What’s A Quitclaim Deed And When’s It Used?
Erica Gellerman3-Minute Read
August 13, 2020
A property deed is a legal document that’s used to transfer ownership of a property from one person (grantor) to another (grantee). But not all deeds are alike. Different types of deeds offer buyers and property owners various assurances.
A quitclaim deed is one type of deed that you should familiarize yourself with. We’ll provide an overview of a quitclaim deed, but it’s a smart idea to check your state’s law or consult an experienced attorney to understand what deed types exist where you live. A good professional can help you decide exactly what type of deed is best for your situation.
What’s A Quitclaim Deed?
A quitclaim deed is a legal document that transfers any and all ownership rights held by the grantor to a grantee. It offers no assurances regarding what property rights are conveyed, and it creates no liability for the grantor should a future claim against title arise. You may sometimes hear a quitclaim deed be incorrectly called a quickclaim deed.
These deeds are used for a grantor to convey whatever ownership interests they might have to another party, the grantee. Quitclaim deeds can be cheaper to execute than other types of deeds as you may be able to do them without an attorney, but people should use caution when doing so.
What makes a quitclaim deed different is that there are no guarantees. You don’t get guarantees that you would with a general warranty deed. No title search is completed to verify ownership, and there isn’t any title insurance issued. That why these types of deeds often are used between parties that know and trust each other.
When Are Quitclaim Deeds Generally Used?
Because a quitclaim deed offers no guarantee as to the title of the property, these aren’t right to use in every situation. You may see quitclaim deeds used in estate planning, closely-held businesses or to settle claims after a divorce or other family disputes.
A quitclaim deed can be used to move a piece of property into a trust. By executing a quitclaim deed to move property to a trust, you’re changing the ownership listed to be the trust rather than the original owner.
Some people may also use a quitclaim deed to move property from one person to another – for example, from a parent to a child. They may choose to do this rather than wait and transfer the property upon death. However, using a quitclaim deed in this situation may result in expensive tax consequences that aren’t ideal and could be avoided by approaching another option. It’s important to speak with an accountant or attorney before making a decision to use a quitclaim deed.
If a business owner wants to transfer their ownership of an asset to a business they control, they might use a quitclaim deed to do that. Once they have completed the transfer, the business owner would file a quitclaim deed to extinguish ownership rights and complete the ownership transfer to the business.
Divorce can be a common use of quitclaim deeds. If one spouse will continue to live in the home that was jointly owned once a settlement is reached, a quitclaim deed can be used to remove the other spouse from ownership.
It’s important to note that if there’s a mortgage on the property, a quitclaim deed doesn’t remove the spouse from the mortgage’s financial obligation. It’s important to deal with the mortgage separately to ensure the person giving up ownership of the home isn’t still financially liable.
Quitclaim deeds can also be used when someone who owns a home gets married. The owner would file a quitclaim deed relinquishing sole ownership and adding a spouse’s name to the title or deed.
Correct Prior Record-Keeping Errors
If there was a mistake found on the deed, a quitclaim deed can be used to correct the error. For example, suppose a title company finds during a title search that a potential additional owner is incorrectly included on the title. In that case, the insurance company may ask that person to sign a quitclaim deed.
Are Quitclaim Deeds Used In Arm's-Length Transactions?
Quitclaim deeds aren’t going to be used in transactions involving strangers. Unlike a general warranty deed, there’s no guarantee made as to the ownership. There’s no title search completed and no title insurance issued. Lenders wouldn’t accept a quitclaim deed being used to purchase a property.
Summary: Quitclaim Deeds Keep Titles Clean
Quitclaim deeds can be a quick, inexpensive and simple way to transfer ownership of a property. But they come with little protection, so they’re not often used in property sales or in transactions with strangers.
Before making a home purchase, it’s a good idea to learn more about home buying, including more about titles and deeds.
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