Quitclaim Deed?  Be Careful, Grandpa…

Quitclaim Deed?  Be Careful, Grandpa…


        Attorneys are oftenvisited by people who want a "simple quitclaim deed."  Aquitclaim deed is seen as an easy way to convey property, especially to a friendor a family member.  Wanting to avoid hassle and legal fees, propertyowners try to make the visit to the lawyer as short as possible.  Forexample, perhaps a grandfather wants to give land to his grandson by quitclaimdeed.  Yes, it’s quick and easy, but be careful, grandpa.  Yourattorney’s warnings are more than an attempt to run up a legal bill. Quitclaim deeds are not only cheap and easy, but can be trouble waiting tohappen.  Without realizing it, grandpa’s choice of a quitclaim deed is alsoa choice to give up some important legal rights.

        A quitclaim deed is aperfectly valid way for an owner to sell or give away property.  However,it gives no guarantee that the owner has anything to transfer.  Use of awarranty deed allows the new owner to be more certain of what he’sgetting.  Using our previous example of a transfer from grandfather tograndson, a warranty deed from the grandfather would include threepromises:                            

  1. Grandpa owns the land and has the right to transfer it.  

  2. No one else owns any interest in the land (unless it is listed in the deed, such as a utility company’s right to run a phone line across the property).

  3. If someone tries to interfere with the grandson’s ownership, grandpa will defend the title in court.

        If one of these promisesis broken, a warranty deed will allow the grandson to recover for hisloss.  Not so with a quitclaim deed.  But can’t grandpa be trusted notto cheat his own grandchild?  Probably so, but grandpa’s title may bedefective because of broken promises from the previous owner.  Without awarranty deed from grandpa, the grandson can’t recover for the dishonesty ormistakes of a prior owner or a title insurance company who previously stoodbehind the marketability of that defective title.  A break in the chain ofwarranties prevents recovery from anyone, leaving grandson to bear his own loss.

        A quick and easy transferby quitclaim deed may also lead to neglect of important details.  Evenamong family and friends, always use caution.  Care taken now may preventdifficulty or expense later.  Transfers involving quitclaim deeds are oftenplagued by problems; consider the following:


Use of a quitclaim deed may signal a possible forgery, and more often, inaccurate or incomplete legal descriptions. bullet

Quitclaim deeds are frequently offered in transactions that lack formality.  An unwritten contract to sell land is unenforceable.  An oral promise to give a quitclaim deed can be broken without legal consequences. bullet

The grantee of a quitclaim deed may agree to assume the existing mortgage debt.  However, if the grantee stops paying, the grantor will remain liable unless a release was given by the lender.  Though the property has been sold in a seemingly trouble-free transfer, the grantor’s debt may not be fully transferred to the grantee. bullet

With mortgages that contain "due-on-sale" clauses, transfer of land without the lender’s consent will result in an acceleration of the loan.  Unless the new owner can pay off the loan or refinance the debt, the property may be lost. bullet

Though making a gift with a quitclaim deed is a way to avoid estate taxes, a gift of over $10,000 will make the donor liable for gift taxes.  In addition, it may be better for the recipient of certain kinds of property, particularly real estate, to receive an inheritance rather than a gift.  When land is inherited, less capital gains tax may be due when the land is eventually sold by the recipient.  bullet

Sometimes owners try to hide property from creditors by giving a quitclaim deed to a family member.  Courts will not allow this. bullet

Use of a quitclaim deed may prompt a grantee to overlook the need for title insurance.  Title insurance is always important.  Besides finding defects in title, the policy may be needed to insure over problems that cannot be resolved without great expense or inconvenience.  Use of a quitclaim deed can, in some circumstances, make it more difficult to get special coverages need to close a real estate transaction.

        Quitclaim deeds should beused with caution.  The lack of warranties may prevent recovery of lossesin lawsuits against previous owners or lead to neglect of importantdetails.  Remember, a quitclaim deed is a trade-off.  A quick and easytransfer is achieved only by giving up legal rights.  


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