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How to Transfer Automobiles without Probate in Mississippi

I get a bunch of e-mails from people who want to know where to start with Mississippi probate. Many of them have not considered whether probate is really required.

As I’ve mentioned in my discussion of how to determine whether Mississippi probate is necessary, so much depends on what assets the decedent owned, where they are located, and how they are titled.

Every once in a while I get a call from someone with a deceased friend or family member that had no assets other than an automobile. Sometimes they have been told that they need to go through probate so that they can get clear title to the automobile. But this isn’t always the case.

The Title Bureau for the Mississippi Department of Revenue has a little-known procedure for transferring a decedent’s automobile that is titled in Mississippi without the need for probate. To take advantage of this procedure, the decedent’s closest relatives (“next of kin”) must file an affidavit with the Mississippi Department of Revenue that contains the following information:

The decedent’s name, date of death, and the VIN, year, make, model, mileage, and title number of the vehicle that the decedent owned at the time of death.
A sworn statement that no will was probated and no administrator, executor or other personal representative has been appointed to administer the decedent’s estate.
Whether the decedent was married or had children.
The surviving relatives (“next of kin”) of the decedent.
The name of the person to who m the next of kin want the automobile to go to.

This information is all found in the form Affidavit When Owner Dies Without a Will, which is promulgated by the Mississippi Department of Revenue.

I sometimes get asked about whether this procedure is available if the decedent had a valid Last Will and Testament. This question usually comes up when the decedent had a valid Last Will and Testament that is not expected to be admitted to probate. This is usually the situation when the automobiles are the only assets involved.

The confusion is caused by the short title of the document (“Affidavit When Owner Dies Without a Will”). At first glance, this seems to indicate that the procedure is only available if there is no will. But this may be misleading. The rest of the Affidavit indicates that reference to the owner dying without a will really refers to the owner dying without a will that has been or will be admitted to probate. For example:

The first sentence fully describes the document as an “application for assignment of title to a vehicle when the owner dies without a will being probated and no personal representative appointed or widow’s allotment made.”
The second numbered paragraph states: “That no will was probated and no administrator, executor or other personal representative has been appointed to administer on his or her estate.”

This language indicates that that the procedure is available even if there is a valid Last Will and Testament, as long as the will is not expected to be probated, no executor is appointed, and no widow’s allowance is made. This interpretation has been confirmed by my calls with the Title Bureau on this issue.

It is clear that the procedure is not available if the decedent’s will has been or is expected to be admitted to probate. If the executor intends to probate the will, the automobiles will pass under the will and not through this special procedure.

I advise potential clients to contact the Title Bureau for the Department of Revenue (601-923-7200) with any specific questions about the form and the circumstances under which it can be used. If the decedent’s only asset was an automobile and the Title Bureau confirms that the form can be used, Mississippi probate can usually be avoided.

Mississippi Limited Liability Company Transfer Set Aside for Lack of Authority; Bank Loses Security Interest

The Mississippi Supreme Court recently invalidated a deed by a minority LLC owner to a new LLC and the subsequent deed of trust on the property. Even though the bank dealing with the new LLC did not know that the prior deed was invalid, the bank lost its security interest in the property.

The Takeaway

This could have far-reaching implications for Mississippi real estate attorneys, lenders, and title companies. Since limited liability company operating agreements (or other business entity documents for that matter) are not public record, any business in the chain of title could potentially invalidate a lender’s security interest in a mortgage. We can expect banks and other lenders to take a closer look at transfers in the chain of title from business entities.

The Facts

Michael was a minority owner of Kinwood LLC. He formed another LLC (Northlake LLC) of which he was the sole owner. He then deeded Kinwood LLC real estate to Northlake LLC and used the real estate to secure a loan. Northlake LLC defaulted on the loan and declared bankruptcy.

It turns out that the operating agreement of Kinwood LLC did not permit Michael to transfer the real estate from Kinwood LLC in the first place. As a minority owner, Michael didn’t have the votes required to execute a deed without the consent of the other members.

