Title Tips by Tute
Volume 3, Number 1
I ran across something I had never seen before during a recent title examination, and couldn't wait to send it to you. Especially since tax time is almost here, maybe your readers will find it interesting, too.
Recorded in the deed books was an affidavit filed by a stranger to my title, but indexed in the current owner's name. It recited that the property titled in the name of the owner was affected by a Certificate of Sale of Seized Property, issued by the Internal Revenue Service, a copy of which was attached to the affidavit. The affidavit recited that the Certificate had been issued to him upon his purchase of the property, and that he was claiming all right and interest in the property as were granted by law. The certificate attached stated that the certificate transferred to the purchaser all right, title and interest of the taxpayer to the property. It also mentioned the Taxpayer's right of redemption.
What did this guy get? I am especially curious because we were supposed be doing the title for a refinance by the current (former?) owner, and not the person filing the affidavit.
- - Time for a 1040 Tea Party?
Dear 1040 Tea Party:
As Tute has noted before, when confronted by instruments which are new to one's experience, they should be read very carefully. The Certificate transfers title to the personal property described, and the certificate you were kind enough to forward with your question did not describe any personal property.
The certificate went on to note that the owner (taxpayer) had 180 days from the date of the sale to redeem the property. (As you might remember from our last column, the IRS has 120 days to redeem property in the event of a foreclosure over the IRS interest. Isn't it wonderful that in a democracy like ours that the taxpayer gets 60 days longer than the IRS?) It also specified a procedure to obtain a deed from the IRS.
Tute feels that the certificate does not irrevocably transfer title. To put it in more conventional terms, it is something in the nature of a recorded contract or option, it signifies a change, but subject to some terms and conditions which have to be fulfilled, and which may or may not have happened yet. Since the certificate must be returned to the IRS in order to obtain a deed, it is likely that the IRS office issuing the certificate will have information regarding a) redemption by the taxpayer or b) issuance of a deed.
Recording an affidavit from your current owner, alleging redemption, combined with the IRS paperwork showing the redemption, should be enough to put most title examiners at rest about the issue. For the truly paranoid, a deed or release instrument from the person who filed the original affidavit would also suffice.
Landowner conveyed property as follows: one half interest to her son; and one half interest to her son as custodian for a minor under the Uniform Transfers to Minors Act. The son now wants to refinance an encumbrance which existed on the property, and pay the surplus cash to his mother in order to allow her to make a gift to her other child in cash. Can he do this on his own, or does he need to go to court for an order authorizing him to encumber the minor's interest in the real estate?
- - Perplexed
The Uniform Transfers to Minors Act (formerly known as the Uniform Gifts to Minors Act) is intended to provide a simple way for people to hold assets for minors. The "custodian" is a fiduciary just as a trustee of a trust would be. The custodian can be almost anyone, and the statutes provide that even the transferor can be the custodian when the gift is real estate. Another interesting twist to the statute is the gift giver can determine when the gift is to be given to the minor by designating either age 18 or 21 as the date for the final transfer to the minor.
The statutes make it clear that the "gift is irrevocable, and the custodial property is indefeasibly vested in the minor, but the custodian has all the rights, powers, duties, and authority provided in [the act] and neither the minor nor the minor's legal representative has any right, power, duty, or authority with respect to the custodial property except as provided in [the act]. " Virginia Code §31-47.
A custodian, acting in a custodial capacity, has all the rights, powers, and authority over custodial property that unmarried adult owners have over their own property, which shall include but not be limited to those powers set forth in §64.1-57 as of the date the custodian acts, but a custodian may exercise such rights, powers, and authority in that capacity only. Virginia Code §31-49.
Section §64.1-57(f) authorizes a fiduciary "to borrow money for such periods of time and upon such terms and conditions . . . as to such fiduciary shall seem advisable, . . . for the purpose of paying debts, taxes or other charges against the trust or estate or any part thereof, and with prior approval of the court for any proper purpose of the trust or estate, and to mortgage or pledge such portion of the trust or estate as may be required to secure such loan . . . ."
Since funding grandmother's estate plan is generally not a proper purpose of the estate of a minor, and banks are notoriously reluctant to take a lien on only a one half undivided interest, I think your custodian will need to file the petition and obtain an order authorizing the encumbrance.
It may be that the custodian can combine the grandmother funding with other funding which is for the benefit of the minor (for instance, a pre-paid tuition plan from a Virginia college, a new option offered this year from the Commonwealth) and encumber his portion for the grandmother, and the minor's portion for the minor, but since commingling of assets is frowned upon in the
UTMA, it would be far better to run the whole thing by the court, obtain specific findings of proper purposes, and authorization to proceed.