PS 01815.055 Wisconsin
A. PS 03-039 SSI-Wisconsin-Review of the Life Insurance Funded Burial Contract of William E~, ~--REPLY Your Reference: S2D5G6 Our Reference: 02P069
DATE: November 13, 2002
The opinion in this case concerns whether or not a burial contract or the life insurance policy used to fund the burial contract are considered resources for purposes of SSI eligibility. For SSI purposes, assets are considered a resource if an individual owns them and can covert them to cash to be used his/her support and maintenance. In this case, the life insurance policy is not a resource because the beneficiary never owned the policy nor did he have the power to surrender the policy for cash. This opinion also addresses the issue of whether or not the burial trust that was funded with the life insurance policy is considered a resource. The trust is not considered a resource because the beneficiary could not revoke the trust and use the funds for his support and maintenance.
You asked whether the burial contract for William E~ was a countable resource to William E~ for SSI purposes. We conclude that neither this burial contract nor the life insurance policy used to fund the contract are resources to William E~. William was never the owner of the insurance policy on his life, has no right to claim the cash surrender value of the policy, and does not have the right to sell the contract with the funeral provider.
On May 30, 2001, Jerry E~, brother to William E~, purchased an insurance policy on the life of William E~. Jerry E~ was the owner of the policy and responsible for paying the $1,500 single premium payment. William E~ was given no rights under or ownership interest in this policy. Also on March 30, 2001, Jerry E~ assigned ownership of the policy to Church and Chapel, a provider of funeral services and merchandise. In return, the funeral provider transferred the policy to a funeral trust and agreed provide funeral services for William E~. Jerry E~ retained the ability to change the beneficiary of the policy to another funeral provider who provides or will provide funeral services at William E~'s death, but waived rights to the surrender value, proceeds, and any income from the policy.
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. William E~ never owned the life insurance policy and did not have the ability to surrender this policy on his life for cash or to recover the premiums. Therefore, the life insurance policy is not a resource to him under this rule. Nor would William have the right to sell the right to receive the funeral under the contract because he was not a party to that contract. Furthermore, it seems unlikely that anyone would purchase it, since it is funded with a life insurance policy on his life.
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 01120.201D.1.- SI 01120.201D.2. Because William E~ did not establish this trust, this rule does not apply to make this trust a countable resource for him. He cannot revoke the trust, since he did not create it or provide the funds. He cannot reach the trust funds to provide for his support and maintenance. And, he presumably could not sell his beneficial interest in the trust, since it is funded with a life insurance policy payable only on William's death. See POMS SI 01120.200D.
Furthermore, even if the policy or the contract were resources to William, the resource would be excludable under 20 C.F.R. §§ 416.1230 & 416.1231(b). 20 C.F.R. § 416.1231(b)(1) (2002) provides that up to $1,500 in funds may be set aside for burial expenses of the individual and excluded when determining resources. These amounts may include burial contracts, burial trusts, or other instruments with a cash value clearly designated for the individual's burial expenses, so long as these assets are kept separately from non-burial related assets. 20 C.F.R. § 416.1231(b)(3) (2002). The assets in this case are kept separately and clearly designated for burial expenses of William E~. Therefore, the $1,500 exclusion should apply to the burial agreement for William E~. POMS SI 01130.41D. Likewise, 20 C.F.R. § 416.1230 provides that life insurance policies are excludable for up to $1,500 in face value. POMS SI 01130.300B.2.
We believe do not believe that this burial contract, the life insurance policy, or the funeral trust is a resource to Willliam E~. Even if this were a resource, however, it would appear to be excludable under the life insurance exclusion or the burial funds exclusion.
Lucille G. M~
Acting Regional Chief Counsel,
Assistant Regional Counsel
B. PS 02-135 Review of a Resource Needed for SSI Claimant's Physical Condition Alicia W~, SSN ~
DATE: September 16, 2002
This opinion addresses whether a personal effect (in this case, a piano) owned by an SSI recipient, should be considered a countable resource for SSI purposes, or whether it can be excluded as a resource required by her physical condition under the household goods and personal effects exclusion. This is essentially an evidentiary issue; i.e., the key is whether the fact finder in the FO has sufficient evidence to determine that the piano is required by the individual's physical condition. Under 20 CFR 416.1216(c), certain household goods and personal effects are excluded from SSI resource counting if they are "required because of a person's physical condition." As long as there is sufficient evidence for the fact finder to determine that the piano (or similar item) is required as treatment or therapy for the individual's physical condition, then the item could be excluded as a resource. If the fact finder cannot determine that the piano (or similar item) is required, then the current market value of the piano (or similar item) is subject to the $2,000 maximum exclusion for household goods and personal effects [20 CFR 416.1216(a) - 20 CFR 416.1216((b)]. It should be noted that the exclusions discussed above do not appear in the Social Security Act.
You asked whether a piano, owned by SSI claimant Alicia W~, should be considered a countable resource for SSI purposes, or whether it can be excluded as a resource required because of her physical condition. We conclude that, although there is no caselaw or other legal authority interpreting the applicable regulation, 20 C.F.R. 416.1216(c), the Agency may consider the piano as an excludable resource, under 20 C.F.R. 416.1216(c), provided Ms. W~ can show that playing the piano is required as treatment or therapy for her physical condition. If the Agency finds that the piano is not so required, further development and consideration may be warranted to determine the actual current market value of the piano.
