No DIY Deeds! Horror Stories from an Estate Planning Attorney
In sports, particularly tennis, there is the concept of an unforced error. It's a mistake a player makes not due to the skill or effort of their opponent, but due to their own failure. An example is when two players are hitting the ball back and forth in a test of who will break concentration first and hit the ball into the net. A similar concept holds true in other facets of life, including the estate planning world.
Although we would love to regularly post about tennis, this post is on unforced errors we see in estate planning - particularly on the title to one's home. From DIY deeds to messy refinances, we've seen a lot of, frankly, dumb errors that could have been avoided by slowing down, taking one's time or consulting with an attorney. Below, we’ll highlight some unfortunate errors we've seen so you can avoid them in your own estate planning. The stories shared below are from real cases but intentionally withholding all potentially revealing information.
When Companies Should Know Better
The first of two categories of errors we'll be discussing is where there was a company involved that should have known better. The big offender here is when refinancing one's home held in trust. The home is taken out of trust, but never put back in and nobody knew until after mom and dad passed away. This has happened three times, wherein two cases, a probate was ultimately required to pass the property on to the beneficiaries. This was because a lot of time had passed in between the refinance and the death of the parents such that the probate court judge couldn't be sure the parents did intend for the home to be put back in trust since they made no effort to, well, put it back.
In the one case where a probate was avoided, the refinancing company made a mistake on a deed when putting the property back, apparently caught the mistake after recording the initially incorrect deed and tried to fix the situation on at least half the property. However, the "fix" would not have avoided a probate entirely. The only saving grace was the county interpreting the language of the deed very favorably for the family and reflected the entire property as being in trust. Even then, this took a few months to finally confirm.
In other cases where we have third party companies involved who should know better, we have horror stories for online trust building websites with little to no instruction. Houses never put in trust and a Will not executed correctly meant a probate on a house with no input as to beneficiaries by the decedent. Mom was doing an unequal distribution too. However, because her Will wasn't even valid, the house went through probate by intestate succession meaning each of her children, many of which couldn't stand each other, now were all on title to a house together.
Horrors of DIY Deeds
In the second category, we have DIY deeds. These usually result in incorrect ownership or massive property tax hikes. One example is where the family matriarch put a nephew on title to help protect the property from creditors and to make transition easier - or so they thought. Instead, they caused a reassessment of half the property resulting in at least $200 more in property taxes every month for the remainder of her ownership (something like 20+ years). They didn't consult an attorney prior to creating and recording the deed so the damage was already done by the time they came in to see us, which was after they received notice about the increased property taxes.
Other horror stories for DIY deeds we've seen are when ownership is stated incorrectly. This has happened twice where although the circumstances were different, the results were the same. The DIY deed in question only listed person A and person B but failed to mention how they were holding title - joint tenants or tenants in common. Both intended joint tenants, where the interest of the first to die would automatically pass to the other, but they both resulted in tenants in common, where the interest of the first to die stays in their estate, thus causing a probate on half the property. One was even the result of a string of DIY deeds where we ended up probating 75% of a house.
For those that don't know, if you have a deed granting a property to person A and person B, but it doesn't explicitly say, "as joint tenants," then the law will presume the property is held as tenants in common and the burden to prove otherwise is on the survivor. This is true in California, and many other states across the US.
A few other problems we see are mistakes on the deeds. Wrong addresses for tax statements so people never receive their tax bills. Quitclaim Deeds where, due to an error in the legal description, the transfer was not considered effective, meaning the transfer hasn't taken place. In this case, a house wasn't moved to a trust as intended but thankfully, we found it before the family would have been bootstrapped into a probate.
Lastly, we've seen several instances where something as simple as the trust name being incorrectly stated in both DIY and deeds from third parties. When that occurs, we can either record a corrective deed or go forward and add an AKA for the trust name when amending the documents. Either can be a solution, although both look a bit awkward.
Avoid Unforced Errors!
Ultimately, the potential upside of saving a few dollars is not worth the potential downside of having to fix a problem arising from either DIY deeds or not checking the work of someone who is drafting deeds for you. It will never hurt to double check someone else's work or speak to an attorney prior to walking down to the county and recording your handwritten deed. Don't make an unforced error and hit the ball into the net. Take your time and ensure your shot is lined up and in bounds. You can never be too cautious when it comes to the title to your home.
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