A fiduciary deed is a type of property deed used to convey real estate when the actual owner can’t sign the deed for reasons such as death or disability. A “fiduciary” is a person authorized to sign a deed in place of the person or entity that owns the real property. Fiduciaries include, but are not limited to, a personal representative, conservator, trustee, plenary guardian, and any of their successors. A fiduciary deed may be used in any of the following situations:
- A personal representative of the estate sells real property on behalf of a decedent or transfers real property to an heir.
- A trustee of the trust sells real property on behalf of the grantor/settlor or transfers real property to a beneficiary.
- A conservator over a protected person sells or conveys real property for the benefit of the incapacitated or incompetent ward (or even a minor under 18 years old).
- An attorney-in-fact pursuant to a power of attorney document conveys real property on behalf of the grantor.
A fiduciary deed is just as valid as any other type of property deed in conveying title. For example, “[p]roof that a distributee has received an instrument or deed of distribution of property in kind, or payment in distribution, from a personal representative is conclusive evidence that the distributee has succeeded to the interest of the estate in the distributed property, as against all persons interested in the estate…”. MCL 700.3910. However, there are some nuances that you should be aware of.
IS THE FIDUCIARY DEED A WARRANTY DEED OR A QUIT-CLAIM DEED?
A warranty deed conveys a promise that the grantor is transferring good and clear title to the grantee. This promise also includes the guarantee that the grantor will protect and defend the grantee against anyone else in the world who comes forward with an alleged superior claim to title in the real property. This is the most desirable type of deed for a buyer. This is distinct from a quit claim deed where the grantor is conveying his or her interest in the real property to the grantee, but provides no warranties or protections whatsoever regarding title. This is the most desirable type of deed for the seller.
A fiduciary deed could be either a warranty deed or a quitclaim deed, or something in between. Most fiduciary deeds take the form of a so-called “limited warranty deed”, meaning that the fiduciary guarantees that he or she has not done anything since acquiring the property that would impair its title. The fiduciary is also attesting that he or she has the legal authority to sign the deed on behalf of the actual owner. However, this does not warrant or protect against any title defects that existed before the fiduciary acquired the property.
In a fiduciary deed, words such as “covenant”, “warrant” or “quitclaim” make a big difference in determining what kind of interest the grantee is getting in the property. Whether you are buying real property from an estate on the open market or inheriting land from a deceased person, you should negotiate with the fiduciary what kind of interest you are receiving ahead of time.
NON-RESIDENT FIDUCIARIES ARE EXEMPT FROM MAKING SELLER’S DISCLOSURE STATEMENTS
Generally, sellers of real estate in Michigan are required to deliver a statement to the buyer disclosing the condition of the property in compliance with Michigan’s Seller Disclosure Act, Act 92 of 1993. However, the seller disclosure statement requirement dos not apply to “[t]ransfers by a non-occupant fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship or trust.” MCL 565.953(d).
If the fiduciary is not an occupant of the real property that he or she is selling, then he or she is not required to report about whether the appliances, electrical, heating or water systems are in working order or whether there are leaks in the roof or basement. A buyer looking to purchase real estate from a fiduciary should ensure that a reputable home inspector verifies the condition of the property since there is no recourse against the estate for any latent defects (unless the fiduciary made a specific representation otherwise).
IT IS WORTH EVERY DOLLAR TO CONSULT WITH A REAL ESTATE LAWYER BEFORE ENTERING INTO A TRANSACTION WITH A FIDUCIARY DEED
Fiduciary deeds are perfectly valid and may lead to an opportunity to acquire unique real property from an estate or a trust. However, the devil is in the details, and it is important to determine ahead of time what type of guarantees regarding quality of title and condition of property you are receiving (if any). A good real estate lawyer can review the transaction and answer any and all questions that you have.
If you have any further questions or require legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC for assistance today.