QUIT CLAIM DEEDS
We at Nichols & Eberth are often asked by our clients to draft a quit claim deed with the primary purpose being to avoid probating upon death of the client of the real estate described in the quit claim deed. However, there are risks and problems that can occur with such a quit claim deed. These risks and problems include but are not limited to the following:
• Once you add another person to the title of your property, you cannot later change your mind and remove that person from the title without that person’s permission;
• If the person that you have added to the title files for bankruptcy, that person’s interest in the property may be brought into the bankruptcy estate by the bankruptcy trustee;
• If the person that you have added is sued and has a judgment entered against him or her, that person’s interest in the property may become the subject of a levy or attachment;
• If you have a mortgage on the property, there may be a clause in the mortgage which states that a change in the ownership of the property may “accelerate” the balance due such that the entire balance owed on the mortgage will become immediately due;
• A change in the ownership will probably nullify your title insurance. We recommend that you have your title insurance policy up dated once ownership of the property is changed.
Often, clients who add a person to the title of their property endeavor to avoid the risks and problems noted above by not having the deed recorded with the register of deeds until after his or her death. However, there are also risks and problems with this procedure as well. These risks and problems are as follows:
• The deed must be stored with someone who will safeguard it, obviously outlive you, be in a position to receive prompt notice of your death and then pursuant to your written instructions, record the deed immediately upon your death;
• The deed can be lost or destroyed;
• The person who is supposed to record the deed after your death might not, either unintentionally or intentionally; and
• If the deed is really old, it can be challenged in probate court on the basis that in the intervening years, you changed your mind but forgot about the deed. This will certainly happen if you have a provision in your will which contradicts the quit claim deed.
• Also, if the person on the deed with you should predecease you by even as little as a second, his or her spouse or children may get nothing. In any case, you will not have accomplished the purpose of the quit claim deed which is to avoid probate.
• In addition, a quit claim deed takes priority over anything that you say in a Will.
For all of the reasons listed about, Nichols and Eberth recommends that a quit claim deed not be used for the purpose of endeavoring to avoid probate upon your death.