SSR 87-8: SECTION 204(a)(1) (42 U.S.C. 404((a)(1)) OVERPAYMENTS -- LIABILITY OF A LEGATEE OF AN ESTATE
20 CFR 404.502(b)(1)
SSR 87-8
- The insured, who died on December 24, 1983, was overpaid $12,577.60 in Social Security benefits. She was survived by R, her minor son and sole heir. On October 18, 1984, the Probate Court ordered that $7,500 of the insured's estate be set apart for R as his exemption from the claims of creditors pursuant to Kentucky Revised Statutes § 391.030. Since the insured's estate had a value of $16,352.78, the effect of this order was to exempt all of the personal property distributed to R from the claims of creditors. The estate assets distributed to R were placed in a guardian account until October 24, 1984, when he became 18 years of age. Held, notwithstanding the effect of the State court's order of October 18, 1984, R was liable for the insured's overpayment to the extent of the estate assets distributed to him because R is deemed to hold such estate assets in trust for the benefit of the United States and a State law exempting such assets from creditors' claims interposes no bar to enforcement by the United States of its claim against R for such assets.
A question has been raised as to whether the sole heir of a deceased insured was liable for the deceased insured's outstanding overpayment.
The overpaid insured died on December 24, 1983. She was survived by her minor son, R, who was born on October 25, 1966. At the time of her death, the insured had an outstanding overpayment balance of $12,577.60.
Probate Court records, dated October 18, 1984, showed that the deceased's estate had a value of $6,352.78. On October 18, 1984, the Probate Court ordered that $7,500 of the estate be set apart for R as his exemption pursuant to Kentucky Revised Statutes § 391.030 (Ky. Rev. Stat. § 391.030 (1984)). The effect of the court's order was to exempt all of R's share of the estate from the claims of creditors. According to the attorney representing the estate of the deceased insured, all estate assets were distributed on or before November 27, 1984. The estate assets distributed to R were placed in a guardian account until he attained 18 years of age, R became 18 on October 25, 1984.
In a notice dated December 19, 1984, the Social Security Administration advised R of his mother's overpayment and his liability therefor to the extent of the estate property value or proceeds therefrom in his possession at the time of receipt of the overpayment notice. According to the attorney for the insured's estate, the value of the estate property or proceeds therefrom in R's possession at the time of receipt of the overpayment notice was $2,773.93.
Generally, the sole heir and distributee of an overpaid deceased individual is liable for the deceased insured's outstanding overpayment. The nonclaim statutes of States or the fact the estate assets have been distributed interpose no bar to an action by the United States to recover an overpayment. United States v. Summerlin, 310 U.S. 414, 60 S.Ct. 1019 (1940); United States v. Anderson, 66 F. Supp. 870 (D. Minn. 1946); United States v. Snyder, 207 F.Supp. 189 (E.D. Pa. 1962). Social Security Ruling (SSR) 86-2, (Jan. 1986). Since the overpayment resulted from payments to which the insured was not entitled and, thus, are not properly a part of the insured's estate, the United States may impress a trust on estate funds distributed to the insured's her. The heir is deemed to hold any distributed assets equal to the amount of the overpayment in trust for the United States. United States v. Snyder, supra; United States v. Anderson, supra. Under this constructive trust approach, the United States is not seeking to enforce its rights against an estate but is enforcing its rights as beneficiary of a trust the corpus of which is in the hands of the estate's distributee.
In the present case, the estate's assets valued at $6,352.78, consisting of personal property and cash, were distributed to R as the insured's sole heir. The effect of the State court's order of October 18, 1984, was to exempt all of the personal property distributed to R from the claims of creditors. However, like nonclaim statutes, a statutory exemption of estate assets from creditor's claims interposes no bar to an action by the United States. Since the heir is deemed to hold such distribution of personal estate assets in trust for the benefit of the United States, R was liable for the insured's overpayment to the extent of the estate assets distributed to him and in his possession at the time of receipt of the overpayment notice.