# Understanding Voluntary Conveyance: Process, Benefits, and Risks

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

### Key Takeaways

*   Voluntary conveyance is an elective transfer of title from one party to another without adequate compensation, often requiring a legal explanation for the transfer.
*   Some borrowers facing financial difficulties may choose voluntary conveyance of property to a lender to avoid default and its negative impact on their credit history.
*   Transferring property to evade creditors is deemed illegal and classified as fraudulent conveyance, which can lead to civil legal actions.
*   When real property is donated to a charitable organization, the transfer must be managed carefully to ensure tax benefits, requiring the organization to have a valid IRS tax exemption.
*   Property can be transferred to descendants as a gift or through a will, though nominal consideration might be required, and these transfers could be scrutinized by creditors.

## Delving Into 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. Voluntary conveyance can take several different forms, depending on the reason for the conveyance.

## How Voluntary Conveyance Can Prevent Default

Some delinquent borrowers will voluntarily convey the property to the lender in order to avoid [default](https://www.investopedia.com/terms/d/default2.asp) and the effects it has on the borrower’s credit history. The lender can accept conveyance of [title](https://www.investopedia.com/terms/t/title.asp), 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.

## Identifying Fraudulent Conveyance Tactics to Sidestep Creditors

In most states, it is illegal to transfer property to a third party in order to avoid [creditors](https://www.investopedia.com/terms/c/creditor.asp)’ claims on that property. This is known as a [fraudulent conveyance](https://www.investopedia.com/terms/f/fraudulentconveyance.asp), 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.

## Leveraging Voluntary Conveyance for Charitable Donations

Donors wishing to convey real property to a charitable organization must carefully manage the issue of consideration to ensure the desired [tax deduction](https://www.investopedia.com/terms/t/tax-deduction.asp). 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.﻿﻿

## Transferring Property to Descendants Through Voluntary Conveyance

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](https://www.investopedia.com/terms/d/deed.asp) 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.

> **Article Sources**
>
> 1.  Internal Revenue Service. "[Publication 526: Charitable Contributions](https://www.irs.gov/pub/irs-pdf/p526.pdf)," Pages 8-13. Accessed Nov. 26, 2020.