So InKleined
by Linda B. Klein, M.Tax., J.D., R.F.P
(Send your questions on any aspect of financial planning c/o this
publication. Please include your name, address, and phone number.)
THE IMPORTANCE OF DEEDS AND CONTRACTS
IN ESTATE PLANNING
We live in such a technological age that record-keeping of almost every
sort is increasingly becoming electronically-based. Public "documents" are
now routinely cataloged and filed into data bases for easy access by other
computers. Transactions and ordinary communications that once had been
conducted through the mail or by voice telephone are now commonly
transmitted by fax or modem. A whole new language is emerging in
cyberspace, a language for which the use of paper seems very foreign and
obsolete. Since England enacted the Statute of Frauds in 1676, however, a
whole set of arcane terminology and pen-and-paper rituals persist even today
which are distinct to dealings in land. Even though deeds are very versatile
legal instruments for transferring all kinds of property and for tracing the chain
of ownership in any particular property, most people have familiarity with
deeds only in the context of conveying land.
In order to be available for public inspection, deeds concerning interests
in land are kept "on file" by the county recorder in the county where the
particular land is situated. A deed is a document that provides specific
information: the former owner (grantor or transferor) of the property, the new
owner (grantee or transferee) of the property, the date of the transfer, any
"strings attached" to the transfer, and a description of the premises in
sufficient detail so as to adequately identify the property and distinguish it
from any other property. Especially in situations involving non-traditional or
blended families, it is not uncommon for the grantor to want the property to
"revert" back to her estate when the grantee's use is concluded. Similarly, the
grantor may retain certain rights in the property for purposes of curtailing the
length of time of grantee's possession or limiting the nature or types of uses
to which the property may be put.
The "legal description" may entail numerous paragraphs reciting a
surveyor's precise measurements of the distances and angles which
constitute the property's boundary lines. This traditional "metes and bounds"
method is very cumbersome, especially in comparison to the modern,
streamlined counterpart of subdivisions and lot numbers. In Ohio, regardless
of how the property is otherwise described, a "legal description" must contain
the parcel number, the routing number (if any), and a street address with
postal zip code.
A mortgage deed provides public notice that a loan has been taken out on
the property described in the deed; the loan balance must be satisfied before
the owner's claim on the equity. If you are thinking about buying a house, then
you would surely want to know whether any outstanding judgments or liens
(such as for unpaid taxes) have been filed against the premises. You would
also want to know whether the property is subject to any easement or right-of-
way. All of this information is brought to light during the "title search"
conducted prior to the transfer of ownership.
In a transaction between unrelated parties, the buyer will insist upon a
"general warranty deed" from the seller as extra protection against a "cloud
on the title" or other adverse interests. In situations where the transfer is
between related persons (including a grantor and the trustee of a trust
established by the grantor), the most common form of conveyance is by quit
claim deed.
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