56 th Mid-Year Meeting Real Estate Tools for Estate Planning

Transcription

1 Vermont Bar Association Seminar Materials 56 th Mid-Year Meeting Real Estate Tools for Estate Planning March 15, 2013 Sheraton Burlington Faculty: James Knapp, Esq. Theodore Studdert-Kennedy, Esq.

2 VBA 56 th Mid-Year Meeting Real Estate Tools for Estate Planning Speakers: Theodore Studdert-Kennedy, Esq. and James Knapp, Esq. Helpful links regarding Reverse Mortgage

3 Part II An Interactive Exercise in the Preparation of an Enhanced Life Estate Deed

4 CHAPTER XV STANDARD 15.1 ****** DEEDS RETAINING LIFE ESTATES WITH RESERVED POWERS A life estate with reserved powers is created when the record title holder (the Grantor ) conveys title to one or more persons (the Remainderman ), and reserves a life estate together with an additional right to sell, mortgage, lease, gift, or otherwise convey with or without consideration fee title or any lesser interest. A title examiner may presume a subsequent conveyance (including a conveyance of the fee, a mortgage, a lease, or the conveyance of some interest less than the entire fee) by the Grantor, without joinder by the Remainderman, is a valid transfer of the specified interest as long as the right to convey such interest was granted to or retained by the Grantor. NOTE: This Standard is not intended to address the efficacy of these deeds for Medicaid Planning purposes, or their compliance with Medicaid regulations. Comment 1. Without reserved powers, creation of a life estate results in two vested estates, an interest for life and a remainder interest. The holder of a life estate without reserved powers cannot convey, alter, revoke or otherwise affect the remainder interest nor convey a greater estate. Deeds creating an enhanced life estate with reserved powers have been variously known as Ladybird Johnson deeds, Granai deeds, Medicaid deeds or Barre deeds. See, Aiken v. Clark, 117 Vt. 391 (1952), for a general discussion of the principles applicable to life estate. See, Weed v. Weed, 2008 VT 121, 185 Vt. 83, 968 A.2d 210 (2008) for a general discussion of the principles related to exercising power to convey under a reserved power where the transfer is a gift and not a sale. Comment 2. No statutory language or universally accepted language exists to create a life estate with reserved powers. Comment 3. The use of the word title in this standard is not intended to define the extent of the holder's interest. Copyright Vermont Bar Association 2010 All Rights Reserved

5 Comment 4. Title examiners should be aware of the consequences of the holding in Brousseau v. Brousseau, 182 Vt. 533, 927 A.2d 773 (2007)), and in particular the Court's adoption of the principle that an off record intention, expressed after the date of the conveyance that the conveyance was not intended to create a present vesting of an interest in the property conveyed is sufficient to overcome any presumption of donative intent. Thus, during the lifetime of the grantor of the deed, it is possible for the grantor to assert that there was no intent to make a present gift of an interest in the property conveyed and thus any transfer of interest apparent in the deed was ineffective. September 24, 2010 This standard was added. History Copyright Vermont Bar Association 2010 All Rights Reserved

