TN 12 (10-19)

PS 01820.055 Wisconsin

A. CPM 19-204 Wisconsin: Restrictions on the Disposal of Real Property Ownership Interest – REPLY Claimant: R. P~

September 30, 2019

1. Syllabus

In this opinion, the Regional Chief Counsel examines an SSI individual's ownership rights over multiple property transactions during and following a divorce and considers whether the transactions constitute transfers of resources at less than fair market value. For the first property, the RCC concludes that the SSI individual transferred resources for less than fair market value to a separated spouse, which is an exception to the period of ineligibility. For the second property, the SSI individual's ownership interest in the property would constitute a resource for SSI and a transfer for less than fair market value occurred when he executed a quitclaim deed.

2. Opinion

You asked about the effect of a divorce and a quitclaim deed on R. P~’s ownership rights in a home previously owned jointly by him and his former spouse in Fairchild, Wisconsin, for purposes of determining his eligibility for Supplemental Security Income (SSI). Specifically, you want to know whether the quitclaim deed indicated that R. P~ transferred a resource for less than fair market value. For the reasons discussed below, we believe that after the divorce, R. P~ owned an undivided one-half interest in the home as a tenant in common under Wisconsin law. This was a countable resource to R. P~ for SSI purposes. We believe R. P~ transferred this resource for less than fair market value when he executed the quitclaim deed removing his name and transferring his ownership interest to his former spouse two months after the divorce.

BACKGROUND

On August 16, 2018, R. P~ and J. P~ filed a joint petition for divorce in the Circuit Court of Eau Claire County, Wisconsin. At the time, they owned a marital home in Augusta, Wisconsin (Augusta home). You indicated that R. P~ lived in that home alone.

On August 29, 2018, J. P~ purchased a home in Fairchild, Wisconsin (Fairchild home), for $36,000, with money she borrowed from another individual, W~. The Fairchild home was J. P~’s primary residence.

On September 27, 2018, R. P~ and J. P~ sold the Augusta home for $160,000. You indicated that R. P~ allowed J. P~ to keep all of the proceeds from the sale, which were $44,754.21. This is corroborated by a signed statement from J. P~ dated October 12, 2018, that she did not give R. P~ any of the proceeds from the sale of the Augusta home.

In a signed statement dated October 6, 2018, W~ stated that he received $36,105.67 from J. P~ as repayment of her loan for the purchase of the Fairchild home. J. P~ also indicated that she repaid W~ $36,105.67 from the proceeds of the Augusta home sale.

A quitclaim deed for the Fairchild home dated November 13, 2018, shows J. P~ as the grantor and “J. P~ and R. P~, husband and wife” as grantees. The deed stated that it was “executed to create survivorship marital property.” You indicated that the parties alleged they were separated and not living together during this period.

On March 20, 2019, R. P~ and J. P~ filed an amended marital settlement agreement in their divorce case. According to this document, both parties owned the Fairchild home as a primary residence, and they agreed that the property would be awarded to both of them upon divorce. On March 29, 2019, the circuit court held a stipulated divorce hearing, at which it granted their divorce. On the same date, the court issued a “Findings of Fact, Conclusions of Law, and Judgment of Divorce,” which approved and incorporated the amended marital settlement agreement.

On May 8, 2019, another quitclaim deed was executed for the Fairchild home, removing R. P~ from the deed “pursuant to divorce.” The accompanying Wisconsin Real Estate Transfer Receipt shows that the value transferred from R. P~ to J. P~ was $18,000.

DISCUSSION

To be eligible for SSI, an individual’s (and spouse’s, if applicable) resources, other than resources excluded from consideration by statute, must not exceed the statutory limit. See 42 U.S.C. § 1382(a); 20 C.F.R. § 416.1205. 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 support and maintenance. See 20 C.F.R. § 416.1201(a); POMS SI 01110.100B.1. In determining the resources of an individual, SSA excludes the individual’s home that is his principal place of residence. See 20 C.F.R. § 416.1212(a);POMS SI 01130.100A, B. The current resource limit for an individual is $2,000.[1] See 42 U.S.C. § 1382(a)(3)(B); 20 C.F.R. § 416.1205(c); POMS SI 01110.003A.2.

In Wisconsin, all property of spouses is presumed to be marital property. See Wis. Stat. § 766.31(2). Specifically, each spouse has a present undivided one-half interest in each item of marital property. See id. § 766.31(3). After a dissolution of marriage, each former spouse owns an undivided one-half interest in the former marital property as a tenant in common, except as provided otherwise in a decree or an agreement entered into by the former spouses after dissolution. See id. § 766.75.

Augusta Home

Here, R. P~ had an undivided one-half interest in the Augusta home, which was a marital home. When he and J. P~ sold the home in September 2018, they each owned half of the proceeds as spouses. As noted above, J. P~ purchased the Fairchild home with the proceeds of the Augusta home. Thus, R. P~’s share of the remaining proceeds, after taking into account the purchase of the Fairchild home, was $4,324.27 ($44,754.21 - $36,105.67 = $8,648.54 ÷ 2 = $4,324.27). This was a countable resource to him. See POMS SI 01110.100A (proceeds from sale of resource are also resources), SI 01110.600B.4 (if individual sells a resource, what he receives in return is a different form of resource).

