POMS Reference

This change was made on Apr 18, 2018. See latest version.
Text removed
Text added

PS 01810.011: Florida

changes
*
  • Effective Dates: 12/08/2017 - Present
  • Effective Dates: 04/18/2018 - Present
  • TN 12 (12-17)
  • TN 14 (04-18)
  • PS 01810.011 Florida
  • A. PS 18-014 Status of Interest in Limited Liability Company as a Countable Resource for Supplemental Security Income (SSI) Eligibility
  • Date: November 2, 2017
  • 1. Syllabus
  • In this case, the Regional Chief Counsel (RCC) concludes that the SSI recipient’s 100% ownership interest in a Limited Liability Company (LLC) is a countable resource for determining the recipient’s SSI eligibility. Under Florida law, because the LLC’s operating agreement entitles the recipient to a distribution based on his 100% ownership interest, he has a “transferable interest” that is personal property. Additionally, since the operating agreement contains no restriction on the transfer of ownership interest, the recipient has the legal right to convert it to cash and use the funds for support and maintenance. Therefore, it is a countable resource.
  • The RCC also concludes that all of the LLC’s income is attributable to the recipient because Florida law would treat the recipient and the corporation as one person in this case. See below for details.
  • 2. Opinion
  • QUESTION
  • You have asked whether a Supplemental Security Income (SSI) recipient’s 100% interest in a limited liability company (LLC) is a countable resource for determining the recipient’s eligibility for SSI. You have also asked how to treat the rent from H~ LLC’s operation of the apartment building for income purposes.
  • OPINION
  • The SSI recipient’s interest in the LLC should be considered a countable resource for determining the recipient’s eligibility for SSI. The rent collected by the LLC should be treated as income to the recipient.
  • BACKGROUND
  • F~ (Recipient) currently receives SSI payments. He is the sole member of H~ LLC and has a 100% ownership interest. H~ LLC was incorporated under the Florida Limited Liability Company Act, and its operating agreement states that it will be construed and enforced in accordance with the laws of the state of Florida. By default, the H~ LLC operating agreement requires distributions of gains or losses pro rata to members as a proportion of their ownership percentage interest. The H~ LLC operating agreement allows members to withdraw from the LLC by assigning their interests and receiving a distribution equal to their capital account. Members may transfer their interest to any person.
  • On June XX, 2015, the G~ Trust sold to H~ LLC real property located in L~, Florida. According to the information provided, the property is an eight-unit apartment building. G~ Trust sold the property for $240,000 and provided interest-free seller financing to H~ LLC. A promissory note executed with the mortgage states H~ LLC will pay G~ Trust $1,500 per month until October 2028.
  • Recipient lives in one of the eight apartment units and uses another unit as storage. As of August 2017, H~ LLC rented the remaining apartments for a total monthly income of $3,105.
  • Recipient provided most, but not all, of H~ LLC’s checking account statements from June 2015 through July 2017. The transaction history shows numerous ATM withdrawals and purchases at gas stations, fast food restaurants, and retail stores, as well as payments to Comcast, Tracfone, and Planet Fitness for “Club Fees F~.”
  • DISCUSSION
  • SSI is a general public assistance program for aged, blind, or disabled individuals who meet certain income and resource restrictions and other eligibility requirements. See Social Security Act (Act) §§ 1602, 1611(a); 20 C.F.R. §§ 416.110, 416.202 (2017).*1 The Act does not define “resources” and provides only a list of certain items excluded in determining the resources of an individual. See Act § 1613(a). However, Congress empowered the Commissioner to promulgate rules and regulations to establish the right to SSI payments. See Act §§ 205(a), 1631(d)(1). Pursuant to that authority, the Commissioner has clarified that resources include “any real or personal property interest that an individual . . . owns and could convert to cash to be used for his or her support and maintenance.” 20 C.F.R. § 416.1201(a) (2017); see Program Operations Manual System (POMS) SI 01110.100B.1; POMS SI 01120.010B. “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. If a property right cannot be liquidated, the property will not be considered a resource of the individual. . . .” 20 C.F.R. § 416.1201(a)(1); see POMS SI 01110.100B.1, B.3; POMS SI 01110.115A; POMS SI 01120.010B.
