By Jennifer Bondy, Esq
Property deeds are used to transfer ownership from one party to another. There are two basic types of property deeds in Florida: a Warranty Deed and a Quit Claim Deed. The two offer different levels of protections, or warranties, to the new owner. A Warranty Deed is typically used in a purchase and sale transactions, however many people opt to use the Quit Claim Deed to transfer property or add someone to the deed to their home.
Even though it may seem like a simple piece a paper, a quit claim deed, especially when not executed properly, can have serious consequences over the short- and long-term.
Cautions Regarding Quit Claim Deeds
Quit claim deeds do not offer any warranties or protections to the new owner (known as a Grantee), which means there is no guarantee that the title is free and clear of liens, the legal description of the property is correct, or that the party attempting to transfer the property title has the legal right to do so.
Even when the Quit Claim deed is filled out correctly, there are several implications of a property transfer that need to be considered, such as:
- Florida’s Homestead Tax Exemption. It is possible to lose or reduce this tax exemption when ownership changes, depending on who qualifies for the exemption, and whether the new owner or additional owner resides in the property.
- Medicaid Eligibility. If you transfer certain assets, namely your primary residence, within five years before applying for Medicaid (known as the look back period), it may cause you to be ineligible for benefits for a period of time.
- Documentary Stamp Taxes. Any property ownership transfer in Florida may be subject to documentary stamp tax, even if the transfer occurs between spouses.
- Potential Liability. When you add someone to the property deed of your home, the home becomes that person’s asset, in addition to being yours. That means that if your new co-owner files bankruptcy or has a judgment filed against them by a creditor, the house is an asset that can be encumbered by their creditors.
- Loss of Title Insurance. When a property is transferred via Quit-claim Deed, it may void the Owner’s Title Insurance Policy.
- Probate. In order to avoid Florida probate the property must be transferred in a certain way. If it is not transferred properly, or if there are any problems with the deed itself, the property will have to go through probate.
- Challenges. If a property transfer has the effect of disinheriting someone or placing undue hardship on the owner’s spouse or dependents, it can be challenged in court. In some cases, constitutional restrictions on the deed can create a title defect.
These are just a few of the possible complications that can arise during a property transfer, even if the transfer is amicable, within a family, and no money changes hands. Although they appear to be a quick fix to a simple property transfer, quit claim deeds can be anything but simple, creating problems where there were none prior.
It is always advisable to consult a real estate attorney or estate planning attorney when real property conveyance is required. These professionals will be able to examine not only the legality of transferring the property, but can provide insight as to the legal implications and how the transfer affects other aspects of your life.