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Was a Proper Delivery of Deed Made?

Discussion in 'Joint Ownership' started by Jack McMasters, Sep 17, 2019.

  1. Jack McMasters

    Jack McMasters Law Topic Starter New Member

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    Jurisdiction:
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    Mother bought SFD in 1974 in sole ownership. It stayed a rental property from purchase to present. Currently in escrow. Mother on deathbed. My sibling and I recently quitclaimed the property to satisfy the title insurance company.

    In 1981 she passed title from herself to herself, my sibling and myself as joint tenants. She never informed us of the transfer. I never found out about it until the property went up for sale a few months ago. I was browsing through her papers looking for something else and stumbled onto a copy of the deed. The original is lost. Knowing her, I believe putting us on title was solely to avoid probate, not to convey ownership. She retained all the incidences of ownership throughout the 45 years she owned the property. I took over managing the property for her 10 years ago when she became too old to do it herself. My sibling and I never once benefited from the property.

    In 2004 she passed the property into a revocable trust she created for herself. She did not indicate any percentage of ownership being transferred nor did the attorney who drew up the trust. From all appearances she believed she was transferring 100% ownership into her trust. She named my sibling and I as the sole beneficiaries of the property.

    Problem: if the 1981 transfer is deemed good, despite no evidence of intention on her part to convey ownership to us or evidence of delivery and acceptance of the deed--add to that the transfer of what she believed to be 100% ownership of subject property into her trust and naming us as beneficiaries--if this 1981 deed is deemed to be good then my sibling and I must lose the step-up in basis and pay a huge capital gains taxes. But if it can be argued that a bonafide joint tenancy was never made in 1981, i.e. title was never successfully transferred to myself and my sibling because intent, delivery and acceptance were all missing, then my sibling and I will receive the step-up in basis and not have to pay a huge capital gains tax. Help!
     
    Last edited: Sep 17, 2019
  2. army judge

    army judge Super Moderator

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    Th help you will receive is after you've retained the services of a licensed, California real estate, or trust attorney.

    The attorney will need to do some research, before you can receive an answer upon which you can legally rely.

    I won't spoil your surprise (which might be very pleasant for you) because without researching the matter, anything I would post would be nothing more than useless (to you) conjecture.
     
  3. Jack McMasters

    Jack McMasters Law Topic Starter New Member

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    Thank you, army judge.:) But you're killing me. You seem optimistic the transfer was not a good transfer. Can you sort of ;)give me your own impression of what might be coming our way? Certainly we will retain an attorney, but the matter seems pretty straightforward. Here's how I see it using one year of law school:

    Since intent, delivery and acceptance are not present (these are the 3rd part of 3 critical things that are necessary for a deed to be valid) and there is no evidence they were ever present, the deed is not valid. Therefore my mother did successfully transfer 100% of her interest into her trust. Quitclaiming might not have been a good move since a person cannot quitclaim what they do not legally own and doing so creates the appearance of belief we had a tenancy. But we had no choice; title would not have issued a policy without the quitclaims.

    We initially never expected to escape capital gains since my mother fell deathly ill only after the property was listed. We expected her to survive past close of escrow in which case she would have paid the capital gains taxes. But it all came on rather suddenly :(.
     
  4. adjusterjack

    adjusterjack Super Moderator

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    Was the deed to joint ownership recorded? If not, then it's likely not valid, especially since the property was deeded to the trust (was that deed recorded?)
     
  5. Jack McMasters

    Jack McMasters Law Topic Starter New Member

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    A deed doesn't have to be recorded to be valid. Here are the requisites for a valid deed:

    1. It must be in writing; 2. The parties must be properly described; 3. The parties must be competent to convey and capable of receiving the grant of the property; 4. The property conveyed must be described so as to distinguish it from other parcels of real property.; 5. There must be a granting clause, operative words of conveyance (e.g., “I hereby grant”); 6. The deed must be signed by the party or parties making the conveyance or grant; and 7. It must be delivered and accepted.

    It is this last element that is missing in my case.
     
  6. adjusterjack

    adjusterjack Super Moderator

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    I reread your original post and realized that there are more issues in there than just that first deed. Too numerous to list. I suggest you have a lawyer review the trust and both deeds.
     
  7. zddoodah

    zddoodah Well-Known Member

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    There's no such thing as a beneficiary of property, so I assume that you meant to say that you and your sibling are beneficiaries of the trust.

    This is a crazy run on sentence, but your assertion that there is "no evidence of intention on her part to convey ownership to" you is wrong. The deed is evidence of such an intention. Perhaps you meant to say that there's no evidence other than the deed, but that's a little like the scene in the move A Few Good Men where Tom Cruise's and Kevin Pollack's characters are prepping for cross-examination of the prosecution's expert witness. Cruise's character asks a question and, after Pollack's character (who was playing the witness) answered, Cruise's character says, "was there any evidence of violence?" Pollack's character responds, "You mean other than the dead body?" The deed is all the evidence of intent that anyone needs. There burden would be on you to disprove intent notwithstanding the deed.

    I'm not sure what sort of "help" you're expecting or think folks on a message board can provide. You said that you and your sibling recently executed quitclaim deeds in connection with the pending sale, so I'm really at a loss to understand what the issue is. Whoever the trustee of the trust is should consult with a tax attorney or CPA regarding the tax issues that the trust will have relating to the pending sale, but nothing in your post seems to suggest that you have any personal tax issues relating to the property.