  • The agency looks to state law to determine an individual’s ability to liquidate his or her ownership interest in property. See POMS SI 01110.500C (noting an ownership interest may vary depending on state law); see also White ex rel. Smith v. Apfel, 167 F.3d 369, 373 (7th Cir. 1999) (stating that “[i]n determining whether . . . accounts are resources, the Commissioner looks to state law to determine whether the conservator has the right, authority or power to liquidate the account. . . .”). H~ LLC was incorporated in Florida, and Florida law governs its operating agreement, so we look to Florida law to determine if Recipient can liquidate his 100% ownership interest in H~ LLC.
  • Under Florida law, the right to a distribution from an LLC is a “transferable interest.” Fla. Stat. Ann. § 605.0102(66) (West 2017). Such transferable interests are personal property. See Fla. Stat. Ann. § 605.0501 (West 2017). Under H~ LLC’s operating agreement, Recipient is entitled to a distribution based on his 100% ownership interest, so he has a “transferable interest” that is personal property. Recipient’s 100% ownership interest in H~ LLC is therefore a resource if Recipient can convert it to cash or otherwise liquidate it. See 20 C.F.R. § 416.1201(a)(1); POMS SI 01110.100B.1; POMS SI 01120.010B.2.
  • Florida law allows Recipient to liquidate his ownership interest in H~ LLC. A transferable interest may be transferred absent a restriction of transfer clause contained in the LLC’s operating agreement. See Fla. Stat. Ann. § 605.0502(1), (6) (West 2017); see also Olmstead v. F.T.C., 44 So. 3d 76, 80 (Fla. 2010) (stating that “the sole member in a single-member LLC may freely transfer the owner’s entire interest in the LLC”), overruled by statute on other grounds as stated in Regions Bank v. Hyman, No. 8:09-CV-1841-T-17MAP, 2015 WL 1912251, at *7 (M.D. Fla. Apr. 27, 2015). H~ LLC’s operating agreement contains no restriction on the transfer of Recipient’s 100% ownership interest but instead allows him to transfer it to any person. Further, Recipient’s ownership interest has an associated market value. See e.g., Olmstead, 44 So. 3d at 80 (noting the value of an LLC membership interest to a judgment creditor); Cardella-Navarro v. Navarro, 21 So. 3d 906, 906-07 (Fla. Dist. Ct. App. 2009) (discussing the market value of a transferred interest in an LLC as part of a divorce proceeding) (Cope, J., dissenting). Accordingly, Recipient’s ownership interest in H~ LLC is a resource for SSI purposes and has an associated equity value. See 20 C.F.R. § 416.1201(a)(1); POMS SI 01110.100B.1; POMS SI 01110.400; POMS SI 01120.010B.2.
  • You have also asked how to treat the rent from H~ LLC’s operation of the apartment building for income purposes. The relevant inquiry in a resource determination is whether the individual could convert the property to cash rather than whether the property is currently generating income. See 20 C.F.R. § 416.1201(a); POMS SI 01110.100B.1; POMS SI 01120.010B. For SSI purposes, Recipient’s ownership interest in H~ LLC should be evaluated by his equity in that resource. See 20 C.F.R. § 416.1201(b). However, even disregarding the equity value of the ownership interest, Recipient’s attempt to use the LLC corporate form to prevent counting of resources and income is improper. Florida courts will pierce the “corporate veil” where a corporation is formed for an improper purpose. Lipsig v. Ramlawi, 760 So. 2d 170, 187 (Fla. Dist. Ct. App. 2000). An improper purpose may be found, for example, where shareholders form a corporation to secrete assets. See Estudios, Proyectos e Inversiones de Centro Am., S.A. (EPICA) v. Swiss Bank Corp. (Overseas) S.A., 507 So. 2d 1119, 1120 (Fla. Dist. Ct. App. 1987). Another “important factor” is “whether corporate funds were used for the individual’s benefit.” Eckhardt v. United States, 463 F. App’x 852, 856 (11th Cir. 2012) (applying Florida law). Here, Recipient is the sole member and has a 100% ownership interest in H~ LLC, and it appears Recipient has used H~ LLC’s checking account funds to pay for his personal expenses including cash withdrawals, food, entertainment, and gym memberships. Where one person dominates a corporation and the veil is pierced, the person and the corporation are “treated as one person under the law.” Raber v. Osprey Alaska, Inc., 187 F.R.D. 675, 678 (M.D. Fla. 1999). Thus, all of H~ LLC’s income may still be considered income of Recipient. See e.g. United States v. Lena, No. 05-80669-CIV, 2008 WL 2774375, at *5 (S.D. Fla. June 11, 2008) (noting the government may pierce the corporate veil to attach assets an individual has attempted to hide behind a legal fiction).
