Deeds are pretty nifty things.  And, there are a lot of different types of deeds.  A deed is a document that shows ownership of real property or real estate and a deed is the documents a person can use to transfer ownership of real property or real estate from one person to another person or from one entity like a business or trust to a different entity, or any combination of people or entities that are selling or purchasing or otherwise transferring a property.

A quitclaim deed is one type of deed.  A quitclaim deed transfers whatever ownership a person or entity has in a property to the purchaser, receiver, or grantee of the deed.  A quitclaim deed conveys whatever ownership the seller, transferor, or grantor has in the real estate property, but doesn’t contain any legal assurances that the person transferring the property actually owns the property.  Sometimes the receiver doesn’t need full legal assurances that the transferor of a property owns the property, but other times legal assurances for transferring a property are necessary.

 

When Would A Purchaser Want Legal Assurances of Ownership?

When someone is purchasing a piece of real estate from a third party they do not know, a “stranger” for lack of a better term, the purchase will likely want legal assurances that the seller is the correct owner of a real estate property.  The purchaser will want to see some sort of title search and title commitment that shows ownership is properly vested in the seller of a real estate property.  Title companies exist for this very reason, to research and establish the chain of title and ownership to the current owner, thereby assuring, and insuring through title insurance, that the seller is the proper person to be selling a piece of real estate.  Almost assuredly the buyer wants to purchase the land from the correct owner and not someone who doesn’t actually own the property.  A non-owner who is trying to sell a piece of land sounds silly, but there have been instances of fraudulent sellers who take the money and run after a transaction of selling land the fraudulent owner does not actually own.  Buyers almost universally would like to avoid paying for land to the wrong person!

Even more than the buyer, if a bank is loaning money to pay for the purchase of land, the bank wants to ensure they will be paid back from the buyer once the buyer is living on or using the land they have purchased.  A bank has a very intense interest in making sure the buyer is going to receive the real estate from the proper purchaser and that the real estate will be available to the bank to repossess from the buyer if the buyer’s loan is not repaid according to the terms of the loan.  Banks just like, and want, collateral for a loan.  As such, the bank is keenly aware that they want the real estate transaction to be 100% legitimate before lending money.  The bank also wants legal assurances that the seller is the legitimate seller, so they will insist on a title search to establish ownership by the seller prior to the transfer of real estate to the buyer.

This type of transaction will be written down and executed on a warranty deed or a special warranty deed, which is a deed that contains warranties (or guarantees) of ownership on the property.  The bank and the buyer rely on the title company, the title search, and the title commitment to establish the current ownership and ensure ownership transfers properly by using a warranty deed or a special warranty deed.  Title insurance is there to pay out for damages if the ownership was improperly determined, and banks and third party buyers want these types of assurances.

 

When Would a Property Buyer Now Want Legal Assurances?

When someone is transferring ownership of a real estate property from them personally to a trust they have created, the need to verify ownership is not nearly as important.  The same is true if real estate is transferred to a family member, or to someone known to them.  If someone has lived in a house for 20 years, and they want to put a house into their own trust, it is a pretty safe bet that they own the house, and not someone who just hasn’t been home for 20 years!  Transferring a house that you know you own into a trust doesn’t need to have a title company do a full title search to determine you own your own property, and a bank is usually not at all involved in moving a house into a trust.  Instead, you can use a quitclaim deed to transfer ownership of a house into the trust without needing to wait the time for a title search and pay for that expense.  If you know you own your own property, a quitclaim deed is a simpler, quicker, less expensive way to transfer ownership of real estate into a trust.

The same is true of a transfer between family members.  Sometimes one spouse wants to transfer ownership of a house into the other spouse’s name only, for many and varied reasons.  Or, sometimes parents want to transfer ownership to their children or some other family member.  Or, even in a divorce situation, quitclaim deeds can be used to transfer ownership from one ex-spouse to the other.  In these types of situations, the transferor and the transferee know each other, know the real estate is owned by the transferor, and don’t need to involve a bank, so a quitclaim deed can transfer ownership quickly, efficiently, and less expensively in these types of situations.  In that way a quitclaim deed is a very helpful and useful tool for estate planning purposes.

 

Not All Situations Require Just One Type of Deed

Of course, some attorneys and real estate professionals will say that you should always use a warranty deed or a special warranty deed, but I do not fall in that camp.  I have seen quitclaim deeds properly transfer ownership to a trust or other family member without the transfer resulting in serious problems for decades and I may just not be quite as paranoid as some others!  I find that a quick and easy transfer of real estate into a trust as part of an estate plan moves things along with an estate plan and gets the estate plan completed in as efficient of a manner as possible.  Of course, to determine if you even need a quitclaim deed as part of your estate plan, you need to determine how to structure your estate plan, as not all estate plans require a deed.  If you would like to schedule a meeting to discuss your estate plan and whether a deed should be part of it, please click the button below.