Norine A. S~, an SSI claimant, and her husband, Arthur S~ entered into a land contract
on August 13, 1998, in which they transferred their property to their son and his
wife. On June 22, 1999, they amended the contract to provide that "Vendor agrees that
Vendor's interest in this land contract and these payments shall not be transferrable
[sic]." You asked whether the change in the contract wording was "acceptable under
the laws of Wisconsin, and does a legal bar to the transfer of the contract now exist
as of June 22, 1999." For the following reasons, we believe that the S~ could sell
their right to receive payments under the contract. Therefore, the contract is a countable
resource for purposes of determining Ms. S~'s SSI entitlement.
On August 13, 1998, Mr. and Mrs. S~ sold farm property to their son and his wife (the
purchasers) for $195,000. The purchasers agreed to pay $106,284.11 toward an existing
obligation to Farm Credit Services. They agreed to pay to the S~'s the balance of
$88,715.89 at the rate of 6%. This balance was payable to the S~ at the rate of $1,100
On June 22, 1999, the S~ amended their contract to provide as follows: "Vendor [i.e.,
the S~] agrees that Vendor's interest in this land contract and these payments shall
not be transferrable [sic]." They also stated that the "corrected" contract was "effective
from the date of that original contract."
Even with the added language concerning transferability, the S~' interest in the land
contract is a resource. Resources for purposes of SSI are 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.
20 C.F.R. § 416.1201 (1999). According to the POMS SI 01120.220 and SI 01140.300, the S~' land contract is a resource, and the value of the resource is presumed to
be the outstanding principal balance. Here, the contract is a resource presumably
valued, as of August 1, 1998, at $88,715.89. See POMS SI 31120.220(I)(2), (J)(2) (value of property agreement as resource is presumed to be principal
unless claimant presents convincing evidence of lesser current market value).
The value of a contract is a resource to the extent that it can be sold and the money
received can be used to meet basic needs. 20 C.F.R. § 416.1201; POMS SI 01120.220(B)(2)(a). Nonliquid resources, such as the land contract, are valued according to
their "equity value," i.e., the market value less any encumbrances. 20 C.F.R. § 416.1201(c)(2).
Here, notwithstanding the language purporting to make the rights to the contract nontransferable,
the right to receive payments under the contract can be sold.
As a general rule, an interest in a contract can be sold and, therefore, is a resource.
See, e.g., Portuguese-American Bank of San Francisco v. Welles, 242 U.S. 7 (1916). Here, in June 1999, the S~ amended their land contract to provide
that "Vendor agrees that Vendor's interest in this land contract and these payments
shall not be transferrable [sic]." The question presented is whether this language
restricts the S~' ability to convert their interest in the contract to receive money.
The general rule is that parties can agree to restrict the right to assign a contract.
See 6 Am. Jur. 2d § 21. However, the restriction on the right to assign a contract is
strictly construed and applies to the delegation to the assignee of the performance
of the contract by the assignor. See id.§ 22. When, as here, the "performance" by the S~ is simply the collection of money,
the restriction on their right to assign means no more than that the assignee (the
person to whom the S~ could assign their rights) could not force the purchasers to
pay the assignees directly. See id. § 25. This general rule is also supported by the Restatement (Second) of Contracts § 322, which explains that a contract term prohibiting assignment of rights under
the contract does not render an assignment ineffective or prevent the assignee from
acquiring rights against the assignor. Therefore, in view of these principles, the
S~ can assign their right to the money due to them under the contract even though
the contract purports to limit their right of transfer. Although the purchasers may
still be able to insist on making payments to the S~ directly instead of to the assignee,
the S~ would themselves be liable to pay any money received over to the assignee.
Because the S~' contract rights can be sold, the contract is a resource.
In this matter the resource value is the equity value of the contract, and based on
the language in the contract, we believe that as of August 1998, the S~' equity value
appears to have been $88,715.89. This amount will decrease each year, as the purchasers
make their payments, but clearly exceeds the SSI resource limit of $3,000. The part
of the monthly payment constituting the 6% interest is income to the S~. POMS § SI 01120.220(B).
For the foregoing reasons, we believe that the land contract entered into by the S~
continues to be a countable resource to them and the interest payments are unearned
income to them. If the contract were not a resource, the $1,100 monthly payment would
be countable unearned income to them.
Thomas W. C~
Regional Chief Counsel
Assistant Regional Counsel