Question:

Hi Quincy,

We spoke when I was deciding about IRAs, and I recall that you said you are an attorney, so can you please answer the question below about title policy? I am trying to transfer a property from my other IRA into Quest, and there is an issue about the warranty deed and moving it to Quest. It was written in the name of the current IRA, so do we need to get it transferred and, if so, how do we go about that?

Answer:

I can see arguments both ways, although I think most people would not get a new title policy.  Certainly it is true that a new lender would require a title policy for them, but the property is going from one custodian for the benefit of your IRA to another custodian for the benefit of that same IRA.  This is analogous to changing trustees on a trust.  Even after conveyance, the title policy would have to continue to protect the insured for defects prior to that time.  For example, in the Conditions and Stipulations section of the standard title policy, Section 2(b) reads, in part:

“After Conveyance of Title.  The coverage of this policy shall continue in force as of the Date of Policy in favor of an insured only so long as … the insured shall have liability by reason of covenants of warranty made by the insured in any transfer or conveyance of the estate or interest.”

So the title protection would not extend to anything that happened to the title after the property was acquired, nor would it directly protect any future owners of the property.  But as long as there were covenants of warranty (as in a general warranty deed) the title policy would cover the owner who was insured (in this case, SDIRA Services FBO Your Name), which would likely be included in any lawsuit alleging a defect of title.

Would it be covered for sure?  I honestly cannot say.  It may have to do with the nature of the defect in title, and of course the timing of when the defect occurred would be critical.  It is always possible that you could argue it was, in fact, the same insured, but just with a different “trustee.”  I have found that title companies do not necessarily shy away from coverage when it is clear they missed something.  I have been protected by title insurance before, as has my mother.  But it is not possible for me to render a legal opinion or give legal advice on something that may or may not happen.

As far as what my staff said, it is true that we do not require you to obtain a title policy.  That is strictly up to you.  I hope this helps you a little.  Thank you for the opportunity to serve your self-directed IRA needs.  Have a great day!