TN 14 (04-18)

A. 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

B. PS 09-054 Interest Held in a Limited Liability Company (LLC) Considered a Countable Resource for Supplemental Security Income (SSI) Eligibility Purposes - North Carolina Applicant - Ainsley G. B~, Minor

Date: February 6, 2009

1. Syllabus

This decision covers the countability of a person's interest in a Limited Liability Corporation (LLC) in the state of North Carolina. The Regional Chief Counsel states that the ownership interest in a LLC is a countable resource under North Carolina law because a person can sell their share of interest.

2. Opinion

QUESTION

You asked whether an interest held in two LLCs by the parents of an SSI applicant is considered a countable resource for the purposes of determining the applicant's eligibility for SSI.

OPINION

We believe the Social Security Administration (SSA) could consider the interest held in the LLCs as a countable resource to the applicant's parents.

BACKGROUND

The parents of the minor child Ainsley G. B~ (Applicant), James M. S. B~, Jr., and his wife, Lisa C. B~, filed an application for SSI benefits on behalf of Applicant. SSA found Applicant was ineligible for SSI benefits, because the interest of Applicant's father in two LLCs exceeded the resource limit of $3000.00.

The operating agreement of B~ Properties, LLC, dated March 12, 1998, shows Applicant's father has a 25% undivided membership interest in a tract of land held by the LLC. Elizabeth G. B~ (Elizabeth) also holds a 25% undivided membership interest. The operating agreement also shows Applicant's grandfather, James M.S. B~, Sr., held a 50% membership interest and was designated the manager of the LLC. However, an amendment to the operating agreement was made on April 4, 2002, in which Applicant's grandfather father by gift transferred his membership interest in the LLC to Applicant's father and Elizabeth, resulting in Applicant's father having a 47% interest in the LLC and Elizabeth having a 53% interest.

Also, the operating agreement for a second company, B~ Properties II, LLC, dated February 3, 2005, shows Applicant's father and Elizabeth G. B~ O~ are members. Applicant's parents together own a 3% undivided interest. Elizabeth G. B~ O~ and her husband, Joseph J. O~, are the owners of 3% undivided interest. Applicant's grandfather is the manager of this LLC and he is owner of a 94% undivided interest. SSA considered the interest Applicant's father held in these LLCs as a countable resource for SSI eligibility purposes. Applicant's father has submitted a request for reconsideration of this decision.

DISCUSSION

Under the Social Security Act (Act), a disabled individual may receive SSI benefits if his or her income and resources do not exceed certain annual limits. See Act § 1611(a); 42 U.S.C. § 1382(a). 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); 42 U.S.C. § 1382b(a). However, “the [Commissioner], pursuant to his authority under 42 U.S.C. § 1302 (1976), has promulgated regulations that further define resources.” Beatty v. Schweiker, 678 F.2d 359, 361 (3d. Cir. 1982). In particular, 20 C.F.R. § 416.1201(a) (2008) provides in pertinent part 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.” “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 the property right cannot be liquidated, the property will not be considered a resource of the individual . . . .” 20 C.F.R. § 416.1201(a)(1). The regulations also define liquid and non-liquid resources. See 20 C.F.R. § 416.1201(b), (c). “Liquid resources are defined as cash or other property which can be converted to cash within 20 days. . . . Examples of resources that are ordinarily liquid are stocks, bonds, mutual fund shares, promissory notes . . . and similar items.” 20 C.F.R. § 416.1201(b)(1); see POMS § SI 01110.30 Resources Assumed to be Liquid. “Nonliquid resources are defined as property which is not cash and which cannot be converted to cash within 20 days. . . . Examples of resources that are ordinarily nonliquid are . . . buildings and land.” 20 C.F.R. § 416.1201(c)(1); see POMS § SI 01110.310 Resources Assumed to be Nonliquid.

In the case of a child who is under age 18, such child's resources shall be deemed to include any resources, not otherwise excluded under this subpart, of an ineligible parent of such child who is living in the same household with such child (as described in § 416.1851). 20 C.F.R. § 416.1202(b)(1). 20 C.F.R. § 416.1851(c) specifically states that “if you are under age 18 and live with their parent(s) who is not eligible for SSI benefits, [SSA] will consider (deem) part of his or her income and resources to be your own.” Here, Applicant resides with her father. Therefore, we look at the resources of Applicant's father in determining Applicant's SSI eligibility.

Here, Applicant's father claims SSA improperly applied 20 C.F.R. § 1201 by considering his interest in B~ Properties, LLC, and B~ Properties II, LLC, as countable resources. He states these companies were not set up as sole proprietorships. He also states he cannot sell his share, individually. Furthermore, he states he cannot sell his share to the public.

