How One Single Initial Unraveled a Real Estate Transaction…

On March 12, 2012   /   Blog, Title Insurance  

Verifying ID at escrow signing

A small piece of Lucerne Valley was being sold for $41,000 in an all-cash transaction. The buyer and seller lived out of the area, necessitating the closing documents be mailed out for signature. The vacant land sale went sideways when the escrow officer mailed the documents to the seller and demanded they be signed in the presence of an approved notary.

Closing documents mailed to principals

Tiffany V., an escrow officer with our sister branch in Victorville, was handling a simple all-cash sale transaction. All the closing documents were mailed out to the principals for signing. The buyer sent in his completed paperwork and closing funds. All Tiffany was waiting for, was the seller to send in his completed documents and signed grant deed.

An approved notary must be used

When the seller returned the documents to Tiffany, she discovered the seller had not followed her direction to sign them in the presence of a Company-approved notary. She advised him he would have to re-sign with an approved notary. The seller complained our offices were, “…too far and too inconvenient to get to.” and “This is ridiculous; a notary is a notary.” The seller’s real estate agent even gave Tiffany flack about the seller having to re-sign the conveyance deed. Finally the seller agreed to have a Company-approved notary come to him. The owner of record is Charles S. Calloway and the person the notary was meeting with only had identification for Charles E. Calloway. The seller insisted the notary notarize him just as Charles Calloway and that it would be fine with no middle initial.

The man who signed the documents is not the owner

The notary immediately called Tiffany after meeting with the seller. He informed her that he went ahead and notarized the signer as Charles Calloway without the middle initial to avoid getting into the legalities with him. The notary wanted to make sure, however, that Tiffany knew the Charles Calloway he met with was not the Charles S. Calloway on title, but Charles E. Calloway – the grandson of the owner of record.

Probates Explained

Probate: Single at Death
Probate: Married, Community Property
Probate: Married, Separate Property

The property had been in the same family since 1938, passed down from father (deceased owner of record) to son (deceased 20+ years) to grandson. The family members apparently never felt they had to transfer title, since they all had the same name of Charles Calloway.Tiffany promptly notified the real estate agents that the seller did not actually own the property. The seller’s agent quickly apologized about the hard time she gave Tiffany over the approved notary requirement and thanked her for catching the situation before it was too late.

…the Charles Calloway he met with was not the Charles S. Calloway on title, but Charles E. Calloway – the grandson of the owner of record.

The agent has put her client in contact with a probate attorney and it appears the buyer is still very interested in the property and is willing to wait for him to go through probate.

The moral of the story

The deed could have been invalidated by the heirs of the estate of Charles Calloway (senior). Since the new owners were purchasing an owner’s title insurance policy, the company would have had to defend them against any claim or loss resulting from the heirs of the estate laying claim to the property or the proceeds from the sale of the property

Questions or comments? Please share below!

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The Probate Path – Married, Separate Property…

On February 14, 2012   /   Blog, Title Insurance  

Probate path married separate property

Our last Probate Paths blog discussed the effect of death on community property. Today, we talk about another complicated situation involving marriage, another marriage, and death.

Sudden death, no will, and an outdated will…

Hank and Dagny were happily married and living in the family home they bought together. Both had been married before and each had children from those marriages. Hank and Dagny died tragically in December in an avalanche while skiing in the Alps. Dagny never made a will. Hank left an old will in which his son Hank Junior and daughter Randi were the sole devisees. Hank’s will didn’t mention their current home or Dagny. The house is listed for sale by his probate.

What’s the Realtor® to do? And how would the title company approach it?

Download the Probate Path Flow-Chart

Click the image or link below to download a printable version:
Probate Path – Married, Separate Property Flow Chart.

Who passed away first?

Because they bought their house together it would be community property and under normal circumstances the surviving spouse gets it. Since it isn’t in Hank’s will it’s not part of his probate estate. However, it would be if Dagny dies before he does. But – how can it be established who died first – or even if either did? In this situation the presumption would be that they died simultaneously, but how does that help?

