The end of a marriage is an intricate dance of decisions and changes. One of the most significant pieces of that puzzle is deciding what to do with your shared property.
In the turbulence of divorce, the question of who gets the house can feel overwhelming. That’s where the concept of a quitclaim deed comes into play.
Timing, they say, is everything, and this adage couldn’t ring truer than when considering the signing of a quitclaim deed in the context of divorce.
The “when” of signing a quitclaim deed can have sweeping implications, influencing everything from your financial obligations to your tax liabilities, and even your property rights.
Whether you sign this pivotal document before or after your divorce is finalized can set the course for your financial voyage ahead. It can impact the nature of your ongoing relationship with your ex-spouse and might even sway the balance in your favor when negotiating other aspects of your divorce settlement.
Timing this decision correctly, with the guidance of expert legal advice, can make a substantial difference, turning a complex and potentially fraught process into a smoother and more manageable journey towards your new life chapter.
What is a quitclaim deed?
A quitclaim deed in California is a legal document used to transfer the grantor’s (the person transferring the property) interest in a piece of property to the grantee (the recipient), without any warranties or guarantees of the title’s quality.
It effectively means the grantor is relinquishing, or “quitting,” any rights, interests, or claims they have to the property, hence the term ‘quitclaim’.
While it doesn’t guarantee that the grantor holds valid ownership, it does have the power to transfer whatever ownership rights the grantor does possess, making it a commonly used tool in situations involving transfers between family members or during a divorce.
Imagine it as a kind of written agreement, a ‘promise’ if you will, that deals solely with your ownership stake in a piece of property.
In the world of quitclaim deeds, there’s an element of trust involved. When you sign a quitclaim deed, you’re essentially saying, “I’m transferring any ownership interest I may have in this property to you.”
But here’s the thing: it doesn’t guarantee that you own any interest in the property at all. It merely transfers any interest that you might have.
It’s a bit like giving someone a key to a house. You’re giving them the key (your ownership stake) without making any promises about whether the house (the property) is in good condition, or even whether you have the right to pass the key along in the first place.
This is what sets quitclaim deeds apart from other types of property deeds, which often come with guarantees about the condition of the property or the validity of the title.
But despite its simplicity, the quitclaim deed holds considerable power in the right situations, like transferring property in a divorce.
Who prepares the quitclaim deed form?
In divorce cases, a quitclaim deed is typically prepared by an attorney, a title company, or a real estate professional.
Although the deed itself may seem straightforward, it’s crucial to have it drafted correctly to avoid potential legal complications down the line.
The professional preparing the deed will ensure that it includes all necessary information, meets state-specific requirements, and accurately represents the intentions of the parties involved.
While it’s technically possible to prepare a quitclaim deed yourself, given the legal and financial implications, it’s generally recommended to seek professional assistance to ensure the process is handled accurately and efficiently.
There are several templates available online through your County Clerks website that will allow you to fill out, print and file the deed on your own.
Here is what a quitclaim deed should look like:
Some title companies won’t be able to issue a new title insurance policy unless the quitclaim deed was completed the right way and is considered insurable. When a title to real property is insurable, it means that the title is clear and free of any blemishes. In short, this allows the grantee the take any steps they want in the future to finance or sell the property.
A deed that was drafted on your own without the help of an attorney or an escrow company may be deemed uninsurable. If this is the case, the original grantor would need to sign a new deed to make it enforceable. This poses some unique challenges in a divorce situation as one could imagine.
In some instances, the grantor can sign an Uninsured Deed Affidavit to verify that they did truly transferred their interest in the property. Only at this point would the retaining spouse be able to obtain a new, clean title insurance policy to protect against the clouded title. Again, in a divorce setting going back to an ex-spouse to resign a deed affidavit isn’t always as easy as one would hope.
For this reason alone, it is imperative that deeds are prepared properly, signed properly, and recorded properly.
How is a quitclaim deed used in divorce?
A quitclaim deed can be utilized in several ways during a California divorce:
Transferring Property to One Spouse
The most common use of a quitclaim deed in divorce is to transfer the ownership of the marital home from one spouse to the other. This could be as part of the divorce settlement agreement where one spouse keeps the home in exchange for a buyout or other considerations.
Equalizing Property Division
If multiple properties are involved, quitclaim deeds can be used to equalize the division of these assets. For instance, one spouse might transfer their interest in a vacation home to the other spouse via a quitclaim deed while retaining full ownership of the marital home.
Removing One Spouse from Mortgage Obligation
If the marital home has a mortgage and one spouse is taking full ownership of the home, a quitclaim deed can be used in conjunction with refinancing the mortgage to remove the other spouse’s liability.
Facilitating a Buyout
If one spouse is buying out the other’s share of the property, a quitclaim deed can be used to effect this transfer once the buyout amount is paid.
Ensuring a Clean Property Title
A quitclaim deed can help ensure a clean title when transferring the property to a third party post-divorce. The spouse who is not part of the sale can use a quitclaim deed to relinquish any potential interest in the property, providing assurance to the buyer.
Satisfying Spousal Support Obligations
In some cases, a quitclaim deed might be used as a tool to satisfy spousal support obligations. The spouse who owes support might transfer property to the recipient spouse instead of making cash payments.
Does a quitclaim deed affect the mortgage?
It is a common misconception that signing a quitclaim deed will accomplish BOTH of the following:
- Remove spouse from the title, AND
- Remove spouse from the mortgage. This is the furthest thing from the truth.
