Transfer on Death (TOD) form trump an active contract to sell land?

This is a discussion on Transfer on Death (TOD) form trump an active contract to sell land? within the Wills, Trusts and Estates Questions forums, part of the Legal Questions & Answers Forum category; This is a two part question. Background: The last grandparent on my mother's side recently passed away. Before this grandparent passed, they entered into a contract with an external party ...

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  1. #1
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    Transfer on Death (TOD) form trump an active contract to sell land?

    This is a two part question.

    Background:
    The last grandparent on my mother's side recently passed away. Before this grandparent passed, they entered into a contract with an external party to sell a plot of land. The proceeds of this land would have been used to pay off the estate's debt. The children of this grandparent understood the intention of this contract.

    Two day's before this grandparent passed away (which was unexpected), a Transfer on Death (TOD) form was signed stating something to the effect of: On death, the ownership of this plot of land will be transferred to Party X. The TOD was signed after the contract (between the grandparent and the external party) to sell the land was signed. The purpose of the TOD was to act as a fail-safe; if the contract to sell the land fell through and the grandparent passed away, then Party X would receive the land. The purpose of the TOD was also understood by the children.

    Fast-Forward to Today:
    Party X believes that the proceeds from selling the land should go to them and not to the grandparent's estate. If this is true, this means that the estate will have to sell property (that was supposed to be split up between the children) in order to pay off the debt. This was supposed to be done with profits from the land sell. The contract to sell the plot of land to the external party is still active; it didn't fall through.

    Question #1:
    After a contract to sell a plot of land has been signed by two parties, can a Transfer on Death form be signed for the same plot of land? Due to the aftermath from recent events, my mother asked the same clerk that gave her the TOD form. The clerk didn't know that the land had already entered into a contract to be sold. And the clerk really didn't give my mother a straight answer.

    Question #2:
    If the TOD is valid, do the proceeds of this land sell go to the estate or to Party X? The contract was between the grandparent and the external party. Party X wasn't apart of the contract in any way.

    Thank You,
    j


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    Interesting situation. So there was a valid contract for sale that was executed before the TOD. This would make the TOD subject to the contract for sale. The Grandparent could only transfer the interest he or she owned in the property at the time of the transfer so I would say that the buyer on the contract has the right to enforce it.

    The question of where the proceeds go gets thorny. Party X can assert that he or she stands in the shoes of the grandparent with regard to the property, and should receive the proceeds. It is hard to get around this result if there is nothing in writing which outlines the Grandparent's intent. There is a rule called the statute of frauds which requires all contracts regarding land to be in writing. Although it sounds like your grandparent was trying to avoid probate, It may be possible to gather that asset into the estate through the probate court. The elderly are often suceptable to undue influence from close family members. If a document is signed under these conditions it may be possible to get an order from the probate court to invalidate it, in which case the proceeds of the sale would be rolled into the estate. I strongly recommend that you contact a probate and estates lawyer in your jurisdiction to get his or her opinion.
    Legal Disclaimer: Answers to questions on this forum are for informational and educational purposes only and do not constitute Legal Advice. No attorney-client relationship is established through this forum.


 

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