Let's understand the battle of Grantor vs. Grantee in Real Estate
Grantor vs. Grantee in real estate is two terms that you’re likely to come across when dealing with real estate transactions. To understand the difference between the two, you’ll have to look at the broader context of the situation. So what exactly does Grantor vs. Grantee in Real Estate mean? And how do they apply to the process of buying and selling homes? When it comes to estate planning, most people think about trusts, irrevocable wills, and other complex legal structures. But real estate also plays an important role for many families.
If you own real estate that you want to leave to someone in your will, you may have heard the terms “grantor” and “grantee” when discussing your options with an estate lawyer or financial advisor. These are relatively uncommon terms in everyday conversation but fairly common among estate planning documents. So what do they mean? In this article, we’ll explain the differences between Grantor vs. Grantee in real estate as well as their implications for your will or trust.
What’s a Grantor?
A grantor is a person who creates an estate planning trust. In many cases, the grantor is also the person who transfers the title to the real estate in question to the trust. In some cases, however, the grantor may transfer the real estate directly to the trust, retaining a life estate. A life estate is a limited interest in real estate that lasts for the grantor’s life. Life estates are relatively rare compared to the number of trusts that own real estate. The grantor’s life estate is usually a limited interest in the sense that the trust owns the remainder interest.
What’s a Grantee?
A grantee is a beneficiary of a trust who has been given title to the trust’s real estate, either directly or through a life estate. If the grantor transfers title to the real estate directly to the trust, then the grantor may be both the grantor and the grantee. If the grantor transfers title to the real estate to the trust while retaining a life estate, however, then the grantee will own a life estate while the grantor owns the remainder interest.
When Are You Both at the Same Time? Alternatively, When Are You Either Only a Grantor or Only a Grantee?
To understand the assessment of Grantor vs. Grantee in Real Estate, let’s understand their major differences. In the majority of estate plans, the grantor is one person, the grantee is another person, and you can’t be both at the same time. There are, however, a few situations where you can be both at the same time. – If you borrow money from an individual or trust and promise to repay it, the person or trust who provided the funds will be named as a “co-grantee” along with you in the trust deed that secures the loan. – If you own a piece of real estate and put it into a trust for the benefit of your spouse and children, you will be a “co-grantor” along with your spouse. This means that you get to retain an interest in the property even after it is put into the trust. – If you own a business and put it into a trust, you will be a “co-grantor” along with your spouse.
What Happens When You’re Currently a Grantor and Become a Grantee in Your Will?
If you are currently a grantor and become a grantee in your will, then you are simply replacing one life interest with another. Your new life estate will apply to the remainder interest that you previously retained, giving you the same level of control over the trust that you had over the real estate before. This may sound simple, but there are a few important points to keep in mind. First, you will be transferring the title to the real estate to the trust while retaining a life estate. Second, the trust may include a provision that allows you to buy out the surviving beneficiaries at some point in the future.
What Happens When You’re Currently a Grantee and Become a Grantor in Your Will?
If you are currently a grantee and become a grantor in your will, then you are simply exchanging one life estate for another. Your new life estate will apply to the remainder interest that the trust previously owned, giving you the same level of control over the real estate that the trust previously had. This may sound simple, but there are a few important points to keep in mind. First, you will be transferring the title to the real estate to the trust while retaining a life estate. Second, the trust may include a provision that allows the surviving beneficiaries to buy you out at some point in the future.
Grantor vs. Grantee in Real Estate: FAQs
Are grantors and grantees two different types of entities in real estate?
What does a grantor give up when they become a grantor in real estate?
When is a person considered a grantee?
Can you be both a grantor and a grantee at the same time?
Does having power of attorney imply property ownership?
Bottom Line
The nature of the relationship between a Grantor vs. Grantee in Real Estate can differ according to the type of real estate transaction and the deeds involved. Being a grantor or grantee in a real estate trust has significant implications for your will or trust. If you are a grantor, you will need to make sure that your trust contains a provision that allows you to buy out the trust beneficiaries if you ever want to get the property back. If you are a grantee, you will want to make sure that your trust includes a provision that allows you to buy the grantor out if you ever want to obtain full ownership of the property.