“UNDERSTANDING DEEDS”
What is the evidence of ownership of your real estate? There is often confusion over the variety of legal documents which are referred to loosely as “deeds.” Several legal documents have the word “deed” in the title such as “Warranty Deed”, “Quit Claim Deed”, “Life Estate Deed”, “Deed of Trust”, “Security Deed”, “Trustee’s Deed”, “Executor’s Deed”, etc. So, which is the correct deed indicating ownership of your real estate? Each of these deeds plays a special role in the title and transfer of real property and all are filed in the land records of all states.
A WARRANTY DEED is the most common document which indicates the ownership of real estate. A Grantor (the person/entity selling or transferring the property) “warrants” or “certifies” to the Grantee (the Purchaser/receiver of the property) that title to the property is free and clear of all liens and defects by executing a Warranty Deed.
A QUIT CLAIM DEED transfers whatever interest the Grantor has in the property without giving any warranty regarding liens or defects. A Quit Claim Deed simply says, “whatever interest I have in this property, I convey to you”.
A LIFE ESTATE DEED has special language in the body of the deed stating that “so-and-so has retained a life estate in the described property” or “a life estate is reserved unto so-and-so”. If you have retained or been reserved a life estate, it means that you have the right to lifetime use of the property, and the property can only be conveyed while you are living subject to that life estate. The life estate can only be terminated as a result of your death or if you agree to relinquish your life estate in writing. However, the property is owned by the person(s) named in the deed as the Grantee. Life Estate Deeds are sometimes used by aging parents who wish to pass property to their children before their death but also desire to retain some control over the property. There are potential tax issues involved in these transfers which should be discussed with an attorney familiar with estate planning and/or with a tax advisor.
A DEED OF TRUST, sometimes called a “Security Deed” or “Deed to Secure Debt”, should be thought of as the recorded instrument evidencing your mortgage. This deed assigns your real estate as collateral to the lender from whom you borrowed money for the purchase of the property. When the loan is “paid in full” the lender who loaned you the money should release the Deed of Trust (mortgage) in writing and have the release recorded in the court records.
TRUSTEE’S DEEDS/EXECUTOR’S DEEDS are titles of deeds in which ownership is transferred by the Trustee of a Trust or by the Executor or Personal Representative in the settlement of the probate of a decedent’s estate. These can be by sale, or under the specific terms of distribution of the trust or estate.
You should retain a copy in your files of the all the recorded Deeds to any property you own or in which you have an ownership interest. If you do not have a copy, you may request one from the recording office in the county in which the property is located or go to the recording office yourself to obtain a copy. There is generally a small fee for these copies.
Ownership of real property is evidenced through the use of Deeds. Most commonly, a Warranty Deed is granted by the seller of the property (the Grantor) to the purchaser of the property (the Grantee). But sometimes there is confusion as to “how” the property is or should be titled. There are several common terms used in the title of real estate that should be understood by anyone involved in the purchase of real property, particularly when the property is to be transferred to more than one individual owner.
TENANTS IN THE ENTIRETY OR JOINT TENANTS WITH THE RIGHT OF SURVIVORSHIP
For example, often there are multiple owners of a property, such as when a husband and wife purchase a home together. If title to the property includes the phrase “tenants in the entirety” or “joint tenants with rights of survivorship” or “JTWROS”, this means that BOTH husband and wife own 100% of the property, and the survivor of them will keep the property at the death of the first one without any probate or further action required. In some states, simply indicating that the relationship of the Grantees is “husband and wife” is sufficient to indicate such an interest “in the entirety”.
TENANTS IN COMMON
However, if property is taken without such a survivorship indication, suchas “tenants in common”, this means that each of the Grantees has acquired a separate fee simple interest in the property, which interest is then a probatable asset which must be transferred through the probate process. This interest may be equal between all of the owners, or held in unequal shares, as may be indicated on the deed.
In another case, property may be transferred to a Grantee with the phrase “as to an undivided XX% interest”. This means that the Grantor has transferred only that indicated percentage interest of the property to the Grantee. It may be difficult for such a Grantee to sell their interest in the property, except to one of the other percentage owners, or unless all the percentage owners agree to sell.
AS TO A LIFE ESTATE INTEREST
Finally, as previously discussed, a Grantee can be listed “as to a life estate interest”. This means the Grantee has no ownership interest in the property, but has the right to use or reside upon the property until death or until the life estate Grantee agrees in writing to relinquish that life estate interest. Additionally, the property encumbered by a life estate interest must be transferred subject to that life estate interest unless the life estate tenant agrees in writing to relinquish that interest.
Careful attention should be paid when acquiring real property so that your intentions regarding how title to the property is held and how it will be handled at your death will be properly indicated on the Deed.