beneficiary even though the trust provides that the balance of the trusts assets at the grantor's death go to those appointed in the grantor's will. Under the Restatement (Second) of Trusts, the grantor is considered the sole beneficiary in the following instances: (1) trust pays grantor income for life and after grantor's death pays the principal to whoever is appointed in grantor's will or by deed or, in absence of such an appointment, to the grantor's heirs or next of kin, (2) trust pays grantor income for life and after grantor's death pays the principal to grantor's estate, and (3) trust pays grantor income for life and makes no provisions for who gets principal after grantor's death. Restatement (Second) of Trusts, 127 (comment b including illustration 2), 339 (comment b including illustration 2) (1959); see also Doyle v Bank of Montclair et al., 9 N.J.Super. 586, 76 A.2d 41, 43 (1950) (grantor held to be sole beneficiary of trust that paid grantor income for life and after grantor's death paid the principal to whoever was appointed in grantor's will or by deed or, in absence of such an appointment, to the grantor's heirs or next of kin); Dunnett v. First National Bank Trust Co., 184 Okl. 82, 83, 85 P.2d 281, 283 (1938) (same); Bottimore v. First Merchants National Bank, 170 Va. 221, 227, 231, 196 S.E. 593, 594, 596 (1938) (same)./

Accordingly, the persons mentioned in Theresa De G~'s will are not considered beneficiaries or contingent beneficiaries under the trust and their consent would not be necessary to revoke the trust. The rationale for this rule of construction is that such a trust permits the grantor to eliminate any potential beneficiaries other than the grantor. Although the trust may provide that those appointed in the will may receive certain benefits after the grantor dies, the grantor is not required to execute a will and, even if such a will were executed, the grantor can revoke or modify the will at the grantor's discretion./ Therefore, the rights of these potential beneficiaries are illusory during the grantor's lifetime because the grantor can eliminate these rights at the grantor's sole discretion.

The final issue here is whether the trust should be considered revocable by Theresa De G~ where she is legally incompetent. The general rule is that "If the settlor [grantor] is the sole beneficiary of a trust and is not under an incapacity, he can compel the termination of the trust . . . ." Restatement (Second) of Trusts, 339 (1959) (emphasis added). In Wisconsin, however, "such consent [to revoke or modify the trust] may be given on behalf of a legally incapacitated . . . beneficiary by the court after a hearing in which the interests of such beneficiary [is] represented by a guardian ad litem." Wis. Stat. 701.12(2). As the court and guardian ad litem would be under an obligation to act in the incompetent's best interests, an incompetent in Wisconsin could therefore revoke the trust for which the incompetent is the sole beneficiary if it were in his or her best interests.

While the Wisconsin statute does refer to an incompetent "beneficiary" and not to an incompetent "grantor," we do not believe this precludes Theresa De G~ from revoking the trust. As Theresa is both the grantor and beneficiary, the guardian ad litem and court can also act in her capacity as grantor. Moreover, if an incompetent in Wisconsin cannot act as a grantor through the action of the incompetent's guardian ad litem and the court, then Theresa De G~'s action as grantor to create the trust would be invalid. Such invalidity would mean that there is no trust, and the assets purportedly held by the trust are in fact held by Theresa De G~, also making the assets countable resources for SSI purposes.

FF. PS 00-152 Supplemental Security Income-Wisconsin Trust, Sarah L. B~, SSN ~

DATE: June 6, 1997

1. SYLLABUS

The issue involves whether funds held in a trust are a resource when there are contingent beneficiaries and under the terms of the trust, any revocation results in the immediate payment of the trust assets to the contingent beneficiaries.

Under Wisconsin law, all trusts may be terminated or modified only with written consent of the Settlor and all beneficiaries, if any, to the trust. The trust principal would not be counted as a resource because the individual lacks the unilateral right, power, or authority to liquidate the trust. In addition, any revocation would result in payment of the trust assets to the contingent beneficiaries. Since revocation would not allow the individual to convert the trust assets for use toward his/her support and maintenance, the funds in the trust are not a resource for SSI purposes.

2. OPINION

You have requested an opinion on whether the funds held pursuant to the terms of a trust agreement should be treated as a countable resource for purposes of eligibility for SSI for Sarah L. B~, the beneficiary of the trust.

The pertinent SSI regulations provide at 20 C.F.R. 416.1201 that:

resources means cash or other liquid asset 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.

(1) 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....

Thus, if an individual is able to obtain funds or convert property to cash to be used toward her support and maintenance, such funds or property are to be included as resources for purposes of SSI eligibility determinations. We have reviewed the documents provided to us and, for the reasons discussed below, we conclude that this trust should not be a countable resource under 20 C.F.R. 416.1201.

DISCUSSION

The memorandum of inquiry refers to Sarah B~ as the Settlor even though the actual terms of the trust refer to her father, Marvin B~, as both Settlor and Trustee. See Introduction and Article I of Borth's Trust. We assume that you consider Sarah to be the Settlor because she indirectly funded the subject trust, and her father is the nominal Settlor. See Wisc. Stat. Ann. 701.01(4); see also 76 Am. Jur. 2d 55 ("The settlor of a trust is the person who provides the consideration for the trust, even if another entity nominally creates the trust"). The information provided to this office does not indicate the source of trust assets, or whether additional assets are included in the trust.