6 Aiken v Clark

7 92 A.2d 620 (Vt. 1952), 1813, Aiken v. Clark Page A.2d 620 (Vt. 1952) 117 Vt. 391 AIKEN v. CLARK et al. No Supreme Court of Vermont. November 5, 1952 Finn, Monti & Davis, Barre, for plaintiff. [117 Vt. 391] C. O. Granai, Barre, for defendants. Before SHERBURNE, C. J., CLEARY, ADAMS, and CUSHING, JJ., and CHASE, Superior Court Judge. [117 Vt. 392] CLEARY, Justice. This is an action for a declaratory judgment brought under V.S.1947, Ch. 77. Heard by the County Court with Findings of Fact and Judgment Order. The Findings of Fact show that on March 30, 1939, Virginia M. Aiken conveyed certain land and premises to C. O. Granai but reserved to herself 'all rights, title, benefits and interests in said property during her natural lifetime.' On the same day, Granai quitclaimed the same land and premises to Virginia M. Aiken, Erwin Page 621 Aiken and Muriel Clark. Both deeds were duly recorded in the Land Records of the towns of Barre and Marshfield where the said lands are situate. The deed from Granai contains the following: 'This deed is given subject to the reservation of Virginia M. Aiken as set forth in her warranty deed to C. O. Granai, dated March 30, 1939, and recorded in Book 28 Page of the Land Records of the Town of Barre, and Book Page of the Land Records of the Town of Marshfield, reserving unto the said Virginia M. Aiken all right, title, benefits and interests in said property during her natural life, and at her decease the same shall vest in Erwin Aiken, free from all marital rights, to his sole and separate use, and the said Erwin Aiken shall have the right during his lifetime to sell, mortgage, lease or otherwise incumber said property as he deems fit, and if he die seized of this property, all of said property or any part thereof remaining shall go in fee to Muriel Clark, her heirs or assigns.' Virginia M. Aiken died on March 5, After her death, Erwin Aiken made and duly executed his last will, leaving all the residue of his estate to his wife, Verna M. Aiken, the plaintiff here, and naming C. O. Granai executor. Erwin Aiken has deceased and the plaintiff claims that upon his death, title to the property in question was in his estate and that, as residuary legatee and as widow of Erwin Aiken, title to the property is now in her. Defendants Muriel Clark and C. O. Granai, executor, claim that title to the [117 Vt. 393] property is in Muriel Clark by virtue of the deed from Granai on March 30, 1939.

8 The Judgment Order holds that 'during the lifetime of Erwin Aiken he had unlimited power of disposal; that the remainder over to Muriel Clark is void for repugnancy'; that fee simple and title to the land and premises in question was in the name of Erwin Aiken at the time of his decease and part and parcel of his estate and that Muriel Clark has no title or interest therein. The case is here on the defendants' exceptions and the only question raised is whether the Judgment Order is supported by the Findings of Fact. In interpreting a deed, the intention of the parties is the thing to be determined. The primary rule of interpretation is to gather the intention of the parties from their words by reading not simply a single clause of the instrument, but the entire context. It is the duty of the Court, if possible, to construe the instrument so as to give effect to every part and from from the parts a harmonious whole. It is only when the meaning is uncertain that resort may be had to the well settled, but subordinate rules of construction, to be treated as such and not as positive rules of law. Latchis v. John, 117 Vt. 110, 112, 85 A.2d 575; Johnson v. Barden, 86 Vt. 19, 25-30, 83 A. 721, and cases there cited. Rules of construction are adopted for the sole purpose of removing doubts and obscurities so as to get at the meaning intended by the parties. When there is no doubt or obscurity, there is no room for construction and the instrument must be given effect according to its terms. Kennedy v. Rutter, 110 Vt. 332, 342, 6 A.2d 17. The language of the deed in question shows that the parties intended that Virginia M. Aiken should have a life estate in the property; that at her death the property vest in Erwin Aiken, free from all marital rights, to his sole and separate use, with the right in his lifetime to sell, mortgage, lease or otherwise incumber the property as he deemed fit. But the language of the deed also shows that the parties intended that if Erwin Aiken died seized of the property it should go in fee to Muriel Clark, her heirs and assigns. The deed does not give Erwin Aiken unlimited power of disposal but only the right to sell, mortgage, lease or otherwise incumber the property as he deemed fit during his lifetime. It does not give him the right to dispose of the property by will, but, on the contrary, plainly provides Page 622 that it shall not become part and parcel [117 Vt. 394] of his estate. Since the deed manifests the intention to confer certain rights and benefits on Erwin Aiken and a different right and benefit on Muriel Clark, it is our duty to so construe the language of the deed to effectuate that intention unless it is legally impossible for the two provisions to subsist together. Hibbard v. Hurlburt, 10 Vt. 173, 178; In re Robinson's Will, 101 Vt. 464, 469, 144 A. 457, 75 A.L.R. 59. The Judgment Order states that the remainder over granted in the deed to Muriel Clark is void for repugnancy. Erwin Aiken was granted the power to dispose of the property in certain specified ways as he deemed fit but in order to make the power complete, he had to assert that power during his lifetime. It was a right, vested and available, but it expired at his decease. The grant to Muriel Clark could have no effect unless Erwin Aiken died seized of the property. Therefore, the grant to Muriel Clark was not inconsistent with the grant to Erwin Aiken and need not be rejected for repugnancy, for the two intentions can subsist together and all parts of the deed be sustained. Hibbard v. Hurlburt, 10 Vt. 173, 178; McCloskey v. Gleason, 56 Vt. 264, 267, 268; Thrall v. Spear, 63 Vt. 266, 269, 272, 22 A. 414; Conant's Exrs. v. Palmer, 63 Vt. 310, 313, 314, 21 A. 1101; In re