When the other members of Kinwood LLC learned what had happened, they had the bankruptcy judge declare both the deed to Northlake LLC and the deed of trust void.

The bank appealed the bankruptcy judge’s order to the district court, which affirmed, and then to the Fifth Circuit. The bank argued that the deed of trust was not void, but voidable. Because the bank had accepted the deed of trust from Northlake LLC in good faith (without knowledge that the transfer from Kinwood LLC was not authorized), the deed of trust should be enforceable.

The Fifth Circuit found that the case involved a matter of Mississippi law for which there is no controlling precedent. It certified the following question to the Mississippi Supreme Court:

When a minority member of a Mississippi limited liability company prepares and executes, on behalf of the LLC, a deed to substantially all of the LLC’s real estate, in favor of another LLC of which the same individual is the sole owner, without authority to do so under the first LLC’s operating agreement, is the transfer of real property pursuant to the deed: (i) voidable, such that it is subject to the intervening rights of a subsequent bona fide purchaser for value and without legal notice, or (ii) void ab initio, i.e., a legal nullity?

The Law

A limited liability company operating agreement can limit the actual authority of a member to bind the company in certain transactions.
Even if a member does not have actual authority, he may have apparent authority. Apparent authority can bind the LLC unless:
- The member does not have actual authority to act for the company; and
- The person with whom he is dealing has knowledge of the fact that the member has no such authority.

The Analysis

Actual Authority – Do to the limitation in the operating agreement, Michael clearly did not have actual authority to transfer the real estate from Kinwood LLC to Northlake LLC.
Apparent Authority – Focusing on the transfer from Kinwood LLC to Northlake LLC: Michael knew he didn’t have actual authority. That knowledge was imputed to Northlake LLC. Applying the above analysis for apparent authority:
- The member (Michael) did not have actual authority to act for the company (Kinwood LLC);
- The other party to the transaction (Northlake LLC) had knowledge that Michael didn’t have authority to transfer the property.
- Thus, Michael had no apparent authority to transfer the property from Kinwood LLC to Northlake LLC.

Note: The bank did not know that Michael lacked authority to transfer the property from Kinwood LLC to Northwood LLC or to sign the deed of trust from Northwood LLC. But the Court was not concerned with the deed of trust between Northwood LLC and the bank. The focus was on whether the earlier transfer to from Kinwood LLC to Northwood LLC was valid.

The Holding

Since Michael had neither actual nor apparent authority to transfer the property, his actions did not affect the title to the property.

Northlake Development, L.L.C. v. Bankplus, 2011 WL 1743943, No. 2010-FC-01308-SCT (Miss. May 5, 2011)

Mississippi Real Estate Recording Changes

The Mississippi legislature recently passed new laws that change and clarify the rules for recording legal documents in Mississippi. The new amendments , which have been signed by the governor and take effect on July 1, 2011, will change the way Mississippi real estate attorneys prepare documents for recording with local chancery clerks.

New Acknowledgement Provisions

The new legislation provides a safe-harbor form of general acknowledgment that can be used by business organizations:

Personally appeared before me, the undersigned authority in and for the said county and state, on this ________ day of ________, 20________, within my jurisdiction, the within named ________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed in the above and foregoing instrument and acknowledged that he/she/they executed the same in his/her/their representative capacity(ies), and that by his/her/their signature(s) on the instrument, and as the act and deed of the person(s) or entity(ies) upon behalf of which he/she/they acted, executed the above and foregoing instrument, after first having been duly authorized so to do.

Mississippi real estate attorneys typically use the model language in the current statute for acknowledgment by business entities, but the model language doesn’t cover every possible combination of business entity. This new safe harbor language will help address these deficiencies.

The new legislation also allows chancery clerks to refuse to record an instrument that is not properly acknowledged. But if the chancery clerk does record the document, it is constructive notice notwithstanding the defective acknowledgement.

