The Perils of Planning for Real Property with Deeds
The recent Idaho Supreme Court case of Garrett v. Garrett has provided a reminder of the limitations of planning for the post-death transfer of real property using deeds. The facts of the Garrett case are as follows:1. Alva and Thelma Garrett lived for thirty-two years on a parcel of real property known as the “Middleton Property,” a parcel Alva had owned prior to their marriage.2. They both had children from prior marriages.3. In 1990, Alva deeded the property from himself to himself and Thelma.4. A day after executing that quitclaim deed, Alva and Thelma granted a mortgage on the property for $20,000 that they jointly paid off.5. Alva and Thelma paid the taxes on the property from their joint checking accounts.6. In 1995, Alva and Thelma entered into a contract for wills that provided that the surviving spouse would take the entire estate and that upon the death of the survivor, the estate would be divided equally among the seven children of their combined family.7. The Middleton Property was the only real property owned by their estates.8. In 2006, Alva executed a quitclaim deed purportedly conveying his interest in the Middleton property to his son, Jack. Alva gave the deed to John Garrett, Jack’s brother, and instructed him not to record it until after Alva’s death. John kept the deed and recorded it in 2008, two days after Alva’s death. Thelma was unaware of the deed until that time.9. In August 2009, Jack filed a lawsuit to partition the property and Thelma opposed saying Jack had no interest in the Middleton Property.The Idaho Supreme Court agreed with Thelma and determined that there had been no valid delivery of the deed to Jack. Most states require that for a deed to be effective there must be a valid “delivery” of the deed to a grantee. A deed in Idaho can be held in escrow until after the grantor’s death; but delivery is valid only if no “dominion or control” is retained by the grantor. In this case, the Idaho Supreme Court determined that Alva retained the ability to “recall” the deed.In my opinion, the moral of the story is that this type of planning is fraught with danger and may result in expensive litigation to determine ownership. While some states do allow a Transfer on Death (TOD) Deed or Beneficiary Deed, most do not. Where allowed, these deeds are a creation of statute and the requirements of the statute should be strictly followed. Meanwhile, a properly drafted will or trust with the input and consent of both spouses would have saved thousands in legal fees in this situation and may have allowed Jack to end up with the property at the end of the day while protecting Thelma. It would also have allowed a platform to promote family harmony as opposed to discord. Get good legal advice. Don’t take shortcuts. When planning – do it the right way.