We refer to state corporate law to determine the extent of the interest Applicant's father holds in the LLCs in question. See Cannuni v. Schweiker, 740 F.2d 260, 263 (3d Cir. 1984); POMS SI 01110.500 (C)(discussing significance of ownership interest in property and variance in state laws with respect to ownership). Here, the LLCs were incorporated in North Carolina; therefore, we look to North Carolina law to determine whether Applicant's father can sell his interest in the LLCs.

The North Carolina Limited Liability Company Act (NCLLC Act), N.C. GEN. STAT. 57C-1-01, provides for the formation of a business entity combining the limited liability of a corporation and the more simplified taxation model of a partnership. Hamby v. Profile Prods., L.L.C., 652 S.E. 2d 231, 235 (N.C. 2008) (citing Russell M. Robinson, II, Robinson on North Carolina Corporate Law § 34.01, at 34-2 to -3 (rev. 7th ed. 2006)). The NCLLC Act contains numerous “default” provisions or rules that govern an LLC only in the absence of an explicitly different arrangement in the LLC's articles of organization or written operating agreement. Crouse v. Mineo, 658 S.E. 2d 33, 36 (N.C. App. 2008) (citing Robinson, § 34.01, at 34-2 to 34-3)).

Here, Applicant's father provided written operating agreements for B~ Properties, LLC, and B~ Properties II, LLC, dated March 12, 1998, and February 3, 2005, respectively. Applicant's Father focuses on Article I, Section 1.7 of the operating agreements. This section defines the nature of a member's interest and, specifically, reads:

The interests of the Members in the Company shall be personal property for all purposes. Legal title to all Company assets shall be held in the name of the Company. Neither any Member, nor a successor, representative, or assign of any Member, shall have any right, title, or interest, in or to any Company property or the right to partition any Property owned by the Company.

Pursuant to this section, Applicant's father does not have a right to sell the property held by the LLC.

However, the question is not whether Applicant's father can sell LLC property, but rather it is whether Applicant's father has the right to sell his interest in the LLC. Article IX, Section 9.1 of the operating agreements describe Buy-Sell Events. Relevant to our opinion, Section 9.1(d) reads, “Any purported voluntary or involuntary Transfer or Encumbrance of all or any part of a Member's Membership Interest in a manner no expressly permitted by this Agreement” shall be considered a Buy-Sell Event. Section 9.2 reads, “Upon the occurrence of a Buy-Sell Event, the Member to whom such event has occurred (the “Withdrawing Member”) . . . shall give notice of the Buy-Sell Event . . . to the other Members. . . .” Section 9.3 reads, “Upon the occurrence of a Buy-Sell Event, each of the other Members, except the Withdrawing Member . . . shall have an option to purchase . . . the Withdrawing Member(s) Membership Interest. . . .” Under Section 9.9, when no Member exercises the purchase option, “the Withdrawing Member. . . may transfer its economic rights in the Membership Interest . . . to any person; PROVIDED, HOWEVER, that any transferee of the Withdrawing Member's Membership Interest [meets other stipulations provided in operating agreement]."

We conclude on the basis of the operating agreement language, above, that Applicant's father has the right to sell his membership interest (share) in the LLCs. Since he has the right, authority or power to liquidate his or her share of the property, it is considered a resource under 20 C.F.R. § 416.1201(a)(1).

CONCLUSION

For the foregoing reasons, we conclude SSA could find that the interest Applicant's father holds in B~ Properties, LLC, and B~ Properties II, LLC, is a countable resource in determining Applicant's SSI eligibility.

Mary Ann S~
Regional Chief Counsel

By: Simone D. P~
Assistant Regional Counsel

C. PS 03-093 SSI - Property Ownership in North Carolina Eugene R. S~, Jr. SSN: ~

Date: February 11, 2003

1. Syllabus

The issue is whether a tract of land deeded to an individual by his mother is a resource. A General Warranty Deed was issued which listed only 2 encumbrances:

(1) utility easements and enforceable restrictive covenants, and

(2) a lien for property taxes. The mother then executed a second document that said the property is to stay in the family, to be passed down to grandchildren, and is not to be sold. The question is whether this notarized, but unrecorded, document is a valid restriction on the individual's right to sell the property.

Under North Carolina law, the notarized document is not legally binding on the individual. The recorded deed takes precedence and the individual can legally sell the property if he desires. When resolving ambiguities related to the transfer of property, North Carolina courts apply the principle that the instrument must be construed most favorably to the grantee, and all doubts and ambiguities are resolved in favor of the unrestricted use of property.

