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A familiar refrain goes "you get what you pay for." For people unwilling to hire an attorney for estate planning matters, the results can be disastrous, expensive and essentially irreversible. The following is an example of such.
Jenkins v. Teegarden, (2014) ___ CA4th ___
The defendant was the caregiver and friend of the decedent, a widower. In 2007, the decedent executed a quitclaim deed which transferred a home to the defendant. The defendant herself prepared the quitclaim deed by using a preprinted form she had purchased from Staples. Although she failed to properly identify the grantor, she used the decedent's individual name instead of his name as trustee of his revocable trust (the actual owner of the property).
In her deposition, the defendant stated that the "only consideration that she gave for the quitclaim consisted of one dollar and her friendship." Yet during the trial, she testified that "pursuant to an oral agreement with Perry, she also gave (1) $100,000,
which went into improvements to the house, (2) her $45,000 equity in a
different house, and (3) her services (Author's comment: obviously changing your story is not the best maneuver).
The most relevant fact of the case was that the defendant was the drafter of the quitclaim deed. This indisputably created a conflict of interest. As the drafter, she had a direct interest in seeing that the decedent sign the quitclaim deed because she would benefit from it. Similarly, a sure-fire method for professional discipline is for an attorney to write themselves into a trust or will they draft for a client under normal circumstances (see the story of former California attorney James D. Gunderson and Leisure World).
Had the defendant acted prudently, she would have told the decedent to retain an attorney to facilitate the transfer. By engaging in do-it-yourself lawyering, the defendant exposed herself to litigation at the trial and appellate court level (and maybe the CA Supreme Court). This case surely cost her tens of thousands of dollars in attorney fees and countless hours litigating it.
A prudent attorney would have spotted the issues associated with the case and told the defendant that a "certificate of independent review" is advisable for this type of transfer. If such was obtained, the conveyance to the defendant from the decedent might have been valid. In turn, years of litigation might have been avoided. Unfortunately, the defendant opted for the inexpensive and expedient route, and suffered the calamitous consequences.
To transfer real property in California, a deed must be executed by the "seller" and be given to the "buyer" for recording.
The introductory language for deeds is "FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged." This phrase encapsulates that the seller and buyer have entered into a bilateral agreement, seller conveys the realty to the buyer in exchange for the buyer's money.
The term "consideration" has a legal meaning to it. The California Civil Code defines consideration as
"Any benefit conferred, or agreed to be conferred, upon the promisor, by
any other person, to which the promisor is not lawfully entitled, or any
prejudice suffered, or agreed to be suffered, by such person, other
than such as he is at the time of consent lawfully bound to suffer, as
an inducement to the promisor, is a good consideration for a promise."
In normal language, consideration basically means something of value, e.g. money, property, etc.
An issue then presumably arises if a person receives real property as a gift. In such case, the "buyer" does not exchange any consideration for the realty. Instead, they receive something for nothing. The buyer then becomes concerned that the inclusion of the language "FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged" on the deed makes it void or voidable. However, a California case held that such language did not have to be listed on the deed. Goad v Moulton (1885) 67 C 536. So in the case of a gift deed, the above language need not be included on the deed.
While this might not seem like a major issue, I think it is emblematic of the propensity of many people to handle document drafting themselves instead of retaining an attorney. I have seen this question raised a few times. Over the years, I have received requests to provide a copy of (1) a small estate affidavit, (2) a grant deed template and (3) a Heggstad petition to various people.
I usually cringe when I hear these requests because I tell them what purpose does the document serve if they cannot understand it. If a person gives you the keys to a stick shift car (I proudly drive one) and you can only drive automatic, what benefit does the car provide you? The same applies to a blank grant deed as a non-attorney typically has no idea what language is necessary and what each component represents. A person is free to act as their own attorney, they should just be aware of the intended (and unintended) consequences.
The process for transferring legal title to real property in California is actually quite simple.
It merely requires the filing of two documents, a deed and a preliminary change in ownership (“PCOR”), with the appropriate County Recorder’s and County Assessor’s Office.
