When is a quitclaim a good way to transfer a whole or partial interest in a home? In a simple transaction among familiar parties. Especially where no money changes hands. No wonder quitclaim deeds are often used between spouses.
Here, we take a look at a variety of ways quitclaims can convey property between partners in marriage.
Just Married? Ready to Switch From Sole Owner to Co-Owner?
If you’re a sole homeowner who’s getting married, you may decide to shift the home into joint ownership. The quitclaim can grant the home from yourself to both of you. On the deed, you’re the grantor. The grantees are two named people: you and your spouse. In effect, you’ll be adding your spouse to the deed.
What’s notable about using a quitclaim for this transfer? Quitclaims don’t forge any new promises that your title is free and clear. You’re making no promises to remedy any title defects.
People understandably want warranty deeds in regular real estate deals. They need appraisals and inspections, title searches and insurance policies. With the quitclaim deed, you are simply making a transfer of whatever property interest you own, without proving anything more.
What Should the Quitclaim Deed Say?
The deed needs vesting language. Most couples vest property jointly as tenancies by the entirety (where allowed by law) or joint tenancies with right of survivorship. There are also states where homes owned by couples are vested as community property.
Identifying relationships has as much legal significance as all other language on the deed. Review the county’s website to understand the expectations. Let’s take an example.
Deed transfers in California generally require a Preliminary Change of Ownership Report (PCOR). Requirements for spouses can differ from general rules. For example, a property transfer in Santa Barbara County needs no PROR if the last names on the quitclaim are the same, or the deed identifies them as spouses. Similarly, when the Santa Barbara County homeowner is clarifying a name (which frequently happens after marriage), no PCOR is needed.
☛ Do you have a new last name? Here’s how to change your house deed.
As you fill out the deed, check the legal property description against your existing deed, then sign the new deed with a notary, with witnessing as required in your home’s state and county. Have the deed recorded by the county recorder of deeds. Once your quitclaim is part of the county records, future title searches for your home will show your new joint ownership under your legal name(s).
Who Needs to Know About a Transfer Between Spouses?
A few entities need to hear from you before the deed changes.
- The mortgage company needs to know. Call the mortgage company before the transfer! Avert a possible triggering of the acceleration clause. Even though the Garn-St. Germain Depository Institutions Act prevents a due-on-sale clause from affecting property given to a spouse, good communication prevents unintended mistakes.
- The title insurer needs to know. Be sure your title insurance can be kept for the new deed. Check your owner’s title policy to and find out how continuation of insurance is handled depending on the deed used. A call to the company can spare some policy holders the pain of learning they have accidentally voided their title insurance!
- Now, what about taxes? Check your local rules to know if the deed transfer will trigger transfer taxes, or if spousal transfers are exempt. As for federal and state taxes, when one spouse transfers an asset to the other for no money, is there a taxable sale? No, but there can be other estate planning ramifications in the long term that affect taxes, so it’s important to sit down with your tax expert and go over them.
As you can see, a well-planned quitclaim requires communication as well as knowledge. Even when you’re shifting a real estate interest to a spouse or other family member, consulting with an experienced local attorney, as well as your tax professional, is recommended. Whenever you transfer real estate, you’ll want to think through the impacts on credit, debt, and estate planning.
What Role Does Divorce Court Play in the Quitclaim?
A divorce decree might award the home to one of the ex-spouses, but that does not transfer ownership. You still need a deed. A quitclaim deed is a basic vehicle for transferring the title from one divorcing spouse to the other.
The court order or settlement agreement may include instructions for the division of assets, including the granting of a deed. The transferor will sign the deed with a notary public. Whether the recipient must also sign is a matter of state law, but the grantee must accept the delivered deed for a valid conveyance.
If the spouse who is supposed to give up the home defies the court’s instructions about the transfer and acceptance of a quitclaim deed, the defiant party can be held in contempt of court. A divorce attorney might then seek a court-ordered quitclaim or deed transfer in lieu of the quitclaim.
After Divorce: Same Mortgage, New Mortgage – Or Neither?
Imagine that Jane has quitclaimed a community or joint property home to Colin, who will live there after their split. The quitclaim has been officially delivered and accepted. Colin signed it in front of the notary. Jane takes it to the county recorder’s office. When the quitclaim is recorded, Jane has no further rights in the house. It has become Colin’s sole property.
So far, so good. But Jane’s still on the mortgage. Lenders do not, as a rule, release anyone from mortgage obligations. And they will expect any party who’s still on the mortgage to pay the debt — divorced or not. If Colin runs into income troubles and defaults on the mortgage in the future, Jane will be asked to pay.
For obvious reasons, it’s best to be released from the original loan before you sign a deed over to any other person. This involves working closely with your lawyer on the divorce terms. If you have already transferred your ownership interest (but not your mortgage obligation), consult with your lawyer to find out what you can do. Your attorney can spot issues affecting your legal situation during or after your divorce. Legal advice can only be obtained through your attorney-client relationship.
Before transferring the house, the spouses should find out if the mortgage permits an assumption of debt. Some loans — particularly government-backed mortgages — are assumable. If the mortgage is assumable, then Colin needs to show a certain level of income to be approved for the assumption of debt. This will allow the mortgage to continue, under the same interest rate and terms, with no need for refinancing. The only thing different about the mortgage? It’s now in Colin’s name only.
But an assumption of debt happens infrequently. Usually, the ex-spouse who keeps the home must qualify for refinancing alone, and have a new mortgage created. The divorce decree might set a reasonable time frame for Colin’s refinancing and for releasing Jane from the mortgage debt.
If keeping the home in the name of one spouse is unworkable, the home may be sold and the proceeds divided according to the settlement agreement.
Do Spouses Need a Deed Preparer?
Spouses can create their own deeds. Your lawyer or you can prepare your deed; anyone else who is not an attorney may not. Where a quitclaim deed form asks for a preparer’s (scrivener’s) name, the line can be filled in with your name — the name of the owner who’s transferring the property interest.
☛ See more about quitclaims here, including up-to-date deed forms.
A deed must:
- Follow state and local requirements. Example: Florida requires two witnesses to the notarization.
- Be specific and unambiguous. Example: Identify the parties as spouses and include the prior name a.k.a. married name.
- Be accurate. Example: Double check your new deed against the last one, and be sure there are no mistakes in the real estate legal description.
- Comply with the local procedures. Example: Pay any fees or documentary stamps on the deed as instructed by your county.
Sometimes, mistakes happen. But with deeds, small mistakes can cause big nuisances. Deed errors can obstruct future sales, conveyances, inheritances, or financing. Handle the process with care, and your transfer will meet today’s goals — and tomorrow’s.
Photo credits: J. Carter, via Pexels, and Andrew Neel, via Unsplash.