  • Further, we note that Recipient appears to expend significant effort in leasing units within the H~ LLC property and contributing to its maintenance. An individual who is doing work that is substantial gainful activity (SGA) is not disabled for SSI purposes. See 20 C.F.R. §§ 416.920(a)(4)(i), (b), 416.971. SGA is work that involves doing significant and productive physical or mental duties and is the kind of work usually done for pay or profit, regardless of whether a profit is realized. See 20 C.F.R. §§ 416.910, 416.972. Recipient does both physical and mental work in leasing and maintaining the H~ LLC property and, as described above, the rental income is attributable to Recipient. Accordingly, Recipient may be engaged in SGA as an employee of H~ LLC or as a self-employed person under the applicable SGA tests for such individuals.
  • CONCLUSION
  • Recipient’s interest in H~ LLC should be considered a countable resource. Even if the interest were not a countable resource, all of H~ LLC’s income are attributable to Recipient. Further, given Recipient’s activity in operating and maintaining the rental units at the H~ LLC property, he may be engaging in SGA. We recommend further development of this SGA issue.
  • B. PS 17-119 State Law Survey of Conservatorship/Blocked Accounts in Atlanta Region
  • Date: July 20, 2018
  • 1. Syllabus
  • The Regional Chief Counsel (RCC) opinion provides a comprehensive list of State laws, in the Atlanta Region, on the ability of individuals to access funds in conservatorship/blocked accounts for the purpose of support and maintenance for Supplemental Security Income (SSI) claimants and recipients.
  • 2. Opinion
  • QUESTION
  • You asked for a comprehensive list of state laws in the Atlanta Region on the ability of individuals to access funds in conservatorship/blocked accounts for the purpose of support and maintenance for Supplemental Security Income (SSI) claimants and recipients.
  • DISCUSSION
  • Introduction
  • A “conservatorship account” (sometimes referred to as a “blocked account”) is a financial account in which a person or institution has been appointed by a court to manage and preserve the assets of an individual (i.e., a claimant, recipient, or other person whose resources are deemable to the claimant or recipient) that are held in the account. See Program Operations Manual System (POMS) SI 01140.215A.1, A.2. The Social Security Administration (SSA) assumes, absent evidence to the contrary, that funds in a conservatorship account are available for the individual’s support and maintenance (and are, therefore, that individual’s resource) if state law requires that funds in a conservatorship account be made available for the care and maintenance of an individual. See POMS SI 01140.215B.1. However, state law may not specifically address the issue, or state law may specifically prohibit the use of funds held in a conservatorship account for the individual’s general support in certain circumstances. See id.
  • Thus, SSA needs regional instructions regarding any presumptions about conservatorship accounts for each state. We note that in the states in the Atlanta Region, not all states have laws that specifically discuss conservatorship accounts. However, each state does allow for the appointment of persons similar to conservators and the creation of financial accounts similar to conservatorship accounts.
