During the estate planning process, real estate properties can be sold, given to family, or put into trusts depending on the situation and goals of the planners. Depending on what course of action needs to be taken, a different deed is required. Here are the four most common real estate deeds you should know about when beginning the estate planning process:
A warranty deed is typically used in residential real estate sales, so seniors may encounter these types of deeds if they’re downsizing and moving to a smaller home. Warranty deeds guarantee the buyer that the seller is, in fact, able to sell the property and that the property does not have any debt encumbrances. The seller is responsible for claims against the property, and warranty deeds usually include language that states the seller is obligated to compensate the buyer for any problems or debts that may arise, which is why obtaining a title insurance policy is a must when buying and selling a house.
Special Warranty Deed
A special warranty deed does not cover the entire history of the house; instead, it only contains guarantees against any problems that may arise from the time the current seller owned the property. Special warranty deeds are mostly used in commercial real estate deals, though there are some where they are appropriate for residential real estate transactions.
The most common real estate deed for estate planning is the quit-claim deed, which is used to easily transfer properties to family members or trusts. Unlike a warranty deed, a quit-claim deed provides no guarantee, and there is usually little to no money involved in the “sale” of the property. The quit-claim deed transfers the owner’s interest in the property to the grantee without stating what the actual interest is, which is why this deed does not provide a guarantee.
Grant deeds are also sometimes used for residential sales and are very similar to a warranty deed. The grant deed guarantees that the seller owns and can sell the property, and that the property is being sold for a price that is agreed upon by both parties. However, like a quit-claim deed, a grant deed offers the buyer no protection from any problems arising from the title of the property.
If you have any further questions about the role of deeds in real estate transactions or estate planning, or if you’d like to have your current real estate deeds reviewed to make sure they meet your estate planning goals, please set up an appointment at our Encino estate planning law office by calling (818) 905-6088.