DAL Law Firm: Top 3 reasons to use a quit claim deed
A quit claim deed is one of the most commonly used documents for transferring ownership of real estate, yet it is also one of the most misunderstood.
Many people assume that every property transfer involves buying or selling a home. In reality, there are many situations where property ownership changes without a traditional sale. In those cases, a quit claim deed is often the appropriate legal document.
A quit claim deed transfers whatever ownership interest a person has in a piece of real estate to another person or entity. Unlike a warranty deed, it does not guarantee that the title is free of liens or ownership disputes. Instead, it simply transfers the interest the current owner has, if any.
Because of that, quit claim deeds are most commonly used between people or entities that already know and trust each other.
Here are three of the most common reasons someone may use a quit claim deed:
1. Gifting Property to a Family Member
One of the most common uses for a quit claim deed is transferring property between family members.
For example, a parent may want to gift a home, vacation property, or vacant land to an adult child. Grandparents sometimes transfer property to grandchildren, and siblings occasionally transfer ownership interests between one another.
Since these transfers are generally not arm’s-length sales between strangers, a quit claim deed is often an efficient way to complete the transfer.
However, before transferring real estate as a gift, it’s important to understand the potential legal and tax consequences. A property transfer may affect capital gains taxes, property taxes, Medicaid planning, or eligibility for certain government benefits. Every family’s situation is different, so it’s wise to speak with an attorney or tax professional before signing any deed.
2. Updating Ownership After Marriage or Divorce
Another common reason for using a quit claim deed is to update property ownership following a major life event.
After getting married, many couples decide they want both spouses listed as owners of their home. A quit claim deed can be used to add a spouse to the property’s title.
Similarly, during a divorce, one spouse may receive the family home as part of the property settlement. If that happens, the other spouse will often sign a quit claim deed transferring their ownership interest to the spouse keeping the property.
It’s important to remember that removing someone’s name from the property’s title is not the same as removing them from the mortgage. If both spouses are listed on the mortgage loan, the lender must separately approve any changes to the loan obligation. A quit claim deed only changes ownership of the real estate itself.
3. Transferring Property to a Trust or LLC
Quit claim deeds are also frequently used as part of estate planning and business planning.
If you’ve created a revocable living trust, signing the trust documents is only part of the process. Your real estate usually needs to be transferred into the name of the trust in order for the trust to control that property. This step is commonly referred to as “funding the trust.”
Without transferring the property into the trust, one of the primary benefits of having a revocable living trust, such as helping avoid probate for that property, may not be fully achieved.
Business owners also use quit claim deeds to transfer real estate into a limited liability company (LLC) when appropriate. This may help separate business assets from personal assets, although there can be legal, lending, and tax considerations that should be reviewed before making the transfer.
Make Sure the Deed Is Prepared Correctly
Although a quit claim deed is relatively short compared to many legal documents, it still needs to be prepared accurately.
An error in the legal description, the names of the parties, the execution requirements, or the recording process can create unnecessary problems or delays later. Once the deed is signed, it should generally be recorded with the appropriate county so the public records reflect the change in ownership.
If you’re considering transferring real estate, it’s worth making sure the deed is prepared correctly and that the transfer aligns with your overall legal and estate planning goals.
If you need assistance preparing or recording a quit claim deed, our office is here to help.
Visit us online at www.dallawfirm.com or check out our YouTube channel for more discussions about estate planning, probate, and real estate at https://www.youtube.com/@dallawfirm.
Contact us:
19803 1st Avenue S.
Suite 200
Normandy Park, WA 98148T (206) 408-8158
F (206) 374-2810
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