The deed needs to be recorded in the county in which the property sits. For instance, if the property is in Davis, CA the deed would need to be filed with the Yolo County Recorder’s Office, or if the property was located in Scotts Valley, CA the deed would need to be filed with the Santa Cruz County Recorder’s Office. My personal experience with the Santa Cruz County Recorder’s Office has been quite pleasant. The clerks there have been very helpful. As for the PCOR, this is filed simultaneously with the deed. The County Recorder will forward the PCOR to the County Assessor.
The following information must be included on the deed:
1. The name of the grantor (the seller essentially). CC §1096,
2. The name of grantee (the buyer essentially). CC § 685.
3. A legal description of the property.
4. The signature of the grantor. CC § 1091.
5. The name of the person requesting recordation. Govt C §27361.6.
6. The name and address to which further tax statements may be mailed. Govt C §27321.5.
7. The amount of the documentary transfer tax due. Rev & T C §11932.
Thought not statutorily required, the assessor’s parcel number should be included on the deed nonetheless. In light of these requirements, deeds are typically only a few pages long.
The other part of the equation is the completion of a preliminary change in ownership (“PCOR”).
California law says that a PCOR must be filed whenever there is a change in ownership of real property. Rev & T C §480(a). The reason for the PCOR is to inform the county assessor whether a change of ownership has occurred that will trigger property tax reassessment (See Prop 13). The PCOR is a 2 page form that asks questions pertaining to the identity of the new owners, the location of the property, the sale cost, etc. Each county may have its own PCOR form but the general format is modeled after a template drafted by the State Board of Equalization.
A key distinction between these two documents is the fact that a deed is subject to public inspection whereas the PCOR is not. For example, if I wanted to know who owned the home across the street from me, I could ask my real estate agent to pull the title for that home. However, I could not ask them to obtain the filed PCOR for that property.
For illustrative purposes, assume that Samantha Seller sold her Malibu dream home to Brooke Buyer for $100, 000. In order for Samantha to transfer ownership of the home to Brooke she would need to execute a deed, and in turn, Brooke would need to file a PCOR with the Los Angeles County Recorder’s Office so as to inform them that the house should be re-assessed for property tax purposes.
Whenever a home is transferred whether by inheritance, probate sale, trustee sale, short sale, eminent domain, etc. a deed is involved.
A deed is defined as a “written instrument by which land is conveyed.” Black's Law Dictionary 8th ed. (West Group, 2004).
For example, if buyer purchases Green Acre from seller, buyer will transfer ownership of Green Acre to seller by giving seller a deed to Green Acre. In the context of a modern real estate transaction, the escrow/title officer at closing will have the seller sit down and sign the deed transferring ownership of the home to buyer.
There are three types of deeds used in real property transactions: grant, warranty and quit-claim. However, due to the advent of title insurance, only grant and quitclaim deeds are used in California. A grant deed is a conveyance that includes all the implied warranties and covenants of title. CC § 1113. In non-legal speak, this means that if seller did not own the property when they transferred it to buyer, for instance seller sold the home to somebody else a few months beforehand, then buyer could turn around and sue seller for breach of covenant of title. A quitclaim deed only transfers the interest seller had at the time of the transfer. Klamath Land & Cattle Co. v Roemer (1970) 12 CA3d 613. Thus, if seller did not own the land that they transferred to buyer and buyer later learns of this, buyer would have no recourse against seller.
The reason why deeds are relevant for estate planning purposes is because a home will need to be transferred into the trust in order for the trust to own the home. Thus, the estate planning attorney will typically prepare a deed transferring the family home into the trust the attorney just created for their clients.
Most stationary stores or a county law library site have quality fill-in forms. The problem is that most people do not understand what they are filling out. For example, a deed could create gift tax, potential property tax re-assessment, the imposition of the documentary transfer or the possibility of judgment attachment, etc. Consequently, I have seen a few cases where families decided to engage in do-it-yourself estate planning by executing deeds in which ownership is transferred amongst family members. Typically the results have been disastrous because of the adverse tax consequences that followed.
Executing or interpreting a deed is not an overly complicated task for an attorney. An attorney should be able to resolve most deed problems within an hour or so. This means the attorney fee should not be the cost of your monthly mortgage payment.
