JR KASMAN, PLLC TRANSACTION TIP SERIES: SUBSIDIARY TRANSFERS AND TITLE INSURANCE

June 26, 2017 | by

In this installment of our Transaction Tip series, we offer a reminder about owner’s title insurance policies. When you (or your client) plans to transfer real estate to a wholly owned subsidiary, remember to read your ALTA title insurance jacket to confirm coverage will continue. Section 1(d) of the 2016 ALTA Title Insurance Jacket defines “Insured” to include “a grantee of an Insured under a deed delivered without payment of actual valuable consideration conveying the Title:

(1) if the stock, shares, memberships, or other equity interests
of the grantee are wholly-owned by the named Insured,

(2) if the grantee wholly owns the named Insured,

(3) if the grantee is wholly-owned by an affiliated Entity of the
named Insured, provided the affiliated Entity and the
named Insured are both wholly-owned by the same person
or Entity, or

(4) if the grantee is a trustee or beneficiary of a trust created
by a written instrument established by the Insured named
in Schedule A for estate planning purposes.”

The ALTA jacket defines “Title” as “the estate or interest described in Schedule A” and “Land” as the “land described in Schedule A, and affixed improvements that by law constitute real property.”

In certain cases, an owner may wish to use an updated or changed legal description on the deed of conveyance to a wholly owned subsidiary. However, given that the ALTA jacket defines Title and Land to refer to Schedule A of the title insurance policy, it is best to discuss any desire to change a legal description on a deed with your title company in advance to confirm that doing so will not prevent continued coverage under the original owner’s title insurance policy for the subsidiary.

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