WHAT IS 'Voluntary Conveyance'

Voluntary conveyance refers to an elective transfer of title from one individual to another without adequate consideration. Consideration refers to compensation which is expected in return for the property. Without it, the conveyor should be prepared to offer a legal explanation for the transfer.

BREAKING DOWN 'Voluntary Conveyance'

Voluntary conveyance, like any sale of real estate, is a form of voluntary property transfer. Voluntary conveyance is distinguished, however, by the lack of adequate consideration given to the seller. Consideration is a legal term that refers to the compensation given in exchange for the property in question. Following are some common scenarios for voluntary conveyance.

Voluntary Conveyance to Avoid Default

Some delinquent borrowers will voluntarily convey a property to the lender in order to avoid default and the effects it has on the borrower’s credit history. The lender can accept conveyance of title, then sell the property. The lender may then have the right to file an insurance claim to recover any remaining deficiency, depending on local laws. In making such a conveyance, the borrower avoids the stigma of default.

Fraudulent Voluntary Conveyance to Avoid Creditors

In most states it is illegal to transfer property to a third party in order to avoid creditors’ claims on that property. This is known as fraudulent conveyance, and creditors can pursue their claim on the property via civil legal action. Penalties depend on whether the court rules that the fraud is actual, that is intentional, or constructive, which describes a de facto fraudulent transaction.

Voluntary Conveyance for Charitable Purposes

Donors wishing to convey real property to a charitable organization must carefully manage the issue of consideration to ensure the desired tax deduction. The receiving organization must have an IRS tax exemption in good standing, and the transaction should be properly vetted by independent appraisers and tax attorneys. With these safeguards in place, consideration comes in the form of a tax deduction.

Voluntary Conveyance to Descendants

A property owner can convey real estate to a descendent as a gift or via a last will and testament. Many states allow for a gift deed to change hands, listing a nominal consideration which could be a small monetary amount or simply love and affection. Such a gift can be considered suspicious when creditors seek possession of the property to fulfill claims on the property.

Involuntary Conveyance Is the transfer of real property without the owner’s consent. This can take place in cases of condemnation due to neglect or natural disaster, failure to pay taxes, or the death of a property owner with no direct heirs. In such cases, the state will take custody of the property.

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