The three children could try to dispute who gets what, especially considering the house could be worth a lot and the rest of the estate might be quite substantial. Maybe they are all one happy family and agree that the house can be sold and the proceeds divided up amicably. Or – Alice might claim 100% for herself, arguing that Hank died first and her mom got everything. Hank Jr. and Randi might do the same. Definitely Hank’s will is going to be probated, and Alice will likely want to open a probate on Dagny’s estate as well. But, what if she doesn’t?

Separate property scenario

Here, separate property rules will be applied – to each spouse. The title company will assume that each estate will treat this situation as if each spouse had pre-deceased the other, odd as that might sound. As community property, on the death of either of them, the home would go to the other and would become 100% separate property of the surviving spouse. That rule applies to both spouses here, but then the separate property of each “surviving” spouse is dealt with. The title company would follow a separate probate path for each estate.

The potential interest of each of the three children (plus any other devisee identified in Hank’s will) must be addressed. “

If there is no probate on Dagny’s estate it would certainly call for a “lack of probate” affidavit where Alice gives the facts as she interprets them. The title would also rely on the facts that Hank’s probate will tell them. The potential interest of each of the three children (plus any other devisee identified in Hank’s will) must be addressed. During the pendency of a probate it would probably accept a deed from the personal representative based on an order of the probate court clearing the sale.

The appropriate probate path if Dagny had pre-deceased Hank

Let’s start with Dagny. If she died first, under community property rules Hank would end up with the house. For however many years (or in this case, moments) that he survives Dagny, the house is his, and Alice would get nothing when he died. Then, at the moment of his death, his will would come into play, and Alice would end up with nothing, because she could get only what Dagny would have gotten – but she was already dead and so couldn’t inherit. Junior and Randi get the house.

This is Probate Path No. 3 if his will is probated. If his will is not probated, it’s Probate Path No. 4. Of course, in the latter case, the title company would want a “lack of probate” affidavit, which would probably assert that he was unmarried at death. In that case, Alice would be out of luck. But, that can’t be applied for certain, because the order of death isn’t known.

The appropriate probate path if Hank had pre-deceased Dagny

Similarly, if Hank died first, then Dagny immediately gets the house. His will wouldn’t control. Again, for however long Dagny survives him, the house is hers alone. Then, upon her death Alice, as her only heir – Hank having pre-deceased her – gets the house. As noted, however, this rule can’t be applied because no one knows who died first.

Assuming that both spouses have pre-deceased each other

So, there are two separate property estates, each of which would assume that the respective separate heirs or devisees would get an interest. If only Hank has a probate, the PR would sign for his estate (following Probate Path No. 1), and Alice would sign for her mom’s estate (following Probate Path No. 3).

If the probate is closed without the house being sold, then the title company would ask for individual deeds from Wesley, Randi and Alice, with escrow distributing the proceeds of the sale in accordance with mutual instructions from all three.

Questions or comments?  Please share below!

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The Probate Path – Married Community Property

On January 4, 2012   /   Blog, Title Insurance  

probate path for married or domestic partnership community property

Our previous probate path blog post discussed the sad tale of Sam Smith, who died with no kids, and the happy tale of Rolf, his nephew and sole heir who discovered that he had the proverbial “rich uncle.”

Three Basic Probate Situations

As noted in the December 6th blog, there are three basic probate situations:

  • The owner was single – not married or a domestic partner
  • The owner was married or a domestic partner and it was community property
  • The owner was married or a domestic partner, but it was separate property (not community property)

There are variations: did the deceased have a will? Is the estate being probated (with or without a will)?

Today we talk about another probate situation, this time involving community property.

A sudden passing with no will

Shelley and Norma are domestic partners, and live in a home that they bought together in 2009 (see the August 2011 blog post, “Domestic Partnership Law in Washington State” where community property laws apply to both a married couple and domestic partners). Shelley has two children, Albemarle and Adelaide, from a previous marriage. They also adopted a child together, Angelina.

Sadly, Shelley passed away from a sudden illness. She did not have a will. The question arises – who gets the house? Is it just Norma, or can Albemarle and Adelaide claim an interest, perhaps forcing a sale of the home in order to get their share? What about little Angelina?

This is a basic community property situation, and Norma inherits the house, free of any claims by Albemarle or Adelaide, and it becomes her separate property. When her time comes (assuming she doesn’t sell the house, get married or enter into a new domestic partnership before then), only Angelina would inherit from her.

