Look a “Gift Deed” in the Mouth - Watch Your Language When Transferring Real Property as a Gift.

Most practitioners and others in the real estate business know what a quit claim deed, a limited warranty deed, a general warranty deed and a fiduciary deed are (See Ohio Revised Code §5302 et. seq. for the statutory language in Ohio required to create the same). While a “gift deed” has no required statutory form, failure to use “required magical language” has recently resulted in two disgruntled, former property owners who thought they had a gift that couldn’t be taken back.

In Dassel v. Hershberger, 2010 - Ohio - 6595 (OH CA 4), Jonathan and Mary Hershberger received a tract of land that they thought was a gift from elderly sisters Ruth and Rosemary Dassel. The Hershbergers were good friends of the Dassels and did odd jobs around their house for many years. In 2008, one of the Dassel sisters (Ruth) became terminally ill and was hospitalized. Five days after Ruth came home from the hospital, in need of full time care, the Hershbergers were given a deed conveying approximately 119 acres of property that was situated in-between the Hershbergers’ home and the Dassels’ home. No money had exchanged hands between the parties and while the Hershbergers testified that they promised to try and take care of the sisters for the rest of their lives, they denied making this promise in exchange for the property. Rather, they claimed the property constituted a gift for all of the past home improvements they made to the Dassel house. The Dassels, on the other hand argued that there was no intent to make a gift; they intended to transfer the property in exchange for the Hershbergers’ promise to take care of the Dassels until they died.

The Hershbergers did in fact move into the Dassel house, made improvements to the house, and initially cared for Ruth Dassel when she returned from the hospital. The stress of providing round the clock care, however, became too much for the Hershbergers, who moved out after a month. Shortly thereafter, the Dassels sued the Hershbergers for breach of contract and demanded rescission of the deed and return of the property.

The Fourth District Court of Appeals affirmed the trial court’s decision in favor of the Dassels. The court held that the deed transfer was not a gift, rather, it was a contract of care and maintenance that the Hershbergers breached, entitling the trial court to rescind the transfer as an equitable remedy for the breach. The Fourth District simply looked at the Deed on its face, which stated “for valuable consideration paid”, and following Ohio precedent held that when a deed contains such a recital, it should be construed as a deed of purchase, and no extrinsic evidence may be permitted to show, instead, it was intended as a gift. Actually, extrinsic evidence helped support the court’s holding that the transfer was not a gift, as the Statement of Reason for Exemption from Real Property Conveyance Fee indicated no conveyance fee was due because the transfer was “ to or from a person when no money…is paid…and the transaction is not a gift”. Perhaps the intent really was to transfer the property as a gift, but the Hershbergers wanted to avoid the conveyance fee (as the conveyance fee exemptions regarding gifts are only applicable to gifts to charities, and gifts between spouses, children, heirs or trust beneficiaries, trustees...). If so, one important lesson from this case is that avoiding the conveyance fee should not be the overriding factor in property transfers.

However, the overriding moral of this story? “When construing a deed, a court must examine the language contained within the deed, the question being not what the parties meant to say, but the meaning of what they did say, as courts cannot put words into an instrument which the parties themselves failed to do”. McCoy v. AFTI Properties, Inc., Franklin App. No. 07AP-713, 2008-Ohio-2304 at Par. 8. In other words, “Say what you mean, precisely, or a judge will tell you what you meant”.

If a transfer of real property by gift is truly intended, the words “Gift Deed” should be the heading. More important, the consideration should be “for love and affection”; not, “for valuable consideration”. Alternatively, if the consideration for the transfer is for support and maintenance of the Grantors for the rest of their lives, those terms should be spelled out in the deed (better yet, the specific provisions should be detailed in a contract).

ps. Tax, gift, estate and other laws and considerations should be carefully evaluated when deciding whether or not to transfer property as a "gift". Professional tax and legal advice is strongly recommended prior to any such transfer.

11 comments :

Rental Property Australia said...

Thanks for sharing great info on "Look a “Gift Deed” in the Mouth - Watch Your Language When Transferring Real Property as a Gift" with us.

Mortgagefit Community said...

Some great information about the gift deed. For more information on related subject, you can join MF Forums.

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New house in new york said...

Yes, be careful in what you can say. Think first before telling something. Especially in talking about properties.

George E. Bourguignon, Jr. Attorney at Law said...

This case shows that real estate can be very tricky; common sense is not necessarily practice.

Deed Copy said...

I appreciate your effort for supply this type of vital information and sure I'll come again across your blog when you will share something new.

Jim said...

We got stung badly by this, thinking that we were being smart when actually we were not! We had to seek help from a conveyancing service to resolve the mess we ended up in!

Muhammad Zahid Iqbal said...

Informative one and decent Article about real estate.
Find it so much helpful and enjoy reading.
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Unknown said...

I have a question. 2 individuals embezzled funds from my estate account. I was awarded a deed of trust against a home owned by the brothet and sister that stole from me thru a court settlement. the 2 owners were both tenant in common. They were to pay me within 6 months, and if they failed to do that they were to sell the home. One of the 2, eddie, wanted to sell the home, but his sister didnt. Both people were family members. Eddie felt bad about what he had done, and agreed to give me his half share in the home. I didnt want to accept it unless he agreed that the deed of trust to me remained on the property. I knew if i was ever going to be able to get the sister to sell it would take a lot of momey and lawyer fees. He verbally agreed to not consider the deed of trust paid and the deed was recorded as a grant deed recorded as a gift deed because of this. I filed the document and told the other owner about the agreement. She argued that the deed of trust no longer existed because i was an owner.
I explained to her the covenant between her brother and i and she never followed thru with getting a loan to sell the home or selling it as the deed of trust called for. A few years later i decided it was best to include the covenants in a correcting deed to vover my butt. The brother signed a correcting deed stating that my interest as a lender did not merge with my interest as a lender and that it was to remain an enforceable contract until paid in full. Now the sister has forced the sale of the home and requested to quiet title to my deed of trust saying she wants it considered paid, lying and saying i was given the 1/2 ownership interest to pay for her and her brothers debt and also that my intereat as a lender merged. Is this true. Will a correcting deed hold up in court with the inadvertently left off non merger language?

Jenny Kiras said...

I have a question. 2 individuals embezzled funds from my estate account. I was awarded a deed of trust against a home owned by the brothet and sister that stole from me thru a court settlement. the 2 owners were both tenant in common. They were to pay me within 6 months, and if they failed to do that they were to sell the home. One of the 2, eddie, wanted to sell the home, but his sister didnt. Both people were family members. Eddie felt bad about what he had done, and agreed to give me his half share in the home. I didnt want to accept it unless he agreed that the deed of trust to me remained on the property. I knew if i was ever going to be able to get the sister to sell it would take a lot of momey and lawyer fees. He verbally agreed to not consider the deed of trust paid and the deed was recorded as a grant deed recorded as a gift deed because of this. I filed the document and told the other owner about the agreement. She argued that the deed of trust no longer existed because i was an owner.
I explained to her the covenant between her brother and i and she never followed thru with getting a loan to sell the home or selling it as the deed of trust called for. A few years later i decided it was best to include the covenants in a correcting deed to vover my butt. The brother signed a correcting deed stating that my interest as a lender did not merge with my interest as a lender and that it was to remain an enforceable contract until paid in full. Now the sister has forced the sale of the home and requested to quiet title to my deed of trust saying she wants it considered paid, lying and saying i was given the 1/2 ownership interest to pay for her and her brothers debt and also that my intereat as a lender merged. Is this true. Will a correcting deed hold up in court with the inadvertently left off non merger language?