Avoid The Use Of The Transfer On Death Deed

I have a file that is supposed to close by the end of the month with an interesting title problem. Transfer On Death deeds seemed to be a good idea, but in practice, they can cause rather difficult problems when they are not prepared properly. Here is a little background revealed by our title search.

Vic and Donna were in title until Donna died. Vic acquired Donna's half interest by a certificate of transfer. Vic then transferred the property to himself, transfer on death to his two children, Ray and Jen. However, the attorney that prepared the deed attached the legal description from the certificate of transfer which had "an undivided half interest" at the top.

Ohio Revised Code section 5302.22 (B) states in part:

Any person who, under the Revised Code or the common law of this state, owns real property or any interest in real property as a sole owner or as a tenant in common may create an interest in the real property transferable on death by executing and recording a deed as provided in this section conveying the person's entire, separate interest in the real property to one or more individuals, including the grantor, and designating one or more other persons, identified in the deed by name, as transfer on death beneficiaries.

Because Vic was actually vested in the entire undivided interest in the property, the half interest stated on the deed is not his "entire, separate interest." So what result?

There is very little case law on the transfer on death statute in Ohio, but one case stands out, in re Estate of Scott. In the Scott case, the transfer on death deed was executed, but not filed before the grantor died. The court held that because the statute required the deed to be filed in the grantor's lifetime, the deed was not valid. This would indicate that the courts are narrowly construing the statute and if the deed violates the statute it is void.

Thus, Vic's deed is void and the property is a probatable asset. This could create a problem because Vic had remarried and left a surviving spouse. Though Vic's will left the "residue and remainder" of his estate to Ray and Jen, the surviving spouse may be able to claim her elective share of the estate. That is really an issue beyond my knowledge, but it is clear that the property did not pass outside of the estate and we will not be able to close until the matter is resolved by the probate court.

Interestingly enough, Bender's Ohio Real Estate Transactions says:

Strategic Point: Avoid use of the transfer on death deed. Of all the matters that have raised unresolved legal questions in the past years among real estate attorneys, the transfer on death deed continues to lead the pack.

These are the types of problems that trained title examiners know to look for. On its face, the problem was not readily apparent - the county had recorded the transfer as a full interest passing to Ray and Jen. Abstractors and examiners need to know much more than how to write take-offs of deeds and mortgages. Unfortunately, we have seen many more inexperienced abstractors get into the business and that just means that the rest of us need to scrutinize our searches that much more closely. The problems only get harder to detect, and correct, as they are missed.

We were fortunate in this instance because Vic's probate case is still open and the attorney can include the property.

Robert A. Franco
SOURCE OF TITLE
rfranco@sourceoftitle.com

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862 words | 10158 views | 2 comments | log in or register to post a comment

	Title examiners - if any human eyes...
	Title examiners - if any human eyes are involved - will spend the next ten years fixing all the problems caused by the last 15 years of crap work - oh the legacy of faster/cheaper/close at any cost providers.
	by Diane Cipa, General Manager, The Closing Specialists® \| 2007/05/16 \| log in or register to post a reply

	Just as an update to this post: I ...
	Just as an update to this post: I spoke with the attorney for the estate and the surviving spouse had tried to make an election against the estate but she had signed a pre-nup. He said that he will get the property added as a newly discovered asset and it shouldn't take too long to get this sale closed. All is well that ends well.
	by Robert Franco \| 2007/05/18 \| log in or register to post a reply

Source of Title Blog

Robert A. Franco The focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco
SOURCE OF TITLE

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