COLEMAN, J.
Mrs. Jeanette Vary spent the last three years of her life as a ward of the state at Northville State Hospital. It is agreed that she died owing the state approximately $20,000 for the care she had received. One asset in her estate is a bank account containing approximately $5,500, accumulated from benefits paid to her during her lifetime pursuant to subchapter II of the Social Security Act. The state has filed a valid claim against her estate and wishes to satisfy this claim in part from the accumulated benefits in the bank account.
42 U.S.C. § 401, et seq. (Federal Old Age, Survivors and Disability Insurance Benefits).
The other assets in Mrs. Vary's estate are not worth enough to satisfy the state's claim.
The issue is whether these benefits are exempt from the state's claim because of 42 U.S.C. § 407, which provides inter alia:
"* * * none of the moneys paid or payable or rights existing under this subchapter [subchapter II] shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law."
The lower courts disagreed as to whether the benefits are exempt. The probate court found they are. The circuit court agreed. However, the Court of Appeals reversed holding that paid "social security funds remaining constructively in decedent's hand at the time of death are a general asset of the estate. As such, the funds are available to pay proper administration expenses and may be reached by creditors who have timely filed claims with the probate court. MCLA 702.95; MSA 27.3178(165)".
In re Vary Estate, 65 Mich. App. 447; 237 N.W.2d 498 (1975).
We affirm.
I — PURPOSE OF SOCIAL SECURITY ACT
A purpose of the Social Security Act as announced in 42 U.S.C. § 301 is to enable "each State, as far as practicable under the conditions in such State, to furnish financial assistance to aged needy individuals".
The parties agree and the Court of Appeals holds that so long as Jeanette Vary lived, her accumulated social security benefits generally could not be diverted by legal process to creditors.
The only two exceptions in the Social Security Act are inapplicable. They relate to tax claims of the Internal Revenue Service and to child support and alimony.
The basic question is whether the personal character of social security payments ends at the death of the person for whose care and maintenance they are made or whether the payments retain the same protected character after death as before.
Inherent is the question of whether there is a conflict between Federal social security legislation and state legislation regarding estates of decedents.
This is a case of first impression in Michigan.
II — FEDERAL CASE LAW
The United States Supreme Court has considered only the disposition of accrued social security moneys during the life of the beneficiary. However, some of those cases cast light upon the purpose of the act and upon that elusive legal concept known as the determination of "legislative intent". Because the clear wording of the act need suffer no further exception in order to reach the conclusion herein, we consider "legislative intent" in conjunction with the Legislature's words.
In finding the social security act constitutional, Justice Cardozo observed for a unanimous Court:
"The hope behind this statute is to save men and women from the rigors of the poor house as well as from the haunting fear that such a lot awaits them when journey's end is near." Helvering v Davis, 301 U.S. 619, 641; 57 S Ct 904; 81 L Ed 1307 (1937).
Throughout subsequent cases, the purpose of the act is stated consistently in different words.
See Social Security Board v Nierotko, 327 U.S. 358, 364; 66 S Ct 637; 90 L Ed 718 (1946): "The purpose of the federal old age benefits of the Social Security Act is to provide funds * * * for the decent support of the elderly workmen who have ceased to labor". United States v Silk, 331 U.S. 704, 711; 67 S Ct 1463; 91 L Ed 1757 (1947), which states that the underlying purpose of the act is "the protection of its beneficiaries from some of the hardships of existence". Delno v Celebrezze, 347 F.2d 159 (CA 9, 1965): "The general purpose of old-age, survivor and disability insurance provision * * * is to protect workers and their dependents from the risk of loss of income due to the insured's old age, death or disability." Coy v Folsom, 228 F.2d 276, 279 (CA 3, 1955): "Old-age benefits are clearly intended to provide funds currently necessary to enable the insured to live."
Our Court of Appeals acknowledged that if there was a conflict between Michigan law on disbursement of an estate and the Social Security Act, the latter would control. However, we should not create a conflict where there is none. Because social security benefits are to protect recipients "from some of the hardships of existence", it would "not comport with the philosophy of the Social Security act" to allow creditors to take those benefits while the individual lives. But in Mrs. Vary's case, there was "no use to which the funds would be put that will aid * * * in meeting the barest essentials of life". (Emphasis in original.) The Court said that although the benefits "retain their distinctive character in a traceable bank account, once they pass to the estate of the recipient they lose that characteristic".