The original bill included language stating that acknowledgments used in other states would be recognized in Mississippi if they were proper in the laws of the state where the document was signed. This provision generated a heated discussion within the Mississippi Bar’s Real Property Section prior to the passage of the bill. Some felt that this would place too great a burden on Mississippi attorneys by requiring them to make a judgment call about the validity of out-of-state acknowledgments. The exclusion of this language is likely to have little effect, however, since the recordation of an acknowledgement done in another state, even if defective, will serve as constructive notice.

New Real Estate Recording Requirements

New legislation will also change the requirements for recording Mississippi legal documents, including deeds and certificates of trust. These new requirements update the changes made a few years ago, which significantly changed the way we prepare documents for recording in Mississippi. Here’s a summary of the new changes:

All documents must now use at least 10 point font. This is an increase from the 8 point font permitted under the prior law.
The document preparer must list his or her physical address and business telephone number. The prior law allowed the preparer to use a post office box and a cellular or home telephone number.
The first page of the document must list the name, physical mailing address and business phone number of ever grantor, grantee, borrower, beneficiary, trustee, or other party to the instrument. Prior law required this information on deeds only (and not deeds of trust, etc.).

All of these changes go into effect on July 1, 2011.

Mississippi Medicaid and Probate

Medicaid is a Federal government program that is administered by state agencies. It provides for payment of medical expenses for persons age 65 or older or individuals that are disabled in accordance with Social Security disability definitions. To qualify, applicants must fit within certain asset and income limitations.

Mississippi law implements the Federal policy of allowing the state to seek recovery from the Mississippi probate assets of some decedents. It requires the executor or administrator of a Mississippi estate to notify the Division of Medicaid of the pendency of a probate proceeding involving the assets of a deceased recipient who was fifty-five (55) years of age or older when he or she received assistance. The notification law ensures that the state will have the opportunity to submit a claim and gives Medicaid the authority to seek recovery for payment of certain benefits.

This enforcement mechanism is authorized by Federal law. The Omnibus Budget Reconciliation Act of 1993 requires states to seek recovery of nursing home services, home and community-based services, and related hospital and prescription drug services from the estate of a deceased Medicaid recipient who was fifty-five years of age or older when the assistance was received. This allows the state to seek reimbursement from a deceased person’s assets for Medicaid benefits received during the person’s lifetime.

Mississippi has implemented an estate recovery program in accordance with Federal requirements. The Mississippi recovery statute provides:

The division shall be noticed as an identified creditor against the estate of any deceased Medicaid recipient …
In accordance with applicable federal law and rules and regulations, including those under Title XIX of the federal Social Security Act, the division may seek recovery of payments for nursing facility services, home- and community-based services and related hospital and prescription drug services from the estate of a deceased Medicaid recipient who was fifty-five (55) years of age or older when he or she received the assistance. The claim shall be waived by the division (a) if there is a spouse; or (b) if there is a surviving dependent who is under the age of twenty-one (21) years or who is blind or disabled; or (c) as provided by federal law and regulation, if it is determined by the division or by court order that there is undue hardship.

While Federal law clearly allows Medicaid to seek recovery against an estate, it is not always clear what property is included in an “estate.” The Federal Omnibus Budget Reconciliation Act of 1993 defines an “estate” to include “all real and person property and other assets included within with the individual’s estate, as defined for purposes of State probate law …” This means that the Federal definition of “estate” will piggyback on the state definition.

Since each state has the leeway to alter the definition of “estate” as it sees fit, there is some variation in how the term is defined under each state’s law. The State Medicaid Manual, which is published by the U.S. Department of Health and Human Services, requires states to make a decision. Specifically, states must decide on a definition of “estate” that will apply for Medicaid recovery purposes. States are also allowed to place liens against assets, even before the Medicaid recipient dies.

