Daily Development for Thursday, April 3, 2003
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC
School of Law
Of Counsel: Blackwell Sanders
Peper Martin
Kansas City, Missouri
dirt@umkc.edu
Thanks to Bruce Davis of Arlington, Va. for this one. The comments are mine.
TRUSTS; DEEDS: A deed to a trustee effects a change in
ownership of
property, even if the grantor, the
trustee and the beneficiary of the trust
are
the same person.
Austin, Trustee v. City of Alexandria, 265 Va. 89 (2003)
James W. Duncan, III owned commercial property in
Alexandria,
Virginia. In 1993, Duncan
deeded the property to himself as trustee
under
a revocable living trust in which he was the only beneficiary.
In
1999, Duncan, signing as an individual,
conveyed the same property to
himself as
trustee under a new charitable trust. After Duncan died, the
successor trustee under the 1993 living trust sued the
successor trustee
under the 1999 charitable
trust to determine who owned the property.
The Court held that the 1999 deed to the charitable trust
did not revoke
the 1993 deed to the living
trust, even though the 1993 living trust was
revocable and Duncan was its only trustee and beneficiary. The
Court
reasoned that the 1993 deed caused a
change in the ownership of the
property.
After the 1993 deed, Duncan owned the property as a trustee,
not in his individual capacity. Because he signed the
1999 deed to the
charitable trust in his
individual capacity rather than as trustee, the 1999
deed was ineffective to transfer title to the property.
Comment 1: Although there might be some
jurisdictions in which
antiquated
technicalities would bar this result, it strikes the editor as
absolutely correct. In light of the various probate
and tax benefits of
holding property as one's
own trustee, there is every reason to permit this
practice. Certainly no harm is done. But if a person chooses
to use the
trust device as a method for holding
property, there is no injustice in
expecting that person to treat the trust as a real thing. This
would include
making transfers in the trustee
capacity.
Comment 2: Although it might be argued that parties could
assume that
when there are no conflicting
interests, a transfer by one serving as one's
own trustee would convey all the interests in the property, even if
made
individually. But the only time the
problem is likely to arise will be, as
here,
when there are conflicting interests.
As Duncan
is not now available to cure the problem, if the facts show
that he did not behave in a regular manner in conveying to
the charitable
trust, there is no reason to
believe that he indeed intended the result that a
regular transfer would have accomplished. Perhaps he was
confused
about what property he was conveying,
and in fact intended an entirely
different
parcel to go to the charitable trust. That's why we require
regularity. It promotes certainty - a useful
characteristic in real estate
transactions.
Readers are encouraged to respond to or criticize this posting.
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