Bulletin: NJ000015

Dear Associates:

Recently, the New Jersey Department of Insurance approved a filing by the New Jersey Land Title Insurance Rating Bureau for the issuance of an Inter Vivos Trust Endorsement. The amended page to the rating manual is available through the New Jersey State Office. Please see reference section below for sample endorsement forms. The NJRB form 5-40 is to be attached to the 1982 form of policies and the NJRB form 5-41 is to be used with the Residential Owner's policy. The charge for either endorsement is fifty ($50.00) dollars.

These endorsements are intended to accommodate insured who are proposing to transfer their title to property to a trustee under a Inter Vivos Trust for estate planning purposes. As you are aware, any voluntary transfer of title voids the owner's policy. However, in these circumstances, the insureds are transferring property to trusts over which they have substantial control and the Department believes it is appropriate to offer to continue the owner's coverage by this endorsement.

This endorsement does not down date the policy. The effective date of the policy remains the same and, consequently, no matters of record or other defects in title occurring after the effective date of the policy are covered by the endorsement. If the trustee under the Inter Vivos Trust wishes to be covered for that period, a new policy must be issued at applicable underwriting rates.

Since the endorsement does not down date the policy nor insure the validity or enforceability of the deed into the trustee, it is not necessary for you to conduct a title continuation search when issuing this endorsement. The endorsement merely changes the definition of insured under the policy. It is anticipated that you will be requested to issue this endorsement at the time of the conveyance into the Inter Vivos trustee. However, the endorsement could be issued at any time including at the time of the initial issuance of the policy.

Although you will not be required to underwrite the conveyance into the trustee, this bulletin does provide an ideal opportunity to remind you that the proper way to convey title into an Inter Vivos Trust is to vest title in the trustee. The grantee in the deed should read, "John Smith, trustee under Inter Vivos Trust, dated April 1, 1995", as an example. The grantee should not be the trust. In addition, as you are aware, it is important that the trust documents contain a power of sale for the trustee. Without a provision in the trust permitting the sale of property by the trustee, a court order may be required to subsequently convey the property.

If you have any questions with regards to this or any other underwriting matter please do not hesitate to call our office.