[WSBAPT] Transfer on Death Deed results in uninsured real property

[Karl Flaccus]

That’s interesting and concerning.  Thanks Nick.  I wonder what would happen in Washington if, after the fire, the beneficiary disclaims the interest, thus putting the house into the Estate?

Karl

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Nicholas Pleasants
Sent: Friday, May 07, 2021 2:58 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Transfer on Death Deed results in uninsured real property

Hi All,
Some food for thought on this rainy Friday afternoon. I learned that State Farm made some caselaw in the 8th Circuit regarding Transfer on Death Deeds. I’ve attached the case for your reference, it is Dawn Strope-Robinson v. State Farm Fire and Casualty, No. 20-1147 (8th Cir. 2021). Here are the basic facts:
State  Farm  Fire  and  Casualty  Company  issued  a  homeowner’s  insurance  contract  to  David  Strope  for  his  house  in  Orr,  Minnesota.  On  August  10,  2017,  Strope executed a transfer on death deed to convey the property to his niece, Dawn Strope-Robinson.  The  transfer  on  death  deed  was  then  recorded  on  August  11.  Strope died  on  August  14. Six  days later,  Strope’s  ex-wife  intentionally  set  the house on fire, damaging the home and personal property inside.
The holding is that the house was not insured because it immediately vested to the niece, and she was not a named insured on Uncle’s policy. A possible point of distinction from the Minnesota statute is that Washington would require the recording of the death certificate with a REETA to change the property tax over to the beneficiary. But this is rather scary to think that the home could become uninsured at any moment because the grantor died, and beneficiary, who may or may not even be aware of the Transfer on Death Deed, would need to immediately purchase insurance.
I’ve used Transfer on Death Deeds from time to time, especially in non-taxable estates with one or a few heirs that get along and want to be able to sell the house without probate. But if this holding were binding on the 9th Circuit, I would not be inclined to have clients use this technique until we come up with a work around for the insurance problem.
I know insurance for a decedent’s estate can be tricky in general, especially if the policy is up for renewal shortly after death. Something we should explore to better protect the beneficiaries.
Best,
Nick

Nicholas Pleasants
Owner

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