Alicia W~ owns a baby grand piano that the Wausau Field Office reported is worth $7000. It is not clear how the valuation of $7000 was reached. For purposes of this memorandum, we assume that $7000 is likely the amount Ms. W~ paid for the piano. Ruth J~, a benefit specialist with the Aging and Disability Resource Center of Marathon County, has advised SSA that Ms. W~ tried to sell her piano by advertising it in a local newspaper and with the Wausau Conservatory of Music and by contacting several local churches. Two individuals expressed interest, but Ms. W~ received no offers to buy the piano. We do not know what price Ms. W~ asked or whether anyone would be willing to purchase the piano for less than her asking price. Ms. J~ stated, in April 2002, that a local music store sold only one comparable piano in the preceding year. The price that the music store charged was not reported. Although Ms. J~ indicated that she was providing the field office with a statement from the music store, no such statement was included in the materials forwarded to us. Ms. J~ also reported that Ms. W~ uses the piano daily and that she is the only member of her household.
Ms. W~ has a congestive heart condition and hypertension. On December 12, 2001, her physician, Arthur W~, M.D., wrote a letter stating that playing piano provided Ms. W~ with positive health benefits in terms of stress relief, which resulted in positive benefits for her hypertension. Dr. W~ further stated that being forced to sell her piano in order to receive SSI "would have a deleterious effect on her overall health."
The Social Security Act (the Act) provides that certain resources are excludable resources for SSI purposes. 42 U.S.C. 1382b. Among the resources that may be excluded are household goods and personal effects, but only to the extent that their total value does not exceed the $2000 limit set by the Commissioner. 42 U.S.C. 1382b(2)(A); 20 C.F.R. 416.1216(b). The regulations define "personal effects" to include musical instruments. Thus, a portion of the value of Ms. W~'s piano could be excluded as a personal effect, provided the total value of her other personal effects and household goods is less than $2000. However, it appears that Ms. W~'s piano may be worth considerably more than that. We must determine, therefore, whether her piano may be excludable for some other reason, or whether the value of her piano can be considered less than previously assumed.
Exclusion for Items Required for Person's Physical Condition
The exclusion for household goods and personal effects that are required because of a person's physical condition does not appear in the Act. See 42 U.S.C. 1382b. The exclusion became a part of SSI regulations effective October 20, 1975. 40 Fed. Reg. 48911, 48916 (October 20, 1975). Neither the preamble to the final regulation published on that date nor the preamble to the proposed regulation states the rationale for the exclusion or gives any further clarification as to its application. See 39 Fed. Reg. 2487 (January 22, 1974); 40 Fed. Reg. at 48911. Thus, we cannot ascertain from those publications whether the Agency intended for the exclusion to apply to items such as a piano that provide "positive health benefits" in terms of an individual's physical condition. The POMS, likewise, provides no guidance in this situation. See POMS SI 01130.430. We were unable to find any caselaw interpreting the regulatory provision or any OGC precedential opinion on the subject. Similarly, we found no caselaw regarding other needs-based federal entitlement programs that might be helpful in interpreting 20 C.F.R. 416.1216(c).
The Internal Revenue Code (IRC), however, includes a personal income tax deduction for medical care expenses. 26 U.S.C. 213(a). The definition of "medical care" includes amounts paid "for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. . .." 26 U.S.C. 213(d)(1)(A). The Internal Revenue Service (IRS) addressed the issue of whether the cost of a piano could be deducted under the IRC medical care provision in two private letter opinions. In the first, parents bought a piano so that their child, who had polio, could strengthen her finger muscles and improve her posture. Priv. Ltr. Rul. 59-03205410A (March 20, 1959), 1959 WL 59702. The IRS determined that, if the use of the piano was prescribed by a physician to mitigate the effects of the child's illness, and if the child was the only one to use the piano, a portion of the cost could be deducted as a medical care expense. Id. The portion of the piano's cost that could be deducted was "the minimum cost of a piano of a quality sufficient for the therapeutic purposes" subject to the ceiling of 7.5% of adjusted gross income, as provided in 26 U.S.C. 213(a). Priv. Ltr. Rul. 59-03205410A. Another private letter ruling states that, after suffering a nervous breakdown, a taxpayer's daughter "was induced by her doctors to resume piano lessons, in view of her particular aptitude in this area, as it was hoped that this would be good therapeutic treatment and would create a motivation toward recovery." Priv. Ltr. Rul. 63-02264710A (February 26, 1963), 1963 WL 14192. The taxpayer could not find a suitable used piano, so he bought a new piano for $800. The IRS held that the taxpayer could take a medical care deduction for "an amount which does not exceed the minimum cost of a piano of a quality sufficient to effect the prescribed therapy," subject to the limitations in 26 U.S.C. 213. Priv. Ltr. Rul. 63-02264710A (February 26, 1963), 1963 WL 14192. To the extent, however, that the expenditure was "elaborate," i.e., beyond the need for the prescribed medical therapy, it was not deductible because it was not directly related to medical care. Id.
