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 protection for the new owner with the Warranty Deed providing better protection, but many people opt to use the Quit Claim Deed to transfer property, particularly if the transfer occurs between family members.
Even with a familial connection, quit claim deeds raise many concerns and, when not executed properly, can lead to serious repercussions over the short- and long-term.
Cautions Regarding Quit Claim Deeds
Quit claim deeds do not require the property to undergo a title review or attorney review, which means there is no third-party verification that the title is free and clear of liens or that the one transferring the property title has the right to do so or if there will be tax implications for either party.
Failing to have a real estate attorney review the entire transfer process can have many different consequences for both the grantee and the grantor, 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.
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 simple solution 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 insights as to how the transfer might affect your tax situation and other aspects of your life.