Diminished Capacity, Authority to Sign, and Title Insurance Concerns

You may have encountered situations where a client retained counsel while experiencing diminished mental capacity—or where cognitive decline became an issue during the course of representation. In those cases, safeguards are often put in place so another individual can lawfully manage decisions and affairs on the client’s behalf.

Common solutions include appointing an agent under a power of attorney or establishing a conservatorship. While these tools are essential, additional considerations arise when a real property transfer is involved and title insurance is required—whether through a sale, a buyout, or a deed transferring ownership between spouses.

Title insurance companies operate under strict underwriting guidelines, particularly when someone other than the titled owner is executing a deed. This heightened scrutiny exists because title fraud has become increasingly prevalent, with a significant rise since the pandemic.

Title fraud typically involves impersonation, forged documents, and the unlawful transfer or encumbrance of property. As a result, when a deed is signed by a conservator or an attorney-in-fact, title companies treat the transaction as higher risk and review it carefully before agreeing to insure.

If a power of attorney is being used, the title company will often require clarification regarding its necessity and validity. This may include questions about the principal’s capacity at the time the document was executed and, in some cases, medical confirmation. Additionally, many powers of attorney lack specific language that title underwriters require in order to approve the transaction.

When a conservatorship is involved, the title company will typically request the full court file and may ask for additional documentation or clarification before proceeding.

While these requirements can feel burdensome, they reflect the title insurer’s exposure. Issuing a policy on a defective or fraudulent chain of title could leave them responsible for the full value of the property—or more.

For this reason, whenever a deed will be signed by anyone other than the titled owner(s)—including a conservator, attorney-in-fact, elisor, or clerk—it’s wise to consult with a title officer before finalizing documents. Addressing these issues early can prevent last-minute delays or the collapse of a transaction just days before closing.

I’m happy to assist with this process. You’re welcome to call or send over the relevant details, and I’ll review them with my title company to confirm compliance. There’s no cost, and it can provide valuable peace of mind that the transaction will proceed without issue.