The IRC provision relied upon in these two private letter rulings is not identical to the resource exclusion provision in the Social Security Regulations. The IRC section would apply to expenditures for treatment of a mental condition as well as a physical condition, but the Social Security regulation would allow exclusion of an item only if it is required because of the SSI claimant's physical condition. Compare 26 U.S.C. 213(d)(1)(A), 20 C.F.R. 416.1216(c). While the Social Security regulation allows for exclusion of a resource "required because of a person's physical condition," 20 C.F.R. 416.1216(c) (emphasis added), the IRC provision, 26 U.S.C. 213(d)(1), allows a tax deduction for "amounts paid" for treatment (emphasis added). Although the IRC section does not address whether an expenditure is medically required, the private letter rulings provide some support for the conclusion that, in some cases, piano playing may be prescribed as part of an individual's medical treatment.
There is nothing in the Social Security Act or Social Security Regulations to direct a conclusion on this issue. We think it reasonable, however, to conclude, based on the private letter rulings, that there are situations in which a doctor may reasonably require a patient to play a piano as a necessary part of treatment or therapy for the patient's physical condition. Unlike the medical care deduction provision in the IRC, the SSI exclusion for items required for a person's physical condition does not place any limitation on the value of items which can be excluded, even though some of the items listed, such as an engagement ring or a dialysis machine, could have considerable monetary value. 20 C.F.R. 416.1216(c); see also POMS SI 01130.430 ("Items Excluded Regardless of Value") (emphasis added).
The letter from Ms. W~'s physician states that it is important that she enjoy the benefits of her piano because it relieves her stress and, consequently, has a positive effect on her hypertension. The doctor further states that selling the piano to receive SSI benefits would be "deleterious" to her health. In the absence of evidence casting doubt on the doctor's credibility, we think this statement may be sufficient for a fact-finder to conclude that the piano is required for Ms. W~'s physical condition. You may want to obtain clarification from the doctor, however, that he considers playing the piano a required part of Ms. W~'s treatment or therapy for her hypertension or her congestive heart condition. You may also want to verify that the "deleterious" effect of selling the piano refers to her inability to receive the therapeutic benefit of playing the piano, rather than to other factors, such as a contemplated elevation of her blood pressure because selling the piano would upset her.
If you find that playing a piano is required for Ms. W~'s physical condition and she is the only person who will use the piano, the entire value of the piano should be considered an excludable resource. If, however, you find that playing piano is not required for Ms. W~'s physical condition, it will be necessary to determine the piano's value.
Determining the Current Market Value
If you determine that the piano is not an excludable resource under 20 C.F.R. 416.1216(c), the current market value of the piano will be subject to the $2000 maximum exclusion for household goods and personal effects. 20 C.F.R. 416.1216(a) - 20 C.F.R. 416.1216(b). Contrary to Ms. J~'s contention, the fact that Ms. W~ was unable to sell her piano does not necessarily mean that the value of the piano is zero. The piano likely has some value, even if it is not the $7000 purchase price. It is possible that the value of the piano is zero, however, if, for example, a buyer's expense to move the piano from Ms.W~'s home to a new location exceeds the price that a buyer would ordinarily pay for the piano.
The information provided to us did not indicate what price Ms. W~ was asking for the piano when she advertised it. It may be that she was simply asking a higher price than the current market value and, therefore, did not get an offer. We suggest further development to ascertain the current market value of the piano. For example, did Ms. W~ get any offers to buy the piano and, if so, what amount was offered? Ms. J~ indicated that the local music store sold one comparable piano over the past year. What was the sale price? Are there other music stores in the area that carry comparable pianos? If so, what price do they charge? Has Ms. W~'s piano been appraised? How much would a pawn shop pay for the piano, given that it could be difficult to sell quickly?
We note that POMS SI 01150.200 contains a provision that, under certain circumstances, allows for conditional SSI benefits for a limited period while an individual attempts to sell a non-liquid resource. The individual must agree to sell the resource at the current market value within a specified period and use the proceeds to refund the overpayment of conditional benefits. POMS SI 01150.200B.1. The period of conditional benefits where personal property is concerned would generally end after three months, except that there could be one three-month extension granted for good cause. SI 01150.201A. The individual must make reasonable efforts to sell the resource, taking all necessary steps to sell the resource through the local media. SI 01150.201B.1. The information provided to us does not indicate whether Ms. W~ was eligible for, or received, conditional benefits under these POMS provisions.
We also note that, even if Ms. W~ purchased the piano for $7000, and if the Agency determines that the current market value of her piano is less than $7000, it does not necessarily mean that her purchase was a transfer for less than fair market value. See POMS SI 01150.005A. (transfers of resources for less than fair market value after December 14, 1999 may result in a period of SSI ineligibility). Nor does the fact that Ms. W~ may not be able to sell her piano for the same price she paid mean that she paid more than the fair market value. Fair market value is the current market value of a resource at the time the resource is transferred, i.e., the going price for which it could reasonably be expected to sell at the time, on the open market in the geographic area involved. POMS SI 01150.005. If Ms. W~ bought her piano on the open market, e.g., from a merchant, the $7000 purchase price is assumed to be the fair market value at the time of the transfer. POMS SI 01140.005C.4.a. It may be that the value of the piano has depreciated since its purchase, or simply that the going price for a comparable piano was $7000 at the time of the purchase but is less now due to economic conditions. A prospective buyer might be willing to pay more for a piano bought from a merchant whose reputation is known than he would pay in a private sale by a stranger. A merchant might also be in a position to charge more because he could offer a factory guarantee or a store guarantee that a private seller like Ms. W~ cannot offer. Finally, a merchant might be in a position to wait until a buyer came along who was willing to pay a higher price. Thus, the current market value of the piano, in Ms. W~'s hands, may be less than the amount she paid for the piano, even though the original purchase was not a transfer for less than fair market value.