“…the children don’t come into play when either parent dies – only when the surviving parent later dies.”

Now, if Norma had died first, the same rule would apply – that is, Shelley would get the house as her separate property. However, when she passes away, Albemarle, Adelaide and Angelina would all inherit the house. In any case, the children don’t come into play when either parent dies – only when the surviving parent later dies.

Determining who is in title

Probate path for married or domestic partner at death & community property

Click the image above to download a printable version of this chart

But we are getting ahead of ourselves. Right now, a Realtor® is listing the house for Norma, and the title company has to decide who is in title and who would need to sign a deed. If there isn’t a lot of money at stake a probate probably wouldn’t be necessary, so a “lack of probate” affidavit is the starting point.

Most community property situations are pretty straightforward, because when two parents own the home as community property it passes directly to the surviving spouse when one passes away, and their kids will end up with it eventually anyway. The chart to the right shows how the title company would proceed to identify who must sign the deed. As in Shelley’s case, with no probate for what is clearly community property, the Probate Path No. 1 is followed.

To view the probate path chart click here. (a PDF will open in a new window)

Complications may arise

However, complications can arise when there are children from a previous marriage, and it may not be so simple for the title company. For example, Albemarle and Adelaide could raise a fuss, and even though it is apparent that Norma inherits the house, the title company may want to get a deed from them. Why might they want to make a claim? Well, Shelley could have inherited the house, in which case, even though that happened in 2009, it would be her separate property, and Norma could be out of luck. Or, maybe Shelley paid the entire purchase price with inherited money, in which case her heirs could argue it was her separate property because separate funds were used to buy it. But let’s add another wrinkle – maybe Shelley contributed the down payment from separate funds, but Norma made the mortgage payments. She might claim an interest – perhaps a “marital” lien, saying that some of the equity value was acquired by her for the value of what she paid. Albemarle and Adelaide could be anything from the sole owners to part owners to having no interest at all.

Lack of probate affidavit

Hopefully, all the complications would be identifiable in the “lack of probate” affidavit. Of course, Norma could open a probate for Shelley (especially if there was a will), and no matter what Albemarle and Adelaide would claim, the probate court would deal with it. The title company would follow either Probate Path No. 3 or 4, and a deed from the personal representative in the probate would be sufficient.

To download a printable version of the probate path chart, click this link: probate path infographic. 

Questions or comments? Please share below!

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The Probate Path – Single at Death

On December 6, 2011   /   Blog, Title Insurance  

Recent blogs have discussed probate issues, or problems associated with a “lack of probate.” If a home is to be sold but the record owner is deceased it is imperative to identify who now owns the property. The transaction can then close if the proper parties execute a deed to the buyer.

We are not talking here about joint tenancy or trust property, but rather where title was vested simply in an individual.

There are three basic situations when the owner has died:

Probate Paths - Single at Death

Click the image above to view a printable version of the chart.

  • First, the owner was single – not married or a domestic partner.
  • Second, the owner was married or a domestic partner, but it was separate property (not community property).
  • Third, the owner was married or a domestic partner and it was community property.

Of course, each of these has additional variations, mostly relating to whether the deceased had a will, and whether or not the estate (with or without a will) is being probated. If there is a probated will, devisees (those named in a will) will get the property or the proceeds from the sale if it’s sold before the probate is closed. If there is no will, then state law provides who inherits. It can get complicated to work it all out.

It may be helpful in such cases to see a chart following the path to a successful closing. In this and future blogs we will show basic diagrams applicable to each situation. This month we start a fairly simple one – a deceased owner who was single at the time of death.

Deceased Owner – Single at Death

Sam Smith, a widower, just died. The home is listed by Rolf, who tells the Realtor® that he is Sam’s nephew and only heir. The title company gets the order and finds the death certificate, but doesn’t find a probate case. Having no other information at this time, the title company vests title in “the heirs and/or devisees” of Sam, and asks Rolf for a “lack of probate” affidavit. This affidavit is designed to identify relevant facts to allow the title company to assess its risk, including whether or not there is a will or a probate (which could be any county in Washington or in another state), the size of the estate (to determine if estate taxes apply) and other valuable information. The goal is to find out who can actually convey the land (and for escrow, who will get the proceeds of the sale), so that the risk is at least minimized, if not eliminated, that an unknown heir will come forward after the title has been insured.

