Bulletin: NM2014002

Date:
March 18, 2014
To:
All New Mexico Issuing Offices
RE:
UNDERWRITING - New Transfer on Death Deed (TODD) Act Effective January 1, 2014

Dear Associates:

On January 1, 2014, the new law governing the use of a Transfer on Death Deed in the state of New Mexico took effect. It applies to all transfer on death deeds made before, on, or after January 1, 2014, by a transferor dying on or after January 1, 2014.

In 2013, the New Mexico Legislature repealed the Transfer on Death Deed statute, NMSA § 45-6-401, and adopted in its place the Uniform Real Property Transfer on Death Act, NMSA §§ 45-6-401 to 45-6-417 (the “Uniform Act”). New Mexico joins six other states and the District of Columbia in enacting the Uniform Act. The Uniform Act was developed by the National Conference of Commissioners on Uniform State Laws and promulgated in 2009.

As under the prior statute, the Uniform Act allows for the non-probate transfer of real property upon the death of the transferor by means of a transfer on death deed recorded prior to the transferor’s death in the real property records of the county in which the property is located. Both current law and the Uniform Act allow the transferor to revoke the transfer on death deed during the transferor’s lifetime by properly recording a later-executed revocation or a conflicting transfer on death deed. The Uniform Act primarily clarifies and explains the process of creating and revoking transfer on death deeds as well as the rights of beneficiaries and joint owners. The Uniform Act also provides simple updated forms of a Transfer on Death Deed and a Revocation, as well as “Common Questions” (or FAQs) explaining the Uniform Act’s provisions in lay terms.

A Transfer on Death Deed (TODD) allows an individual who owns real property to pass title to their property upon his/her death, avoiding the need for a probate. Key elements of the newly effective Uniform Act are as follows:

a.

The TODD must contain all of the essential elements and formalities of a properly recordable inter vivos deed.  

 

b.

The TODD must be signed by the transferor and properly recorded during the transferor’s lifetime in the office of the County Clerk where the property is located.  

 

c.

The capacity required to create a TODD is the same as the capacity to make a will. 

 

d.

Until the transferor’s death, a recorded TODD has no effect - it does not affect any right or interest of the transferor or any other person in the property.  

 

e.

The beneficiary of a TODD must be identified by name and cannot be a class designation, such as “the living children of my sister”.

 

f.

A TODD does not impact the transferor’s ability to transfer or encumber the property.

 

g.

At the time of the transferor’s death, title to the property is transferred automatically to the beneficiary, subject to any conveyances, encumbrances, assignments, liens, or other interests in the property. In other words, the beneficiary receives only the interest that the transferor owned at the time of death, subject to all encumbrances against the property. It functions much like a quitclaim deed.

 

h.

The beneficiary may disclaim all or part of the transferred interest in the same manner as New Mexico law permits for any other testamentary devise.

 

i.

A TODD is revocable any time during the transferor’s life (even if the document states otherwise) in three different ways:

 

 

a.

By recording a new TODD that revokes the prior TODD expressly or by inconsistency;

 

 

b.

By recording an instrument of revocation; or

 

 

c.

By an inter vivos deed to a third party that includes language expressly revoking the TODD.

 

j.

The instrument revoking the TODD must be recorded prior to the transferor’s death.

 

k.

A TODD cannot be revoked by a will.

 

l.

A TODD or an instrument revoking the deed that is procured by fraud, duress or undue influence is void.

 

m.

A TODD does not make the property subject to claims or process of the designated beneficiary’s creditors, but liens against the beneficiary can attach once the beneficiary acquires title upon the death of the transferor.

 

n.

If a transferor is a joint owner and is survived by one or more joint owners, the property belongs to the surviving joint owners with a right of survivorship. If the transferor is a joint owner and is the last surviving joint owner, the TODD is effective upon the death of the transferor.

 

o.

Unless the TODD states otherwise, the divorce of the transferor after the recording of the TODD revokes all provisions in a TODD in favor of the former spouse of the transferor.

 

p.

A proceeding to contest a TODD must be commenced within one year of the transferor’s death.

Please note the following underwriting guidelines:

1.

If title to the property is still held in the name of the transferor and the transferor is still alive, include a requirement for revocation of the TODD.

 

2.

If the transferor in the TODD has conveyed the property to a third party, examine the deed to determine if it includes revocation language. If it does, then no further requirements are needed. If it does not, include a requirement for revocation of the TODD.

 

3.

If you are notified from a source other than a recorded death certificate or affidavit of death certificate that the transferor is deceased, include a requirement for a copy of the transferor’s death certificate. 

 

4.

Please include the following requirement in the commitment:

Evidence satisfactory to the Company that the Estate of [state name of decedent transferor/owner], deceased, is not subject to the Federal Estate Tax, pursuant to the Internal Revenue Code, 26 U.S.C. Sec. 6324(a).

 

5.

If you are asked to insure a sale or refinance of the property less than one year after the death of the transferor, please contact your underwriter. We may require a probate prior to insuring in these circumstances.

 

6.

If you have reason to believe that the transferor lacked capacity at the time of execution of the TODD, executed the TODD as a result of duress or undue influence, or if there are circumstances which may affect the validity of the execution of the TODD, please contact your local underwriter.

It is important that you contact your local underwriter if you have any questions pertaining to a TODD or a revocation of a TODD.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter. 

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None