[WSBARP] TODD and Title update

Fri Jan 5 16:24:11 PST 2024

Just for a point of reference, I would like to offer the perspective of an underwriter for a title insurance company. As with any deed, there are certain risks to insuring through a TODD – fraud, forgery and undue influence to name a few. There is a broad duty to defend challenges to title under the title insurance policy, even if those challenges are frivolous. Setting aside valid claims, you can imagine many scenarios which may present a risk of frivolous litigation, for instance a TODD followed by an inconsistent devise of the property in a subsequent will. While that wouldn’t revoke the TODD, the devisee under the will may have an expectation of inheritance that they are willing to bring a lawsuit over. This says nothing of the more obvious situations that would give an underwriter pause – would anyone insure through TODD executed and recorded on the day of death without perhaps making inquiry of other potential heirs or devisees?

There are also risks that we must underwrite such as succession taxes, expenses for last illness owed to the state, and even the possibility of excise tax being due on the TODD (see WAC 458-61A-202(5)). Title companies generally use a custom Lack of Probate Affidavit to underwrite these risks.

Most of these risks are not particular to insuring through a TODD, they also present themselves when insuring without a probate where we rely on wills, community property agreements, and LOPAs to determine whether and how we are willing to insure title. In short, there is nothing that makes insuring through a TODD automatic and each transaction presents with unique facts and risks.

Thanks,

Dan

Dan MacMillan
Regional Counsel
Fidelity National Title Group

701 Fifth Ave., Suite 2700
Seattle, WA 98104
(206) 628-5620 Direct
Daniel.MacMillan at fnf.com<mailto:Daniel.MacMillan at fnf.com>

From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Lynn Clare
Sent: Friday, January 5, 2024 1:14 PM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] TODD and Title update

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I do, but only if the beneficiary is 1) all the children or 2) an individual and there is NO spouse and NO children - IOW, a slam dunk in the new title-company interpretation of the law.

On Fri, Jan 5, 2024 at 10:17 AM Jan Kelly <jan at jankellylaw.com<mailto:jan at jankellylaw.com>> wrote:
I don't recommend them to clients anymore, due to situations like this one.

On Thu, Jan 4, 2024 at 4:19 PM Timothy Lehr <timothy at stileslaw.com<mailto:timothy at stileslaw.com>> wrote:
All,

I wanted to let the listserv know about a recent opinion I received from a title company.

Surviving husband had a Will that left everything to three kids, equally. He subsequently recorded a TODD as estate planning tool because he wanted one son to have a house, which son lived in with him. Husband passed and about 6 months later son decides to sell house. He records death certificate to have title transferred to him via TODD. At closing, title company is now asking for a copy of a Will, if any, and lack of probate affidavit. I contact them and ask why, and they say that it’s their new policy to ask for this. We get into it a little bit, and they say their legal department does not want to get into litigation with any other heirs of the estate. I ask “What if the Will says something different?” And they answer vaguely that it might cause a problem. They said the TODD statute is “too new” and “there is no case law on it” and they don’t want to get wrapped up in litigation.

Moral of the story, if the Will contradicts the TODD in any way, or even if it is silent as in this scenario, they may not insure title in TODD grantee. This seems crazy and would completely change the way many attorneys advise on TODDs as estate planning tools. Has anyone else heard of this?

Timothy C. Lehr
Attorney & Partner

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Jan Kelly, JD/MBA
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