  • Alabama
  • Under Alabama law, a court may appoint a conservator for the estate and affairs of a minor or a person unable to manage property and business affairs effectively if the court determines that the minor or person has funds or property that requires management or protection and the funds are needed for health, support, education, or maintenance and that protection is necessary or desirable to obtain or provide funds. See Ala. Code § 26-2A-130 (2017). The appointment of a conservator vests in the conservator title as trustee of the property of the protected person, and the protected person generally cannot transfer or assign his or her interest in the property vested in a conservator. See Ala. Code § 26-2A-148 (2017). A conservator is given numerous powers over the property of a protected person, including the power to distribute the property of the protected person. See Ala. Code §§ 26-2A-152, 26-2A-153 (2017). In particular, “[a] conservator may expend or distribute income or principal of the estate without court authorization or confirmation for the health, support, education, or maintenance of the protected person and dependents.” Ala. Code § 26-2A-153(a). In addition, a conservator must expend or distribute sums reasonably necessary depending on the specific circumstances of the protected person, including the protected person’s accustomed standard of living. See Ala. Code § 26-2A-153(a)(2).
  • Thus, under Alabama law SSA may assume that funds in the conservatorship can be made available for the support and maintenance of the SSI claimant or recipient.
  • Florida
  • Although Florida has a chapter under its domestic relations law titled “Conservatorship,” the chapter is limited to conservatorships for persons who are absentees. See Fla. Stat. Ann. §§ 747.01 - .052 (West 2017). “Absentee” includes persons serving in the Armed Forces of the United States or similar entities during a time of hostilities who are reported as missing in action or who disappears under circumstances indicating her or she may have died. See Fla. Stat. Ann. § 747.01. Because “absentee” does not include persons who might be eligible for SSI, Florida’s formal conservatorship law is not applicable here. However, Florida guardianship law appears to address the circumstances under which a party may have control of the funds or assets of a person who is not an “absentee.” See Fla. Stat. Ann. §§ 744.101 - .653 (West 2017).
  • Under Florida guardianship law, a guardian of an incapacitated person is a fiduciary and may exercise only those rights that have been removed from the ward and delegated to the guardian; the guardian shall act within the scope of the authority granted by the court and as provided by law. Fla. Stat. Ann. § 744.361(1), (2). A guardian, if authorized by the court, shall take possession of all of the ward’s property and rents, income, issues, profits from it and the proceeds of any sale, lease, or mortgage of the property. See Fla. Stat. Ann. § 744.361(12) (West 2017). The guardian may use the ward’s assets and income from the property for care, support, maintenance, and education of the ward or the ward’s dependents, as provided under terms of guardianship plan or by law or as authorized by the court. See Fla. Stat. Ann. §§ 744.361(12), 744.397(1); see also Fla. Stat Ann. § 744.444 (without obtaining court approval, a plenary guardian of the property or a limited guardian of the property within the powers granted by the order appointing the guardian or an approved annual/amended guardianship report may pay reasonable living expenses for the ward (but no authorization to pay funds for living expenses of minor ward if one or both parents are alive)).
  • Thus, before assuming the funds are available for support and maintenance of the SSI claimant or recipient, SSA should review the court order/initial plan to determine the scope of authority granted by the court.
  • Georgia
  • Under Georgia law, a conservator shall receive, collect, and make decisions about the property of a minor or ward except as otherwise provided by law or by the court and must “[p]rovide for the support, care, education, health, and welfare of the [minor or ward].” Ga. Code Ann. §§ 29-3-21(a), (b)(5), 29-5-22(a), (b)(5) (West 2017). In addition, a minor or ward for whom a conservatorship is created has the right to have his or her property “utilized as necessary to provide adequately for the [minor’s or ward’s] support, care, education, health, and welfare.” Ga. Code Ann. §§ 29-3-20(a)(3), 29-5-20(a)(3) (West 2017). A conservator may use any income from the property/funds within the conservatorship for the support, care, education, health, and welfare of the minor or ward. See Ga. Code Ann. §§ 29-3-22(a)(1), 29-3-30(c), 29-5-23(a)(1), 29-5-30(c) (West 2017). However, the conservator must have approval from the court of a budget for expending funds/resources in excess of the income from the property. See Ga. Code Ann. §§ 29-3-22(a)(1), 29-5-23(a)(1).
  • Thus, under Georgia law, SSA may assume that the funds in the conservatorship can be made available for the support and maintenance of the SSI claimant or recipient. However, SSA should obtain the court order granting the conservatorship to check for any restrictions on the disbursement of the assets of the minor or ward.
