Transfer Deed of Home To Avoid Student Loan Payments
Ask the Real Estate Lawyer: Real Estate Law Q&A
By Ilyce R. Glink and Samuel J. Tamkin
Summary: A reader wonders if his partner can
transfer the deed to their home to him and avoid paying off a student loan bill.
Ilyce and Sam discuss the legal and ethical angles to this proposition.
Q: My partner and I have been together for 20 years. About three years ago,
I received an inheritance that allowed us to pay off our house.
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My partner has epilepsy and recently had a very strong seizure that resulted
in a broken leg in several places. His seizures are coming more frequently and
he is unable to work. He has about $60,000 in student loan debt.
I am considering having him quit claim the house to me because I don't think
he is going to be able to work any longer to pay the student loan. Will this
appear as some type of fraud for hiding assets? Also, is it safe to do the quit
claim ourselves by getting the forms off the internet? Any advice you could
give would be greatly appreciated.
A: First things first. If you haven’t already done so, you should make
sure that you and your partner have written valid wills, that you have each
designated a person to take care of each other’s assets and affairs in
case of a long term illness or accident, and that you each have designated someone
to make medical decisions on your behalf.
An estate planning attorney should be able to help write a valid will, a durable
power of attorney for financial matters, and a durable power of attorney for
health care. While these estate planning components are important for everyone
to have, they’re vital when two people share their lives and assets but
are not married.
Now, let’s think about your ethical dilemma. It seems that you are aware
of the fact that if your partner transfers his assets to you and then is unable
to pay his debts, you may be participating in a fraud and to that degree you
are correct. Each person is responsible for his or her own debts and to the
extent any of us has assets that can be used to pay these debts, we must use
all or some of the assets for that purpose.
Creditors have a legal right to pursue your partner for his debts when and
if he stops paying his obligations. They do not have a right to pursue you,
as long as you are not married to your partner.
Depending on whether a person files for bankruptcy or not, different laws will
apply to determine whether a transfer of assets from someone in debt would be
considered a fraudulent conveyance.
Generally, if you transfer assets (including a home or money) to a third party
that is intended to deprive creditors of a valuable asset, it would be considered
a fraud. But there may be other circumstances that cloud the issue.
For example, parents might transfer ownership of their home to their kids or
give gifts of money to their grandkids. Even though the parents have debts and
that transfer of cash or property causes the overall assets of the parent to
diminish, the transfer may be okay if the parents continue to pay all of their
bills as they come due. If the parents run into financial trouble seven years
later, it’s unlikely a court would require the transfer of cash or property
to be unwound.
In some cases transfers of assets within a year of filing for bankruptcy will
cause a problem to both the debtor and the recipient of the asset. In other
cases, such as with Medicare costs, the transfer of assets within three years
to five years are often reviewed -- and reversed.
So it isn’t easy to figure out whether transferring the house into your
name would be fraud or not. And, your particular case has some interesting issues.
Your money was used to pay off your partner’s debt. As part of that transaction,
your partner could have transferred his interest in the home to you, but only
if the interest in the home equaled the amount of his share of the loan. While
there are many factors to consider, you can try to determine what your share
and your partner’s share of the equity in the home was prior to paying
off the mortgage.
If you paid most or all of the expenses in the home, including the mortgage
payment, taxes and insurance payments, it’s possible that your partner
owes you a considerable amount of money for what he should have contributed
to the property over time.
If he does owe you this money and you have kept good records, including copies
of your tax returns indicating that you paid for these expenses and took the
deductions for them, you may be able to claim that the transfer of the home
from your partner to you when you paid off the mortgage was merely taking the
amount of money he owed you into account.
If your partner files for bankruptcy in the near future, this argument may
not withstand a court challenge, but the longer the period of time, the better
off you will be.
Stay away from Internet sites that claim to offer forms that will transfer
title to property. Many “legal” documents on the Internet are so
generic that they may not be acceptable in the county in which your home is
located. For a few hundred dollars, you might be able to pay a local attorney
to prepare the documents for you.
If you’re searching for a less expensive way to get the right documents,
talk to a representative from one of the many title companies located in your
area. In some cases, title companies have forms that you may be able to use.
Or, you may be able to have someone at the Recorder of Deeds office help you
complete the form.
Keep in mind that if the form is completed wrong or you fail to fill it out
correctly, your deed may be invalid and the transfer of ownership may be invalid.
So make sure you get it right the first time.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce
R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your
Home Faster and For More Money In Any Market. If you have questions for
them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022
or contact them through Ilyce’s website www.thinkglink.com