Will the Real Seller,
Please Stand Up?
We
recently had an issue involving the identity of the seller of a property. The
listing agent had the Personal Representative of the Estate of the deceased
owner of the property sign the listing agreement and put the house on the
market. The tax records reflected the deceased owner's name so all of this made
sense. The Personal Representative of the Estate signed an offer from a buyer
and the contract was ratified, right? All of you know it would be too easy to
say yes.
After
researching the title we discovered the property was not held by the owner
individually which upon his death would have passed to his Estate. The Personal
Representative named by the Court would have the legal authority to sell the
property as was thought above. Title to the property was in fact held in a
Trust. In order to determine who had the legal authority to sell the property we
had to review the Trust Agreement. After reviewing the Trust Agreement, we were
able to determine that the Trustees were no longer living and their successor
trustee was also no longer living. There was no one who had the legal authority
to sell the property. How do you solve this problem?
We
went to court and filed a consent order to have the Personal Representative of
the Estate approved to serve in the legal capacity as Trustee of the Trust to
sell the property. The consent order was granted by the judge and we went to
settlement, right? Wrong! The Beneficiary of the Trust was a Non-profit
Organization, so it made more financial sense from a tax perspective to have the
Beneficiary of the Trust sell the property to the Buyer than it did the Trust.
In order to accomplish this goal we had the parties acknowledge the seller of
the property was in fact the Trust not the Estate and that the Court Appointed
Trustee would assign the contract to the Beneficiary of the Trust and the
Non-Profit Beneficiary accepted the assignment of the contract. We then had the
person authorized to sell the property on behalf of the Non-Profit Organization
convey the property to the Buyer.
What
is the lesson learned? Sometimes the best made plans still have a wrench thrown
into them. It is very important to remember when dealing with an entity (Limited
Liability Companies, Partnerships, Estates, Trusts, etc.) that you have all of
the documents provided and reviewed as soon as possible. The attorneys at KVS
are here to review them for you at no additional cost to your client.
