Volume 3 Number 2
Title Tips by Tute
Volume 3, Number 2
How should I report the vesting of title for a family farm that passed through a will as follows:
Article I(A) of the will left the farm equipment to a corporation. Article I(B) named a Trustee to hold title to the residuary estate for the benefit of the wife for life, in trust, and upon her death to distribute the remaining principal and income as set forth in paragraphs (D). That paragraph stated that if the wife predeceased, the residuary estate went to his sisters, nieces and nephews and the descendants of any deceased niece or nephew living at the time of his death in equal shares.
Article IV(A) of the will stated the corporation had rented the farm land for a number of years, and stated a "desire" that it be allowed to rent the farm land on the same terms and conditions as at present for a period of five years. The deceased coupled this "desire" with an option or right of first refusal to rent for five years. If the corporation declined the option, the Executor and Trustee could rent to any person upon such terms as deemed to be in the best interest of the estate and the trust for the wife.
Article IV(B) of the will directed and authorized the Executor and Trustee to sell the real estate privately or publicly upon such terms and conditions as deemed to be in the best interest of the estate in order to make distribution of the residuary estate. He could retain any real estate until the rental term in favor of the corporation terminated.
Article IV(C) defined residuary estate as "all the residue of my real and personal property wherever situated in which I have any interest at the time of my death and which is not otherwise effectively disposed of."
Article V appoints the Executor and Trustee and grants the powers contained in §64.1-57 of the Code of Virginia. The named executor and his wife were the two witnesses to the will.
The list of heirs recorded with the will showed the decedent was survived by five sisters, two nieces, two nephews and a great-nephew.
After the title examination was completed, we learned that the wife did predecease; that the corporation was not one in which the deceased had any interest (it was owned by a neighbor and good friend); and that the sisters also had children not named on the list of heirs.
What do I say in my report? Can the executor sell on his own? Must he sign as both executor and trustee? Do the children of the surviving sisters have any interest? Do you see any other issues I should worry about?
Sign me as "Son of a Sister"
Thank you for the copy of the will; your summary is more precisely drafted than the original. After the first reading, Tute was convinced that some property owners are better off intestate. But, being charitable and patient, Tute swallowed those less-than-kind thoughts and proceeded on to your questions.
A. You did right in obtaining independent verification of the wife's death. Her omission from the list of heirs could be evidence she predeceased, or of a divorce, or that the personal representative just didn't like her.
B. In a perfect world, I would look for a deed conveying interests on behalf of the following persons: The Executor should join the deed, because if there were an estate related reason, he could use the asset. The Trustee should join, for the purpose of letting the world know the trust was never funded, and he never received any interest (And people say you can't prove a negative!). The sisters, nieces, nephews and great nephew shown in the list of heirs should join, since the property was left to them (subject to the rights of the executor mentioned above to meet estate obligations). The children of the sisters who were alive at the time of death should be identified of record and join the deed, since they fit in the category of nieces or nephews. Any children of a deceased niece or nephew must be identified, so their interest can be conveyed as well.
C. I do not see this will as clearly providing the executor with the authority to convey the real estate without the beneficiaries of the will. I know the majority of the real estate bar will disagree with me on that issue. Unlike the most recent case dealing with the statutory powers, the devise of the property and the grant of powers to the fiduciary are totally unrelated in this will. Absent an overriding estate purpose, the executor and trustee do not have an interest in the title to this property in order to exercise the statutory powers they were given.
The paragraphs directing the sale of real estate in order to make distribution of the residuary estate, coupled with the Trustee's right to retain the farm during the term of the leases for the benefit of the wife during the trust period, do show some intent for the Executor and Trustee (remember, these are the same person holding both positions), acting as Trustee, to have some power over this farm, but it is not nearly as clear as it could be. On a judgment call like this, you should always run the possible permutations past your underwriting counsel.
D. I would note that any niece or nephew is a beneficiary under the will, and since the sisters are still alive, this is a class that has not closed. Since the testator was 90 at the time of death, and the list of heirs merely states "adult" for ages of the sisters, there is a remote chance new nieces or nephews may come into being. Only the descendants of a deceased niece or nephew alive at the time of the landowner's death are members of that class, and thus it closed once the landowner died. Your underwriting counsel should probably be aware of this class issue as well.
E. Given the size of the bond required of the executor, don't forget the possibility of federal and state estate taxes. Since the farm did not come onto the market until over a year after the will was admitted to probate, the risks of attack on a sale by a creditor of the deceased, or by the proponent of a new and later will, are somewhat minimal.
There was a definite lack of questions for pondering during tax time (one might think you had something else to worry about), but it got me thinking about the importance of dates in title examination. (No, April 15 is not a significant date for most title examinations!) So, for your edification and enlightenment, the following quiz is provided. Be the first examiner in your office to get all the answers right! Make your Mother proud. (By the way, you did remember Mother's Day didn't you? That is a very important date, also having nothing to do with most title examinations, but still very important! If you forgot, go straight to the phone, call your Mother, and tell her that you called just as soon as you returned from a top secret mission to the South Pole. Then you can finish this column.)
Date Related Quiz
1. Date on which dower/curtesy interest was converted from life interest to fee simple.
2. Date on which dower/curtesy was abolished, and replaced with augmented estate.
3. Date on which surviving spouse moved into first place in the statute of descent and distribution.
4. Date on which the time period to enforce an Internal Revenue Service Notice of Lien was extended from six years to ten years.
5. Cut off date for validation in the most recent savings statutes for "slightly defective" acknowledgments.
6. Enforcement period for deed of trust with stated maturity date. Same, but maturity date is not stated. Same, but interest rate and monthly payments are stated.
7. Enforcement period for financing statement. Time period in which continuation statement must be filed. Enforcement period for continuation statement.
8. Enforcement period for Internal Revenue Service notice of lien. (This ought to be an easy one!) Same, but for Commonwealth of Virginia notice of lien.
9. Enforcement period for judgment rendered in a Virginia court. Same, but for judgment rendered in a federal court in located in Virginia. Same, but for judgment rendered in a state or federal court outside of Virginia.
10. Adverse possession minimum time limit. Prescriptive easement minimum time period. Same, but church is the claimant.
Have fun, and make your mothers proud.
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