9 Keniston's Will, 73 Vt. 75, 84, 50 A This view gives effect to both provisions according to the manifest intention of the parties. In re Robinson's Will, 101 Vt. 464, 469, 144 A. 457, 75 A.L.R. 59. It is significant that the language of the deed does not grant a fee-simple estate to Erwin Aiken but does grant it to Muriel Clark and her heirs and assigns if Erwin Aiken dies seized of the property. The grant to Erwin Aiken does not specify the quality of his estate. Since it grants him only a qualified power of disposition it does not create in him a fee-simple estate. In re Robinson's Will, 101 Vt. 464, 468, 144 A. 457, 75 A.L.R. 59, and cases there cited under Proposition (5). The plaintiff relies chiefly on the cases of Stowell v. Hastings, 59 Vt. 494, 8 A. 738; Chaplin v. Doty, 60 Vt. 712, 15 A. 362 and Judevine v. Judevine, 61 Vt. 587, 18 A. 778, 7 L.R.A. 517, but all of these cases are clearly distinguishable. In the Stowell case the testator gave his wife an absolute power of disposition; in the Chaplin case the testator's gift to his granddaughter and her heirs was absolute; in the Judevine case the testator's gift to his wife and her power of disposal were both absolute. Reading the entire instrument before us, we hold that the grant to Erwin Aiken was not in fee simple, that he was granted only a [117 Vt. 395] limited power of disposal, and that at his death the property was not part of his estate but immediately went in fee to Muriel Clark, her heirs and assigns. Judgment reversed and judgment that title in fee to the property in question is in Muriel Clark.

