When insuring a conveyance by inheritance or devise, the agent must determine that the estate has been settled with all taxes and debts paid, and that potential demands or prior unrecorded creditors or other debt obligations of the deceased grantor have been disposed of through probate proceedings. However, where the estate has not been settled, the Company will not usually issue a policy unless there is a sale by order of the court in which the liens of legatees and debts are transferred to the proceeds of the sale and are no longer liens on the real estate. The time for appeals must also have expired. When a commitment is requested while an estate is in the course of administration, an exception must be made for claims or demands against the decedent’s estate, or inheritance taxes, discovery and probate of will, and any unrecorded deeds or interests created by the deceased or his estate.
It should be noted that, in an inheritance situation, the person or persons inheriting title to real property are not considered bona fide purchasers for value due to the fact that they did not pay any value for such property.
Title vested in heirs at law or devises under a will, even with a court order establishing such interests, does not create marketable title. Such title continues to be subject to appeals, claims of creditors of the estate, spousal interest, and state and federal taxes, and cannot be insured until all claims and appeal periods have expired, tax waivers are received, and the estate has been cleared without possibility of reopening.