In summary, we conclude that, if the Agency fact-finder concludes that Ms. W~ has shown that playing piano is required as part of her treatment or therapy for her physical condition, the piano's entire value may be excluded under 20 C.F.R. 416.1216(c). If the fact-finder concludes that playing piano is not required for Ms. W~'s physical condition, the current market value of the piano should be considered a household good or personal effect subject to the $2000 maximum exclusion for all household goods and personal effects. However, the Agency may want to give further consideration to the current market value of the piano in Ms. W~'s hands.
Thomas W. C~
Regional Chief Counsel
Nancy L. B~
Assistant Regional Counsel
C. PS 02-062 Pre-review of Irrevocable Assignment of Death Benefit Proceeds and Transfer of Ownership Document for Advance Planning, Inc. a Private Wisconsin Corporation
DATE: April 11, 2002
The issue discussed here is whether or not a life insurance policy that is assigned to fund a burial agreement is considered a resource for SSI purposes. A life insurance policy can be considered a resource if an individual can surrender it for cash or recover the premiums paid. Under Wisconsin law, a life insurance policy issued for a burial agreement is revocable for the first 30 days after issuance. Recognizing this, for SSI purposes the policy would considered a resource for the first 30 days, but not thereafter.
You sent us, for pre-review, a sample "Irrevocable Assignment of Death Benefit Proceeds and Transfer of Ownership" used by Advance Planning, Inc. of Wisconsin to transfer the proceeds and ownership of life insurance policies to funeral firms, which then transfer ownership of the policies to a trust. You have requested our opinion regarding whether a life insurance policy transferred under the assignment would be a resource for SSI purposes. We conclude that, under Wisconsin law, the policy would be revocable during the first 30 days after issuance; accordingly, the policy would be a resource until the 30 day period expires. However, assuming the policy is otherwise valid and allowed for such an assignment, it would not be a resource after the first 30 days it is assigned using the proposed document.
Under the document provided, the policy owner would "irrevocably assign the ownership and beneficiary designation" of a Great Western Life Insurance policy identified within the document to a funeral firm also identified within the document; the funeral firm, in turn, promises "to immediately transfer ownership of the policy to the Great Western Funeral Trust" on behalf of the insured. By signing the agreement, the policy owner further agrees that: (1) no other irrevocable assignment of ownership or beneficiary rights exists; (2) all proceeds of the policy must be used for funeral/burial expenses; (3) the assignment is permanent and cannot be revoked, amended or terminated; (4) the transferor has waived all contracted rights to surrender the policy for cash, to obtain loans against the policy or to change owner of the policy; (5) the transferor has renounced any interest in reversionary or power to control ownership rights; (6) the transferor will pay all premiums due on the identified policy; (7) the funeral firm will transfer ownership of the policy to the Great Western Funeral Trust which shall assure payment to the funeral firm; and (8) if a different funeral firm is chosen by the transferor, owner, his or her family or representative for the provision of merchandise and services prior to the identified funeral firm's provision of those services, the Great Western Funeral Trust shall make payment to the providing funeral firm.
The policy owner, the beneficiary and a representative of the funeral firm must sign the document. The funeral firm representative accepts the assignment on behalf of the funeral establishment, and acknowledges that the assignment satisfies "the purchaser's obligation under the Funeral Arrangement Contract" with the understanding that payment of the proceeds is contingent upon delivery of the merchandise and services "as specified in that Contract."
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, when an individual pays money to fund a prearranged funeral contract, the money is generally considered to be held in trust which can be made irrevocable only up to $2,500 plus interest or dividends. Wis. Stat. Ann. 445.125(1). This statute, however, distinguishes burial agreements funded with the proceeds of life insurance policies, which are not subject to these provisions. Wis. Stat. Ann. 445.125(1)(a)(1). 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 W~, at 2 (December 13, 1999).
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 provided the insurance intermediary who sells or facilitates the sale of the policy is not an agent of the funeral director or operator of the funeral establishment. Wis. Stat. Ann. 632.415(2). A life insurance policy sold with the intent to provide funeral services "shall permit the policyholder to designate a different funeral director or operator of a funeral establishment . . . 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. However, Wis. Adm. Code 23.30 expressly provides that an 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). Moreover, this provision must be conspicuously printed on the front of the policy or attached thereto. Wis. Adm. Code 23.30(1)(e).
As we have previously advised, it is our belief that, after the 30 day period during which a life insurance policy issued for a burial agreement is revocable, such a policy 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 and (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. 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 W~, at 3 (December 13, 1999).
