Hard for an ability to be legendary, since legends are typically related directly to dead people =P

The episode said 3 people in the history of the clan. The Clan's history is not 20-30 years old. ... It spans over many generations, dating back to the creation of the clan. Since the first Hokage is the one that built the village, its safe to assume the village is less than 400 years old. Now, during which time, there was enough time for the legend to be created, and for a record of it to be created, and then voted on to be hidden by everyone who was qualified to know.

Reason would assume that the said 3rd person is most likely gone already, i.e. not alive. So, why is it that the 3rd person has to be alive? I think its a bit much to assume that much, as there's no basis to support that theory. The clan has been slaughtered, with Itachi and Sasuke as the sole survivors.

*shrug*