The property can be sold and, therefore, is a resource for SSI purposes.

2. Opinion

You requested a legal opinion as to whether a tract of land owned by the NH and his wife, which was deeded to them in 1998 by his mother, should count as a “resource” affecting NH's eligibility for Supplemental Security Income (SSI). After reviewing the facts as presented, and researching North Carolina law, we conclude that the mother's notarized statement prohibiting the sale of the property is not valid, and that the NH is therefore free to sell this property.

On January 6, 1998, NH's mother transferred a parcel of land to NH and his wife, and a General Warranty Deed was issued and recorded in Brunswick County, N.C.

The General Warranty Deed listed only two encumbrances on the property:

(1) utility easements and enforceable restrictive covenants; and

(2) a lien for 1998 property taxes. NH's mother executed a second document, also dated January 6, 1998, which was notarized but not recorded at the courthouse. This second document states, in pertinent part, that NH's mother was deeding the property in question to her son (NH), and that the property “is to stay in the family, to be passed down to my grandchildren, it is not to be sold.” The question, therefore, is whether this notarized but unrecorded document is a valid restriction on NH's legal right to sell the property in question. Based on the common-law principles regarding the transfer of real property, as well as North Carolina law, the notarized document is not legally binding on NH. The recorded deed takes precedence, and he can legally sell the property if he desires.

By definition, a “general warranty deed” expressly guarantees the grantor's good, clear title and contains covenants concerning the quality of title, including warranties of seisin, quiet enjoyment, right to convey, freedom from encumbrances, and defense of title against all claims. Black's Law Dictionary (7th ed. 1999). The deed which was recorded at the Brunswick County courthouse complies with this definition. Because the purpose of recording a document is to provide legally sufficient notice to all subsequent parties, Williams v. Town of Grifton, 199 S.E.2d 288 (N.C. App. 1973), a document which is properly recorded, as this deed was, will take precedence over an unrecorded document. Therefore, as a threshold matter, the deed would take precedence over the unrecorded document.

In construing a deed and determining the intention of the parties, ordinarily the intention must be gathered from the language of the deed itself when its terms are unambiguous. However, there are instances in which consideration should be given to the instruments made contemporaneously therewith, the circumstances attending the execution of the deed, and to the situation of the parties at the time. Smith v. Smith, 107 S.E.2d 530 (N.C. 1959). See Beveridge v. Howland, 271 S.E.2d 910 (N.C. 1980). However, where the language of the deed is clear and unambiguous, as is the case here, courts will not go outside the document itself to interpret its meaning. Strickland v. Jackson, 130 S.E.2d 22 (N.C. 1963). Consequently, the recorded General Warranty Deed, which is unambiguous on its face, gives NH the right to sell the property.

Even if a reviewing court were to look at the notarized statement from NH's mother, the limitation on selling the property would not be enforceable. When resolving purported ambiguities related to the transfer of property, North Carolina courts apply the principle that the “instrument must be construed most favorably to the grantee, and all doubts and ambiguities are resolved in favor of the unrestricted use of the property.” Amerson v. Lancaster, 415 S.E.2d 93 (N.C. App. 1992), quoting Stegall v. Housing Authority of the City of Charlotte, 178 S.E.2d 824 (N.C. 1971). Where a deed unambiguously grants title to property, language which seeks to limit the terms of the conveyance are “mere surplusage without force or effect.” Jeffries v. Parker, 73 S.E.2d 783 (N.C. 1953). Such language will be rejected as “repugnant to the estate and interest conveyed.” Whetsell v. Jernigan, 229 S.E.2d 183 (N.C. 1976). Therefore, on its face, the limitation on NH's ability to sell the property would not be upheld. In addition, this limitation, as written, contains several legal inadequacies which would lead to its invalidation by a court. For example, there is no indication that NH had any children at the time of the conveyance, nor is there any indication that NH's mother has any other grandchildren to whom the property would pass. Furthermore, there is nothing in the document which indicates what would happen to the property in the event that NH dies and there are no grandchildren to inherit the property. The absence of language to deal with these contingencies constitute an additional bar to any enforcement of the limitation sought to be imposed by NH's mother.

As was noted by the Claims Representative in Sanford, N.C., there are “moral issues” which NH must resolve in deciding whether to sell the property at issue. However, from a legal standpoint, the notarized statement does not prevent him from selling the property.

Mary Ann S~
Regional Chief Counsel

By: Michael S. F~
Assistant Regional Counsel