The document appears to set up a transfer of proceeds which complies with Wisconsin law. Paragraph 3 provides for a permanent and irrevocable transfer of the policy's proceeds; paragraph 4 provides for the waiver of the cash surrender value; paragraph 5 renounces reversionary rights or power to control ownership; and paragraph 7 provides that the insured or a family member or representative may chose a different funeral firm to provide the services. Assuming the life insurance policy the document references comports with statutory requirements and allows for such an assignment, the policy transferred pursuant to the document would not be a resource.
For the foregoing reasons, we conclude that, assuming the life insurance policy surrendered pursuant to the document meets the statutory requirements, the policy would be a resource for the initial 30 day period during which the insured may return the policy, but not thereafter.
D. PS 00-330 Wisconsin Real Property Bettie J. M~ (A/N ~)
DATE: April 19, 1996
Despite quitclaiming his interest in home property to his spouse, under certain circumstances, an individual retains property rights under the Wisconsin homestead statute. The property may not be sold without his consent.
Bettie M~ owns a home at ~ Street in Milwaukee, Wisconsin. You inquired whether this property could be sold to someone other than Ms. M~'s husband, Rufus M~, if he did not sign the conveyance or join in the transaction with a separate conveyance.
In Wisconsin, each spouse's signature or separate conveyance is required to effect the sale of homestead property. Wis. Stat. Ann. 706.02(1) (West 1981 Supp. 1995). The fact that Mr. M~ in September 1994 quitclaimed his interest in the property to Bettie M~, who moved out of the home in June 1993 and had no intention of returning, suggested a substantive variation to the general rule and prompted this inquiry.
This question ultimately focuses upon whether Bettie M~'s home could be considered to be a "countable resource," which could affect her eligibility for Supplemental Security Income (SSI) benefits. The Social Security Act (the "Act") provides that every aged, blind, or disabled individual who is determined to be eligible on the basis of her income and resources shall be paid Supplemental Security Income (SSI) benefits by the Commissioner of Social Security. 42 U.S.C. 1381a. The Act specifies those elements that are counted toward income, excluded from income, and excluded from resources in determining eligibility. 42 U.S.C. 1382a, 1382b.
Relevant to the current inquiry, both the Act and the regulations provide that a home is excluded in determining the resources of an individual (and his eligible spouse, if any). 42 U.S.C. 1382b; 20 C.F.R. 416.1212. A home is "any property in which an individual (and spouse, if any) has an ownership interest and which serves as the individual's principal place of residence." 20 C.F.R. 416.1212(a). Whether the home is a countable resource, therefore, generally depends upon two factors: first, whether the individual has an ownership interest in the property, and second, whether the home serves as the individual's principal place of residence. Although the home no longer serves as Bettie M~'s principal place of residence, an exception under the Program Operations M~ System (POMS) provides that the property could nevertheless be excludable provided that its sale would cause Rufus M~ hardship as a coowner of the property. POMS SI 01130.100A.6.b. (7/90). We conclude that under Wisconsin's homestead statute and case law, Mr. M~'s September 1994 quitclaim deed to Bettie M~ does not defeat his ownership interest in the property because the statute nevertheless requires his signature or separate conveyance to sell the homestead.
Although Bettie M~ Has An Ownership Interest In Wisconsin Property, It Is Not Her Principal Place Of Residence.
Bettie M~ lived with her husband Rufus M~ on the subject property from at least August 1992 through June 1993. They separated in June 1993, and Bettie M~ moved out to live in an apartment. Rufus M~ remained in the home, but on September 18, 1994, he quitclaimed his interest in the property to Bettie M~, leaving the home in her name only.
This information appears to have been derived from the April 13, 1995, Report Of Contact, appended to the cover memorandum. Although Rufus M~ at that time suggested that he and Mrs. M~ held the property as coowners and completed a form indicating that sale of the home would cause "hardship," the local office observed that all available records showed Bettie M~ as sole owner of the property, including the September 18, 1994, quitclaim deed. Thus, the evidence clearly suggests that Bettie M~ has an ownership interest in the Wisconsin property.
But, Bettie M~ moved off of the property and into an apartment in June 1993, and indicated that she never intends to return to live on the property. As a general rule, for the home to be excludable, the individual must not only retain an ownership interest in the property, but the property must serve as her principal place of residence. See 20 C.F.R. 416.1212(a). The home becomes a countable resource, because "it is no longer the individual's principal place of residence," when an individual moves out of her home "without the intent to return." 20 C.F.R. 416.1212(c). Thus, Bettie M~'s Wisconsin property, barring the application of certain exceptions, would not be excludable as a home.
Rufus M~ Appears To Retain An Ownership Interest In Wisconsin Property That Falls Within An Exception To The General Rule.
Because Bettie M~ does not use the home as her principal place of residence, and because she has expressed no intent to return to live on the property, as a general rule, the home would cease to be excludable. The POMS, however, does provide exceptions to the general rule. The POMS states that even if an individual leaves the home without the intent to return, the property remains an excludable resource for as long as either (a) a spouse or dependent relative of the individual continues to live there while the individual is institutionalized; or (b) its sale would cause undue hardship, due to loss of housing, to a coowner of the property. POMS SI 01130.100A.6.b. (7/90). Rufus M~ has indicated that the sale of the property would cause him hardship. Whether Rufus M~ retains an ownership interest in the property under Wisconsin's homestead statute, therefore, determines the applicability of the second exception.
