A fiduciary deed is a type of legal documents used for real estate property rights transfer. We describe its main properties, how to fill it, when to use it, and risks applied to consider.
With a fiduciary deed, a property can be legally conveyed to a new owner. But contrary to all other deeds, this form is not signed by the current owner of the property. A trusted representative of the owner signs it on his/her behalf.
Neither fiduciary nor quitclaim deed gives guarantees against possible encumbrances.
When a property owner signs a quitclaim deed, he or she transfers the rights to the property they might have. A trusted representative of the owner signs a fiduciary deed and transfers the rights the owner might have.
Suppose the owner of a house wants to transfer her summer house to her grandson. She issues a quitclaim deed on behalf of him. If she forgets to pay last year’s property tax, her grandson, as a new owner, will be asked to pay the debt.
Suppose the grandmother is in a coma in a hospital after surgery and cannot sign anything herself, but she has appointed her daughter as her trustee in advance. The daughter can transfer the house to her son with a fiduciary deed if she believes that she acts in her mother’s best interests. Still, if the grandmother forgets to pay the property tax, the grandson will be held liable.
There are situations when the owner of a property does not sign property-related documents himself/herself:
In all these cases, a fiduciary can sign a deed on behalf of the owner if he or she believes the transfer of real estate is in the owner’s best interests.
This type of property conveyance is not the best option for a beneficiary to the deed since it does not give any guarantees against possible encumbrances. There is an additional risk that the trusted person’s authority or intentions could be challenged in a court, causing disruption to the deed.
In the above example, the grandmother, if she recovers from her illness, or another family member can claim that it was never her intention to convey the house to the grandson and the trustee was well aware of it.
The forms of legal deeds vary from state to state, and the correct form for each one can be easily found online.
The typical fields are:
A fiduciary is a person who signs a deed on behalf of the owner of some asset. A fiduciary can act on behalf of a diseased person as an executive of their will. It could be an appointed trustee of a particular person. A guardian of a minor can sign a deed on his or her behalf too.
A fiduciary deed legitimately conveys property, but it does not protect a new owner from legal and financial risks. Additionally, a fiduciary’s intentions and authority can be challenged, but it is the fiduciary who carries the risks of violation of the owner’s will.
Suppose the granddaughter in the above example files a complaint about transferring the summer house against her grandmother’s will, and the court agrees with the granddaughter. The fiduciary will be held responsible, not the beneficiary to the deed.
A last will is a legal document in which a person states how his/her property has to be distributed upon his/her death and appoints an executor of the will. After the person’s death, the property goes through probate. During probate, the validity of the will is studied by the court. When it is determined, the executor transfers the property of the deceased person to his/her heirs with a fiduciary deed.
Suppose the grandmother died in the hospital. In her will, she asked to give the summer house to her grandson and distribute her other property between her daughter and her granddaughter. She appointed the granddaughter as her executive. The granddaughter will be managing the property during the period of probate. And when it is over, she will transfer the property to her mother, brother, and herself with fiduciary deeds.