When a married couple divorces, their assets are divided. The assets may be divided as agreed upon by the parties in a settlement agreement that is later approved by the court. Alternatively, the court may divide the assets as part of a process called equitable distribution. Either way, the court will issue an order specifying who gets what.
The order (divorce decree) granting the divorce usually directs the couple to transfer assets as described in the order. It does not, however, actually transfer the assets. The couple must take whatever steps are necessary to transfer the assets in accordance with the divorce order. For real estate, these steps involve the use of a deed to transfer real estate to the ex-spouse.
There are several types of deeds that could be used to transfer real estate to an ex-spouse. These deeds have different names—quitclaim deed, warranty deed, special warranty deed—that depend on the warranty of title included in the deed. In a divorce proceeding, most spouses will not want to provide a warranty of title to the other spouse. Because of this, a husband or wife will often use a deed that makes no guarantees regarding title. In states like California and Florida, the parties may use a quitclaim deed to transfer the property without warranting title. In other states, like Texas, a deed without warranty may be used.
To remove an ex-spouse from the deed, the spouse who will not keep an interest in the property must sign a deed conveying the entire property to the spouse that will keep the property. It is important that the entire property be included in the deed. Some ex-spouses make the mistake of transferring only a one-half interest in the property thinking that this will be sufficient to transfer the ex-spouse’s one-half interest. But this is not the way that co-ownership of real estate works. When spouses jointly own property, they are each considered to have an interest in the entire property. To remove an ex-spouse, the deed should transfer the entire property—not just a one-half interest—to the spouse that will keep the property.
Removing an Ex-Spouse from the Mortgage or Deed of Trust
When couples purchase property, they usually finance it with a bank. The bank loan is secured by the property. In some states, the document that secures the property is called a mortgage. In others, it is called a deed of trust (which many people understandably confuse with a deed).
A mortgage or deed of trust may not match the title to the property. This can occur, for example, when both spouses are originally included in the loan documents, but only one spouse receives the property in the divorce. In this scenario, one spouse will own the property, but both spouses could remain responsible for the loan. This puts the spouse that does not have an interest in the property in the unenviable position of being partially responsible for the debt associated with the property. Failure to make payments could be reported to the credit bureaus and appear on that spouse’s credit report.
When an ex-spouse is removed from the title to the property, he or she will usually also want to be removed from the loan. This protects the ex-spouse (and his or her credit) from responsibility if the former spouse does not make payments on time or if the mortgage is foreclosed.
It is important to recognize that deeding the property to an ex-spouse does not remove that spouse from the mortgage. The deed deals only with title to the property. To remove an ex-spouse from a bank loan, the lender must agree to release the ex-spouse from the loan. If presented with a divorce decree and a quitclaim deed, many lenders will remove the ex-spouse and leave the loan in the name of one spouse only. This is true even for loans that are underwritten by the Veteran’s Administration (VA loans) or other governmental organizations.
Although it is reasonable for an ex-spouse to expect to be released from the loan at the time that he or she releases the property, some spouses go a step further and try to require additional payment before they will cooperate in the transfer and/or release of the loan. In many cases, these types of unreasonable demands violate the divorce decree and could result in legal liability. In this scenario, the spouse that is seeking cooperation may seek to have the uncooperative spouse declared to be in contempt of court for ignoring the court order.
Frequently Asked Questions about Quitclaim Deeds and Divorce
Many divorcees have questions about how to use quitclaim deeds to straighten out ownership of real estate after the divorce. The following is a list of frequently-asked questions and answers.
How do I remove myself or my ex-spouse from title to our former marital home?
To remove a person from title to real estate, you will need a deed. A deed transfers property from one or more person to one or more other persons. In the divorce contexts, both spouses will sign a deed transferring the former marital property to only one of the ex-spouses. The spouse that receives the property will continue to own the property. The other spouse has no interest in the property.
What type of deed should I use to transfer property to or from an ex-spouse?
There are several different types of deed that you could use. In most cases, divorcing spouses will not want the liability associated with making a warranty of title. And since the property was formerly owned by both spouses, it is usually reasonable to transfer title without making any of these warranties. For these reasons, most ex-spouses transfer property to each other by quitclaim deed (or, in Texas, a deed without warranty).
Does a quitclaim deed remove or release me from the loan?
No. As stated above, a quitclaim deed deals only with title to the property. Property ownership is different from lender liability. Property ownership is determined by the deed that is filed in the land records. Your liability to the lender is determined by your loan documents and your mortgage or deed of trust, which is also filed in the land records.
It is possible for you to be removed from the deed without being removed from the loan. This often happens with a divorcing couple signs a quitclaim deed without requiring, as a condition of the transfer, that the lender release the spouse that no longer owns the property. In this scenario, you could be responsible for debt on property that you do not own. The lender could still sue you if your ex-spouse does not make payments on the loan.
What should I do to get removed from the loan to the property?
You should obtain a release from the lender. Assuming your spouse is creditworthy and that you are not in default on the loan, most lenders will release you from the loan. You should contact your lender to find out about any specific requirements before you sign the quitclaim deed to the property. You should also consult with your divorce attorney to be sure that your divorce decree and/or settlement agreement contains language that conditions your transfer of the real estate on your release from the loan documents.
What should I do if I have already signed a deed but I am still listed on the loan documents?
First, contact your lender to find out if the lender will simply release you from the loan. You should provide your lender with the final divorce decree and any related settlement agreement. You should also provide the lender with a copy of the quitclaim deed that has already been signed and filed in the land records. With this information, the lender should be willing to release you from the loan.
If the lender is unwilling to release you, contact the divorce attorney that handled the divorce. You should ask whether the divorce documents required a lender release as a condition to the property transfer. You should also ask whether the divorce documents included an indemnity clause to protect you from obligations of your ex-spouse. If your ex-spouse has defaulted and his or her creditors are now looking to you, this indemnity clause could allow you to take legal action against your ex for breaching his or her obligations.
When should I sign a quitclaim deed transferring property to my ex-spouse?
The deed is used to transfer the property as required by the divorce documents. You should only sign a quitclaim deed once there has been a final divorce decree and/or a settlement agreement approved by the courts. You may also require, as a condition of your transfer of the property to your ex-spouse, that you be fully released from the mortgage or deed of trust associated with any loan on the property.
Can my ex-spouse enter our home after he or she has signed a quitclaim deed transferring the home to me after our divorce proceeding?
No. Once the divorce is final and the home has been transferred to you by quitclaim deed, your ex-spouse is no longer an owner and has no right to enter the property other than by your invitation and consent.