Under Wisconsin's homestead statute and case law, it does not appear that Rufus M~'s ownership interest is defeated by his September 1994 quitclaim deed to Mrs. M~. The homestead statute provides that each spouse's signature or separate conveyance is required to effect the sale of any interest in homestead property, excepting conveyances between spouses and purchase money mortgages pledging the property as security. Wis. Stat. Ann. 706.02(1) (West 1981 Supp. 1995). Here, Rufus M~ quitclaimed his interest in the property to his wife in September 1994, which the statute allows as a conveyance between spouses. But, the fact that one spouse has quitclaimed his interest in the homestead to the other spouse does not necessarily mean that he need no longer join in the conveyance of homestead property to third parties by signature or separate conveyance. In fact, the tenor of recent Wisconsin case law suggests that so long as the objecting spouse continues to use the property as his homestead, a conveyance without his consent is invalid.
The fact that Bettie M~ indicates that she will never return to live on the property does not compromise Rufus M~'s homestead rights, because he continues to live there. In Schapiro v. Security Sav. and Loan Ass'n, 441 N.W.2d 241 (Wis. Ct. App. 1989), review denied, 443 N.W.2d 310 (Wis. 1989), the Wisconsin Court of Appeals upheld the validity of a quitclaim deed signed by one spouse, no longer residing on the property, to his sister after the other spouse abandoned the property. By contrast, in this case, Mr. M~, rather than moving away in the same manner as his wife, and rather than attempting to convey the property to a third party like Mr. S~, quitclaimed his interest in the property to his wife alone, but continued to reside there. Thus, at no point did Mr. M~ abandon his homestead rights to the property. Thus, his rights would not appear to have been compromised by the quitclaim deed to his wife.
In Elfelt v. Cooper, 485 N.W.2d 56 (Wis. 1992), cert. denied, 113 S. Ct. 1251 (1993), the Supreme Court of Wisconsin determined that the Internal Revenue Service (IRS) did not have the authority to transfer Mr. C~ ownership interest in the C~' homestead to the E~ in the manner and form accomplished. Because the property was a jointly held homestead, it could only be sold with Mrs. C~ consent or by a court order in the absence of Mrs. C~ consent. The court observed that "[t]here is no way to convey any interest in a jointly held spousal homestead in Wisconsin without both spouses' consent except through court proceedings, such as a divorce, bankruptcy, or lien foreclosure." 485 N.W.2d at 62. In reaching this conclusion, the court in E~, 485 N.W.2d at 61, quoted from Cumps, 80 N.W. at 939:
The policy of the statute indicated is not to give the wife a mere personal right for her personal benefit which she may waive, or be estopped by her conduct from insisting upon, but to protect the home for the benefit of the family and every member of it, ....
Here, although Mr. M~ has quitclaimed his interest to Mrs. M~, the tenor of the court's ruling in E~ suggests that this may not be sufficient to subvert his homestead rights the purpose of the homestead statute was to "protect the home for the benefit of the family and every member of it."
In conclusion, although Bettie M~ no longer resides on the property, her husband's homestead rights persist so long as he continues to reside there. Furthermore, Mr. M~'s 1994 quitclaim deed to Bettie M~ was expressly allowed by the homestead statute and does not compromise his homestead rights, given the case law which appears to support the proposition that one spouse may void an attempted conveyance of land held solely by the other spouse. Thus, Rufus M~ must consent to any conveyance of homestead property, and his hardship given any sale renders the property excludable under the POMS exception.
E. PS 00-319 Wisconsin Life-Insurance-Funded Burial Agreements: Betty U~, ~ - Wisconsin Funeral Assurance Plan (Your July 17, 1991 Request) (Your ref: S2D5B2, SI 2-1-4); Rose A. S~, ~ - Gold Key Life Insurance (Your August 28, 1991 Request) (Your ref: S2D5B2, SI 2-1-4); Lorena M~, ~ - Gold Key Life Insurance (Your October 30, 1991 Request) (Your ref: S2D5B2, SI 2-1-4); National Security Memorial Plan - Monumental Life Insurance
DATE: October 28, 1992
This opinion provides criteria for evaluating life insurance funded burial arrangements in the State of Wisconsin. It supersedes prior opinions.
By memoranda dated August 28, 1991 and February 24, 1992, we advised you that the life insurance-funded burial programs offered by the Wisconsin Funeral Assurance Plan and the Gold Key Plan were not valid under Wisconsin law, and that the purchase price should therefore be counted as a resource 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 U~, ~" (August 28, 1991); OGC-V (Michaelson) to ARC, POS, "Wisconsin Gold Key Life Insurance- Funded Burial Agreements, Rose A. S~, ~ and Lorena M~, ~" (February 24, 1992).
