What states are community property states?

Community Property States

Credit: sXc

Credit: sXc

We’ve often been asked the question:

What states have community property laws?

Well, that’s easy! In the US, there are currently nine community property states. They are as follows:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

In these states, the acquisition of property is treated differently when you’re married… and it’s something you need to consider even if you don’t live there.

For example: if you purchase rental property in Arizona but you live in New York, Arizona State law will take precedence! And by default, in Arizona you and your spouse will own that property together as “community property“. If you want to keep it separate from your spouse he or she must sign a Disclaimer Deed simply stating you will acquire it as your “sole and separate property” on the deed is not enough!

On the other hand, Arizona will not give you the “right of survivorship” by statutory default. So unless you and your spouse clearly indicate it’s your intention to acquire title as “community property with right of survivorship” on the deed and have both your signatures notarized, your estate will be subject to probate! If you need assistance changing the manner in which you hold title to real estate, just let us know. We’re happy to help!

 

Ways to Hold Title to Real Property in Arizona

Ways to Hold Title to Real Estate in Arizona

To download a PDF version of this post, click here: “Ways to Hold Title In Arizona“.

 

 

Credit: UnknownCOMMUNITY PROPERTY

Because Arizona is a community property State, there is a statutory presumption that all property acquired by husband and wife during the marriage, except property acquired by gift, devise or descent, is community propertyCommunity property is an estate of co-ownership between married persons only. Neither spouse, acting individually, may transfer or encumber real estate that is vested as community property.  Upon death of one of the spouses, the decedent’s interest will pass by will (if one exists) or intestate succession (if no will exists).

COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP

A Community property estate between married persons that vests the title to real property in the surviving spouse provided it is expressly declared in the deed.  This vesting has the tax benefits of holding title as “community property” and the ability to avoid probate through “survivorship rights”.

JOINT TENANCY WITH RIGHT OF SURVIVORSHIP

Joint Tenancy with right of survivorship is a method of co-ownership that gives title to the real property to the surviving tenant(s) upon death of a joint tenant owner.  Title to real property can be held in joint tenancy by two or more individuals either married or unmarried.  If a married couple acquires title as joint tenants with the right of survivorship, they must specifically accept the joint tenancy to avoid the presumption of community property.

TENANCY IN COMMON

Tenancy in common (or tenants in common) is co-ownership where parties do not have survivorship rights and each owns a specific undivided interest in the entire title. For example, one party could own “an undivided 25% interest” while another 2 parties own 60% and 15%. It’s important to note that this can be combined with other ways to hold title, e.g. JOHN SMITH and JANE SMITH, husband and wife as community property with right of survivorship as to an undivided 50% interest. They would be “tenants in common” with whoever else were on title, but their 50% interest would be “community property with right of survivorship“.

TRUST (WITH A TRUSTEE)

Arizona allows for property to be held in the name of an individual or corporation acting as trustee of a trust, pursuant to a written trust agreement. The name of the trustee, trust and date of the trust agreement must all be declared as grantee. (Also, Arizona law requires that the names and addresses of the trust beneficiaries are disclosed when transferring property into or out of a trust.)

SOLE AND SEPARATE PROPERTY

Sole and separate property is real property owned by a spouse before marriage or any acquired after marriage by gift, devise, descent or specific intent to hold the title separate from the marital community.  If a married person acquires title as sole and separate property, his or her spouse must execute a disclaimer deed.

CORPORATION

Title may be taken in the name of a corporation provided the corporation is duly formed and in good standing in the State of its incorporation.

GENERAL PARTNERSHIP

Title may be taken in the name of a general partnership duly formed under the laws of the State of the formation of the partnership. A partnership is defined as a voluntary association of two or more persons as co-owners in a business for profit.

LIMITED PARTNERSHIP

A partnership formed by two or more persons under the laws of Arizona or another State and having one or more general partners.  A certificate of limited partnership must be filed in the Office of the Secretary of State, a certified copy of which must be recorded.

Quitclaim Deeds: When You Should Use Them

Photo Credit: Stock.X.Chang

Photo Credit: Stock.X.Chang

Quitclaim Deeds: When You Want To Use Them.

In a previous post, we discussed the Top 3 Reasons Why You Shouldn’t Use A Quitclaim Deed. Of course, there are times when it is appropriate to use a quitclaim deed!

The best use of a quitclaim deed is to remove a cloud from the chain of title. What’s that mean? Any time there is a real or apparent dispute regarding ownership interest, liens, encumbrances or any sort of claim against a property we call it a “cloud on the title“.

(In the event you are unable to remove a cloud on title with a quitclaim deed, you may have to file a Quiet Title Action.)

Removing a person from title

For a most title transfers, using a quitclaim deed isn’t the best idea (for reasons already discussed). But sometimes, a quitclaim deed does exactly what you need it to do! How do you decide when it’s appropriate to use a quitclaim deed? One helpful way to ask yourself whether or not the party you’re removing from title was supposed to be on there in the first place. 