By allowing J. P~ to keep all of the proceeds of the Augusta home, R. P~ essentially conveyed his share of the remaining proceeds to her. We believe this constituted a transfer of a resource for less than fair market value. See POMS SI 01150.110 (explaining period of ineligibility for SSI for transfers of resources for less than fair market value on or after 12/14/1999). However, there is an exception for a transfer of a non-home resource for less than fair market value to a spouse (including a separated spouse), so the period of ineligibility would not apply here. See POMS SI 01150.123A.

Fairchild Home

R. P~ also had an undivided one-half interest in the Fairchild home, which J. P~ bought during their marriage in August 2018. As noted above, in November 2018 a quitclaim deed was executed establishing the Fairchild home as “survivorship marital property” of R. P~ and J. P~.[2] Under Wisconsin law, survivorship marital property indicates an intent to establish a joint tenancy exclusively between spouses. See Wis. Stat. § 766.60(4)(b)(1)(a), (5). On the death of a spouse, the ownership rights of that spouse in the property vest solely in the surviving spouse by nontestamentary disposition at death. See id . § 766.60(5).

Moreover, when R. P~ and J. P~ divorced in March 2019, the Fairchild home was awarded to both parties, pursuant to the amended marital settlement agreement which was approved by the circuit court. This was consistent with Wisconsin law. See Wis. Stat. § 766.75 (after a dissolution, each former spouse owns undivided one-half interest in former marital property as tenant in common, except as provided otherwise in a decree or agreement entered into by the former spouses after dissolution). There is no evidence of a different disposition in the divorce decree or of any agreement between R. P~ and J. P~ after the divorce. As a result, after the divorce R. P~ had an undivided one-half interest in the Fairchild home as a tenant in common. Since the purchase price of the home in August 2018 was $36,000, the approximate value of R. P~’s interest in the home after the divorce was $18,000. Under the agency’s SSI rules, this was a countable resource to R. P~.[3] See POMS SI 01140.100B (policy for non-home real property).

Thereafter, in May 2019, R. P~ executed a quitclaim deed transferring his interest in the Fairchild home to J. P~. According to a Wisconsin Real Estate Transfer Receipt, the value transferred was $18,000. Thus, we believe that R. P~ transferred a resource for less than fair market value.[4] See POMS SI 01150.110 (explaining period of ineligibility for SSI for transfers of resources for less than fair market value on or after 12/14/1999).

CONCLUSION

For the reasons discussed above, we believe that after his divorce from J. P~ in March 2019, R. P~ owned an undivided one-half interest in the Fairchild home as a tenant in common, which was a countable resource for SSI purposes. R. P~ subsequently transferred this resource for less than fair market value when he executed a quitclaim deed removing his name from the Fairchild home.

B. PS 04-199 SSI-Wisconsin-Review of a Land Contract for Norine A. S~, SSN: ~-Action

DATE: November 15, 1999

1. SYLLABUS

The beneficiary and her husband entered into a land contract in 8/98 in which they sold their property to their son and his wife. In 6/99, they amended the contract to say that the parents' interest in the land contract and any payments from the son were not transferable. The issue is whether the contract wording is acceptable under Wisconsin law and whether a legal bar to the transfer of the contract now exists as of 6/99.

In 8/98, the son agreed to pay the existing obligation on the property of $106,284.11, and to pay the balance of $88,715.89 to his father at the rate of $1,100 a month at a 6 percent interest rate. In 6/99, the parents amended the contract to read that their interest in the land contract and the payments they receive are not transferable, effective from the date of the original contract.

As a general rule, an interest in a contract can be sold and, therefore, is a resource. Also, an individual can agree to restrict the right to assign a contract. This restriction is strictly construed. The parents can assign their right to the money due them under the contract even though the contract purports to limit this right of transfer. Although the purchasers may still be able to insist on making payments to the parents directly instead of to the assignee, the parents would themselves be liable to pay any money received over to the assignee.

Since the parents can sell their right to receive payments under the contract, their interest in the contract is a countable resource for SSI purposes.

2. OPINION

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.

FACTS

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 per month.

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."

DISCUSSION

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).

CONCLUSION

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

By: __________

John Martin

Assistant Regional Counsel


Footnotes:

[1]

This applies both to a single individual and to a separated spouse. See POMS SI 01110.003A.3, SI 01110.530B.1.

[2]

Spouses may reclassify their property by, among other things, a marital property agreement. See Wis. Stat. § 766.31(10). A marital property agreement is an enforceable document signed by both spouses, and can include agreement with respect to any matter affecting either or both spouses’ property, including the disposition of any of either or both spouses’ property upon dissolution. See id. § 766.58(1), (3). There is no indication that R. P~ and J. P~ had a marital property agreement.

[3]

The home exclusion did not apply to R. P~ because the Fairchild home was not his principal place of residence. See 20 C.F.R. § 1212(a).

[4]

The exception for a transfer of a home did not apply because J. P~ was no longer R. P~’s spouse. See POMS SI 01150.122A.1.


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PS 01820.055 - Wisconsin - 10/21/2019
Batch run: 10/21/2019
Rev:10/21/2019