Inherited property: Transfer on Death or Quit Claim: Best for enhanced basis ?

[genelawson566]

Very confusing situation for me.  Grandpa passed away in 2004 , Grandma continued to live in their home.  In 2007 Grandma, for whatever reason, decided to create a Quit Claim deed naming her two children as recipients, however, the Quit Claim was never recorded and Grandma continued to live in the home until her death in 2023.  Grandma, while still living, also created a Transfer on Death instrument in 2019 for the house to the two kids and this TOD was recorded with the county.  

I'm thinking as far as cost basis of the now-inherited home, probably best to forget about the Quit Claim and just rely on the TOD so that the new basis would be the value of the home at the time, 2023, of Grandma's death, right ?  Wrong ?

Just out of curiousity, had Grandma actually recorded the Quit Claim back in 2007 and moved out, how would the basis of the been determined for the sale when the kids eventually sold it?

Thank you !

[Mike9241]

see a lawyer since state law governs. For a QCD to be valid all that may be needed is the grantor's signature and notarization but not recording. Nor is there any requirement that the grantor move out. 

[tagteam · Accepted solution]

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@genelawson566 wrote:

.....probably best to forget about the Quit Claim and just rely on the TOD so that the new basis would be the value of the home at the time, 2023, of Grandma's death, right ?

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Yes but, as @Mike9241 stated, you should consult local legal counsel.

TOD deeds are not valid in all states but assuming the TOD deed is valid, it would take precedence over the prior QCD as the TOD deed was recorded (which is considered delivery of the deed (and acceptance if beneficial)) whereas the QCD was never delivered, which is one of the requirements for a deed to be valid.

[Critter-3]

TOD is far superior if legal ... ask a local attorney.

[genelawson566]

I found a couple of sites which stated in order for a QCD to control, it must be "delivered" aka "recorded" prior to the death of the property owner.  Exception would be if the Will provided for recording after death.   One reputable site advised of a common scam by which a QCD is signed by the grantor and grantees and notary but not attempted to be recorded until after the grantor dies.  Exactly my situation/question.  The site says, nope, can't do it.  Not legal.  

[genelawson566]

Coming to the same conclusion, TOD is superior in that it probably will avoid probate and FMV of the property will be the basis for the grantees.  I live in Washington State, TOD is available. Thanks.

[tagteam]

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@genelawson566 wrote:

I found a couple of sites which stated in order for a QCD to control, it must be "delivered" aka "recorded" prior to the death of the property owner. 

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"Delivery" in this sense is a term of art; it does not require recordation. Regardless, it appears as if the QCD was never delivered and, even if it were, the TOD deed would take precedence since it was executed and recorded at a date subsequent to the QCD.

[Mike9241]

My point is if the QCD is legal, the TOD may not be because she no longer owned the property. 

[tagteam]

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@Mike9241 wrote:

My point is if the QCD is legal, the TOD may not be because she no longer owned the property. 

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That would be correct. Regardless, the QCD was apparently never "delivered" (constructively or otherwise) and there was no will referring to that deed, so it would not be valid (a classic example of a "pocket deed").