Deeds…. we really don’t even think of this all powerful piece of paper unless we are buying or selling a home. It sits safely tucked away in our home file cabinet, safe or safety deposit box. Or perhaps in that stack of random papers if you are less Type A than others of us. So what is this magical piece of notarized pulp? Let’s start with what a Deed is not. It’s not a Title. The two terms are not interchangeable. Think of Title as a relationship between people and property. A way of showing you have the ownership right to access/use and transfer the property. The Deed is the actual legal hard copy document that transfers the Title from one person to another. Think of it as a vehicle for transfer of Title. Have I lost you? Title is a conceptual term. Deed is a document. Let’s not get bogged down with this. After all, this isn’t the main point of my commentary.
So, onto the meat of the matter. Deeds. Do you have a clue what type of Deed is attached to the ownership of your home? I’m betting the vast majority of us don’t. Adulting is hard enough without remembering what that paper you signed all those years ago says! Settle in for a little Deed refresher and suggestion for future success.
General Warranty Deed: The seller guarantees the right to transfer title, that the title is free and clear of any encumbrances, and the seller will handle any liens or encumbrances that appear or pay buyer for any losses incurred if the title cannot be established as clear and transferable. This covers from first sale of house to current sale. This is the Cadillac Deed!
Special Warranty Deed: This Deed only covers the period of time that the seller had the title; the seller would be responsible for any liens or encumbrances. The seller is not responsible for any time frame other than when owning this property. Think of this as still higher end but limited… like a base model Lexus with a few upgrades.
Quit Claim Deed: There is no guarantee at all that the seller actually has a legal claim to the property. The seller only conveys his or her interest in the property at the time of the sale. This is like base model Ford Fiesta. This is a bit of a risky approach. You aren’t getting title insurance with a Quit Claim Deed. That should say something when an insurance guy doesn’t even want your money.
There are several other types of Deeds but for fear of losing you I’ll stop with these 3. Let’s move onto how you can hold Title in these Deeds.
Sole Ownership: This isn’t a brain buster. You hold ownership ALONE. It’s the simplest form of ownership and gives you the most control. Have your Will in order because upon your death this does not automatically transfer to anyone else. That means you will likely pay a visit to Probate Court to determine if the deceased had a Will. If so, good news. The court will validate the Will or sort out issues if someone contests the Will. No Will? Not good. Then probate law distributes property to the next of kin. As you can imagine, this can lead to hurt feelings, anger and explosions of ego if everyone isn’t in agreement. Why not save your loved ones the trouble and just get your Will in shape! Probate can take a minute, or months.
Joint Tenancy: The joint tenants own equal shares of the same deed at the same time. Hold up though! Any tenant can sell their share to another party thus breaking the joint tenancy. Should this happen then it becomes Joint Tenants in Common. Let’s add a little more to this name with Right of Survivorship.
Joint Tenants with Right of Survivorship: Ahem…. If you like to live a simple life as a married person I would encourage you to consult your real estate attorney regarding this type of ownership. If one of the interest holders passes away, the full interest is automatically transferred to the remaining Tenant. Easy Peasy! No court or estate hassle for you. You have to follow the rules though and there are 4.
- The joint tenants’ interest must all begin at the same time.
- The joint tenants must all receive the same interest.
- The joint tenants must all receive title in the same deed or other instrument.
- All joint tenants must have equal right to control and possess the property.
Beware though that each tenant can still sell their share without approval from the other tenant(s). Let’s get real though, who would want to buy half ownership of a half owned property. Let’s say your spouse gets angry and decides to sell his half. Who on this green earth would want to purchase his half knowing the jilted wife still owns the other half?? Probably not a common occurrence. Who wants that drama?
Joint Tenants in Common: Tenants in common can have different ownership interests. For example, Tenant A could own 25% and Tenant B could own 75%. Ownership can be obtained at different times. There is no right of survivorship here folks. If one owner dies and there is no will or other document stating specifically that his/her ownership is to be divided between the other owners then it becomes a part of the estate. Hello probate court!
Living Trust: In this form of ownership you make the rules. There is the expense of setting up the trust (maybe $1000 or less) and assigning a Trustor. Upon your death your assets are disbursed according to the terms you set up in your trust. Very rarely will a Living trust see the light of probate court or it’s delays due to challenges by family members. An added plus is that Living Trusts are kept private, unlike a Will which becomes part of the public probate file. No one has to know that you left your weird cousin Phil all your stuff.
I hope this kept your attention. I think we could all benefit from a little education now and then. If you have questions about titles or deeds I would highly recommend dialing up a real estate attorney. I can assure you I am not the authority but a vehicle for information… kind of like a Deed 🙂