Let’s assume, for a moment, the following:

  • You are married. (Congratulations!)
  • Your parents own property in a community property state.
  • Your parents want to transfer that property to you as your “sole and separate property”. (You have been married for years now… when are they just going to accept your spouse as a member of the family already?!)
  • You are named in as a grantee in the deed, and it even says “as sole and separate property”. (Or alternatively your marital status is not disclosed at all.)
  • Your spouse never signs a disclaimer deed.

In this situation, your spouse actually owns half of your interest! Because you were supposed to be the only one on title, it would be considered a “cloud” and a quitclaim deed would be the perfect instrument to clean things up.

If title was intentionally conveyed to you and your spouse together and one of you wants to be removed, you might want to consider signing another document such as a Special Warranty Deed. It might just save you some trouble down the line.

Photo Credit: SXC

Photo Credit: SXC

Boundary Disputes

Sometimes, the boundary at which your property stops and the adjoining property begins is not so clear! A common boundary dispute arises when a survey reveals that a fence (or other structure) has been built on what turns out to be the neighboring property. This is called encroachment.

An easy way to fix the situation would be for your neighbor to simply quitclaim “the west 5 feet” (or whatever part of their land your fence is on) to you, thereby resolving the encroachment. Of course, you can’t force your neighbor to simply give up their land… but asking won’t hurt! (You might remind your neighbor they benefit from the fence as well. Also, a bottle of wine and a compliment sure couldn’t hurt!) 

If your neighbor is unwilling to quitclaim the portion of land in question to you, you could also sign and record an encroachment agreement. This will disclose publicly how the parties resolved the encroachment issue and offers some additional protection.

If nothing else seems to work, you might have to bite the bullet and take down the structure. There’s only so long you can fence with someone over a fence!

Adverse Possession

Because quitclaim deeds don’t make any guarantees of ownership, they can also be signed used to prevent cases of adverse possession.

What if you have been using your neighbor’s driveway for years? You know the driveway isn’t yours, they know it isn’t yours, but now your neighbor is selling their house… A potential new buyer comes over and sees that you have been using the driveway as your own! The new buyer becomes concerned about you claiming the driveway for yourself through adverse possession law.

In this situation you can execute a quitclaim deed to show for the record you don’t have any rights to the driveway. That prevents any adverse possession claim and satisfies the new buyer. (You may not enjoy the use of the driveway anymore, but hey… your neighbor was nice enough to give you the west 5 feet of his property over that fence dispute, remember? It’s the least you can do!)

Photo Credit: SXC

Photo Credit: SXC

Are you a grantor (seller) with something to hide?

We have to at least address the possibility that you could have some unscrupulous motivation for using a quitclaim deed. After all, this is what a title company is afraid of when they see a quitclaim deed where another instrument should be!

You want to sell a piece of property. You have a buyer and have convinced them everything is on the up and up… except there’s a problem:  You are about to get a judgment against you. Or, there’s an unrecorded lien against the property you know about. Heck, maybe you actually already sold an undivided 50% interest to someone else… in all of these cases, you’re a scumbag that is trying to hide the truth from the buyer and you think you should use a quitclaim deed so they can’t sue you later.

Will it cause you more problems down the road? Definitely.

Do we recommend this as a course of action? Never.

Shame on you!

Top 3 Reasons Why You Shouldn’t Use A Quitclaim Deed To Transfer Title

Photo Credit: Unknown

Photo Credit: Unknown

Let’s take a moment to address the differences between a Quitclaim Deed and a (Special) Warranty Deed. There are several points to consider when choosing the correct deed to use for a title transfer. When you look at the differences between the deeds and scenarios for which each is best suited, you might reconsider using that Quitclaim Deed to transfer title.

Quitclaim Deeds: Why They Stink.

A Quitclaim Deed (often mistakenly referred to as a “quick claim” deed) is a popular instrument for title transfers. However, when choosing a deed its popularity should not be a determining factor! Many different deeds will convey title to real property, each will be useful for different situations. One of the most important things to keep in mind when choosing a Quitclaim Deed is that it doesn’t even say whether or not the person conveying title owns the property! The grantor offers no “guarantees” as to their ownership interest in the property or the condition of the title, which brings us to reason number 3…

Reason Number 3:  NO GUARANTEES.

Although a quitclaim deed does convey title, doesn’t make any other guarantees, warranties or assurances. Basically a quitclaim deed says this:

“I don’t promise that this property has a clean title, or even that I own it at all! Whatever interest I may have in the property I’m giving to you. If you find out later you don’t have a marketable title, you can’t sue me! I didn’t promise you anything! Bwahahahaha!!!”

