Bulletin: VA000001

Date:
March 25, 1991
To:
All Virginia Agents
RE:
Virginia Augmented Estates Change of Position

Dear Associates:

Stewart Title Guaranty Company has changed its position with respect to insuring the resulting title when a married person, owning land in his own name, conveys that land, either by deed or deed of trust, without joinder by the spouse. The Company will now insure all such transactions without exception for the Augmented Estate laws, except those transactions falling within the four categories established by Section 64.1-16.1 of the Code. These categories are:

  • Conveyances to the spouse of the grantor;
  • Conveyances where no consideration is given therefore;
  • Conveyances where the grantor retains for himself any interest in the property conveyed, e.g., a life estate or estate for years, retained by reservation or in any other manner, or a trust estate in which the grantor has a power to revoke, or to invade or consume the principal. The change in position is found here. It is the opinion of the Company that a deed of trust is not such a conveyance as is proscribed by this section.
    Conveyances to the grantor and another or others with survivorship.

Insurance without exception may be granted for some conveyances falling within these categories. They will be considered on a case by case basis.

It was the declare intent of the legislature in creating the Augmented Estate to better protect the surviving spouse from disinheritance. It was not the intent to discourage exchanging one asset for another. The estate might even be increased in this manner. The legislature did not expect everybody to be a business genius, however, and it was, therefore, not the intent to prevent exchanges of one asset for another, even if a loss resulted. The accomplishment sought by the legislature was to prevent the deliberate reduction of the estate in such a manner that a surviving spouse would be left penniless, or, at least, less affluent than he would otherwise have been. To gain this end, the legislature decreed that property transferred under certain circumstances would be part of the decedent's estate for the purpose of determining the entitlement of the surviving spouse, notwithstanding the fact of the conveyance.

Section 64.1-16 of the Virginia Code now provides that, upon duly making claim as earlier provided, a surviving spouse is entitled to property equal in value to one-third of the decedent's augmented estate if the decedent left surviving children and equal to one-half of said estate if there were no surviving children. Section 64.1-16.1 defines what constitutes the augmented estate. All of the net estate of which the decedent died seized and possessed is, of course, included. To that net estate is added the value of items enumerated in Subsections 1, 2 and 3. The property, itself, is not added. It is the value of the property that becomes part of the augmented estate. Subsections 1 and 2 name to the Augmented Estate the values of those properties conveyed to the surviving spouse by the decedent without full consideration. Subsection 1 describes property in the possession of the surviving spouse at the time of the decedent's death, while Subsection 2 describes property acquired from the decedent, but conveyed by the surviving spouse in such a manner than, had he died first, the property would be in his augmented estate.

Subsection 3 is somewhat more complex. One of its provisions is that the value of land conveyed without consideration will be included in the Augmented Estate, provided it is made causa mortis, or the conveyance, together with other gifts in the same calendar year, amounts to more than $10,000.00. The Company is unable to determine the motivation for a gift. Further, in most cases it would be unable to determine what other gifts have been made to a given donee or what other gifts might be made during the remainder of the year. Accordingly, the Company is unwilling to insure a title in the hands of a donee without taking exception to the rights of a surviving spouse under the Augmented Estates law.

The other parts of Subsection 3 deal with the situation where the grantor, after conveying a property, dies holding any one or more of certain rights with respect to that property. If, at the time of his death, the grantor held a life estate or an estate for years in the property conveyed, or if he had the power to revoke the conveyance, to invade the principal of the property conveyed, or to appoint the property to a remainderman or other recipient, or if the conveyance was to himself and one or more others with survivorship, and that estate remained at the time of his death, then, in any of those events, the value of the property conveyed would be included in the Augmented Estate.

There are three exceptions set forth in Subsection 3, which will permit such conveyances without the value of the property conveyed being included in the Augmented Estate. Each presents its problems in interpretation. The first exception is a conveyance to a bona fide purchaser. The legislature did not define a bona fide purchaser for these purposes. Nor did it suggest how there could be one under the circumstances of a conveyance without either joinder by a spouse or statement of marital status. The second exception is a conveyance for the benefit of a spouse. It is unknown whether a conveyance for the benefit of a spouse is the same as a conveyance to a spouse, which is the subject of Subsections 1 and 2.

Finally, a conveyance for full consideration in money or money's worth will not be included in the Augmented Estate. "Full consideration", though, is such a subjective term that there is no definition until it has been found by a court. Because of the uncertainties with respect to these exceptions, the company will not insure titles which it believes fall within the categories enumerated in Subsection 3 without exception for the Augmented Estate.

As far as real estate is concerned, Code Section 64.1-16.2 restricts the application of the previous section to such land so conveyed so long as it remains in the hands of the grantee, with a single category or exception. That exception is where the grantee reconveys the property without consideration or where he permits the property to pass by will or intestate succession. Therefore, in the hands of any party to whom the original grantee has conveyed the property, except in the case where that party paid no consideration, the title to the land is insurable without exception for the Augmented Estate. The rights of the surviving spouse do not forever blight the property.

Other developments, toward both insurability and non-insurability, will undoubtedly arise as time passes. Hopefully, we shall be able to inform you of these changes as they arise. In the meantime, if there is any doubt on any area of the subject, please do not hesitate to ask. There is nothing more difficult to deal with than a question unasked.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
4.04 Decedent's Estates
 
8.16 Husband And Wife
Exceptions Manual:
VA Marital Rights
Forms:
None