What Is Voluntary Conveyance?
Let me explain voluntary conveyance directly: it's when you elect to transfer the title of real property from one person to another without getting adequate consideration in return. Consideration means the compensation you'd normally expect for the property. If you're the one conveying without it, you need to be ready with a legal reason for why you're doing this transfer.
Understanding Voluntary Conveyance
You should know that voluntary conveyance is just like any other voluntary real estate transfer, but what sets it apart is the absence of proper consideration to the seller. In legal terms, consideration is the payment or value exchanged for the property. I'll outline some typical situations where this happens below, so pay attention to how they work.
Voluntary Conveyance to Avoid Default
If you're a borrower who's fallen behind on payments, you might choose to voluntarily convey the property to your lender to sidestep a full default and the hit to your credit score. The lender can take the title, sell the property, and possibly file an insurance claim for any leftover debt, depending on the laws in your area. By doing this, you avoid the negative mark of default on your record.
Fraudulent Voluntary Conveyance to Avoid Creditors
Be aware that in most states, transferring property to someone else just to keep it out of creditors' hands is illegal—this is called fraudulent conveyance. Creditors can go after it through civil lawsuits. The penalties vary based on whether the court finds it was actual fraud, meaning you did it on purpose, or constructive fraud, where it effectively acts like fraud even if not fully intended.
Voluntary Conveyance for Charitable Purposes
If you're donating real property to a charity, you have to handle the consideration aspect carefully to secure your tax deduction. The organization needs a valid IRS tax exemption, and you should get independent appraisers and tax lawyers to review everything. Once that's set, the consideration effectively becomes your tax deduction.
Voluntary Conveyance to Descendants
As a property owner, you can transfer real estate to a descendant as a gift or through your will. Many states permit a gift deed with just nominal consideration, like a small amount of money or even 'love and affection.' Keep in mind, though, that creditors might view this as suspicious if they're trying to claim the property to settle debts.
Involuntary Conveyance
On the flip side, involuntary conveyance happens when real property is transferred without the owner's agreement. This can occur due to condemnation for neglect or after a natural disaster, unpaid taxes, or if the owner dies without heirs. In these cases, the state steps in and takes control of the property.
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