We did note, however, that the Attorney General's office had found at least one plan to be valid even though in our opinion it violated the legal principles the Attorney General appeared to establish for evaluating such plans. We therefore asked you to seek further clarification of the matter under Wisconsin law from the Wisconsin Attorney General and the Wisconsin Commissioner of Insurance, and offered to help you reevaluate the matter in light of the State's response. You submitted to the State, with copies to us, examples of the Wisconsin Funeral Assurance Plan package, the Gold Key Plan package, and the National Security Memorial (NSM) Plan package.
On October 15, 1992, William H. W~, Assistant Attorney General, State of Wisconsin Department of Justice, issued a legal opinion to the Wisconsin Office of the Commissioner of Insurance regarding the legality under Wisconsin law of three prepaid funeral plans: (1) Wisconsin Funeral Assurance Plan; (2) Gold Key Plan; and (3) National Security Memorial (NSM) Plan. We have now reviewed the State's opinion. For the reasons that follow, we now conclude that so long as the facts are consistent with those assumed in the State's opinion, each of these plans is valid under Wisconsin law.
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.
In our previous opinions involving this matter, we referred to a series of opinions issued by the Wisconsin Attorney General's office, and concluded that the critical distinction between valid and invalid arrangements is "linkage." That is, it appeared that the Attorney General concluded that where there is no connection between a life insurance policy and a burial agreement, these separate agreements are independently valid under State law. 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. See OAG 35-89 (October 27, 1989).
The Attorney General's office has now specifically evaluated three plans. (William H. W~, Assistant Attorney General, to Diane R~, Office of the Commissioner of Insurance (October 15, 1992).
With regard to the Wisconsin Funeral Assurance Plan, the Attorney General's office concluded that the plan is valid under Wisconsin law. The client agrees to fund his or her funeral expenses, either in whole or in part, with the proceeds of a life insurance policy. The funeral director does not market the insurance policy on behalf of an insurer, although the funeral director may provide the client with information on securing insurance. The client is free to assign an existing policy or to secure an insurance policy from an insurer of the client's own choosing. In our opinion, the Wisconsin Funeral Assurance Plan package you submitted for our review is consistent with the facts assumed by the Attorney General's office.
With regard to the Gold Key Plan, the Attorney General's office concluded that the plan is valid under Wisconsin law if: (1) a funeral provider is not named as a beneficiary in the insurance policy that is issued, but, instead, the insured makes an assignment of the policy to a person or entity, not the funeral provider, who is free to select any funeral provider to fund the client's funeral needs at the time of death; and (2) the pre-need contract that the client receives from the funeral home does not contain a requirement that the client or assignee/beneficiary engage the funeral home at the time of death. The opinion specifically addressed and dismissed several "troublesome" aspects of the Gold Key plan that we previously questioned. In our opinion, the Gold Key Plan package you submitted for our review is consistent with the facts assumed by the Attorney General's office.
With regard to the National Security Memorial (NSM) Plan, the Attorney General's office concluded that the plan is valid under Wisconsin law if: (1) a funeral provider is not named as a beneficiary in the insurance policy that is issued; and (2) the subsequent assignment of the proceeds of the policy is not made to the funeral provider. Again, the opinion specifically addressed several "troublesome" aspects of the NSM plan. In our opinion, the NSM Plan package you submitted for our review satisfies these factual prerequisites. Since we have seen only one NSM package, you may wish to confirm that the package we reviewed is typical in that a funeral director was not named as either a beneficiary or assignee of the insurance policy.
We have been informed that your central office has made a policy choice to defer to a State's interpretation of its law regarding life-insurance-funded burial agreements so long as the State's interpretation is defensible.
After review of the State's position, we now conclude that the State's interpretation is a permissible reading of the State statute. It would therefore be an appropriate policy choice for SSA to find that the Wisconsin Funeral Assurance Plan, Gold Key Plan, and NSM Plan you submitted to us for review are valid under State law. Absent other considerations, the packages should therefore not be counted as a resource for SSI purposes.
As we have discussed, you will have to take action regarding several specific individuals whose claims were affected by our office's previous advice. You will also have to revise the advice you have given to your Field Offices regarding life insurance funded burial agreements in Wisconsin.
F. PS 00-206 SSI - Wisconsin - Review of Irrevocable Funeral Trust Agreement for Elizabeth D~
DATE: November 22, 1999
This opinion concerns whether some or all of the funds in an irrevocable funeral trust agreement are excludable or countable resources.
The grantor deposited $4,245 in a funeral trust agreement for future payment of the cost of her own funeral services. The agreement designates as irrevocable the first $2,000 of the trust principle and provides that the nature and type of funeral services shall be agreed upon and the cost of services and merchandise determined at the date of her death. The agreement does not provide for, or otherwise represent, the purchase of a particular burial space, container, or casket.
The trust at issue is partially revocable and partially irrevocable. Consistent with Wisconsin law, the agreement designated the first $2,000 of trust funds as irrevocable. Thus, it is unavailable for the individual's support and maintenance and is not a countable resource for SSI purposes. However, the rest of the trust is revocable and the individual has the legal authority to liquidate it. Thus, the remaining $2,245, together with interest or dividends, constitutes a resource for SSI purposes. In addition, the $2,000 in irrevocable trust funds uses up the burial fund exclusion and does not allow any of the remaining funds to be excluded under that exception. Since the funeral trust agreement is neither a contract for a specific burial space, nor does it represent the individual's ownership or possession of a burial space, the funds do not qualify for the burial space exclusion under regulations section 416.1231(a).