A case upon which the Court of Appeals relied was Philpott v Essex County Welfare Board, 409 U.S. 413; 93 S Ct 590; 34 L Ed 2d 608 (1973). An individual receiving state welfare benefits was awarded retroactive social security benefits. The state sought to reach the money. The Court said because the funds were on deposit and readily withdrawable, they "retained the quality of `moneys' within the purview of § 407". The recipient was alive and subject to personal needs.
The Court likened that case to Porter v Aetna Casualty Surety Co, 370 U.S. 159; 82 S Ct 1231; 8 L Ed 2d 407 (1962), which involved veterans' benefits deposited in an account in a Federal savings and loan association. The statute rendered payments "due or to become due * * * exempt from the claim of creditors, and * * * not * * * liable to * * * any legal or equitable process whatever, either before or after receipt by the beneficiary".
In Porter, the Court reviewed the case law involving veterans' exemptions. It had been held that benefits lost their exempt quality when converted into permanent investments. Bank deposits were still exempt if they "remained subject to the demand and use as the needs of the veteran for support and maintenance required". However, negotiable notes and United States bonds purchased with benefit payments were not exempt.
See Trotter v Tennessee, 290 U.S. 354; 54 S Ct 138; 78 L Ed 358 (1933).
See Lawrence v Shaw, 300 U.S. 245; 57 S Ct 43; 81 L Ed 623 (1937).
See Carrier v Bryant, 306 U.S. 545; 59 S Ct 707; 83 L Ed 976 (1939).
Applying case law to the account in Porter, the Court said it "appears clear to us that the savings and loan deposits here, rather than being investments, are the only funds presently available to meet petitioner's needs". The legislation should "protect funds granted by the Congress for the maintenance and support of the beneficiaries". The veteran should be able to select a safekeeping method "provided the benefit funds * * * are readily available as needed for support and maintenance".
All the parties to our case agree that the state could not collect by legal process from Mrs. Vary's social security benefits while she was alive. All agree that Philpott, as a minimum, provides this protection.
In Beers v Federal Security Administrator, 172 F.2d 34, 36 (CA 2, 1949), the Court said in applicable part:
"Hence checks issued to him pursuant to certification are freely transferable by him, and on his death pass by operation of law to his executor or administrator."
Defendants argue that Philpott overruled Beers sub silentio. However, the Philpott court did not consider or discuss in any part the nature of accumulated social security funds after death of the beneficiary. Philpott is instructive of the legislative purpose, but does not speak to our issue. However, defendants argue that social security benefits are a res which does not change its protected personal characteristic even after death of the beneficiary. We find it presumptuous to read into Philpott an unstated extension of the stated legislative object. Such an extension would go beyond the personal protection of "aged needy individuals".
Also see Gardner v Ewing, 88 F. Supp. 315 (SD Ohio, 1950), aff'd 185 F.2d 781 (CA 6, 1950), reversed on other grounds, 341 U.S. 321; 71 S Ct 684; 95 L Ed 968 (1951).
The protection, being personal to the recipient, dies when that person dies and it no longer inures to his or her benefit.
III — MICHIGAN CONCERNS
In fact, the interpretation urged by defendants might well inure to the disadvantage of the living beneficiary. Access of the "aged needy" individual to credit or to contractual relationships involving the payment of money could be diminished were there no possibility of collecting just debts even from a decedent's estate when remaining funds, if any, could no longer assist the now deceased person (e.g., extended medical care, a loan to pay taxes on the home, a convenient charge account could well be made unlikely should we adopt that interpretation).
According to defendants' theory, it also would appear that an estate consisting of accumulated social security benefits might not be probatable under existing law partially because no funds could be diverted for costs required by law. If the social security funds were commingled with other funds, another problem would arise in differentiating which was "protected" and which was not. Payment of some state and local taxes, in addition to other lawful debts, would be precluded.
We cannot attribute to the Legislature such carelessness or such callousness.
The Court in Recor v Commercial Savings Bank of St Clair, 142 Mich. 479; 106 N.W. 82 (1905), found similar concerns. The plaintiff had a three-fourths interest in a barge. The defendant's husband owned the remaining fourth. When the husband died, plaintiff sued the wife on an indebtedness concerning the barge. The moneys available to the wife were proceeds from a benefit certificate. A statute said the "money * * * to be paid" under such a certificate "shall not be liable * * * to pay any debt or liability * * * of any beneficiary". The trial court said the wife's money was exempt, but this Court reversed.
