P17 – How to Prepare a Quit Claim Deed
0:01
Hi, everybody.
0:02
This is John Jay Singleton, and I wanted to do record this instruction as a, let’s say a second part to the video I did on Equity Stripping, where we recorded a trustee or mortgage with a promissory Note to encumber equity in real estate.
0:20
And I’m talking about, um, a home where someone lives, or it could be a rental property.
0:25
So I just want to go over a couple of issues here that that deal with actually conveying the title and not just putting a lien on it.
0:31
When you convey the title.
0:33
Typically, if you’re the homeowner and you want to do some estate planning, like, you want to protect the equity, you want to take something out of your name and this is a sure way to do it. You want to do it quickly, indeed.
0:46
A quitclaim D, that means you’re quitting the claim.
0:49
Q U I T?
0:50
OK, and it’s ideal to do.
0:52
If you can do it before, there’s a claim against the property, OK, or a claim against your name, that would be against the property, if you were the recorded owner of record at that time.
1:03
So, so a quick claim deed is going to going to remove your ownership interests and conveyed over to another party and I recommend that you not conveyed over to a friend or a spouse or something because that really doesn’t protect you.
1:16
You want it conveyed over to something that only does one thing, hold title to your property.
1:21
The ideal structure is a registered limited liability company. You can do an unregistered one. I’ll explain about that in a minute.
1:30
Um, the reason being, as a limited liability company, is very easy to recognize. It’s it’s very strong, very stable.
1:37
No one’s going to challenge its existence, even if your charter has been dissolved or revoked.
1:41
No one’s going to try and pick apart your structure, because the articles are already accepted by the state.
1:48
So there’s nothing really to, to question about the structure of the ownership. It’s just establish, It’s very simple.
1:55
Packet statutory, It’s very simple.
1:57
So if I were to use a trust, someone could pull the trust documents and subpoena them, criticize the trust, and say that it’s not really no valid or whatever it’s subject to being, uh, attack, let’s say.
2:14
And if I really like the trust, for some reason, if I want to use a trust, I would just simply make the trust the owner of the LLC, then I would transfer the property over to the LLC name.
2:27
So, the thing to keep in mind is if this is a rental property somewhere, where you are, not, you haven’t told the bank that you’re going to live there primarily.
2:36
And you’ve got, you still got your financing, OK?
2:38
If that’s the case, then it’s not going to have Homestead exemption, and in many states, you won’t have a homestead exemption or a big break in your property taxes either either way.
2:49
But just keep this in mind.
2:50
If it’s truly a rental property, and you got financing as a rental property, not by tricking the bank and saying I’m going to live there, but you’re actually just renting it out, or you live there for Awhile. Meant, decided to rent it out and didn’t change your mortgage terms.
3:05
Just make sure it truly is rental.
3:09
And it’s not considered your homestead or principal place of abode.
3:13
As they say, you can simply change the title. Quitclaim deed it over, no considerations, it won’t matter. It doesn’t even matter if there’s a judgement lien against the title. Or there’s even a public record of there being an IRS Federal Income Tax Lien, or even a state income tax name, or state tax of any kind.
3:29
You can convey the title while there’s a lien file.
3:32
The benefit, though, of conveying it before a lien is public record, is that you avoid the lease, the property value is not encumbered by the lien, so you want to do this as early as possible, but just realize that you can’t do it, let’s say you’re you’re getting sued by two creditors and Last week the first creditor recorded a judgement against you, and you are the owner of your house, and so that lien encumbers the equity whatever equity is available at whatever time you go to sell the property.
4:03
But you still have another case out there that may result in a judgement. You can convey the title to an LLC, and prevent that second lien holder from recording a judgement against the title or against your interest in the property. If you conveyed it over, you can do that. You just want to avoid that firstly because it’s already been recorded before you conveyed the title.
4:21
And no one’s going to say it’s a fraudulent conveyance because the lien still attaches.
4:25
There is no claim for fraud, because no one’s been defrauded.
4:29
Even if that was your intent, is that the public records or are very clear on that, if you and the case law is very clear. If you, if you can bait title to real estate that’s already encumbered, bylines, those lean still attached.
4:40
So what we’re really concerned about, and this is what one of the things I look at when I’m gonna do this for somebody is, I will convey the title. If it’s necessary.
4:50
two, and usually it is, if there’s an IRS like issue, OK.
4:54
Iris Lean situation.
4:58
Just putting another mortgage on the property won’t protect against the IRS interests, because the IRS lien has a priority over a mortgage.
