Page 10 - 2020 Winter Pinnacle

Dangerous Deeds???
Susan J. Brotman
The Lawyer Who ListensTM
There are many different kinds of deeds and there are many potential pitfalls if a deed is improperly worded and often the results are opposite of what someone was trying to do. There are Warranty Deeds, Quit Claim Deeds, Trust Deeds, Life Estate Deeds and Ladybird Deeds, and there are “magic words” common to all deeds that drastically change ownership rights, sometimes not as intended. (These “magic words” will be discussed in detail in next month’s article.) Below are described the most commonly used types of deeds and each serves a different purpose.
WARRANTY DEED:
First of all, deeds must be witnessed by two people and notarized. Once that condition threshold is met, you may have a valid deed but it may not accomplish your goal. In a Warranty Deed the seller states that they have full ownership of the property and have the right to transfer the property. This means they will defend the property against all claims that may arise to ownership. A Statutory Warranty Deed is the most commonly used type of conveyance. A Special Warranty Deed is often used by builders in that they are agreeing to defend title arising from their prior ownership of the property.
QUIT CLAIM DEED:
A Quit Claim Deed contains no warranties, for example, I may give you a valid Quit Claim Deed to the Brooklyn Bridge, and all it is saying is that I am giving you whatever interest I may have. Obviously, if I have no ownership interest, you are getting no ownership interest. Often Quit Claim Deeds are used when the parties are related and there is no question as to ownership, or it is used to correct a previous deed, or when someone thinks they can avoid paying documentary stamp tax. It doesn’t matter if there is a Quit Claim Deed or a Warranty Deed, document stamp taxes have to be paid on the value of the property being transferred. Most often, when a Quit Claim Deed is done, only the minimum amount of documentary stamp tax is paid, but if there is a mortgage on the property, even if no money is being exchanged, the Florida Department of Revenue requires that documentary stamp tax be paid on 50% of the outstanding mortgage, even if it is transferred from one family member to another. I have had a few people call me stating they had received a bill from the Florida Department of Revenue because they had not paid the documentary stamps on a deed when it was originally recorded, and now they were subject to not only the documentary stamp tax, but a penalty and interest.
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TRUST DEED:
Another kind of deed is used when someone transfers real estate by Trust Deed. In that case, language needs to be added that the property is being conveyed according to Florida Statues 689.073, with full power to protect, conserve and to sell, or to lease or to encumber, or otherwise to manage and dispose of the real property described. Such allows the Trustee to sell the property without recording the entire Trust (a document usually intended to be private).
LIFE ESTATE DEED:
Often in the area of estate planning, Life Estate Deeds are used to keep or give someone ownership of a property during their lifetime, but immediately upon their death it goes to the other person named as the “remainderman.” This is not a 50/50 ownership situation, but rather a division of property in time, for example, now versus later. However, if the property is to be sold or mortgaged, the holder of the life estate, as well as the holder of the remainder interest, must agree to the transaction and must sign all the required documents. A Life Estate Deed is considered a permanent gift and if the remainderman dies, the property doesn’t revert back to the life tenant but instead, that share has to be probated (usually such is exactly what was meant to be avoided). If the life tenant wants to change the remainderman, the remainderman would have to agree to give back his ownership interest by providing a Quit Claim Deed. Often this is not easy as the person is being asked to surrender his ownership interest.
ENHANCED LIFE ESTATE DEED:
Another version of a Life Estate Deed is called an Enhanced Life Estate Deed, which is also known as a Ladybird Deed. This is similar to a Life Estate Deed, but in an Enhanced Life Estate Deed, the person owning the property has the right to change his or her mind and can sell or mortgage the property without the remainderman. This type of deed is becoming increasingly more popular with estate planning attorneys in that it is not a completed gift that can be challenged if there is a medicaid application pending. Also, if the remainderman falls out of favor or dies, the grantor can just do another deed removing that person’s name.
Please, please, please, consult a professional when deeding property. Next issue: “Magic Words.”