10 Blair v Blair, 111 Vt 53 (1940) Life Estate as a contingent remainder interest

11 Vermont. Page A.2d 188 (Vt. 1940) 111 Vt. 53 Pearl Blair v. Mary M. Blair And Herbert P. Blair. Supreme Court of Vermont January 2, 1940 November Term, Present: MOULTON, C. J., SHERBURNE, BUTTLES, STURTEVANT and JEFFORDS, JJ. Deeds---1. Testamentary Instrument Deed must Pass Present Interest Enjoyment of Interest under Deed May be Postponed Statute of Uses not Adopted Future Interest may be Created Construction of Deeds "Heirs and Assigns Forever" Indicates Fee Intended Habendum may Limit Grant Only Life Estate in Absence of Words of Inheritance Habendum may Limit Implications of Grant Grant to One if Survives, or to Another Construed Habendum Construed Deed Reserving Life Estate by Remainder Over Contingent Remainder. [111 Vt. 54] Contingent Remainder Alienable Creator of Vested Remainder Cannot Later Affect It Practical Construction of Instrument Limited Practical Construction Necessitates Agreement by All Concerned. 1. The essential characteristic of a testamentary instrument is that it operates only upon and by reason of the death of the maker, during his lifetime it is ambulatory and revocable, and by its execution the maker parts with no right and divests himself of no modicum of his estate. 2. It is fundamental that an instrument to be operative as a deed must pass a present interest, although it is not necessary that the grantee take a present estate in the property conveyed. 3. If the interest which the grantee takes in an instrument is a present one it is a deed, although the enjoyment of the estate may be postponed until some future time. 5. Under our statute of conveyancing there is no objection to the creating of a freehold estate to take effect in the future. 6. To determine whether a present interest passes under a contingency expressed in an instrument we must resort to the intention of the parties which, when ascertained from the entire instrument, prevails over technical terms or their formal arrangement. 7. Although there may be no words of inheritance in the granting clause of a deed the use of the words "his heirs and assigns forever" in the habendum shows that a fee is to be conveyed. 8. The habendum of a deed may modify, limit and explain the grant thereof but it cannot defeat it when expressed in clear and unambiguous language. 9. If no words of inheritance are used in the premises of a deed the grantee by the premises takes by implication only a life estate at the most. 10. The habendum of a deed expressing a defined limitation of an estate granted must necessarily exclude the uncertain implication from the premises. 11. A deed in which the habendum extends to the grantee, his heirs and assigns upon condition he is then living, otherwise to another if he be living or if he be deceased to another party clearly shows that the grantors intended to convey all their [111 Vt. 55] title, except for an estate retained during their lives, to the grantee contingent upon his surviving them. 12. The limitation over in the habendum of the deed in issue tends to show that the grantors intended to divest themselves of all title except a life estate. 13. A deed to a grantee if he be living at the decease of the grantors or to another in case of his failure to survive is no different than a grant to a third person who in turn reconveyed a life estate to the grantors and remainders to the other parties. 14. Such a situation creates a contingent remainder with the only dubious event the uncertainty of the first remainderman surviving the life tenant. 15. An ascertained grantee who takes an interest in the nature of a contingent remainder, the uncertainty of which is the happening of the event upon which it is limited to take effect, may alienate the remainder because the remainder is a possibility coupled with an interest. 4. The Statute of Uses has never been adopted in

