Realtors are often asked by clients if they can deed a property they bought into a company or trust they own after closing. You should be aware that doing so may void their Owner’s Title Policy coverage.
There is a solution for your clients that want to transfer ownership and also extend their Owner’s Title Policy coverage to the new owner as long as certain parameters are met.
When your client wants to deed into a company they own (or into their trust) they should contact us about the Additional Insured Endorsement (T-26 Endorsement). This endorsement is primarily used where title was initially deeded into individuals but has since been conveyed to a living trust, family partnership, family corporation or limited liability company.
To issue the endorsement the additional insured must be:
(a) the trustee and beneficiary of the trust to whom title was transferred, or
(b) the members/partners of the family partnership, or
(c) the members/owners of the limited liability company.
The Additional Insured Endorsement amends the Owner Policy by adding successors in ownership as an additional insured under the policy. The original date of the policy is not changed. The cost for this endorsement is 10% of the base premium paid at the time of acquisition. For example, if the sales price was $500,000 the premium paid at closing was $2940. The cost for the endorsement to extend coverage would now be $294.
In order for a title company to issue the endorsement we need the following items:
1. Trust agreement, partnership agreement or operating agreement;
2. Recorded warranty deed;
3. Additional premium.
If you have a client asking about post-closing deeds it is best for you to put them in touch with our Texas National Title closing team. Our escrow officers are all very well versed in these matters and are here to guide your clients through their coverage options.