What Is Voluntary Conveyance?
Voluntary conveyance refers to an elective transfer of title from one individual to another without adequate consideration. Consideration refers to the compensation which is expected in return for the property. Without it, the conveyor should be prepared to offer a legal explanation for the transfer.
Embrace the Concept: Voluntary Conveyance
Voluntary conveyance, similar to other real estate transactions, involves a voluntary property transfer. What sets it apart is the absence of adequate consideration given to the seller. Consideration is the term used for the compensation expected in return for the property in question. Let’s explore some common scenarios where voluntary conveyance is applicable.
Voluntary Conveyance to Avoid Default
Some delinquent borrowers voluntarily convey the property to the lender to avert default and mitigate the negative impact on their credit history. Upon accepting the conveyance of the title, the lender can then sell the property. Depending on local laws, the lender might be entitled to file an insurance claim to recover any remaining deficiency. This process allows the borrower to dodge the stigma of default.
Steering Clear of Fraudulent Voluntary Conveyance
Across numerous states, transferring property to a third party to avoid creditors is illegal. This act, known as a fraudulent conveyance, allows creditors to take civil action to claim the property. Penalties for fraudulent conveyance can vary, depending on whether a court rules it as actual (intentional) or constructive (unintentional yet fraudulent).
Voluntary Conveyance for Charitable Purposes
Philanthropists looking to convey real property to a charitable organization must carefully handle the aspect of consideration to ensure a valid tax deduction. The recipient organization must have a valid IRS tax exemption, and the transaction should undergo rigorous evaluation by independent appraisers and tax attorneys. With these precautions, consideration is factored in as a tax deduction.
Sharing the Wealth: Voluntary Conveyance to Descendants
A property owner has the option to convey real estate to a descendant either as a gift or through a last will and testament. Many states permit a gift deed that potentially lists nominal consideration which could be minimal monetary value or simply love and affection. However, this act can be viewed with suspicion if creditors pursue the property to satisfy claims.
Understanding Involuntary Conveyance
It’s also essential to differentiate voluntary conveyance from involuntary conveyance, an occurrence where property is transferred without the owner’s consent. This can happen due to causes like condemnation from neglect or calamity, tax defaults, or when a property owner passes away without direct heirs.
Related Terms: Title, Default, Creditors, Fraudulent Conveyance, Tax Deduction, Deed
References
- Internal Revenue Service. “Publication 526: Charitable Contributions”, Pages 8-13.
