Can we file a quit claim deed to get ownership of a property with a line of credit out on it?

A fellow caregiver asked...

We have a quit claim signed and notarized from a deceased parent. There is an outstanding line of credit loan for $40,000. There are no other assets involved. Can we avoid the expense of probate court and just file the quit claim deed to get ownership of property?

Expert Answer

You ask if you can file a quit claim deed signed by a deceased parent "with an outstanding line of credit loan" of $40,000. You can certainly file the deed and have it recorded, assuming the deed was properly executed and notarized by the deceased parent of your state. And there is no requirement in any state law that I know of that a probate proceeding must be filed whenever someone dies. But... here come the Buts.

Was the $40,000 line of credit extended on the real estate in question?. If so, the lender probably has a lien against the property, or the right to obtain one. Next, whatever the line of credit was given on or for, did the lender take a security interest in the real estate? If so, that security interest goes with the property, no matter who the owner is. Finally, could the real estate transfer to you be considered a fraud against creditors if that transfer were used, or tried to be used, to escape the $40,000 owed? I think that it could be. So, not knowing all the facts or the legal realities, I suggest that you avoid probate, and pay off the $40,000. Of course, if the equity in the real estate is worth less than $40,000, then I'd simply turn the real estate over o the creditor. You're not liable for any difference