Bar News - September 21, 2016
Section Connection: Joint Section Meeting Mixes Land, Trusts and Ice Cream
By: Timothy McKernan
Members of the NH Bar Association’s Trust and Estate Section and Real Property Law Section met Aug. 2 at the Sheraton Portsmouth Harborside Hotel for their annual ice cream social and joint section meeting.
The group engaged in a lively discussion on current topics, including recent changes to RSA 78-B exemptions (the real estate transfer tax), the impacts of “nominee trusts” on finance underwriting, and whether ancillary New Hampshire probate is required for property owned by out-of-state residents.
Members enjoyed an ice cream sundae buffet featuring local favorite Annabelle’s Natural Ice Cream, as well as beverages and other treats catered by Sheraton staff. After an informal networking interlude, Trust and Estate Section Chair Michael Panebianco opened the joint meeting. Panebianco recognized the officers of each section and introduced the panel.
Timothy Boucher of First American Title Insurance Corp., vice chair of the Real Property Law section, started the discussion by asking whether ancillary probate is necessary and immediately answering his own question by stating yes, it probably is, if the death occurs within two years. However, ancillary probate may be necessary in some cases to convey real property. Each estate must be taken on a case-by-case basis, and practitioners should be familiar with the standards of a valid will and for self-proving in the state concerned. When transferring property, it is necessary to have evidence of the legatee’s identity and that the testator is deceased; affidavits and picture identification (as is standard in a real estate transaction) suffice for the legatees to sign the deed, and a death certificate to show the deceased is, in fact, deceased.
Beth Fowler, an attorney at McLane Middleton, addressed the change in real estate transfer tax, which took effect on June 21 of this year. The law clarifies that conversions of an entity to another form do not trigger the transfer tax, and that nominal consideration (such as $10) that satisfies the Statute of Frauds is not consideration under this law, and does not trigger the tax. As long as the owners (direct or indirect) and entities maintain ownership in the same proportions in the real property before and after the conversion or transaction, the transaction is exempt. This is true even if the proportion of ownership in other assets changes; each real property is considered separately. The DRA released TIR 2016-005 on Aug. 4, which provides some guidance.
Scott Kumpf of Signature Escrow and Title Services addressed the issue of nominee trusts. Some problems arise for trusts seeking Fannie Mae and Freddie Mac loans and second loans. Kumpf stressed the importance of uniformity among grantors, trustees, and borrowers. Perceived lack of transparency can cause problems with lenders. Some lenders have told members they would “never” allow borrowing by a trust. Kumpf provided a checklist of elements that prospective borrowers should expect inter vivos trusts to meet before loan approval will even be considered. Kumpf acknowledged that some lenders balk when presented with affidavits, and will demand a complete copy of the trust. However, title insurance is less of a problem – now, boilerplate title insurance contracts routinely cover the title after conversion in and out of such trusts, and insurance companies are generally comfortable with providing the same coverage to older insurance contracts. Finally, Kumpf warned against using quitclaim deeds, which were once standard for transfers into a trust, but now can jeopardize title coverage.
Timothy McKernan is co-clerk of the NHBA Trust and Estate Section. A fourth-generation Granite Stater, he is a solo practitioner in estate and nonprofit and works as research director for Granite State Progress, a New Hampshire advocacy organization.