- June 07, 1992
- All Issuing Agents, Underwriters and Settlement Agents
- 1992 Amendments to Virginia Augmented Estates and Other Matters
The Virginia Augmented Estates law was materially amended by the last legislature. None of the basic precepts were eliminated, however. The five types of transfer which cause the value of the property transferred to be added to the decedent transferor's augmented estate still remain, as do the circumstances permitting the value of a transferred property to be excluded from that estate. There were many changes, large and small, but the most important modification, from the viewpoint of title insurance, was the addition of an extensive definition of a bona fide purchaser.
Section 64.1-01 has been added to the Code to define "bona fide purchaser" for the purposes of title 64.1. The term is defined to mean any purchaser of property for value who has acted in good faith. The status of bona fide purchaser is not affected by the purchaser's knowledge of the seller's marital status or of a marital agreement. A purchaser is then defined as anyone who acquires property by "sale, lease, discount, negotiation, mortgage, pledge or lien" or in any other manner except by gift. Value is next defined as (1) a binding commitment to extend credit, either to the transferor or to another, (2) a pre-existing claim, or (3) "any other consideration sufficient for a simple contract". Since the value of property transferred to bona fide purchaser is not included in the augmented estate, this definition frees from that taint any deed of trust or any transfer in an arms-length transaction. There is no requirement here that the value by equal to the full consideration in money or moneys worth. The only requirement is good faith and some value.
Section 64.1-16.1(3)(d), the subsection on gifts, was amended to include in the augmented estate only those gifts made in the year of death or any of the preceding five calendar years, and then only to the extent that gifts to any donee in any one of those years exceed a value of $10,000.00. The value of gifts made more than five years prior to the year of death is not included in the augmented estate.
Other amendments touching on augmented estates include the following Amendment of Section 55-41 to provide that joinder by a non-owner in spouse's deed will constitute consent to the transfer and will not create liability for covenants or warranties, unless it is specifically provided that it will do so.
Addition of Section 55-42.01 providing that a married infant may release his rights by joining in his spouse's contract, deed or other instrument. Please note that there is no provision for a release to the spouse.
Addition of Section 55-47.01 providing that the estate known as equitable separate estate will not exist after January 1, 1992. Section 55-47 was repealed.
Section 64.1-16.1 was amended to exclude from the augmented estate the value of property transferred by the deceased spouse, which property was acquired by gift, will or intestate succession prior to, as well as during, the marriage and maintained as separate property of the deceased.
Section 64.1-16.2(c) was amended to provide that a fiduciary holding or controlling property or the proceeds of property, the value of which is included in a decedent's augmented estate, after receiving notice that the surviving spouse has claimed an elective share, will be subject to contribution. Remember that this subsection has always provided that only an original transferee, together with subsequent inter-vivos donees and persons claiming by testate or intestate succession, are subject to contribution. That contribution is limited to the property or proceeds of property possessed by such persons at the time of the decedent's death or thereafter. Accordingly property conveyed by such original transferce, other than by gift, is free from a requirement for contribution. If the title being insured or settled arises from an arms-length transaction, no concern with respect to augmented estates need be expended on the circumstances by which the grantor acquired title.
These amendments are effective July 1, 1992.
Section 55.59 was amended to permit the holder of more than 50% of the indebtedness secured by a deed of trust to substitute trustees without cause notwithstanding the failure of the deed of trust to so provide.
Section 55-59.1 was amended to require that written notice of foreclosure of a deed of trust be given to the noteholder secured by a subordinate deed of trust, provided the subordinate deed of trust, or any assignment thereof, was recorded at least 30 days prior to the date of the proposed foreclosure sale, and provided that the recorded document sets forth the address of the beneficiary or the assignee. Keeping an eye on the ever expanding application by the U.S. Supreme Court of the "Mennonite" due process rules, it is recommended, even urged, that similar written notice of foreclosure be given to all subordinate lien holders, whatever the source of their lien.
Section 3001 of Title 28 of the U.S. Code (28 USC 3001) was enacted by the Federal Debt Collection Procedures Act of 1990. It provides, in general, that the lien of any judgment rendered in favor of any U.S. Department, Agency or corporation in a federal court proceeding (a federal judgment lien) will be effective for 20 years, and may be renewed at any time during that 20 years for an additional period of 20 years extending from the filing of a notice of renewal, provided the court approves the renewal. Such a judgment, and its lien, will not be subject to state laws governing priorities. The lien will not expire with respect to any property 10 years after the recording of deed by the defendant conveying that property. The lien will take precedence over a subsequent purchase money deed of trust. The lien will not be subject to the immunities of tenancy by the entirety.
As a result of this statute, it is now necessary that the names of purchasers be searched in the appropriate judgment lien records for a period of 20 years prior to the date of examination, and any federal judgment lien discovered be properly disposed of or excepted to. The usual, non-judicial IRS lien is not a federal judgment lien and will not enjoy its priorities.
The RTC and FDIC have reconsidered their respective positions with reference to foreclosures of superior deeds of trust where they hold a subordinate lien. Both have issued new statements. Both have liberalized their policies and both have consented to some types of foreclosures. If you deal in foreclosures or foreclosed properties, it is essential that you understand completely the complexities of the new statement and, perhaps, be in a position to recite or otherwise certify that the necessary consents were obtained.
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