TN 1 (06-06)
PS 01820.025 Michigan
A. PS 06-122 SSI-Michigan-Review of Property of John E~, ~ REPLY Your Reference: S2D5G6, SI 2-1-6 MI (E~) Our Reference: 05-0134
DATE: April 24, 2006
This opinion analyzes a probate court order that provided non-home real property to an SSI beneficiary, and the beneficiary's subsequent transfer of the property. In June, 2000 a probate court order was executed resulting in an SSI beneficiary receiving sole ownership of one piece of non-home real property (Property A) and a one-third interest in another (Property B). The beneficiary entered into a land contract agreement with a third party for property A in October, 2001 and property B was sold on the open market in July, 2004. In January, 2004 the beneficiary established a living trust with the intention of placing property A in the trust for the benefit of two of the beneficiary's relatives. Property A is determined to be the beneficiary's resource until the land contract was issued. At that time, the land contract becomes a resource to the beneficiary in the amount of the balance due. The beneficiary's one-third interest in property B is also determined to be a resource. The transfer of property A into the trust is determined to be a transfer for less than fair market value since no compensation was received. Additionally, the beneficiary did not receive one-third of the proceeds from the sale of property B, resulting in another transfer for less than fair market value.
We have reviewed the documents that you provided and concluded that, for the reasons stated below, the house in Saginaw, Michigan, as well as his one-third interest in the real property in White Cloud, Michigan, should be considered a resource of John E~. We further conclude that Mr. E~ later disposed of these resources for less than fair market value.
According to the facts provided, a probate court order was executed in June 2000 due to the death of John E~'s brother, Thomas E~. The order provided that the house in Saginaw, Michigan be transferred and deeded to John E~ and the real property in White Cloud, Michigan, be transferred and deeded to John E~ and Thomas E~'s two minor children as joint tenants with full rights of survivorship.
In July 2000, Mr. E~ signed a notarized statement indicating that the Saginaw house will pay all the expenses for the house in White Cloud, including taxes, insurance and maintenance expenses. At that time, Mr. E~ was renting the Saginaw house for $300 per month. He further stated that he was "just the overseer" of the two properties for his brother's estate.
When the Agency became aware of this situation, Mr. E~ was notified that he was no longer eligible for SSI due to excess resources because of his sole ownership of the Saginaw house (Mr. E~ also owned the home in which he lived in Weidman, Michigan). Mr. E~ insisted that he never benefited or profited from either the Saginaw or White Cloud properties and claimed they were deeded to him because his niece and nephew were minors.
In October 2001, Mr. E~ entered into a land contract agreement for the property in Saginaw in the amount of $14,000. He alleged that the buyer continued to make monthly payments of $300, which paid the expenses of the White Cloud home. Later, Mr. E~ alleged that the money went towards renovations and back taxes on the Saginaw property and that he "lost" money on the arrangement.
Mr. E~'s attorney informed the Agency that he believed that the Saginaw house being deeded in Mr. E~'s name was incorrect. He was unable to discuss the matter with the attorney or attorneys involved in the probate matter. Mr. E~'s attorney then prepared a living trust agreement, in January 2004 (about three and one-half years after the probate court order was entered). The living trust agreement names Mr. E~ as the settlor and initial trustee, refers to the probate court order and provides that the intent of the conveyances of the properties was for Mr. E~ to act as trustee for the benefit of his brother's two children and manage the properties. It also provided that the Saginaw property was sold pursuant to a land contract and had been deeded to Mr. E~ solely for the purpose of collecting the proceeds to maintain the White Cloud house. The living trust agreement also indicated that it was not intended that Mr. E~ have any beneficial interest in the Saginaw property. It further provides that the agreement is intended to be irrevocable and for the sole purpose of transferring the Saginaw property to the trust intending to effectuate the actual practice of the parties since the date of the court order of June 2000.
In July 2004, the buyer of the Saginaw house allegedly stopped making the monthly land contract payment. The last monthly payment was received in early July 2004.
Also in July 2004, the White Cloud house was sold for $60,000.00. Apparently, Mr. E~'s niece and nephew were no longer minors and decided to sell the home. Mr. E~ and his niece and nephew signed the Seller's Statement and Warranty Deed, however, Substitute Form 1099S and copies of checks show that the proceeds of the sale were issued only to Mr. E~'s niece and nephew.
Finally, in February 2005, the buyer of the Saginaw house fulfilled the land contract and the agreed payoff amount was $6000. According to an attorney, a check made out to John E~ was sent directly to him. He deducted attorney and title insurance fees, which left a balance of $5,090, and sent a check in this amount to Mr. E~'s nephew, Thomas E~, Jr.
