SSR 86-2: SECTION 204(a)(1) OF THE SOCIAL SECURITY ACT (42 U.S.C. 404(a)(1)) OVERPAYMENTS -- LIABILITY OF A LEGATEE OF AN ESTATE
20 CFR 404.502(b)(1)
SSR 86-2
- The decedent, who died on May 23, 1982, was overpaid $5,522.80 in Social Security benefits. The evidence of record showed that the decedent's estate was probated in South Carolina and that its assets, which totaled $77,070.70, were inherited by R, who was also executor of the estate. When the Social Security Administration (SSA) asked R on March 30, 1983, to repay the overpayment incurred by the decedent, he refused, contending that he was not liable for repayment inasmuch as the estate had been closed and its assets had been distributed prior to his receiving notification of SSA's claim. South Carolina's nonclaim statute provides that claims of creditors against an estate will be barred if they are not notified with the executor, administrator, or probate judge within five months after the first publication of notice to the creditors. Moreover, in Delaware v. Irving Trust Company, 92 F.2d 17 (2nd Cir. 1937), the Court decided that fiduciaries are not personally liable under § 192 (now 31 § U.S.C. 3713) where they pay creditors other than the United States if, at the time they made these payments, they were unaware that the person they represented owed money to the United States. Nonetheless, legatees of an estate, including a legatee who may have been the estate's executor or administrator, may be sued individually (in their capacity as legatee, but not in their capacity as fiduciaries) for recovery of funds due the United States, since the Supreme Court decided in United States v. Summerlin, 310 U.S. 414, 60 S.Ct. 1019 (1940) that claims of the United States are not barred by State nonclaim statutes. Held, the right of the United States to regain improper payments from residuary legatees is barred neither by State nonclaim statutes nor by 31 U.S.C. § 3713. Therefore, R is liable individually, but not in his capacity as the estate's executor, for repayment of the overpayment incurred by the decedent.
A question has been raised as to whether a person listed as a legatee of an estate is liable for repayment of a Social Security Administration (SSA) overpayment made to the decedent in claims where the estate was notified of the overpayment only after the estate was probated, closed, and the assets distributed.
The decedent died on May 23, 1982, leaving an outstanding Social Security debt of $5,522.80. His estate was probated through the State of South Carolina and was closed on December 20, 1982. An accounting, dated March 11, 1983, showed that assets of the estate totalling $77,070.70 were inherited by the legatee, R, who had also served as executor of the estate. When SSA asked R on March 30, 1983, to repay the overpayment incurred by the decedent, he refused, contending that he was not liable for repayment inasmuch as the estate had been closed and its assets had been distributed prior to his receiving notification of SSA's claim.
The Code of Laws of South Carolina contains what is known as a nonclaim statute. Statutes of nonclaim are normally considered to be those statutes, usually found in the Probate Court, fixing the time within which claims against a decedent's estate must be filed or presented to the executor or administrator, and which usually further provide that the claims will be barred if not presented within such time. 34 ALR.2d pp. 1004-1005, § 1. The South Carolina nonclaim statute, set forth at § 21-15-640 of the Code, provides that claims of creditors against an estate not filed with the executor, administrator, or probate judge within five months after the first publication of notice to the creditors will be barred. As interpreted by the South Carolina Supreme Court in Moultis v. Degen, 279 S.C.1, 301 S.E.2d 554 (1983), the legislature intended to bar after five months all claims other than those specifically exempted. The specific exemptions which are not barred are "obligations secured by mortgages or other liens which have been duly recorded prior to the expiration of such period."
Nonetheless, there is no doubt that claims of the United States Government are not within nonclaim statutes, this question having been settled by the Supreme Court of the United States. As referenced in United States v. Snyder, 207 F.Supp. 189 (E.D. Pa. 1962),
"The priorities accorded the United States by Congressional action, 31 U.S.C.A. §§ 191, 192, are not affected by statutes of limitations or laches. Mr. Justice Hughes speaking for the majority in United States v. Summerlin, 301 U.S. 414, 60 S.Ct. 1019, 84 L.Ed. 1283 (1940), restates the many cases similarly holding (p. 416, 60 S.Ct. p. 1020):
- "It is well settled that the United States is not bound by State statutes of limitation or subject to the defense of laches in enforcing its rights."
As stated in 34 ALR.2d, p. 1007,
- "Subsequent cases have relied on the authority of the Summerlin case whenever the question has arisen."
The Snyder court, supra, further held, at 191, that
". . . the right of the United States to regain the improper payments from the residuary legatee has been decided favorably to the United States. United States v. Munroe, 65 F.Supp. 213 (W.D. Pa. 1946). The United States may impress a trust on the funds in the hands of the residuary legatee which were not properly a part of the decedent's estate. United States v. Anderson, 66 F.Supp., 870 (D.Minn. 1946). See, also, Waterman v. Canal-Louisiana Bank and Trust Company, 215 U.S. 33, 30 S.Ct 10, 54 L.Ed 80 (1909)."
In United States v. Gibson, 101 F.Supp. 225 (D.C. Idaho 1951), the Court decided that the fiduciaries referred to in § 192 are personally liable thereunder if, with notice of the debt due to the United States, they satisfy debts owing to general creditors of the insolvent or decedent, and in so doing deplete assets to such an extent that they cannot discharge the debts of the insolvent or decedent owing to the United States. However, in Delaware v. Irving Trust Company, 92 F.2d 17 (2nd Cir. 1937), the Court decided that fiduciaries are not personally liable under § 192 where they pay creditors other than the United States if, at the time of the making of such payments, they were not aware that the person whom they represented owed money to the United States.
Thus, the above-referenced § 192 (now, 31 U.S.C. § 3713) releases an individual in his or her capacity as the representative of the estate or fiduciary (executor or administrator) from personal liability for debts owed to the United States if, at the time of making payments to creditors other than the United States, the individual was not aware of the debt owed to the United States Government; however, the provisions of § 192 only relate to the aforementioned parties. Legatees of an estate, including any individual who may have served as executor or administrator of the estate, may be sued individually (in their capacity as legatees, and not in their fiduciary capacity) for recovery of funds owing to the United States, since the claims of the United States are not barred by statutes of nonclaim. United States v. Summerlin, supra.
In this claim, it is clear from an examination of the facts and the applicable law that the right of the United States to regain improper payments from residuary legatees is barred neither by the State statute of nonclaim nor by the former § 192 (now 31 U.S.C. § 3713). Therefore, the legatee of the estate, R, is liable individually, but not in his capacity as executor, for repayment of the overpayment made by SSA to the decedent.