For purposes of determining whether the subject trust is a countable resource, however, it does not ultimately matter whether Sarah or her father was the de facto Settlor. It also does not ultimately matter whether the subject trust was technically "revocable" or "irrevocable." Under Wisconsin law, all trusts may be terminated or modified only with written consent of the Settlor and all beneficiaries, if any, to the trust. See Wisc. Stat. Ann. 701.12 (West 1981 Supp. 1996). As you accurately pointed out, Holly K. B~, Michelle A. B~, and Brian S. B~ are all contingent beneficiaries to the trust. See Wisc. Stat. Ann. 701.05(2)-(3) (West 1981 Supp. 1996); see also Restatement (Second) of Trusts 127 and comment (b); 339 and comment (b) (1959); 76 Am. Jur. 2d 95 (a trust cannot be terminated by consent where there exist contingent beneficiaries that cannot be determined until the happening of certain events).

The written consent of the identified contingent beneficiaries and the Settlor is required to revoke the subject trust, and SSA policy would prohibit the trust principal from being counted as Sarah's resource on revocability grounds because she lacks the unilateral right, power, or authority to liquidate the trust. See Deborah A. Niklasch, ~ RA V (Larson) to Acting ARC-MOS 7-22-96, re: Wisconsin Trust.

It is also significant that under the express terms of the subject trust, any revocation results in the immediate payment of trust assets to the contingent beneficiaries. See Borth's Trust Article IV. In particular, the trust provisions state that should any governmental agency withhold support payments because of the trust existence, the trust shall terminate with all proceeds to be immediately paid to the contingent beneficiaries. See Borth's Trust Article 1, Subsection C. Thus, even if Settlor and the contingent beneficiaries consented to revocation in writing, the trust assets would not revert to Sarah. Revocation would not allow Sarah to convert the trust assets for use toward her support and maintenance, and as such, the trust should not be considered an available resource for SSI consideration. See 42 U.S.C. 1382b; 20 C.F.R. 416.1201 (A "resource," for the purpose of being eligible for SSI benefits, is defined as property that the beneficiary owns and could convert to cash, or property over which the beneficiary has the right, authority, or power to liquidate).

Finally, the Program Operations Manual System ("POMS") states that if the claimant is a beneficiary of a trust and the beneficiary's access to the trust principal is restricted, then the principal is not a resource for the claimant. POMS 01120.105(A)(2). The subject trust has been tailored to preclude the Trustee from using trust assets to pay for Sarah's primary needs, and it specifically limits the Trustee to furnishing services such as dental treatment, education, special training, and education. See Borth's Trust Article I, Subsection C. This section indicates that Sarah cannot, as the beneficiary, compel the Trustee to distribute trust funds in a manner that would endanger her eligibility for public assistance under the unearned income provisions of the regulations. See 20 C.F.R. 416.1123, 416.1124. See Laura Schwalbach, ~, RA V (Bradley) to Acting ARC-POS Region V (McHale) 5/27093, re: Wisconsin Supplemental Trust. This fact, along with the foregoing reasons, demonstrates that the subject trust should not be a countable resource under 20 C.F.R. 416.1201.

GG. PS 00-135 American Legacy Plan - Life-Insurance-Funded Burial Package Sold in Wisconsin (Your October 22, 1993 Request) (Your ref: S2D5B51, SI 2-1-4)

DATE: December 10, 1993

1. SYLLABUS

The American Legacy Plan ( a life insurance-funded burial package sold in Wisconsin) is legal under Wisconsin law. Assignment of ownership of such a policy to a funeral home is prohibited under Wisconsin law.

The American Legacy Plan is similar in all critical respects to the Gold Key and National Security Memorial Plans marketed in Wisconsin. Therefore, the American Legacy Plan should be treated the same way as these other two plans. Absent other considerations, the American Legacy Plan burial package should not be considered a resource for SSI purposes.

2. OPINION

On October 22, 1993, you asked for a legal opinion regarding the American Legacy Life Insurance Plan that funds a burial agreement. You have asked us: (1) is the plan is legal under Wisconsin law; and (2) if so, does it constitute a countable resource for SSI purposes.

In our opinion, it would be an appropriate policy choice for SSA to find that the American Legacy Plan is valid under Wisconsin law. Absent other considerations, the package should therefore not be counted as a resource for SSI purposes.

DISCUSSION

You stated to us that you "presumed" that the ownership and proceeds of the policy would be assigned to a funeral provider. Wade Urban, Vice President of American Legacy, suggested that you contact him if you had any questions. Since it is unwise to base precedential legal opinions on a "presumption," we contacted Mr. Urban by telephone on December 9, 1993. He stated to us that assignment of ownership to a funeral home is prohibited under Wisconsin law, and that assignment of the policy is therefore made to a person of the insured's choice.

Based on the documents you submitted to us, as well as the description of the program we obtained from Mr. Urban, it appears to us that the American Legacy Plan is similar in all critical respects to the Gold Key and National Security Memorial (Monumental Life Insurance) Plans marketed in Wisconsin. Under all three plans, (1) a funeral provider is not named as a beneficiary of the insurance policy that is issued; (2) the insured makes a subsequent assignment of the policy to a person or entity that is not the funeral provider; and (3) the assignee is free to select any funeral provider to fund the client's funeral needs at the time of death. We advised you on October 28, 1992 that, based on an October 15, 1992 opinion by the Wisconsin Department of Justice regarding the Gold Key and National Security Memorial (Monumental Life Insurance) Plans, it was permissible to conclude that those plans did not violate W.S.A. 632.41(2), and were therefore legal under Wisconsin law.

OGC-V (Michaelson) to ARC-POS (Williams), "Wisconsin Life-Insurance-Funded Burial Agreements," October 28, 1992.

Therefore, for the same reasons stated in our October 28, 1992 memorandum, SSA should treat the American Legacy Plan the same way it treats the Gold Key and National Security Memorial (Monumental Life Insurance) Plans.

]
To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/1601810055
PS 01810.055 - Wisconsin - 09/08/2005
Batch run: 09/09/2016
Rev:09/08/2005