TN 6 (12-15)

PS 01815.007 Colorado

A. PR 16-003 Treatment of Promissory Note and Deed of Trust

DATE: October 6, 2015

1. Syllabus

This Regional Chief Counsel opinion discusses whether a promissory note and deed of trust prove the number holder (NH), did not transfer a resource, her house in La Junta, Colorado, for less than fair market value. It was determined that the promissory note and deed of trust adequately demonstrate that the NH did not sell the La Junta house for less than fair market value. However, the NH continues to have property interests in the house and promissory note that might be countable resources and should be further evaluated.

2. Opinion

Question Presented

You asked whether a January 2015 promissory note and deed of trust prove A~, the number holder (NH), did not transfer a resource, her house in La Junta, Colorado, for less than fair market value.

Short Answer

Yes, the promissory note and deed of trust show that the NH received fair market value for transferring a partial interest in her house in La Junta, Colorado. However, the NH still has property interests that should be evaluated.

Background

According to the information you provided, at some point before August 2014, T~ gave title in La Junta, Colorado (the “La Junta house”), to her sister, the NH. The NH began living in the La Junta house in August, and lived there rent and mortgage free until December 2014, when she moved in with J~, in Ordway, Colorado (the “Ordway house”).

Because the NH owned the La Junta house, but was not living there, the agency notified her that she had excess resources. After she was notified she had excess resources, she sold a percentage interest in the La Junta house to J~’s father for $10,000. She apparently did not receive $10,000 cash, but instead told the agency that she received a $10,000 equity stake in the Ordway house in exchange for an ownership interest in the La Junta house.

While the NH provided a quitclaim deed showing she sold an interest in the La Junta house, she initially did not provide evidence that she received an interest in the Ordway house. As a result, the field office concluded she sold the La Junta house for less than fair market value. Later, the Colorado Cross-Disability Coalition (CCDC) provided a promissory note and deed of trust. The promissory note states that J~’s father borrowed and promised to repay the NH $10,000 and that the debt was secured by a deed of trust in the Ordway house.

Discussion

Under the Act, an individual’s eligibility for SSI is affected, and she may be temporarily ineligible, if she disposes of resources for less than fair market value. 42 U.S.C. § 1382b(c); see POMS SI 01150.110.

Here, the NH’s quitclaim deed demonstrates that she did not sell the entire house. Instead, she sold a percentage ownership of the house. The exact percentage is not specified in the quitclaim deed, but instead will be calculated at the time the La Junta home is sold, based on what percentage interest corresponds with $10,000. See Eastbrook Homes, Inc. v. Treasury Dep’t, 820 N.W.2d 242, 250 (Mich. Ct. App. 2012) (“A quitclaim deed is generally construed as conveying all the grantor’s interest in the described property unless some interest is expressly excepted or reserved.”), cited in 26A C.J.S. Deeds § 327. In other words, the NH transferred whatever percentage of the property that is worth $10,000.

In return, the quitclaim deed indicates that the NH would receive $10,000. Although the particulars of the consideration she received were not in writing at the time she conveyed an interest in the La Junta home, the promissory note and deed of trust were subsequently executed. The fact that these documents were executed after the quitclaim deed is not problematic. See Jarnagin v. Busby, Inc., 867 P.2d 63, 66 (Colo. Ct. App. 1993) (“[A] contract that contains essential terms may constitute a valid binding contract, even though the parties agree to negotiate on additional terms.”).

These documents show that, while the NH did not receive cash for her transfer of an interest in the La Junta home, she received a promise of $10,000 in the future. A promise of future performance is consideration “if, but only if, the promised performance would be consideration.” Restatement (Second) of Contracts § 75. Here, the promised performance (payment of the $10,000) is plainly consideration. Further, the promise is secured by an interest in the Ordway house. Because the NH received a secured and enforceable promise to pay the $10,000, we believe that the NH received fair market value for her interest in the La Junta home.

Although the NH did not transfer a resource for less than fair market value, it should be noted that she continues to have property interests that might be countable resources. First, she continues to own a percentage interest in the La Junta house. Whether or not her percentage interest is countable may depend on whether she can convert her percentage interest to cash, in light of the joint ownership. See POMS SI 01120.010(C)(2) (property not a resource if litigation would be required to accomplish sale of joint property). Second, she owns the promissory note, which appears countable. See POMS SI 01140.300(C)(1), (D)(3) (noting that a promissory note is a resource, but giving the claimant the right to submit evidence showing that there is a legal bar to sale of the agreement).

Conclusion

The promissory note and deed of trust provided by CCDC adequately demonstrate that the NH did not sell the La Junta house for less than fair market value. However, the NH continues to have property interests that might be countable resources and should be further evaluated.


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PS 01815.007 - Colorado - 12/21/2015
Batch run: 12/21/2015
Rev:12/21/2015