Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, January 31, 2014

When Deeds Fail For Estate Planning

House brokenThe conveyance of deeds is a possible estate planning tool that carries the risk of creating a present rather than future transfer. The parents of Angela Michelle Edmounds Harrison conveyed real estate through quitclaim deeds to their daughter as an estate planning tool. Issues arose when Harrison filed for bankruptcy, and her bankruptcy trustee wanted to liquidate her real estate interest. Harrison and her parents argued that their intent for the conveyance to only give bare title to Harrison and then equitable interest after the parents’ death, created a trust. Harrison’s parents paid all cost for the property including taxes and upkeep, and collected the rent payments.

 In Soulé v. Gragg (In re Harrison), the bankruptcy trustee, as a bona fide purchaser, was not defeated by the undocumented trust and has the right to sell the property. While the existence of the trust was not challenged in the case, under Oklahoma law a bona fide purchaser of a property titled through a quitclaim deed only has an inquiry duty equal to that of a conveyance by warranty deed. Though the intent of the parents’ conveyance is not unimportant, it does not overcome the interest of a bankruptcy trustee, making deeds a risky estate planning tool if the recipient enters bankruptcy.

See Luke Lantta, Bankruptcy Ruling Highlights Potential Problems of Using Deeds As Estate Planning Tools, Bryan Cave, Jan. 22, 2014.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.


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