PS 01820.026 Minnesota

A. PS 04-257 SSI-Minnesota-Validity of a Life Estate Agreement for Ina S~ SSN: ~

DATE: August 13, 1998

1. SYLLABUS

The issue is whether a quitclaim deed created a valid life estate.

An individual owned property in Minnesota. Since 1982, her two children have held a mortgage against the property. In October 1992, the individual executed an individual-to-individual quitclaim deed which purported to grant her interest in the said property to her two children. However, she reserved a life estate in and to the real estate.

The deed executed by the individual comported almost exactly with the Minnesota form 27-M, for individual-to-individual quitclaim deeds. The only difference is that this deed includes a statement in the description of the property which reserves a life estate in and to the real estate for the individual. The deed was recorded with the county in October 1992, as Minnesota State law requires.

It is a well-settled rule that if a deed is not testamentary in character, and passes a present interest in the property even though possession and enjoyment of the fee is postponed, the grantor may reserve in himself a life estate in which the fee is granted. A deed that reserves a life estate to the grantor is not testamentary as long as the grantor retains no right to recall or control the property's destiny. In the deed in question, the individual has no right to recall or control the property's destiny. Therefore, the deed is not testamentary and may reserve a valid life estate.

Nothing in Minnesota law suggests that a quitclaim deed cannot reserve a life estate in the grantor. So long as the intent of the grantor is plainly manifest in some part of the conveying instrument, the creation of a life estate will be upheld.

Therefore, a valid life estate was created by the quitclaim deed.

2. OPINION

You asked for our opinion on whether the quitclaim deed from Ina S~ to LeRoy and Audrey S~ created a valid life estate for Ina S~. For the reasons set out below, we believe that the deed did in fact create a valid life estate.

FACTS

Ina S~ owned property in Hoffman, Minnesota. Since 1982, her two children have held a mortgage against the property. On that date, Ina S~ signed a promissory note for the amount of $10,744 at twelve percent interest per annum compounded annually from and after January 1, 1980. As of 1997, Ms. S~ owed over $40,000 on this note. Recovery upon default is at the option of the legal holder of the note.

On October 21, 1992, Ina S~ executed an individual to individual quitclaim deed which purported to grant her interest in the said property to LeRoy and Audrey S~. However, Ina reserved a life estate in and to the real estate. The total consideration paid for the transfer of that property was less than $500.

DISCUSSION

The deed which Ina S~ executed comported almost exactly with the Minnesota form 27-M, for individual to individual quitclaim deeds. Minn. Stat. Ann. § 507.45. The only noticeable difference is that Ina S~' deed includes a statement in the description of the property which reserves a life estate in and to the real estate for Ms. S~. The deed was recorded with the county on October 21, 1992, as Minnesota state law requires. Minn. Stat. Ann. § 507.34 (1997).

It is a well-settled rule that if a deed is not testamentary in character, and passes a present interest in the property even though possession and enjoyment of the fee is postponed, the grantor may reserve in himself a life estate in which the fee is granted. 28 AM. JUR. 2D, Estates § 67 (1966). A deed that reserves a life estate in the grantor is not testamentary so long as the grantor retains no right to recall or control its destiny. Hagen v. Hagen, 161 N.W. 380 (Minn. 1917). According to the deed here, Ina S~ had no right to recall or control the property's destiny. Therefore, the deed is not testamentary and may reserve a valid life estate.

As mentioned, the insertion of the life estate reservation deviates from the form found in the annotated Minnesota statutes. However, this clause should still be considered valid. Nothing in Minnesota law suggests that a quitclaim deed cannot reserve a life estate in the grantor. So long as the intent of the grantor is plainly manifest in some part of the conveying instrument, the creation of a life estate will be upheld. 28 American Jurisprudence Second, Estates § 64 (1966); First & American Nat. Bank of Duluth et al. v. Higgins et al., 293 N.W. 585, 590 (Minn. 1940). As the deed says "reserving to the grantor, Ina S~, a life estate in and to the real estate," the grantor's intentions are certainly clear. Ina S~, therefore, validly reserved a life estate.