A. The Saginaw Property.
For SSI purposes, "resource means 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 or maintenance." 20 C.F.R. § 416.1201(a). Generally, real property that is not a beneficiary's principal place of residence is a countable resource. POMS SI 01130.100A.6.a. It is our understanding that Mr. E~'s niece and nephew did not reside in either property. Therefore, from the time the Saginaw house was transferred and deeded to Mr. E~ until October 12, 2001, when he entered into a land contract agreement, it should be considered a resource of Mr. E~'s as it was transferred and deeded solely to him. Further, the $300 monthly rent payment constitutes income belonging to Mr. E~. POMS SI 00830.505 (rent is a payment which an individual receives for the use of real or personal property). However, since Mr. E~ used these payments for maintaining the Saginaw property and/or the White Cloud property, the rental payments were offset by ordinary and necessary expenses, such that Mr. E~ did not have any net rental income. See POMS SI 00830.505.
As stated above, in October 2001, Mr. E~ entered into a land contract agreement for the Saginaw house for $14,000. POMS SI 01140.300B.2. The land contract is a resource to the seller, who is the owner of the agreement. POMS SI 01140.300.C.1. The resource value of a land contract (to the Seller) is assumed to be its outstanding principal balance, unless the individual provides evidence to the contrary. POMS SI 01140.300.C.3. Here, since Mr. E~ and the buyer of the Saginaw house ultimately agreed to a contract payoff amount of $6,000, we believe that the land contract is a resource which should be valued at $6,000 belonging to Mr. E~ but the Saginaw house is no longer a resource as of the date of the contract. Any principal payments on the land contract would be a conversion of a resource, and interest payments would be income. POMS SI 01140.300.C.1.
In January 2004, Mr. E~ transferred the land contract for the Saginaw house into a living trust. The trust agreement names Mr. E~ as settlor and initial trustee and refers to the probate court order and provides that the intent of the conveyances of the properties was for Mr. E~ to act as trustee for the benefit of his brother's two children and manage the properties. It also provided that the Saginaw property was sold pursuant to a land contract and had been deeded to Mr. E~ solely for the purpose of collecting the proceeds to maintain the White Cloud house. The living trust agreement also indicated that it was not intended that Mr. E~ have any beneficial interest in the Saginaw property. It further provides that the agreement is intended to be irrevocable and for the sole purpose of transferring the Saginaw property to the trust intending to effectuate the actual practice of the parties since the date of the court order of June 2000. The trust agreement also provided that any sums left over after payment of the costs associated with the White Cloud property shall be held in trust for Mr. E~'s niece and nephew and paid in equal shares upon their attaining the age of twenty-five.
Although Mr. E~ claimed that he had always held the Saginaw property for the benefit of his niece and nephew, we have been informed that he later acknowledged that he and his deceased brother never discussed that the decedent would leave the property to Mr. E~ and he was not even sure that the decedent wished for him to receive the property. Therefore, from the time of the June 2000 probate court order through the creation of the living trust agreement, the Saginaw property, and the subsequent land contract, were resources belonging to Mr. E~.
Mr. E~'s transfer of the Saginaw into the trust was a transfer for less than fair market value, as Mr. E~ did not appear to receive anything in exchange for the home. POMS SI 01150.001, et. seq. We note that the exception in POMS SI 01150.125 (Exceptions - transfers for purposes other than to obtain SSI) would not be applicable since the trust was created in apparent response to an Agency notification of excess resources.
B. The White Cloud Property.
The June 2000 probate court order ordered that the real property in White Cloud be transferred and deeded to Mr. E~ and Thomas E~'s two minor children as joint tenants with full rights of survivorship. We conclude that Mr. E~'s one-third interest in the White Cloud property was a resource. Based upon information provided to us, it is our understanding that the White Cloud property was a "hunting and fishing cabin" and Mr. E~'s niece and nephew did not reside there. Since Mr. E~'s niece and nephew were not living in the house in White Cloud, Mr. E~'s one-third interest was a resource. POMS SI CH101110.510.
The White Cloud property was sold in July 2004 and, apparently, Mr. E~'s niece and nephew received all the proceeds from the sale. This constitutes another transfer for less than fair market value, as Mr. E~, as one-third owner of the White Cloud property, was entitled to one-third of the proceeds from the sale.
In sum, we conclude that the Saginaw house and land contract through the date of the January 21, 2004, living trust agreement, as well as the one-third interest in the White Cloud house were resources belonging to Mr. E~. Further, Mr. E~'s transfer of the Saginaw land contract into the trust constituted a transfer for less than fair market value. Finally, the sale of the White Cloud property also constituted a transfer for less than fair market value, as Mr. E~ did not receive any of the sale proceeds despite having a one-third interest in the property.