  • Kentucky
  • Under Kentucky law, any interested person or entity may petition the district court for appointment of a conservator for a minor who owns property requiring management or protection. See Ky. Rev. Stat. Ann. § 387.025(2) (West 2017). Similarly, any interested person or an individual needing conservatorship may petition the district court for the appointment of a limited conservator or conservator. See Ky. Rev. Stat. Ann. § 387.530(1) (West 2017). A guardian must expend or distribute income or principal of the ward’s estate for the support, care, and education of the ward, but the district court may limit or restrict the guardian’s exercise of this power. See Ky. Rev. Stat. Ann. § 387.065(4) (West 2017). In addition, a guardian cannot provide for the support, care, or education of a ward if a parent is legally obligated and financially able to provide support, care, and education. See Ky. Rev. Stat. Ann. § 387.065(6). A conservator must generally use the income and principal of the account for the support, care, and education of the minor. A conservator generally does not require court authorization to use funds for these purposes, but a court may require the court’s order before the conservator withdraws funds and a court may restrict access to the account’s funds. Ky. Rev. Stat. Ann. §§ 387.065(4)-(6), 387.122, 387.125(1), 387.137.
  • Thus, in Kentucky, SSA may assume that the funds in a conservatorship account can be made available for the support and maintenance of the SSI claimant or recipient. However, SSA should obtain the court order granting the conservatorship to check for any restrictions on the disbursement of the assets of the minor or ward.
  • Mississippi
  • Under Mississippi law, a court “may appoint a conservator to have charge and management of the property of” a person who “is incapable of managing his own estate by reason of advanced age, physical incapacity or mental weakness.” Miss. Code Ann. § 93-13-251 (West 2017). A “conservator shall have the same duties, powers and responsibilities as a guardian of a minor, and all laws relative to the guardianship of a minor shall be applicable to a conservator.” Miss. Code Ann. § 93-13-259 (West 2017); see also Miss. Code Ann. § 93-13-261 (West 2017) (stating “the person whose property or person is in the charge of such conservator shall be limited in his or her contractual powers and contractual obligations and conveyance powers to the same extent as a minor”). Applying Mississippi guardianship law, a court may determine the amount of funds that a conservator may expend for the support and maintenance of the person for whom the conservatorship is established. See Miss. Code Ann. § 93-13-35 (West 2017). The court also may authorize the sale of the person’s property if the income from the person’s estate does not cover necessary expenses, and a conservator cannot make any expenditure in excess of the person’s income without a previous court order authorizing such expenditures. See id.; see also Miss. Code Ann. § 93-13-263 (West 2017) (stating “[i]f there be any persons dependent upon the person for whom the conservator has been appointed, the court shall provide for their support and maintenance from the assets of said estate and the conservator shall be directed to make the necessary support and maintenance available from the assets of said estate”). A conservator has the duty “to apply so much of the income, profit or body thereof as may be necessary for the comfortable maintenance and support of the [person for whom the conservatorship is established] after obtaining an order of the court fixing the amount.” Miss. Code Ann. § 93-13-38(2) (West 2017). A conservator empowered to purchase a home for the person for whom the conservatorship is established and pay the person’s debts. See id. However, if the person for whom the conservatorship is established is a minor and had a parent, the court must determine whether the expense of maintaining and educating the minor must be borne by the guardian. See Miss. Code Ann. § 93-13-37 (West 2017).
  • Thus, in Mississippi, SSA cannot assume the funds in a conservatorship account are available for the support and maintenance of the SSI claimant or recipient. SSA must review the court order establishing the conservatorship and any subsequent court orders concerning the authority of the conservator to use the funds of the SSI claimant or recipient.
  • North Carolina
  • Under North Carolina law, the statute lays out the specific powers of a general guardian or guardian of the estate (a legal designation that the agency considers equivalent to a conservator), which includes an appointee, who takes possession of the individual’s estate for the individual’s use to expend estate income for the support, maintenance, and education of the individual’s minor children, spouse, and dependents and who can petition the court for prior approval of expenditures from the estate principle for these purposes. N.C.G.S.A. § 35A-1251(1), (21).
