What Is A Quitclaim Deed, And When Is It Used?

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What is a quitclaim deed? Definition and overview

A quitclaim deed is a legal document in which a homeowner, called the grantor, transfers their interest in a property to a grantee (the recipient). There is no money exchanged and there are no legal clauses to protect the parties involved — the quitclaim deed conveys all the grantor’s interest in the property without stating the nature of, and with no warranties of, their interest or rights in it.

In more simple terms, a quitclaim deed releases ownership rights without the need for a home sale. But it doesn’t make any assurance that the grantor actually owns the property. This means that if any issues arise down the road, the grantee may have limited legal recourse.

While less formal than other types of deeds, quitclaim deeds must adhere to certain protocols. The deed document itself must include the names of the grantor and grantee, a description of the property and when the property is to be transferred. It must be signed by both parties and notarized before being filed at a local county clerk’s office. If more than one person owns the property, all of them must sign the deed. In some states, a witness may be required, and if the grantor is married, the spouse may also need to sign.

When is a quitclaim deed used?

These deeds are most often used for transferring property between family members, when there is no money changing hands. They may also be used to add or remove a person to the title or to cure a simple defect on the title, such as a mistake in an address or a misspelled name. It often comes into play in scenarios like marriage or divorce, or in cases of bequests or gifts.

Quitclaims are also used when it is unclear who in the chain of title may have an interest due to an inheritance — say, the decedent’s brother’s wife’s cousin — or a change in marital status, like the children of a divorcing couple.

What to consider before using one

The rules for using quitclaim deeds vary from state to state, and real estate ownership is often complex. Here are a few things to think about before deciding on one:

• While forms are widely available online for free, it’s best to hire a real estate attorney, who can guide you through the process and help prepare the document. A small mistake or an omission can be costly down the road.

• You may also want to consult an accountant about the potential tax implications. Depending on the property’s value and your state’s rules, the property may trigger a gift tax, or a capital gains tax if the grantee ever decides to sell.

• Also, note that a quitclaim deed does not affect ownership of the mortgage on the property, if there is one. The grantor is still responsible for making payments unless the mortgage is legally transferred to the grantee.

• A quitclaim deed may also affect the grantor’s will, if one exists. Filing a quitclaim deed means relinquishing your ownership of the property, and you can’t bequeath what you don’t own — making sure the will is updated can avoid questions or misunderstandings later.

Quitclaim deed vs. warranty deed

Quitclaim deeds aren’t your only option to transfer ownership of a property — warranty deeds are another commonly used method. The key difference between quitclaim deeds and warranty deeds is the extent to which they safeguard the grantee/recipient’s interests.

Warranty deed

A warranty deed provides a higher level of protection for the recipient, and is therefore typically used in sale transactions between unrelated parties. It guarantees that the grantor owns the property and has the legal right to sell it — if the grantor of a warranty deed misrepresents the title or their ownership, the grantee can sue them.

Quitclaim deed

A quitclaim deed, however, does not guarantee the seller’s ownership or clear title. Instead, the grantor is simply saying that he or she is giving over ownership of the property to the grantee. That’s why this option works better for non-sale transfers between trusted family members, when there is no question about ownership.

FAQs

• What are the disadvantages of a quitclaim deed?
  

  The biggest downside of a quitclaim deed is that it doesn’t provide protection for the recipient — there is no guarantee that the grantor had clear title and legal ownership. In typical real estate sales, where the parties don’t know each other and there is money changing hands, a warranty deed is typically used instead.

• Does a quitclaim deed override a will?
  

  Typically, yes. Assuming the grantor properly executed and filed the quitclaim deed while they were still alive, they would no longer own the property at the time of their death, and therefore they could not bequeath it in a will.