Countable Assets 400-19-55-05-15

(Revised 6/1/10 ML #3218)

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(N.D.A.C. 75-02-01.2-25)

 

Countable assets include, but are not limited to, the following:

1. Contract for Deed -- When an applicant or recipient has sold real property or a mobile home, and received in return a promise of payments of money at a later date, usually to be made periodically, and an attendant promise to return the property if the payments are not made, the arrangement is usually called a "contract for deed." The essential feature of the contract for deed is the right to receive future payments, usually coupled with the right to get the property back if the payments are not made. Contractual rights to receive money payments also arise out of other types of transactions. The contract document may be called a note, accounts receivable, mortgage, or by some other name.

The principle from a contract for deed is considered an asset (Reference N.D.A.C. 75-02-01.2-21(1)(k). The interest income received on a contract for deed is considered unearned income (Reference N.D.A.C. 75-02-01.2-44).

 

Valuing Contract for Deeds

The value of a contract in which payments are current is equal to the total of all outstanding payments of principal required to be made by the contract, unless evidence is furnished that establishes a lower value.  

 

The value of a contract in which payments are not current is an amount equal to the current fair market value of the property subject to the contract. If the contract is not secured by property, the value of the contract is the total of all outstanding payments of principal and past due interest required to be made by the contract.

 

In situations where the contractual right to receive money payments is not collectable and is not secured, the debt has no collectable value, and thus no countable asset value. An applicant or recipient can establish that a note has no collectable value if:

1. The debtor is judgment proof. A debtor is judgment proof when money judgments have been secured and not satisfied. An applicant or recipient may show a debt has no value as long as a money judgment obtained by any creditor (including the applicant or recipient) has been on file in a county in which the debtor lives, or owns property, for at least 60 days and has not been satisfied; or

2. The applicant or recipient verifies the debt is uncollectible due to a statute of limitations. A satisfactory verification includes an attorney’s letter identifying the statute and facts that make a debt uncollectible due to a statute of limitations.

 

Applicants and recipients should be encouraged not to forgive debts that have been determined to be uncollectible. Such debts could have a future value if the debtor ever accrues assets. At each annual redetermination, determine whether the judgments are still on file or whether the debtor has any change in assets.

2. Income Producing Property -- The equity value of income producing property is considered a countable asset. Examples of income producing property include real property (i.e., farm land, apartment building, house other than primary residence), crops, livestock, grain in bin, tools, equipment, vehicles used for business, and business bank accounts.

3. Life Estates and Remainder Interests -- Real property interests may be divided in terms of the time when the owner of the interest is entitled to possession of the property. The owner of a life estate is called a "life tenant" and is entitled to possession of the real property for a period of time measured by the lifetime of a specific person or persons. A life tenant has the right to use the property and is entitled to any rents or profits from the property. A life tenant may sell the life estate, but such a sale does not change the identity of the person or persons whose lifetimes measure the duration of the life estate. A life estate may also be referred to as a "life lease."

When a life estate is created, the right to possess the real property after the death of the life tenant must also be created. That right is called a "remainder interest," and the owner of that right is called a "remainderman." Upon the death of the life tenant, the remainderman owns the real property. The remainderman is not entitled to possess or use the property until the death of the life tenant. The remainderman does, however, have the right to sell the remainder interest.

 

In order to determine the value of a life estate or remainder interest, it is necessary to first know the age of the life tenant or, if there is more than one life tenant, the age of the youngest life tenant and the fair market value of the real property subject to the life estate or remainder interest. The value of the life estate or remainder interest is determined by the automated computer system.  (Refer to the Life Estate and Remainder Interest Table on the County Intranet (P: Drive) under TANF Hard Cards.)

4. Life Insurance Cash Surrender Value -- Cash surrender value of life insurance, cash and savings (including those of eligible children), accounts receivable.

5. Liquid Assets -- Liquid assets such as cash on hand, checking, savings and money market accounts, certificate of deposits, stocks, bonds, etc.

6. Mineral Rights – Value of the right to search for and remove minerals from the land.

Mineral rights are often more difficult to establish a value.  TANF often accepts valuations from sources such as appraisers; however, if evidence shows that an appraised value is not accurate, or is at least questionable, we must seek further information to establish true fair market value.

 

To determine the value of mineral rights:

1. If determining the value for mineral rights currently for sale:

• The fair market value is the value established by a good faith effort to sell. The best offer received establishes the value.

A good faith effort to sell means offering the mineral interests to at least three (3) companies purchasing mineral rights in the area, or by offering for bids through public advertisement.

2. If determining the value for mineral rights sold or transferred in the past, the fair market value is:

1. If the minerals are producing, three (3)  times the annual royalty income based on:

2. Actual royalty income from the 36 months following the transfer; or

3. If 36 months have not yet passed, based on actual royalty income for the months that have already passed, and an estimate for the remainder of the 36 month period.

2. If the minerals are not producing, but the mineral rights are leased, two (2) times the lease amount (based on the actual lease and not the yearly lease amount).

3. If the mineral rights are not leased, the greater of two times the estimated lease amount or the potential sale value of the mineral rights, as determined by a geologist, mineral broker, or mineral appraiser.

In determining current or previous value, an applicant or recipient may provide persuasive evidence that the value established using the above process is not accurate. Likewise, if an established value is questionable, the Department may require additional evidence be provided to establish estimated fair market value.

7. Real and Personal Property -- Real and personal property such as land, life estate, remainder interest, pensions, recreational vehicles, cabins, mobile homes not owner-occupied, livestock, machinery, 401K, etc.

8. Trusts -- Trust assets available for disposal or use by the TANF household. This does not include trust assets held by a member of the TANF household as trustee unless the trust beneficiaries are also members of the TANF household.  If you are not certain whether an arrangement constitutes a trust, contact the Legal Advisory unit.  Submit all trusts to the Legal Advisory unit for review and identify who is applying for assistance, send a complete copy of the trust agreement, provide verification of all assets owned by the trust, and provide any other relevant documents or information.

9. Vehicles -- With the exception of one vehicle of any equity value per TANF household, the equity value of all additional vehicles owned by members of the TANF household is considered a countable asset. To determine the value of a vehicle, use the average trade-in value with no add on’s found in one of the reliable used car guides (NADA Car Guide or Kelley Blue Book, etc.), either hard copy or on the internet.

10. Workers with Disabilities PASS Accounts -- The assets excluded under the Workers with Disabilities coverage group as an approved plan to achieve self-support (pass) are countable assets under TANF.