5:08
and secondly, and a third leen and so forth, ironically, though, an IRS lane does not have priority over state tax liens, So that’s interesting, something to look into if you want to. I’m not going to cover that right here.
5:19
So, um, first consideration is am I going to lose homestead exemption property tax? Usually it’s around 25%.
5:26
Sometimes it’s worth it to lose your exemption, because of the money involved, or the timing, Maybe you’re going to sell it a couple of years, so no, these are things to consider.
5:38
Sometimes you don’t need to convey the title. Let’s say, for example, you just bought the house, let’s say eight years ago, and you have no plans, you’re very happy there, and people come and tsui and put a lien on the property.
5:50
They’re not going to foreclosing the property.
5:51
These are unsecured lanes It’s not mortgage lanes, You gotta mortgage or happily paying the mortgage, OK, you’re getting doing that just fine. There’s a lien from the IRS that comes along.
6:00
And all that, it does slaps against a property, right. But so what, because your objective is you want to keep that house for, let’s say, 50 years.
6:09
What do you care about a 20 year lane? That’s nothing to you. That’s not even a lien, it doesn’t affect you at all.
6:15
So don’t be so concerned about a lien on the property, if you’re not going to dispose of the property to a third party. If you’re not going to sell it, then it doesn’t really matter.
6:26
But, if you just have to, or if you want to prevent lanes in the future or prevent the need to defend against a claim that you might, you know, if you have a personal liability of some kind of like debt or something or guarantee of some kind, You can convey the title for estate planning purposes.
6:40
And in many jurisdictions, you can, if there’s a, if there’s a property tax benefit for holding the title in your name, You can still get that benefit if you can pay the property to an LLC provided that the beneficial interests remain identical.
7:00
So, like if John and Mary Smith, where the property owners and they conveyed the property to, let’s say, 123 M Street LLC.
7:08
OK, I gave the LLC the name of the property address, just because that’s simple.
7:13
As long as John and Mary Smith are the owners of the LLC of record, when we register the LLC and their names came up, if you go search on the articles, you’ll see John and Mary Smith as the owners. The members will then, the beneficial interests are exactly the same. If they added somebody to the membership, well, then that would change, and then it wouldn’t qualify, and you might have problems.
7:34
But, if John and Mary Smith remain a beneficial owners only, just like they were only owners at the time, they held the title, then you should not have any problem with property tax exemptions under the Homestead Statute. So, you have to look that up.
7:48
I’m going to show you right now real quick on them.
7:51
On the homestead thing, let’s switch over.
7:54
I’m going to, I’m going to switch the view here, too.
8:00
This is in California, I’m going to show you here. California has a quick claim Deed form.
8:05
But here’s what it looks like.
8:06
So if I do.
8:11
If I do a change of ownership in California, this is an example of the form. How would you see this change of ownership statement?
8:20
Basically, you would just tell the County Recorder’s office.
8:25
That all these conditions are present.
8:30
None of these apply, see this, A through whatever L, None of these conditions apply.
8:35
I went and I checked all these boxes, I did this for somebody.
8:38
Then Line M, OK, we’re telling the county, Hey, this is a transfer between parties in which proportional interests of the transfer.
8:46
and transfer E in each.
8:50
And every parcel being transferred Remain exactly the same, OK, Remain exactly the same, and I’ll say this again Remain exactly the same as long as that, or they remain exactly the same.
9:05
Um, you’re going to have an exemption from You’re going to, you should be able to retain your homestead exemption, and you’ll have an exemption from another type of tax, which is A It’s a tax that’s assessed against a transaction, right?
9:19
So, if I convey the property to a third party other than for estate planning purposes, I may have to pay, especially in California and Florida, a document tere stamp tax.
9:31
This is a percent against the value of the property.
9:33
It’s a one-time tax for conveying the title, as if I sold it, But if I convey the title for estate planning purposes, and I retain, the beneficial interests, were I used to be the owner, then, this item here, M applies, and I get a 100% exemption from the documentary stamp tax. So, you’ll have to check with your state as to whether or not there’s, you know, such a, such a document I think there is for every state. I know in Florida, California, there, there are, but you’ll see here on NLP. Now this stuff applies.
10:04
And if you go through here, it’s going to ask me to explain, right? So I’m going to restate it again.
10:10
But basically I took and which is the true condition of this conveyance.
10:15
And I went here and I explained it. It’s a conveyance solely for estate planning purposes, right?
10:20
Where the beneficial interests remain the same, All right.
10:25
And then the rest of the stuff, you know, self explanatory.
10:29
You can fill out part three, I don’t really care about that.
