Underwriting Questions and Answers
Articles from The Massachusetts Focus
Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Spring 2004, Volume 3, Number 2
Underwriting Questions and Answers
by Richard Urban, Vice President and Massachusetts State Counsel
Question: I have an upcoming refinance. The borrower took title in 1994 from an "Administratrix with the Will Annexed" pursuant to a power to sell as set forth in the decedent's will. No license to sell was ever issued by the Probate Court. The will, although executed in Massachusetts, was probated in Maryland. The Executor named in the will was deceased at the time of the will's filing; a sister of the deceased Executor was appointed "personal representative" of the estate in Maryland. Is the deed to the borrower by the Administratrix any good?
Answer: Maybe. Two issues arise in this matter.
One, there is a need to determine if an ancillary administration of the decedent's Massachusetts property was ever filed locally. Each state will dictate the descent and distribution of a decedent's assets that are located within its locale. However, the laws of Massachusetts will govern the administration of a decedent's interest in real property located in Massachusetts. Consequently, the will of the decedent must usually first be allowed in the state where death occurs. At that time, a petition for probate of a non-resident's will can be filed locally whereupon a fiduciary will be appointed.
In this case, the named executor in the decedent's will was unable to serve and a successor applied to the court for appointment, which was allowed. The titular name the courts bestow upon such a successor is "Administrator C.T.A.", (i.e. cum testamento annexo), or "Administrator with the Will Annexed." In this case, the sister of the deceased named executor filed for appointment that was allowed.
Two, a determination must be made if the Administrator with the Will Annexed could sell the Massachusetts real estate without applying for a license to sell. To make this determination, we need to look no further than the will itself and should look for:
- Clear and succinct language that authorizes the executor to sell real estate of the decedent without leave of the court.
- The manner in which the will bestows powers upon the executor. The general rule of thumb is that a will's powers, including the power to sell, attach to the office but not those that involve personal trust and confidence. In other words, if the will describes the power to sell and bestows them on the "Executor" or, better yet, if the will defines the term "Executor" by including successors thereto, the Administrator with the Will Annexed should be able to sell the real estate by exercise of the power to sell. However, if the will bestowed the power upon a specific, named individual, (e.g. the same person who is typically nominated as executor elsewhere in the will) and not, literally, the "Executor," then we are dangerously close to a situation involving "personal trust and confidence." This might prohibit anyone but the named individual from exercising the power to sell and may compel petitioning the court for a license to sell real estate instead.
Question: Is there any time restriction limiting an Executor's ability to exercise a power to sell that is contained in the decedent's will?
Answer: It depends on the attendant circumstances surrounding the sale. For example, the most common scenario is a sale within one-year of the decedent's death. The period of time for a creditor to file a claim has not expired and the Executor desires to sell real estate of the decedent to pay existing creditors, legatees or beneficiaries. An exercise of the power to sell under these circumstances and within the year is fairly routine and acceptable. If these same attendant circumstances exist beyond the one-year period, then the exercise of the power to sell should remain equally acceptable.
There is no definitive restriction for the exercise of the power. The more removed you are from the date of death triggers increased scrutiny upon the attendant circumstances involving the use of the power. For example, I insured a transaction five years from date of death by exercise of the power in which the attendant circumstances were an equal combination of paying beneficiaries of the estate and avoiding the logistical speedbumps of filing a petition. In that situation, my comfort level increased immeasurably by imposing a requirement that the final accounts of the estate were to be filed shortly after the sale. Any questions over the propriety of the power's exercise five years after the date of the decedent's death would be placated by final, allowed accounts demonstrating the sale of the real estate and distributions to appropriate individuals.
The exercise of a power to sell under these circumstances is analogous to situations in which a petition for a license to sell may be sought. As one commentator has noted in a discussion of time limits for filing a petition for license to sell, the most important distinction is whether or not a conveyance or mortgage of the real estate has occurred by the heirs or devisees (See Newhall's Settlement of Estates and Fiduciary Law in Massachusetts, Fifth Edition, Section12:7). Absent such a conveyance or mortgage, the exercise of the power to sell under attendant circumstances as above described should be accepted. For example, in an 1897 case the court approved a license to pay an administrator's debt 17 years after the death of the decedent and in a 1958 case the court approved a license to satisfy a judgment creditor 16 years after the death of the decedent. Abbott v. Downs (1897) 168 Mass. 481, 47 NE 94; Campbell v. Anusbigian (1958) 338 Mass. 35, 153 NE2d 757.
Although such a sale might be possible even with the existence of a conveyance or mortgage of the real estate, the transaction will become more complicated due to the additional interested parties. Underwriting approval should be sought prior to insuring such a transaction.