Some states have implemented broad definitions of “estate” for Medicaid recovery purposes, pulling in such assets as living trusts, jointly-titled assets, life insurance proceeds, and other assets that have traditionally considered to be “non-probate” assets. But Mississippi has taken a more conservative approach, limiting estate recovery to assets that are included in the Mississippi probate estate. As noted above, the Mississippi statute does not expand the definition of “estate” beyond the traditional probate estate. As a result, Medicaid must look only to the assets that pass through the decedent’s Mississippi probate estate.

Mississippi Supreme Court: Marriage Alone Does Not Create Presumption of Undue Influence

The Mississippi Supreme Court recently extended the holding of Genna v. Harrington to inter vivos gifts, holding that marriage alone does not create the presumption of undue influence.

I wrote about the Mississippi Court of Appeals decision in this case last year (see No Presumption of Undue Influence between Spouses). The case involved Patricia Langston’s decision to name her husband, Mansfield, as a joint tenant with right of survivorship on her home and a $200,000 certificate of deposit. Patricia did not leave anything to Mansfield under her will.

When Patricia died, her estate sought to set aside the two transfers to Mansfield, claiming that they were the product of Mansfield’s undue influence over Patricia. This raised the issue of a confidential relationship, which is where the real battle lies in undue influence cases. If a confidential relationship exists, the person is presumed to have exerted undue influence over any gifts to that person. This puts the alleged influencer in the position of being guilty until proven innocent.

Relying on prior decisions, the court defined a confidential relationship to mean:

A relation between two people in which one person is in a position to exercise a dominant influence upon the other because of the latter’s dependency upon the former, arising either from weakness of mind or body, or through trust.

Mississippi courts have traditionally drawn a distinction between testamentary (at death) and inter vivos (during life) gifts:

[The] presumption of undue influence only arises in the context of gifts by will when there has been some abuse of the confidential relationship, such as some involvement in the preparation or execution of the will. On the other hand, with a gift inter vivos, there is an automatic presumption of undue influence even without abuse of the confidential relationship. Such gifts are presumptively invalid.

But the Mississippi Supreme Court has declined to apply the presumption of undue influence to the marital context. As the Court explained in Genna v. Harrington:[1]

It is undoubtedly true that a husband or a wife may exercise undue influence upon the other spouse, but the mere fact that there is a close relationship between the parties in a marriage does not mean that one’s influence upon another is undue influence. The influence which a loyal wife, by her virtues, kindnesses and devotion, gains over her husband’s affection and conduct, whereby a husband is caused to make a will in her favor, is no ground for refusing to admit the will to probate.

A wife may be caused by her love and affection to make a will in favor of her husband in the same way. In order to set a will aside upon the grounds of undue influence on the part of a spouse, it must be shown that the devisee spouse used undue methods for the purpose of overcoming the free and unrestrained will of the testator so as to control his acts and to prevent him from being a free agent.

In other words, there are many reasons other than undue influence that would cause one spouse to provide for another in a will, so the court won’t assume that something suspicious is going on merely because the parties happen to be married. But, as the quoted language indicates, Genna applies specifically to testamentary transfers. The question of its application to inter vivos transfers remained open. This was what the Mississippi Supreme Court had to decide in this case.

The court had little trouble in extending Genna to inter vivos gifts, holding that “a confidential relationship between a surviving spouse and a deceased spouse does not create a presumption that the surviving spouse used undue influence with respect to inter vivos gifts and transfers.” And it would be hard to come up with a convincing argument for why this should not be the case. If a husband would be naturally inclined to leave something to his wife in his will, why wouldn’t he be inclined to transfer assets to her during his lifetime?

This case brings needed clarity to this area of law and provides guidance to chancery courts on how to apply the burden of proof in undue influence cases involving husbands and wives. The full text of the case is available in the link below.

[1] 254 So. 2d 525 (Miss. 1971).

In re Estate of Langston, 2008-CT-01090-SCT (Feb. 24, 2011)