Okay, maybe that’s a bit dramatic… but you get the point! Many bloggers and “experts” (sometimes even real estate attorneys or a divorce court) might advise you to use a quitclaim deed. Lots of people have used them to transfer property into or out of a trusts, limited liability companies, between husbands, wives and family members “because you don’t necessarily need such strong guarantees in that situation”. Well that may be true, but it’s certainly not the only thing to think about.

Reason Number 2:  THE “SUBJECT TO” SUBJECT.

You might think that a you have to use a quitclaim deed because the property isn’t “free and clear” from liensNot so! This is probably one of the more common misconceptions we’ve heard regarding quitclaim deeds (and Warranty Deeds). The argument goes something like this:

“Well I can’t use a Grant Deed, Warranty Deed or a Special Warranty Deed because those documents say the property is free from liens… I have a mortgage on the property so I have to use a quitclaim deed!”

Well, that’s almost true. Warranty Deeds and Special Warranty Deeds do contain verbiage that makes some sort of guarantee as to the condition of the titleWhat they actually say, however, is that all existing claims have been disclosed. Warranty Deeds do not say the property is “free and clear”.  You see, each deed has a section that contains “subject to” verbiage. In the “subject to” section of the deed, certain elements are called out as being part of the transfer. A typical example of “subject to” language is as follows:

“SUBJECT TO: Current taxes and other assessments, reservations in patents and all easements, rights of way, encumbrances, liens, covenants, conditions, restrictions, obligations, and liabilities as may appear of record.”

This is significant because any liens that are recorded in the public record are “part of the package”. The grantee has no legal recourse to go back to the grantor because of a lien on the property he didn’t know about, so long as it was properly recorded (and therefore disclosed). When you purchase a title insurance policy, the title company will do a title search and list everything they find on the “Schedule B” section of the title commitment.

Reason Number 1:  TITLE COMPANIES HATE ‘EM.

Many title examiners will not accept a prior conveyance made by quitclaim without additional documentation signed by grantor. Remember, a quitclaim doesn’t guarantee anything! So when a title officer sees a quitclaim deed in the chain of title, they may question whether or not the grantor in the quitclaim deed had something to hide. Imagine how difficult it would be to track down an ex-spouse or trustee of a trust (who’s probably out of the country or deceased) so they can sign off on this property, again… just clear up the chain of title because the title officer doesn’t like the quitclaim deed. Now this is holding up the escrow! People want to move in and unpack! People want their money! If you don’t have anything to hide, why not use a stronger document? Here’s a good one that you can use in almost every state: The Special Warranty Deed.

Want to know when quitclaim deeds are supposed to be used? Check out this article!

Escrow Agent or Certified Legal Document Preparer?

When are the Services of a Certified Legal Document Preparer (CLDP) preferred over an Escrow Agent?Legal Papers




The services of a real estate Certified Legal Document Preparer [“CLDP”], also referred to as a Legal Document Assistant, are a great resource to anyone who owns or has an interest in real estate.  Many property owners and investors are unaware of this option or understand when it is a good idea to employ the services of a CLDP rather than an Escrow Agent.   Let’s try and shed some light here so you know what your options are!



If you are purchasing or selling real property where money is to be placed with a third-party and title insurance is required, then you are looking for an Escrow Agent. It is in an escrow that all terms of a transaction are clarified and an Escrow Agent acts as the fiduciary to all parties holding funds and documents. In an escrow transaction, the Escrow Agent, orders a Title Search contacts and requests a Payoff Statement from Lenders and prepares a Settlement Statement for all parties to review, sign and approve.



Often times, full escrow services as described above are not needed.  A CLDP will prepare one or all of the documents that are normally produced in a real estate transaction, regardless of whether or not a title insurance policy is to be issued.  In other words, a CLDP will focus on only the documents requested, and makes no requirements that the customer must purchase additional products or services.  As a result, the costs for obtaining documents are substantially reduced limiting the fee charged only to the items requested.  Title Insurance can be made available, as well as the other services, but are not required.



We advocate obtaining title insurance when necessary. Some situations however, such as adding a spouse to title, transferring property into your family trust, or recording a Power of Attorney to be used in connection with real estate purchases/sales, (just a few examples), the cost of a new title insurance policy outweighs its benefits.



Your CLDP can assist you with the preparation of Promissory Notes, Deeds of Trust, Release of Liens (Full and Partial), Affidavits of all Types, Deeds in Lieu of Foreclosures, Road Maintenance Agreements, Quitclaim Deeds (sometimes mistakenly referred to as “Quick Claim” Deeds), Special Warranty or Warranty Deeds, Beneficiary Deeds, Power of Attorney, Agreements for Sale, Subordination Agreements – to name a few.  Arrangements may also be made for additional services such as loan servicing.



The next time you are contemplating a matter that involves real estate and legal documents, consult your Legal Document Preparer to see how they can assist you in accomplishing your goals.