There appears to have been some question as to whether Ina S~' mortgage obligation still exists, since the owners of the mortgage now are the owners of the property mortgaged, thus possibly causing a merger of the smaller interest (mortgage) with the larger interest (title). No merger occurred here. Since the holders of the mortgage have calculated how much is owed to them through 1997, and since the deed was done in August of 1992, it can probably be assumed that they did not intend to have their mortgage interest merge with the ownership of the property. "Where a merger would frustrate the interests of the party holding both estates and that party's intent regarding merger has not been expressed, merger will not be presumed to occur." Resolution Trust Corporation v. Independent Mortgage Services, 519 N.W.2d 478, 482 (Minn. App. 1994). We are unaware of any evidence that the holders of the mortgage (apparently Ms. S~' children) intended to give up their mortgage interest. Therefore, their mortgage interest would appear to be fully enforceable, and continued to apply against the life estate.

CONCLUSION

For the foregoing reasons, we conclude that a valid life estate was created by Ina S~' quit claim deed.

Thomas W. C~
Region V
By:_____________

Charles A. C~
Law Clerk

B. PS 00-498 Non-Home Real Property Transfer for David M~

DATE: June 19, 2000

1. SYLLABUS

Does a valid deed exist even though it has not been recorded? In general, deeds must be recorded in order to provide notice to the public and to potential purchasers of the ownership of land. However, when a deed is executed and delivered, but not recorded, it may still be effective as against the grantor. Indiana law provides that an unrecorded deed is effectual against the grantor and persons having notice of the transfer. Therefore, in this case, the transfer of the property from the SSI recipient to his grandchildren was a valid transfer even though the deed was never recorded.

2. OPINION

You asked whether a quitclaim deed, executed by David M~, an SSI claimant, validly transferred Mr. M~'s interest in property even though the deed was never recorded. For the reasons set out below, we believe that the deed transferred Mr. M~'s interest in the property even though it was not recorded. We recommend, however, that the local office investigate whether Mrs. M~ had any interest in the land and whether Mr. M~ received any consideration in return for executing the quitclaim deed.

Background

David and Savelia M~ are an SSI aged couple. They were determined to have excess resources based on their ownership interest in 10 acres of undeveloped land. On March 2, 1998, however, David M~ completed a quitclaim deed in which he transferred his ownership interest in the land to four people, who are described as his grandchildren. The note from the district office states that the deed was never filed or recorded.

Discussion

1. Role of filing and recording-Mr. M~ transferred his interest in the property to his grandchildren.

In general deeds must be recorded in order to provide notice to the public and to potential purchasers of the ownership of land. See Roger B~, Real Property in a Nutshell (3d e. 1993). However, when a deed is executed and delivered, but is not recorded , it may still be effective as against the grantor. Thus, Indiana law provides that an unrecorded deed is effectual against the grantor and persons having notice of the transfer. See Wests Annot. Ind. Code § 32-1-2-11. The unrecorded quitclaim deed might in certain circumstances allow a third-party to obtain the property, but is binding between the grantor and the grantees. Mr. M~ would be found to have validly transferred his property to his grandchildren.

2. What property did Mr. M~ transfer?

Mr. M~ executed a quitclaim deed. Under Indiana law, a quitclaim deed transfers “all the estate which the grantor could convey ”by any other deed. West Annot. Ind. Code § 32-1-2-9. Here, therefore, Mr. M~ transferred all interest he had in the property described in the deed.

3. Did Mrs. M~ have any interest in the land?

The note from the district office states that Mr. and Mrs. M~ were an aged couple entitled to SSI. The quitclaim deed was executed by Mr. M~, not by Mrs. M~. We recommend that the field office investigate how the land was owned prior to Mr. M~'s execution of the quitclaim deed in order to determine whether Mrs. M~ had any ownership interest in the property. If she were a co-owner, and if she has not transferred her interest, she might remain an owner of the property or of part of the property.

4. What, if anything, did they get for the transfer?

The quitclaim deed uses traditional legal language showing consideration for the transfer. It states that the deed was executed in return “for the sum of ONE DOLLAR ($1.00), and other valuable consideration.”The recited consideration need not be the only consideration provided for the transfer. Therefore, we recommend that the field office investigate whether Mr. M~ received any consideration for the land. If he did, that consideration would presumably be a resource.

Conclusion

For these reasons, we believe that the March 2, 1998, quitclaim deed was legally sufficient to transfer to his grandchildren all of Mr. M~'s ownership interest in the property. We recommend, however, that the field office investigate whether Mrs. M~ had any interest in the property and also whether Mr. M~ received any additional consideration for the transfer. Assuming that Mrs. M~ did not have an ownership interest and that Mr. M~ did not receive other consideration, the property would have ceased to be a resource on March 2, 1998.


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PS 01820.026 - Minnesota - 08/02/2004
Batch run: 01/27/2009
Rev:08/02/2004