10:33
Um, again, you know, part three doesn’t really apply, because if it’s for estate planning purposes, you’re not selling it to yourself, right?
10:40
So, now, this applies.
10:41
That’s why you’re getting the exemption because none of this applies, et cetera. And then you come down here, and you make your certification.
10:49
And there’s some instruction now.
10:53
Yeah, I mean, instruction is not that you don’t even need it, but, notice, here.
11:00
I’m going to try to find what was it, OK, What I had to do, in this case.
11:05
This is for a county in California, Now, if you want to search on the internet, you can look for this.
11:10
Number four, this phrase here, for California, County Marine, if you want, or county or whatever, whatever county you’re in, you’ll find this.
11:20
It’s usually a PDF file in your state, too. You can find something similar to this.
11:25
You can also ask your county clerk for this type of document asked for the waiver or fee waiver or exemption form for transferring or conveying real estate titles, so that you don’t have to pay the stamp tax.
11:40
All right, Now, this is just an addendum to your quitclaim deed and I haven’t covered the quitclaim deed yet. I’m going to, I’m going to switch over here to the actual quitclaim deed that I’ve used for California.
11:54
See?
11:57
Yes.
12:02
All right.
12:03
Let’s go into another one.
12:10
Now, I’m not saying you have to use this.
12:16
But this is an example of the one that you would use for California.
12:21
So here’s the California quitclaim deed.
12:25
And you can see here that it wants your parcel number. It’s nice to have that.
12:30
You list the current title holder and then the new owner, which is going to be your LLC and its address.
12:35
It can be any anything the name of the city and the name of the county. Now, notice up here.
12:43
There is no tax, right? Because the exemption R and T code, usually these guys have a code, there’s all kinds of codes. I had to look this up.
12:51
I don’t remember where it was and it’s going to be different for every county state, for every state I should say.
12:56
But in this case, there was a tax exemption code, 1125 That specifies conveyance is done for estate planning purposes. So, there’s no tax. And the explanation is, I just copy this from the statute or the code.
13:11
The grand tours and grantees are comprised at the same parties, and their proportional interests remain the same, or, yeah, remain the same immediately following the transfer.
13:21
OK, I didn’t put on that, didn’t appear on the second line, but that’s OK.
13:28
So that’s the idea, and you’ll just have it notarized. You can actually just do this document here. But let me go over to the one. I have the generic one that I want to share with you, because you can get this anywhere, and I just, you can use it for California.
13:39
I mean, maybe your State might want to use it. Have you use its form? But it doesn’t matter.
13:46
I’ve never had a problem. So let me go back over here.
13:51
OK.
13:56
So here’s the format I wanted to share with you.
13:59
Passed all this, all right.
14:01
So we’re back to the standard, generic Quitclaim form and we covered this, the considerations on the estate planning purposes and the due on sale.
14:12
Now, let’s cover the due on sale to do on sale has to do with when you can pay title.
14:17
That it is viewed by the lender possibly as a sale, whether or not it’s a third party.
14:23
But you have to tell the bank the lender are all the lenders that this conveyances done again for estate planning purposes and the title holder retains the same exact beneficial interests as before the conveyance.
14:36
And that would have avoided due on sale issue.
14:39
All right.
14:40
I’ll pull up that letter here in just a second.
14:42
I’m gonna go with that language with you but let’s go over here and look at the quitclaim deed.
14:47
Here, you would just, it’s very simple, just self explanatory.
14:51
Just put in the name and address of the person preparing this, it could be the people that own the property.
14:57
Same thing here, when it’s all done being recorded, send it to the same people, if you want.
15:02
I mean, you can change this, of course, Very simple.
15:05
Make sure you have the right state.
15:08
You can do a global search and replace for yours.
15:11
Your, your state and then your county. Make sure you remove the brackets to don’t leave the brackets.
15:17
So, do a global search and replace explain how the consideration is being made.
15:22
It’s for zero dollars in the in the example of estate planning, right?
15:27
So you have to reword this a little bit, but, basically, it’s from the current owners, which may be a married couple, or it could be a single woman, a single man doesn’t matter.
15:36
Residing at whatever address in whatever county, in whatever state.
15:42
But, that information in there, will be very careful, read through this, slowly, Take your time.
15:47
These people, the current titleholders, or the grand tour’s, and they do, or he does singular or plural, so be careful about that.
15:57
Quitclaim, two, and the name of the LLC, in this case, the LLC is going to be, called a 123 …, LLC. I do that a lot, means sometimes you don’t have that. You can name it whatever you want.
