Gift Deeds
Posted Wednesday, June 19, 2013 by John S. Palmer
A deed conveying real estate as a gift need not state any consideration was paid by the recipient, according to a recent decision by the Washington Court of Appeals.
That may sound obvious, because a “gift” implies that no money changes hands, but the law regarding what constitutes a valid deed can be quite arcane and technical. Some requirements are obvious; for example, the grantor and grantee must be named, and the grantee must be properly identified (which can be an issue if the grantee is a business entity). And Washington courts generally require that the property be identified such that its location on the ground may be determined with reasonable certainty, without recourse to oral testimony (or it must contain a reference to another instrument which contains a sufficient description). A description by which a surveyor could locate and identify the property satisfies this requirement, whereas simply using the street address or tax parcel number may not. That is why deeds usually include a formal legal description (using the “metes and bounds” method or referencing a specific plat on file with the county where the property is located).
With respect to consideration, the case decided by the Court of Appeals (Bale v. Allison, decided February 11, 2013) involved a preprinted quitclaim deed form that had been obtained online; the space next to “in consideration of” was left blank, but the grantor had filled out a real estate excise tax form stating the property was a gift. After the grantor’s death, a dispute over the validity of the deed erupted between the deed’s grantees and the persons who would have inherited the property under the decedent’s will. The trial court declared the deed invalid because it lacked a recitation of consideration and the grantees appealed.
The Court of Appeals noted that although prior cases have generally affirmed the validity of gifting real property, “no Washington case addresses whether a quitclaim deed must recite consideration when the grantor intends to convey real property as a gift.” The will beneficiaries argued that RCW 64.04.050 requires a quit claim deed to recite consideration received for the conveyance. However, the Court of Appeals said that the statute merely recites suggested, not mandatory language to be used in quitclaim deeds. Moreover, it found that past cases suggest that a deed is valid without valuable consideration, and noted that that WAC 458-61A-201(1) provides that:
Generally, a gift of real property is not a sale, and is not subject to the real estate excise tax. A gift of real property is a transfer for which there is no consideration given in return for granting an interest in the property. If consideration is given in return for the interest granted, then the transfer is not a gift, but a sale, and it is subject to the real estate excise tax to the extent of the consideration received. (Emphasis added by court).
Therefore, despite the fact that most deeds will recite some form of consideration, including “love and affection” or the rote phrase “ten dollars and other valuable consideration” (even if it’s not true), the court specifically held that “no recital of consideration is required to effectively gift real property” and overturned the trial court’s decision invalidating the deed at issue.
The court then went on to address the will beneficiaries’ claim that the decedent had entered into a valid “oral contract to devise” the property to them, which trumped the deed. This portion of the opinion will be discussed in an upcoming blog post. (The will beneficiaries lost and unless they appeal further, the deed grantees get the property.)
If you have any questions or would like to schedule an appointment, please call us at (425) 455-5513, toll free at (877) 455-5513, or info@palmerlegal.com.