12 16. No subsequent conveyance by grantors creating the same can affect a contingent remainder which is a present interest. 17. When the meaning of an instrument is clear and obvious, practical construction thereof by the parties is of no force or effect. 18. In order to apply the rule as to practical construction of an instrument it must appear that the particular construction is participated in by all parties in interest. EJECTMENT. Trial by court, September Term, 1938, Washington County Court, Shields, J., presiding, upon an agreed statement of facts. Judgment for the plaintiff. Defendants excepted. Affirmed. Frederick W. Wakefield, Jr., for the defendants. Robert H. Ryan for the plaintiff. SHERBURNE, J. In this action of ejectment the plaintiff claims title to the land in dispute under a quit-claim deed from David A. Blair and Lucy Ann Blair, husband and wife, dated and recorded on June 8, The consideration is given as one dollar, love and affection and other valuable considerations. In the granting part the grantors remise, release and forever quit-claim unto "Pearl Alonzo Blair, all right and title which" [111 Vt. 56] the grantors or their heirs have in and to the land. The habendum reads as follows: "To have and to hold all our right and title in and to said quit-claimed premises, with the appurtenances thereof, to the said Pearl Alonzo Blair and his heirs and assigns forever, upon condition that said Pearl Alonzo Blair is then living, otherwise all of the above described property is to pass under this deed to William Alonzo Blair, if then living, and if neither are living at our decease, all the above described property to pass under this deed to Herbert P. Blair of Warren, Vermont." The grantors continued in possession until the death of said David, and the survivor, Lucy, continued in possession until her decease. The defendants are now in possession of the premises and claim title thereto under a quit-claim deed from said Lucy to the defendant Mary M. Blair, dated and recorded on June 29, To a judgment in favor of the plaintiff the defendants have excepted. The only points raised here by the defendants are that the deed to the plaintiff is void because it conveys no present interest and because it is testamentary in character. The essential characteristic of a testamentary instrument is that it operate only upon and by reason of the death of the maker; during his lifetime it is ambulatory and revocable, and by its execution the maker parts with no right and divests himself of no modicum of his estate. It is fundamental, on the other hand, in order that an instrument may be operative as a deed that it pass a present interest, although it is not necessary that the grantee take a present estate in the property conveyed. If the interest which the grantee takes is a present one, the instrument is a deed, although the enjoyment of the estate is postponed until some future time. 16 Am. Jur., Deeds, 7. In order to nullify the common law rule against the creation of estates of freehold to commence in the future, many jurisdictions construe a deed as a covenant to stand seised, under the Statute of Uses, 27 Henry VIII, c. 10. See Annotations, 11 A. L. R This statute has never been adopted in this state, and ever since the enactment of our statute of conveyancing, there being no livery of seisin in fact necessary to invest the grantee with the title, but only the seisin resulting from the due execution and recording of the deed, there has been no objection whatever to the creating of a freehold estate, in terms, [111 Vt. 57] to take effect in future. Gorham v. Daniels, 23 Vt In that case an estate was reserved during the lives of the grantor and his wife. Had there been no contingency in the deed before us there could be no question of its validity. To determine whether under the contingency a present interest was passed we must resort to our master rule for the construction of deeds, which is that the intention of the parties, when ascertained from the entire instrument, prevails over technical terms or their formal arrangement. Kennedy, Admr. v. Rutter, Admr., 110 Vt. 332, 338, 6 A. 2d. 17; Vermont Kaolin Corp. v. Lyons, 101 Vt. 367, 376, 143 A. 639; Johnson v. Barden, 86 Vt. 19, 83 A. 721, Ann. Cas. 1915A, 1243; DeGoosh v. Baldwin & Russ, 85 Vt. 312, 82 A. 182; Robinson v. Missiquoi Railroad Co., 59 Vt. 426, 10 A. 522; Collins v. Lavelle, 44 Vt. 230; Flagg v. Eames, 40 Vt. 16, 94 Am. Dec. 363; Mills v. Catlin, 22 Vt. 98; State v. Trask, 6 Vt. 355, 27 Am. Dec Although there are no words of inheritance in the granting clause of this deed, the use of the words "his heirs and assigns forever" in the habendum, the subsequent condition aside, shows that a fee is to be conveyed. This results from the holding in DeGoosh v. Baldwin & Russ, supra. The habendum may modify, limit and explain the grant, but cannot defeat it when expressed in clear and unambiguous language. Kennedy, Admr. v. Rutter, Admr., supra, 110 Vt. at page 339; Bennett v. Bennett, 93 Vt. 316, 318, 107 A If no words of inheritance are used in the premises, the grantee by the premises takes by implication only a life estate at most. The habendum may then by express limitation define the estate granted as an estate for life or in fee, and the estate so expressly defined necessarily excludes the uncertain implication from the premises. Thompson on Real Prop.