In fact, a quitclaim deed and transfer of ownership have no impact whatsoever to the status of the existing mortgage.
If both spouses’ names are on the mortgage, and one spouse uses a quitclaim deed to transfer their interest in the property to the other, the transferring spouse remains legally obligated on the mortgage.
This can be a significant issue.
Even if the divorce decree states that one spouse must pay the mortgage, if both names are on the mortgage loan, both parties are liable to the lender. If the spouse responsible for the mortgage payments fails to make them, it could negatively affect the credit of both parties.
If you want to remove a spouse’s responsibility for a mortgage during a divorce, refinancing the mortgage is often necessary.
In this case, the spouse who keeps the property would need to qualify for a new loan independently and use that loan to pay off the existing mortgage. It’s important to work with a knowledgeable attorney and possibly a financial advisor to understand and navigate these issues during a divorce.
Can either myself or my ex-spouse refuse to sign a quitclaim deed DURING divorce?
Yes, either spouse can refuse to sign a quitclaim deed during the divorce process, and it’s not uncommon for some couples to wait until after the divorce is finalized before making property transfers.
There’s no legal requirement for a quitclaim deed to be signed at a specific time; the timing often depends on the unique circumstances of the divorce and the agreement between the spouses.
Several reasons might make you or your spouse choose to wait:
The division of property is often a complex part of divorce negotiations. It might not be clear who should receive the house until other aspects of the divorce settlement, like alimony or child support, are agreed upon.
If a mortgage is involved, the spouse who’s keeping the house might need time to refinance the mortgage into their name only.
Depending on your specific situation, there could be tax implications associated with transferring property, and you might choose to delay the transfer until a new tax year.
Children or family considerations
You may choose to delay the transfer of the home to provide stability for children or other family members during the divorce process.
Can either myself or my ex-spouse refuse to sign a quitclaim deed AFTER divorce if it is part of our final agreement?
If a quitclaim deed is specified in your final divorce settlement agreement, neither spouse can simply refuse to sign it.
The divorce settlement agreement is a legally binding document, and both parties are obligated to comply with its terms. If one spouse refuses to sign the quitclaim deed as stipulated in the agreement, they are in violation of a court order, which can lead to legal consequences.
Enforcement of Court Orders
Courts have the power to enforce their orders. If your spouse refuses to sign the quitclaim deed as required by the agreement, you can return to court and ask the judge to enforce the order.
Contempt of Court
If a spouse willfully disobeys a court order, such as not signing a quitclaim deed as specified in the divorce decree, they can be held in contempt of court. This could result in fines, attorney’s fees, or in extreme cases, jail time.
There are also other legal remedies available, such as a court order to sign the deed or even an order that allows the court to sign on behalf of the non-compliant spouse.
Can a quitclaim deed filing be reversed?
Once a quitclaim deed has been signed, delivered, and recorded with the appropriate county recorder’s office, it typically cannot be reversed or “undone” by the grantor (the person who transferred their property interest). This is because a quitclaim deed is a legally binding document that transfers ownership interest in a property from one party to another.
There are, however, certain exceptions where a quitclaim deed might be voided or set aside:
If both parties – the grantor and the grantee – agree to reverse the quitclaim deed, they could sign a new quitclaim deed restoring the property interest back to the original owner.
If it can be proven in court that the quitclaim deed was signed under duress, coercion, fraud, or undue influence, a judge could potentially invalidate the deed.
If the grantor was not mentally competent at the time they signed the quitclaim deed, a court could possibly declare the deed invalid.
How does a quitclaim deed affect property taxes?
There are two potential tax consequences of signing a quitclaim deed in a divorce.
- Transfer taxes (both City transfer taxes, and County transfer taxes)
- Property Tax Assessment, or Property Tax Basis
- Capital Gains Tax via 1099-S
Simply put, tax laws vary from state to state.
In fact, City and County tax laws surrounding transfer taxes will also vary by the specific City & County. In California, there are typically no transfer taxes for the conveyance of real property pursuant to a divorce settlement agreement.
In addition, there is usually no impact to your property tax basis for buying out your spouse’s interest in the home and transferring title to your name as an individual. It’s worth noting that while this transfer doesn’t trigger a reassessment, that’s not to say that your property will NEVER be reassessed in general.
The third tax component of these transfers is a 1099-S that a title company would issue to the Grantor for their ‘gain’ on the sale of their interest.
Below is a copy of what a 1099-S looks like.
As your CPA or tax professional can advise you; while you may receive a 1099-S, this transfer pursuant to a divorce settlement is a non-taxable event. You would still note the 1099-S earnings to the IRS, however, these earnings would then be excluded.
What are my next steps?
Navigating the turbulent waters of divorce is no small feat, and understanding the role of a quitclaim deed in this process is a significant step. As we’ve explored, a quitclaim deed can provide an effective solution to property division concerns but understanding its impact on aspects like your mortgage obligations and property taxes is crucial.
Every situation is unique, and the best solution for you will depend on your individual circumstances. Remember, the road to making an informed decision starts with seeking professional advice.
Don’t navigate this journey alone.
Consult with an experienced attorney or a real estate professional who can guide you through the complexities of quitclaim deeds in the context of divorce, helping you to make the best decisions for your future.
Take control of your divorce journey!
Divorce Mortgage Advisors does not provide tax or legal advice and we always suggest you speak to a professional in either of those areas for guidance specific to your scenario.