Unrecorded deeds hurt estate planning

Unrecorded Deeds hurt Estate Planning

"While discussing estate planning with my parents, they told me that an attorney prepared a deed for them but told them not to record it yet."

Using an unrecorded deed to transfer property without probate sounds like an easy way to transfer ownership of the family home, but is it asking for trouble in your estate planning? That’s the topic of an article from NWI Times entitled, “Estate Planning: Are unrecorded deeds a good idea?” The fact that the idea came from a family’s attorney makes the question even more important. The attorney told the parents the children could record the deed after their deaths and transfer the property without probate. Most estate planning attorneys haven’t seen this technique used in a long time, and some may never have heard of it. There’s probably a good reason for this—it’s an estate mess waiting to happen. Unrecorded deeds hurt estate planning.

First of all, what if the deed itself goes missing? One of the most common questions estate planning attorneys hear is “What do I do because Mom lost the_____?” Fill in the blanks—the deed, the title to the car, the bank statement, etc. Important documents often get lost. If a deed is missing and can’t be recorded, title can’t be transferred. Hoping an unrecorded deed doesn’t get lost could be devastating to your estate planning.

Until the unrecord deed is processed, and title transferred, the holders of the title still own the property. They can mortgage the property or sell it. The plan for the children to receive and record the deed may not have legal authority.

Laws about how deeds must be created change. Indiana made a change to the law in 2020 that required signatures on deeds to be witnessed. Without the witness, the deeds can’t be recorded. If the adult child is holding a deed for the recording and it’s not witnessed because the parents have died, it can’t be recorded.

There are better ways to transfer ownership of the family home than an unrecorded deed, that adhere to the general principles of estate planning.

There are also different types of deeds that are more commonly used in estate planning to transfer home ownership without going through probate. One is a Transfer on Death Deed (TOD Deeds). A TOD deed allows a person to name beneficiaries on their real estate property without giving up any rights of ownership. The TOD deed is recorded, so there’s no worry about mom or pop losing the paperwork.  The TOD deed can also be changed by recording another deed or using an affidavit.

Trusts can also be used to transfer home ownership and keep the transaction out of probate. Do not wait. Unrecorded deeds can hurt your estate planning. An estate planning attorney will be able to explain the different types of trusts used to transfer a home. State laws vary, and allowable trusts vary, so talking with a local estate planning attorney is the best option.

If you are interested in learning more about handling property in your planning, please visit our previous posts. 

Reference: NWI Times (May23, 2021) “Estate Planning: Are unrecorded deeds a good idea?”

Photo by Anete Lusina from Pexels

 

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Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact Texas Trust Law to schedule a complimentary consultation.
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