13 3317; Adams v. Dunklee, 19 Vt From a reading of the entire habendum, including the condition, it is clear that the grantors intended, except for an estate retained during their lives, to convey all title to the plaintiff contingent upon his surviving them. What the effect of the limitation over to the two other persons named in the habendum would have been, had not the plaintiff survived the grantors, need not be determined, but this limitation over tends to show that the grantors intended to divest themselves of all [111 Vt. 58] title except an estate for their lives. In our judgment the situation, so far as the plaintiff is concerned, is no different than as if the grantors had conveyed to a third person, and such third person had in turn reconveyed to the grantors an estate for their lives with remainder to the plaintiff if he be living at the time of the death of the survivor of the grantors. Under such a situation we have a contingent remainder where the plaintiff is ascertained to be the remainderman, and the only dubious event is the uncertainty of his surviving the grantors. 23 R. C. L. 500, 31; 2 Bl. Comm Consequently the plaintiff took an interest in the nature of a contingent remainder, and as the remainderman is ascertained and the uncertainty which makes it contingent is to the happening of the event upon which it is limited to take effect, such contingent remainder is alienable because in the remainder there is a possibility coupled with an interest. Kennedy, Admr. v. Rutter, Admr., supra, 110 Vt. at pages 344 and 345; 21 C. J. 998, 156; 2 Washburn Real Prop. 240; 23 R. C. L. 572, 125; Bartholomew v. Murry, 61 Conn. 387, 23 A. 604, 29 Am. St. Rep. 206; Putnam v. Story, 132 Mass. 205; Clarke v. Fay, 205 Mass. 228, 91 N.E. 328, 27 L. R. A. (N. S.) 454; Woody v. Cates, 213 N.C. 792, 197 S.E. 561; Reilly v. Mackenzie, 151 Md. 216, 134 A. 502, 48 A. L. R. 778; Restatement of Property, vol. 2, 162. No subsequent deed of the grantors could affect this interest. Kennedy, Admr. v. Rutter, Admr., supra. A present interest was conveyed to the plaintiff. This deed expresses a clearer intent to convey a present interest than the deed sustained in Blanchard v. Morey, 56 Vt That deed was in the usual form of a conveyance of a present fee simple from John Morey, Sr. and his wife to two sons, William C. Morey and John Morey, Jr., but with the following conditions: "The conditions of this deed is this: That the said Wm. C. and John Morey, Jr., are not to have any right or title whatever to the above described premises as long as we or either of us live; and the above deed is not to be binding upon us or either of us if in any case we should want or need to sell a part or all of said real estate in order to maintain [111 Vt. 59] us, and the above deed is to be null and void in such case and we are to have the entire control of the above premises during our natural lives." The deed was construed to convey the premises in fee conditioned upon a right of possession and use in the grantors and the survivor of them during life, and of being supported, so far as needed in addition and suitable to their condition in life, by the grantees; with the further right in the grantors to sell and convey for their necessities in case of failure to receive support from the grantees. In citing authorities from other jurisdictions it should be noted that they may have been based upon a somewhat different statute of conveyancing. However, the following cases arrive at the same conclusion and carry considerable weight with us. It is held in Thomas v. Williams, 105 Minn. 88, 117 N.W. 155, that a deed in the usual form is a present conveyance, and not a will, despite the following clause contained therein: "The intent of this deed being to convey to said second party all of said land, in case he survives said first party; otherwise said land to be vested in first party in case he survives said second party." "If, by the terms of the instrument, the right or interest passes at once, subject to a contingency over which the grantor has no control, it is a deed," the court says, "and irrevocable, even though the enjoyment of the thing granted is postponed until his death." In Abbott v. Holway, 72 Me. 298, the grantor in the deed involved provides that the instrument "is not to take effect and operate as a conveyance until my decease, and in case I shall survive my said wife [the grantee] this deed is not to be operative as a conveyance, it being the sole purpose and object of this deed to make a provision for the support of my said wife, if she shall survive me." This instrument was held to pass an irrevocable interest, and not to be testamentary in character. The defendants cite Kennedy, Admr. v. Rutter, Admr., supra, to support their claim that the fact that Lucy Ann Blair subsequently deeded the property to the defendant Mary M. Blair, clearly manifests that she never intended that any interest in the property should pass to the plaintiff until after her death. That case, see 110 Vt. page 342, only holds that [111 Vt. 60] resort may be had to the practical construction adopted by the parties when the meaning of an instrument is doubtful. But when the meaning, as here, is clear and obvious, such practical construction is of no force or effect. Moreover, in order that the rule as to practical construction may apply in a given case, it must appear that the particular construction was participated in by all the parties in interest. 18 C. J. 262; 12 Am. Jur. Contracts, 249, p Hence the fact of the execution of the later deed is immaterial to the interpretation of the deed here in question. Judgment affirmed.