  • Thus, it may be presumed that funds under conservatorship are to be made available for the maintenance and support of the protected individual.
  • South Carolina
  • Currently in South Carolina, a guardian/conservator may expend or distribute sums from the principal of an estate without court authorization or confirmation for the support, education, care, or benefit of the protected person and his dependents in accordance with certain principals. See Code of Laws of S.C. § 62-5-425. Thus, the funds under conservatorship are countable as a resource for the protected individual.
  • Beginning January 1, 2019, a guardian serving as a fiduciary, is obligated to apply the money for the benefit of the minor/incapacitated person, but the court must explicitly set forth the rights and powers vested in the conservator (if the powers are not entrusted to the conservator, they are retained by the protected individual). See S.C. Statute § 62-5-103(B) (2017 amendment); § 62-5-304(A) (for minors); § 62-5-407(A), (B) (for incapacitated adults)); § 62-5-304(B) (2017 amendment). Subject to rights and powers retained by the ward and except as modified by order of the court, the guardian has the following duties, rights and power: if entitled to custody of his ward, providing for the care, comfort, and maintenance of the ward. See § 62-5-309(A) (2017 amendment); § 62-5-423 (A)(2) (a conservator may expend or distribute sums from the estate without further court authorization for the health, education, maintenance, and support of the protected person and his dependents in accordance with certain principles as outlined in the statute).
  • Thus, in South Carolina, SSA may currently assume that the funds in a conservatorship account can be made available for the support and maintenance of the SSI claimant or recipient. However, beginning in January 2019, SSA should obtain the court order granting the conservatorship to check for any restrictions on the disbursement of the assets the claimant.
  • Tennessee
  • Under Tennessee law, conservatorship “is a proceeding in which a court removes the decision-making powers and duties, in whole or in part, in a least restrictive manner, from a person with a disability who lacks capacity to make decisions in one or more important areas and places responsibility for one or more of those decisions in a conservator or co-conservators.” Tenn. Code Ann. § 34-1-101(4)(B) (West 2017). A conservator is a person or entity “appointed by the court to exercise the decision-making rights and duties of the person with a disability in one or more areas in which the person lacks capacity as determined and required by the orders of the court.” Tenn. Code Ann. § 34-1-101(4)(A); see also Tenn. Code Ann. § 34-1-101(7) (stating that a conservator is a fiduciary). The ability of the conservator to use the funds placed under conservatorship will depend on the specific rights and duties laid out in the letters of conservatorship or court order establishing the conservatorship. See Tenn. Code Ann. §§ 34-1-104(a), 34-1-113(a)-(c), 34-1-122, 34-3-107(a)(2) (West 2017); see also In re Conservatorship of Melton, No. E2014-01384-COA-R3-CV, 2015 WL 4594126, at *4 (Tenn. Ct. App. July 31, 2015) (stating the authority, rights and responsibilities of a conservator are not independent of the court, as a conservator acts as the court’s agent). The Court can grant the conservator the power to pay bills and expenses of the person with a disability, but the specific powers of the conservator will be based on the letters of conservatorship or court order. Tenn. Code Ann. § 34-1-113(a), (b), 34-1-129, 34-3-107(a)(2) (West 2017); see also Tenn. Code Ann. § 34-1-109(b) (West 2017) (stating that “the fiduciary’s faithful performance oath shall include a promise to timely file each required inventory and accounting and to spend the assets of the minor or person with a disability only as approved by the court”); Tenn. Code Ann. § 34-3-108 (West 2017) (allowing for the modification of a conservator’s duties by court order).
  • Thus, in Tennessee, SSA cannot assume the funds in a conservatorship account are available for the support and maintenance of the SSI claimant or recipient. SSA must review the letters of conservatorship and court order(s) to determine the scope of authority granted to the conservator by the court.
  • Sincerely,
  • M~
  • Regional Chief Counsel
  • By: K~
  • Assistant Regional Counsel
  • Footnotes:
  • [1]
  • . * All references to the C.F.R. are to the 2017 edition.
  • . . . * All references to the C.F.R. are to the 2017 edition.