Underwriting Manual: Incompetents And Mentally Incapacitated Persons

See Also

Standard Exceptions


  • No references available.


  • No references available.
State Supplements

View state supplements to the national underwriting manual.

Underwriting Manual Subtopic

In General

V 4

Generally, incompetents and mentally incapacitated persons possess the legal capacity to acquire ownership of real estate as long as no specific obligations are attached to the acquisition thereof. However, incompetents and mentally incapacitated persons experience a disability that prevents them from validly executing a legal conveyance or encumbrance of title to real property. Obviously, this disability presents a hidden threat or risk to the insurance of land titles.

The terms "incompetent" and "mentally incapacitated" are oftentimes used interchangeably, although the latter may be used more commonly in situations in which the condition is voluntary, transitory and has not been judicially determined.

A person, though actually incompetent, may never have been legally disqualified to convey or encumber real property. Any finding or adjudication of incompetency is exclusively a judicial function. No person should be referred to as being an incompetent unless that person has been judicially determined incompetent.

If a person is adjudged to be incompetent, the court will appoint a guardian, or conservator, or committee for the estate and the person of the incompetent. However, guardians, conservators, or committees have no other powers except those specifically granted to them by statutes or by proper court orders, and they are not vested with any interest in the incompetent's property.

Underwriting Manual Subtopic

Instruments Executed By Mentally Incompetent Persons Prior To Adjudication

V 4

Any conveyance or encumbrance made by a person who is subsequently judicially determined to be mentally incompetent at the time of execution is considered, depending on the jurisdiction and the circumstances of the case, either void, that is, a nullity, or merely voidable, (subject to be disaffirmed).

In those jurisdictions in which this type of transaction is voidable, the following factors must be considered:

  • Whether fair and adequate consideration was received by the conveyor or encumbrancer.
  • The bona fide condition of the purchaser or lender.
  • Whether the transaction is executory or nonexecutory.
  • That no disaffirmance of the instrument is made within the statutory time period.
  • Whether there is a statute restricting the time allowed to persons under disabilities to assert their claims.

State law must be fully researched.

Underwriting Manual Subtopic

Instruments Executed By Mentally Incompetent Persons Subsequent To Adjudication

V 4

Any conveyance or encumbrance made by a person previously adjudicated incompetent is void.

After an adjudication of incompetency, the guardian, conservator, or committee appointed by the court can be empowered by the same court, under the pertinent statutory provisions, to complete any real estate transaction either affecting or in relation to the estate of the incompetent

Underwriting Manual Subtopic

Parties Who Seem To Be Mentally Incapacitated At The Time Of Closing

V 4

Title insurance professionals, especially closers, must be aware of the possibility that any instrument may be set aside upon proof that the grantor was mentally incompetent at the time of its execution.

Because a grantor must possess adequate and sufficient mental capacity, no closing should be consummated if the grantor appears to not comprehend any of the following:

  • The purpose and nature of the transaction.
  • How the execution of the transaction will affect the grantor's title.
  • The extent and value of the grantor's property.
  • The full amount of consideration the grantor is receiving.
  • The manner in which the grantor intends to dispose of the property.

Although mental incapacity cannot always be objectively determined, the following physical signs or characteristics obligate the closer to cancel the closing of the transaction:

  • Amnesia or lack of full memory.
  • Drunkenness
  • Drug intoxication
  • Extreme senility
  • Undue influence exerted upon a party by another party.

Any questions should be submitted to authorized underwriting personnel.

Underwriting Manual Subtopic

Vesting Of Title And Incompetency

V 4

An adjudication of incompetency has no effect whatsoever on the incompetent's ownership of real property.

Title to any property owned by an incompetent person remains unaffected by a subsequent judicial finding of incompetency. Generally, the same may be said for property acquired after to the adjudication.

Any title to real property held by the adjudged incompetent, either prior to adjudication or subsequently acquired, is never vested in or held by the court, guardian, conservator or committee. Title remains exclusively vested in the incompetent, subject only to the statutory disabilities in regard to its conveyance or encumbrance. Nevertheless, a guardian or conservator may be empowered to deal with the incompetent's real property.