If you are interested in creating a trust to manage your real property and other assets, at some point you will need to transfer your real estate into said trust. This involves recording a deed with the appropriate local authority. If your property is not retitled and transferred correctly, you may not be able to manage or sell the property. In addition, if you pass away or become incapacitated without properly retitling your property, the property may have to pass through the probate process (avoiding the probate process is one of the key benefits of creating a trust).
For those individuals in the process of transferring their property into a trust, they may wonder what type of deed they should be using. There are several different types of deeds you can use: a General Warranty Deed, a Specialty Warranty Deed, or a Quitclaim Deed. Read on for a closer look at these three deeds and which one you may want to use to transfer the ownership of your property.
General Warranty Deed
With a general warranty deed, the person creating the trust and transferring property (the transferor) can assure the beneficiary of the trust (the transferee) that the property is free from encumbrances like a mortgage or a lien. They’re also ensuring that the title is free from any defects. With a general warranty deed, the transferor is promising that if any mistakes arise concerning the title, the transferor will be liable to the transferee.
General warranty deeds are frequently used for transferring property into a trust. It is common for transferees to require a general warranty deed so they can avoid any risks related to the transfer of property. Many insurers dealing with title insurance policies will also request that real property be transferred via a general warranty deed for the same reasons.
Special Warranty Deeds
A special warranty deed is similar to a general warranty deed in that the transferor is making certain promises to the transferee about liens, encumbrances, or title defects. However, with a special warranty deed, the transferor is not guaranteeing that there were no title defects before the transferor took control of the property. In short, the special warranty deed does provide the transferee some assurances, but it is not as protective as a general warranty deed, leaving the potential for future issues with the title insurance policy should the insurer find any defects prior to the transferor’s ownership.
With a quitclaim deed, a property owner is signing his or her rights over to a transferee. In other words, the property owner is in effect saying, “Whatever I own regarding the property is now transferred to ___.” However, unlike the general warranty deed or the special warranty deed, the property owner is not making any promises or warranties that the property is issue-free or that the title is defect-free. Despite these risks, quitclaim deeds are still commonly used to transfer real property into a trust.
Have Additional Questions? Contact Brian M. Douglas & Associates
To figure out which deed you should use to transfer your real property into a trust, you should consider whether the title may have any defects and/or if you are planning to hold or manage the property in trust for a long time. At Brian M. Douglas & Associates, we can walk you through all of your options and help you choose the best one for you and your loved ones. If you have additional questions or would like to schedule a consultation, please reach out to us at (770) 933-9009 or via our online contact page.