    P.S. I agree that lack of delivery of the 1981 deed would be an issue if you were in a position to need to contest the validity of that transfer. You didn't say whether that deed was ever recorded, but that would be relevant.


    That's incorrect. In fact, that's the whole point of most uses of quitclaim deeds. A quitclaim deed conveys the grantor's interest, if any, and makes no representations or warranties that the grantor has any interest at all.

    FYI, info at the CA DRE web site is not law.
     
  8. Jack McMasters

    Jack McMasters Law Topic Starter New Member

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    Yes, I am consulting with a malpractice lawyer tomorrow.
     
  9. Jack McMasters

    Jack McMasters Law Topic Starter New Member

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    There's only the one property in the trust, no other assets. Roundabout way, we're beneficiaries of the trust but there's only thing in the trust, subject property.


    Yes, I read on a website that the deed itself does convey the appearance of intent but that intent is "rebuttable". Yes, the CDRE is not a law firm but I am pretty sure they are not putting anything on their website before it is run by a team of real estate attorneys.

    My assertion is that no one thing proves "no intent" but a conglomeration of things can. The law recognizes that it is impossible to prove person A handed a deed to person B in the privacy of a home. The IRS would assume intent and then leave it up to an attorney for the parties to prove otherwise. The IRS would have to explain why, if my parent intended to pass ownership to my sibling and I, we never behaved as if we were 2/3's owner of the property and why we allowed said parent to accrue all the benefits of ownership, as well as explain why parent would then not point out to attorney setting up the trust that parent had the right to only pass 1/3 of property into trust rather then 100% ownership because parent had already deeded 2/3's ownership to children. A bigger question why didn't the attorney handling the trust do due diligence in discovering the 1981 deed indicating parent only had 1/3 ownership to pass into the trust or have us sign quitclaims right on the spot. All these factors taken together demonstrate that parent didn't intend to pass ownership; that more often than not parents are putting children on title not knowingly to give them ownership but strictly to avoid having to put them through probate.

    In truth, I originally thought this was a board where attorneys answered questions in hopes of picking up clients. We executed quitclaims for different reasons: my sibling want nothing to do with the property. Why is not important. I executed a quitclaim under duress. The property needs to be sold to pay for my parent's care and it couldn't be sold unless I signed. Recall I said parent was well when the property was listed and fell deathly ill after sales agreement was signed. What has to be determined is will the IRS claim my sibling and I had our basis set at 1981's real estate prices because of the deed, or will we inherit the property via the trust and set the step-up in basis to the time of our parent's passing.

    I read somewhere that the IRS could make the case "why sign a quitclaim unless you had an interest to transfer?" It's a valid question. The website went on to suggest that signing a quitclaim can hurt the person signing because it would cause someone like the IRS to assume the person had an interest to quit, otherwise why ask them to sign if they own 0% interest?

    Nevertheless, the 7 prerequisites on the DRE are still valid.
     
    Last edited: Sep 19, 2019
  10. zddoodah

    zddoodah Well-Known Member

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    The IRS isn't going to claim anything. The IRS isn't aware of the deeds or anything else. You will submit your tax returns based on what you believe is appropriate. Whether the IRS will get involved and challenge what you put on your returns is impossible to predict in the abstract, but you should discuss the matter with a tax attorney or CPA.

    I can't address things you read without citations. That said, sure, it's a "valid question," but it's an easy one for you to answer. You did it because the title company required it, but you used a quitclaim deed because you did not believe you had a valid interest because the 1981 deed was never delivered.

    That suggests whoever wrote whatever you read doesn't truly understand what a quitclaim deed is.
     
  11. Jack McMasters

    Jack McMasters Law Topic Starter New Member

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    Thank you, zddoodah. You've given me quite a bit of good info. I'm waiting for a malpractice attorney to return my call even as I type.

    For everybody's info; I've already talked to FIVE CPA's and the moment they heard there was a conflict of trust vs deed they declined to do the returns.
     
    Last edited: Sep 19, 2019
  12. Jack McMasters

    Jack McMasters Law Topic Starter New Member

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    So I talked briefly to a paralegal this morning and sent her post #1 in an email. She never responded. I suppose her boss read it and decided it wasn't worth pursuing. I'm going to go with what you suggested, zddoodah. I'll just file the returns as if my sibling and I inherited the property via the trust and if the IRS wants to investigate they can call us. Then we will get a tax attorney to represent us.
     
  13. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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    I think it is a little too soon to make that assumption. People are busy and can't always reply in less than a day. Not all emails make it to their recipient the paralegal may not have ever received it.
     
  14. zddoodah

    zddoodah Well-Known Member

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    That would be an ill-advised conclusion unless the paralegal told you that, if you don't hear back by 1:30 p.m. it means the lawyer isn't interested. Believe it or not, many lawyers are busy and may take a day or two or three to get back to you.
     
    Zigner likes this.
  15. Jack McMasters

    Jack McMasters Law Topic Starter New Member

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    Here it is the end of another day after I returned her call yesterday morning and they told me she was in a meeting. Pretty long meeting.
     
  16. army judge

    army judge Super Moderator

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    I call this move the "silent treatment".


    If a meeting was used as an excuse, it might be the "pushback", if it was done with kindness.

    Sprinkle in a little tough language, it becomes the "brushback".
     
  17. Jack McMasters

    Jack McMasters Law Topic Starter New Member

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    It was done with kindness. I figure it's too penny-ante for them.
     

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