If your deed is not delivered prior to your death, then that deed would expire with you because it was an uncompleted gift. Your deed is no longer effective to transfer the property after your death. Your loved ones may be able to argue it was your intent to transfer the property after death with the deed. In such instances, your deed may be considered a "will" and have to be probated as such. Deeds in trust or escrow ineffective if not delivered after death.
You may have delivered the deed during your lifetime to a third party trustee or escrow agent who holds the deed with instructions to record the deed after your death. Sometimes your family does not know about the deed and does not inform the trustee or escrow agent of your death, then your deed never gets recorded.
The deed also may get lost, destroyed or mislaid when it is being held in some file storage facility. Sometimes the trustee or escrow agent may have died and his or her files could be destroyed or transferred to someone who is unaware of the arrangement.
Undisclosed unrecorded deed may be considered Medicaid fraud. When you apply for Medicaid to pay for your long-term care in a nursing home, you are required to disclose all of your assets and how they are titled. Failure to disclose an unrecorded deed could result in temporary or permanent ineligibility for Medicaid to pay for your nursing home long-term care expenses, or civil and criminal penalties.
Firstly, just don't do it! Keep your home in your own name. Have detailed instructions in your will and probate your home in accordance with those instructions. The delivery requirement is important. Just signing the deed is not enough to complete the transfer. In ordinary real estate transfers, the deed is delivered and recorded at the time of the conveyance.
But with pocket deeds, the deed is not recorded. There is no proof of delivery. This raises a number of questions: Was the deed delivered to the transferee at all? Can it be proved? Questions like these can create a cloud on title, meaning that title insurers will not write a policy on the property without some legal action to clear things up. In some situations, a title company will simply presume that there was valid delivery. But conservative title companies may require a declaratory action to quiet title before it will issue a policy on the property.
The transferee will be unable to sell, mortgage, or otherwise deal with the property until the title issue is resolved. Most jurisdictions require that sellers file an original deed with a government agency that maintains such records in a given municipality. In the United States, this often takes place at the county level. This record serves to notify the public of the sale of property, which in turn provides assurance of current ownership to any entity involved in transactions affected by the property, such as the issuance of a mortgage or a home equity loan , where the property serves as collateral.
Failure to record a deed effectively makes it impossible for the public to know about the transfer of a property. That means the legal owner of the property appears to be someone other than the buyer, a situation that can have serious ramifications. A buyer, for example, could encounter great difficulty in selling, insuring, or obtaining loans for a property if financial institutions and insurance companies cannot establish clear title. Worse, an unrecorded deed creates potential for a seller to engage in a subsequent sale of the same property to yet another buyer.
Most mortgage companies require prospective home buyers to conduct a title search and secure title insurance on the property to be purchased.
The title search examines existing public records to ensure a clean transfer of title, a process that could be disrupted by outstanding liens or past-due property taxes. Self-financed purchasers would do well to consider doing a title search and securing title insurance for any property they want to buy. Title insurance offers a further backstop by protecting the insurance holder from any losses due to deficiencies in the title not turned up by the title search.
Buyers should note that lenders often require a separate title insurance policy that protects only the lender's interest in the property. Therefore, buyers may want to purchase a policy covering their interests as well. Suppose, for example, that a homeowner self-funded the purchase of a home with an unrecorded deed and the seller neglected to close out an existing second mortgage.
If the seller were to default on the loan, the bank would file a lien against the collateral, which would still appear to belong to the seller because of the unrecorded deed. The rule is when one of two innocent parties must suffer a loss, that loss should fall on the person who failed to use the recording law protections.
Of course, the first buyer would have grounds to sue the unscrupulous seller who sold the same property twice. Most real estate documents, such as deeds, leases, mortgages, deeds of trust, purchase options, land contracts, and purchase agreements, can be recorded to cloud the title of a specific property and give constructive notice of their effect.
However, recording rules require the document to be in proper format, with a notarized or witnessed acknowledgement, and there must be payment of the recording fee or tax. If the recorded document contains an error, such as a wrong legal description of the property, this is called a ''wild document'' because it is out of the chain of title.
Such documents usually have no legal effect even though recorded because recording an incorrect document does not make it valid. In addition to giving constructive notice of the recorded document, recording also establishes priority.
The general rule is ''first in time is first in right.
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