Thus, the first $2,000 in trust funds is excluded from resources and the remaining $2,245 in funds is a resource for SSI purposes.
You have asked for our assistance in determining whether the funds held in the claimant s "Irrevocable Funeral Trust Agreement" should be treated as countable resources for purposes of SSI eligibility. For the following reasons, we believe that: (1) the first $2000 of the $4245 trust fund are excludable; and (2) the remaining $2245 in funds are countable resources.
You provided copies of two separate funeral trust agreements. The first document, dated June 24, 1994, includes assets in the amount of $4245. The second agreement is dated August 21, 1993, and also contains assets in the amount of $4245. You indicated that the August 1993 agreement was actually created after the June 1994 agreement, but backdated to reflect an earlier date. You also suggested that the intention of the parties to these two agreements was to replace the June 1994 agreement with the August 1993 agreement. Although it is unclear from the face of the documents themselves, consistent with the facts provided, we will assume for purposes of this discussion that the June 1994 agreement has been rescinded and the only trust agreement now in effect is the August 1993 agreement.
The August 1993 agreement is captioned as an "Irrevocable Funeral Trust Agreement." The agreement indicates that Ms. D~ (the grantor) deposited $4245 with a depository institution (the trustee) for future payment of the cost of her own funeral services. Accordingly, Ms. D~ is both the grantor and the sole beneficiary of the trust. The agreement designates as irrevocable the first $2000 of the trust principle, and provides that the "nature and type of funeral service" shall be agreed upon as of the date of Ms. D~ death. It further provides that the cost of services and merchandise provided by the pre-designated funeral home shall be determined as of the date of her death. The agreement does not provide for, or otherwise represent, the purchase of a particular burial space, container, or casket.
For purposes of determining SSI eligibility, a "resource" is any cash or other liquid asset 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 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).
The trust at issue here is partially revocable and partially irrevocable. Consistent with Wisconsin law, the agreement designated the first $2000 of trust funds as irrevocable. Thus, the first $2000 is unavailable for Ms. D~ support and maintenance and not a countable resource for SSI purposes. However, the balance of the trust is revocable, and Ms. D~, as the trust grantor, has the legal authority to liquidate any or all of the remaining $2245 without limitation on the purpose for which it may be used. Accordingly, the $2245 balance, together with interest or dividends, constitutes a resource for SSI purposes (unless otherwise excludable). See 20 C.F.R. 416.1201(a); POMS SI 01120.200(D)(1).
As you suggested in your memorandum, the regulations provide exclusions for burial spaces and certain funds set aside for burial expenses. See 20 C.F.R. 416.1231 et. seq. These are two distinct exclusions. See SI POMS 01130.400(A)(2). The burial space exclusion is unlimited; the burial funds exclusion is limited to $1500. See 20 C.F.R. 416.1231. Burial funds include amounts held in revocable burial contracts or revocable burial trusts. See 20 C.F.R. 416.1231(b)(3). Clearly, the funds in the revocable portion of the trust were set aside for burial expenses that qualify under 416.1231(b). However, any funds from a revocable trust that might otherwise qualify as an exclusion from resources must be reduced by any amounts in an irrevocable trust available to meet burial expenses. See 20 C.F.R. 416.1231(b)(5). Since the irrevocable portion of the trust here already contains $2000, and thus exceeds the $1500 limitation, none of the revocable portion of the trust qualifies as a 416.1231(b) exclusion from resources. In short, the $2000 in irrevocable trust funds uses up the burial fund exclusion and does not allow any of the remaining funds to be excluded under that exception.
The burial space exclusion provides that the value of burial spaces including plots, gravesites, containers, and caskets may also be excluded from resources. See 20 C.F.R. 416.1231(a). A burial space is defined as a space that is "owned by the individual or held for his or her use." 20 C.F.R. 416.1231(a)(2). A burial space is "held for" an individual when the individual has title to and/or possession of the space or has a contract with a funeral service company for a specified space. See POMS SI 01130.400(B)(4). The subject trust agreement provides that the nature and type of funeral services and merchandise will be determined at Ms. D~ death. Thus, the agreement is neither a contract for a specific burial space, nor does it represent Ms. D~ ownership or possession of a burial space. The revocable trust funds therefore do not qualify for the burial space exclusion under 416.1231(a) of the SSI regulations.
You suggested in your memorandum that if the trust document would have specifically earmarked the revocable portion of the trust for a burial space, such as a casket and vault, then some or all of the additional $2245 of funds might have been excludable under 416.1231(a). We believe that such a designation would be ineffective under the terms of this agreement to transform otherwise countable trust assets into excludable resources. The fact that funds are held in trust for the specific purpose of purchasing a burial space in the future is not equivalent to owning or possessing a burial space in the present. Since current ownership, or right to possess, is an essential condition of the burial space exclusion, it would be very difficult, if not impossible, to design a trust agreement that would qualify under 20 C.F.R. 416.1231(a).
In sum, we concur with your conclusion that it would be appropriate to consider the first $2000 in trust funds as an exclusion from resources and the remaining $2245 in funds as countable resources.