The 2015-2016 legislative session is now concluded and the following are summaries of the statutes of interest to the title insurance industry.
HB 2539 Real Estate Excise Tax
The Real Estate Excise Tax ("REET") applies to sales of real property. Transfers by operation of law, such as from a decedent to heirs, are not sales and therefore are exempt from the tax. Some counties, however, had taken the position that transfers to heirs where the decedent’s estate was not probated were not exempt from the REET and were requiring an excise tax to be paid as a result of the heirs coming into title. This often required the heirs to pay two REETS when the property was sold by them – one for the transfer into the heirs and one for the sale to a third party.
HB 2539 amends RCW 82.45.197 and is intended to clarify the documentation necessary for exemption from paying REET where the property is transferred through a non-probated inheritance. Under the statute, heirs may record a “Lack of Probate Affidavit” to evidence the change of ownership. This provision exists for intestate successions as well as where a will exists but the estate has not been probated.
The statute requires that the affidavit contain the following information:
Name of the affiant(s);
Relationship of the affiant(s) to the decedent;
Names of all other heirs of the decedent living at the time of death;
A description of the property;
Whether the decedent left a will that includes a devise of the property;
Any other information the Department of Revenue may require.
The affidavit will need to be recorded in the county where the property is located, along with a death certificate. This excise tax Lack of Probate affidavit should not be confused with a Lack of Probate affidavit used for underwriting purposes. Each one has a different purpose. The underwriting Lack of Probate affidavit contains additional information that is not in the REET Lack of Probate affidavit and should not be recorded because it may contain private information. Therefore, the REET Lack of Probate affidavit will not replace the affidavit used for underwriting purposes and both will be necessary.
The bill is effective June 9, 2016.
HB 2519 Nuisance Abatement Liens
Several provisions of the RCWs allow governmental entities to levy special assessments for nuisance abatement costs. Those assessments have constituted a “secret” lien against the property and did not require any recording to attach to the property. HB 2519 changes the “secret” lien to one that requires a recorded instrument. The statute provides that the lien is binding upon successors in title only from the date the lien is recorded in the county where the affected real property is located. However, there is a caveat to this limitation. Up to two thousand dollars of the recorded lien is of equal rank with state, county, and municipal taxes. In other words, the first two thousand dollars of the abatement lien will have priority even without a recorded notice. The statute is effective June 9, 2016.
SB 5635 -- Uniform Power of Attorney act
SB 5635 repeals Chapter 11.94 replacing all power of attorney statutes with the new Uniform Power of Attorney Act. The general requirements of a valid power of attorney will be the same under the Uniform Act as the previous statute. Washington is the nineteenth state to adopt the uniform act. The changes are generally intended to protect the elderly from abuse.
Under the statute, the requirements for executing a power of attorney are not significantly different that the current law, though an attorney in fact is now designated as an “agent”. The principal must sign and date the power of attorney and have the signature acknowledged by a notary. The signature will be presumed to be genuine when it is properly acknowledged. In the alternative, a power of attorney may also be attested by two witnesses. The witnesses may not be care providers or relatives of the principal. A principal may designate co-agents in a power of attorney, who exercise authority jointly unless the power of attorney provides differently. Like the current law, the powers conferred under a power of attorney terminate when the principal is incapacitated unless they are expressly made durable.
The statute provides for categories of grants of authority, from which the principal may choose the ones that are appropriate. The principal may also grant general authority for any actions that the principal may do. In that case, the agent has authority for all categories. The categories to choose from are:
real property and tangible personal property;
stocks, bonds, and financial instruments;
banking and other financial services;
operation of a business or entity;
insurance and annuities;
estates, trusts, and other beneficial interests;
claims and litigation;
personal and family maintenance;
benefits from governmental programs or civil or military services;
health care matters; and
matters related to care of the principal's minor children.
Similar to the current law, some categories of authority are not to be implied in a power of attorney, but must be stated. Those generally relate to estate planning matters, trusts or community property or health care decisions.
The statute provides protection to third parties who rely in good faith on a properly executed power of attorney. In addition, a third party may request a certification from the agent, which also provides protection when it is relied upon in good faith. That certification shall state that:
(a) The person presenting himself or herself as the agent and signing the affidavit or declaration is the person so named in the power of attorney;
(b) If the agent is named in the power of attorney as a successor agent, the circumstances or conditions stated in the power of attorney that would cause that person to become the acting agent have occurred;
(c) To the best of the agent's knowledge, the principal is still alive;
(d) To the best of the agent's knowledge, at the time the power of attorney was signed, the principal was competent to execute the document and was not under undue influence to sign the document;
(e) All events necessary to making the power of attorney effective have occurred;
(f) The agent does not have actual knowledge of the revocation, termination, limitation, or modification of the power of attorney or of the agent's authority;
(g) The agent does not have actual knowledge of the existence of other circumstances that would limit, modify, revoke, or terminate the power of attorney or the agent's authority to take the proposed action;
(h) If the agent was married to or in a state registered domestic partnership with the principal at the time of execution of the power of attorney, then at the time of signing the affidavit or declaration, the marriage or state registered domestic partnership of the principal and the agent has not been dissolved or declared invalid, and no action is pending for the dissolution of the marriage or domestic partnership or for legal separation; and
(i) The agent is acting in good faith pursuant to the authority given under the power of attorney.
The statute will be effective January 1, 2017.
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