We said if the trial court were sustained, "the entire amount of money paid beneficiaries [would] be removed from being subjected to taxation or legal process". The Court did "not think the statute [would] bear such an interpretation." Certainly, if the Legislature intended "to make so important and unlimited an exemption, it would have used language indicative of such intention".
We think the same reasoning applies here. If the Congress intended to exempt benefits such as paid to Mrs. Vary from legal process even when the recipient died, it would have said so or would have used different wording. Both Philpott and Porter indicate that such benefits are for support of living people with continuing needs. Exemption is a protection that does not survive the individual. It is a personal protection which dies with the beneficiary.
The director of the Social Security Administration agrees with this position. In a letter to the Michigan Revenue Commission, the director noted the trial court decision holding that the state could not recover from Mrs. Vary's estate. He wrote:
"However, it is the view of the Social Security Administration that § 207 of the Social Security Act and the Philpott case, relied upon by the Michigan court, apply to accrued social security benefits being conserved only by (or on behalf of) a living beneficiary. The Social Security Administration does not read § 207 to protect the benefits of a deceased worker from legal process and does not agree that the Philpott decision must necessarily be read to protect the estate of a deceased beneficiary from the claims of creditors. * * * It is true that in Philpott the United States Supreme Court used very broad language * * *, but it should be borne in mind that the court had before it a case in which benefits were being conserved for a living beneficiary. The clear purpose of § 207 was to assure that social security benefits are available for the support of the beneficiary on whose behalf they are paid. That purpose can no longer be served after the beneficiary has died." (Emphasis in original.)
The decedent's spouse and dependents are not abandoned by the Social Security Act. Another section provides them benefits. They are placed in a better position than the spouse and dependents of a decedent not receiving social security benefits.
IV — STATUTORY WORDING
Although it might be rationalized that the goods and services of this proven creditor were provided to assist the living beneficiary and therefore should be paid, this rationale evades the issue and would resolve only one portion of the dilemma.
Therefore, we look to the stated object of the Social Security Act and conform the wording of 42 U.S.C. § 407 to it.
We are persuaded that a simple, straightforward interpretation permits not only a logical and ethical conclusion, but is necessary to avoid convolution inimicable to the intent to protect the needy and aged person.
The words "none of the moneys paid or payable or rights existing" under subchapter II refer to moneys and rights of living persons entitled to receive the designated funds. Whether the funds were saved, spent or given away is not important. The section goes on to mandate protection of those funds from "execution, levy, attachment, garnishment" or "the operation of any bankruptcy or insolvency law". All of the actions named are in terms commonly employed regarding living persons. The words "or other legal process" must be interpreted as consistent with the named actions at law. There is no language anticipating death.
Further, the Federal act in no way purports to do with state law other than to provide for possible payment of moneys which were due the living person into the "estate" of the now deceased. It is consistent with the wording of the act to find that Congress intended the state law to apply in the event of an estate subject to probate.
V — CONCLUSION
The object of the Social Security Act "to furnish financial assistance to aged needy individuals" is consistent with the clear wording of 42 U.S.C. § 407 which seeks to protect those individuals by prohibiting named actions (and other legal process) commonly available against living persons. The phrase "and other legal process" must be interpreted in context with the remainder of the statute, all of which refers to moneys accrued to the benefit of an individual while alive and actions commonly available against the living.
Philpott, supra, may be all-encompassing as to legal process directed against deposits of a living beneficiary, but neither the facts of the case nor the wording of that Court refer to accumulated social security moneys after death. To strain the meaning so as to "protect" such funds after death leads to absurdities, conflict of state and Federal laws and injustice not only to those who might have extended needed credit (and others), but to the social security recipient who could anticipate a curtailment of credit upon such an interpretation. We do not ascribe to the Philpott Court nor to the Congress such an intent.
Social security is imbued with a personal characteristic which dies with the beneficiary. Thereafter, if any funds pass into an estate for probate as did Jeanette Vary's, they are subjected to state law.
We would not create a conflict where there is none.
The Court of Appeals is affirmed. There are no costs, this having been a public question.
KAVANAGH, C.J., and WILLIAMS, FITZGERALD, and RYAN, JJ., concurred with COLEMAN, J.