16:08
And by the way, the LLC can be registered in any state, or even unregistered, that’s what goes here, the name of the new owner.
16:16
It’s a limited liability company. You want to say what kind of state. Like if it’s in Nevada, New York, Florida, it doesn’t matter.
16:24
It could be anywhere, the property that you’re conveying title to, it can be situated anywhere as well.
16:33
And your LLC is organized in the state of whatever state it is, right, and that becomes the grantee, that’s the one receiving the title.
16:42
And then all the rights and title and everything transfers over there and then picture county and so forth.
16:48
And then just, you know, look carefully here and make sure all this works is correct or accurate.
16:53
And then, again, here’s John Smith and here’s Mary Smith then this this is called the Jeer At, by the way, OK.
17:02
This is where the notary affixes, his seal, dates it. And here, again, should be the people whose signature is being witnessed.
17:09
So both names, you should have John and Mary Smith here and then they should individually type out their names here and sign here, OK?
17:19
And then put the address.
17:20
Again, this addresses probably be the same as here.
17:23
All right?
17:25
Now over here the County Recorder’s office is going to use this area of the document and affix a seal or stamp a receipt showing that the fee has been paid.
17:37
There shouldn’t be a taxpaying page. If you can’t get around for some reason, it looks like you can’t get around having to pay some documentary stamp tax.
17:46
Probably the language in here is incorrect. Or your addendum is incorrect, or you incorrectly identified the exemption. So just check that out.
17:54
Now, if you just hang up for one second, I’m gonna, I’m gonna grab a document here that some.
18:02
See how this looks here?
18:06
Letter to the bank.
18:11
That explains how you’re just doing this for estate planning purposes. And there’s no need to invoke the due on sale clause.
18:22
I’m not going to make you wait, OK.
18:24
Let’s see here for a second.
18:37
OK, so, here’s an example, a letter you would send to the mortgage lender.
18:45
I mean, I would do this before our, at least get an acknowledgement before I record the conveyance right before I record the quitclaim deed just to make sure that you’re not going to have any wacky responses.
18:58
So, again, just, you know, adjust your address and name the title holder and all this sort of thing.
19:03
Then you’re gonna have an account number with your mortgage. I’m sure you can find that.
19:07
Sometimes you have to send it to the servicer.
19:09
So, just be sure, you know, what address to send us to so, doesn’t get lost.
19:16
Um, so I just kinda generically told you X X X X mortgage company, I would put the data on there.
19:23
I would say this by first class mail, you could do by certified mail, but I think first class mail be just fine.
19:29
If you don’t get a response, and I would do certified mail, and I would call to confirm and see what’s a good address for written communications, OK, And explain your, the borrower.
19:39
You’re the mortgage or for the mortgage dated, and then use the date that shows on shows up on your trust deed or your mortgage.
19:46
And that’s account number, of course, and then I would have a clue include a copy of the first few pages, the mortgage of the trustee, just for reference, Then you’re going to explain what you’re doing.
19:56
I’m conveying this title for state planning purposes and the grantee is going to be a what limited liability company in this state or another state, basically the name of the state, where you register the LLC, or where it’s going to be registered.
20:11
And then, this is the language explaining what you’re doing, OK, And, of course, the Titleholders should sign, and here’s the legal reference, so you guys can look this up, all right, so, this should be a good letter.
20:23
I mean, you could do this without an attorney, but, uh, that’s an example.
20:28
I’m gonna, I’m gonna include this with the, that the video here, so that you’ll have it better.
20:34
That’s as simple as it gets. I’m gonna go back to the deed here real quick.
20:45
Alright, so here’s the deal that we just covered all this. So, we just fill out this, the missing information, go through and have it notarized, and then take it to your County Recorder’s office. You can also mail it.
20:55
I mean, you could do this anywhere in the world.
20:57
As long as you can deliver the document to the County Recorder and have it recorded and pay the fee and the tax should be like 10 bucks.
21:04
That’s not the conveyance tax, though. Hopefully, you’ve got an exemption to that. So, but, yeah, there should be some kind of feel, like 10 bucks, 20 bucks, I don’t think it should be over $100. I mean, I don’t know what your, your cat or accounting state is doing.
21:19
It should be a reasonable amount, so you have to decide, if it’s something worth doing.
21:24
So this is the other side of, I mean, really Equity stripping. You want to take the equity out of your name, in this case.
21:31
You’re actually taking the title of the property or the ownership of the property out of your name, where before we were just taking the equity out of your name using a lien.
21:41
This way, we’re actually deeding over the title using a quit claim deed.
21:47
All right. Well, I hope that clears it up for you.