No Heirs?

At some point, if there are no heirs at all, the home would eventually escheat to the State of Washington. In such cases, a probate may be opened, but here there are no easy answers. Usually creditors will open a probate and attempt to sell the property, with excess proceeds going to the state after the sale of the home.

Rolf completes the affidavit, and says that Sam never had children, and that his parents are also deceased. Sam did have a sister, but she is also died. She did, however, have an only son – Rolf who in turn is Sam’s nephew.

The laws of descent (RCW 11.04.015) provide that inheritance would be in the following order:

  1. Spouse, if any, or if none, then
  2. Children if any, or if none, then
  3. Parents, if alive, or if not, then
  4. Siblings, and if none survive him, then
  5. Grandparents, or if none, then
  6. Children or grandchildren of the grandparents and on down the line.

So, it would appear that the nephew is the sole inheritor and can sell the house. Now, it’s only the word of the nephew on the affidavit, but it is sworn under oath. It’s a judgment call on the part of the title company to decide the veracity of the nephew – is there a hidden will? Other heirs he’s just not mentioning? It is a risk, but the sworn affidavit is something for the title company to go on.

The chart below gives a simple guide to follow with these facts. There are four “paths” to follow. The first doesn’t apply, because although there is no will, neither is there a probate. The second doesn’t apply since there is neither a will nor a probate. The third doesn’t apply, because there is no will. So, we are left with the fourth path – no will and no probate. It requires the lack of probate affidavit, and a deed only from Rolf (as the sole surviving heir of Sam Smith, deceased), the child of a sibling, because Sam left no living kids, grandkids, parents, brothers or sisters.

Probate Paths - Single at Death

Click the image above to view a printable version of the chart.

Questions or comments?  Please share below!

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Where there’s a will, there’s a way… Or not! Probates & Real Estate Explained.

On May 3, 2011   /   Blog, Title Insurance  

Probates & Real EstateMom just passed away, and the family wants to sell the home. This is a listing with a motivated seller. But who actually owns it?

Of course, the family home (if it isn’t in a trust) will automatically go to the surviving spouse without the need for a probate. But, what about a married person who owned the house as separate property, or Mom who was widowed? Washington law (RCW 11.04.0115) identifies heirs at law who inherit when there is no will, including (in this approximate order) the spouse, children and grandchildren, parents, siblings and children of siblings.

A formal probate allows for the protection and orderly distribution, after payment of debts, of the assets of the deceased to heirs and/or devisees or a sale to a third party by the personal representative. Nonetheless, even though Washington probates are not expensive or time consuming, they often are not done. But how else will the buyer know that all of the title interest is properly conveyed? What if there are valid liens (including estate taxes or state Medicaid reimbursements) against the estate that would otherwise be paid in probate? That is where the “lack of probate” concept comes into play.

Vesting

Title to property of a decedent immediately vests in either devisees (if there is a probated will) or the heirs (if there is no probated will), even if the identity of those parties are unknown at that time – with or without a will, and with or without a probate.

With or without a will

When someone dies, that person will be either testate (with a will) or intestate (without a will). Both can be probated – but it’s not required, even though RCW 11.20. 010 says a will must be filed with the county superior court.

In order for the title company identify who these people are, or whether there is an unprobated will (which could give an interest to a non-relative or charity), it uses an affidavit. The affidavit, usually signed by a relative, must identify all these interests – including the estranged prodigal son who’s been incommunicado for years. It says when and where the deceased lived and died, and identifies any unprobated will or foreign probate. Finally, it states whether Mom received Medicaid benefits, and identifies the value of the estate for estates tax purposes. Based on this information, and deeds from all potential claimants and releases of liens, the title company can usually assume the risk of future claims and insure clear title in the buyer.

Keep in mind that this can be used when the will is probated in another state. Since foreign courts don’t have jurisdiction in Washington, an ancillary court action can be opened in Washington Superior Court that essentially blesses what the foreign court orders. Again, however, that expense and bother can be avoided with the lack of probate approach.

The Realtor® can help the family gather this information and get it to the title company so that the closing can take place and everyone is happy.

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