Colorado Beneficiary Deeds

Posted about 4 years ago. Applies to Colorado, 3 helpful votes

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The BENEFICIARY DEED--an effective tool for small estates. Since 2004, Colorado has had a new estate planning tool--the Beneficiary Deed, which is sometimes called a "transfer on death deed" and is referred to in this article as a "BD." It works to transfer title to real property to a named Beneficiary upon the death of the owner without the need for probate of a will or use of a trust. Like any other deed, the BD is signed and notarized by the owner and recorded with the county clerk where the property is located. During the lifetime of the owner the Beneficiary named in the BD has absolutely no legal or enforceable interest in the property and may or may not know about the existence of the BD. More importantly, even after recording, the owner maintains the power to sell or mortgage the property (including use of a reverse mortgage) or to revoke or change the BD without the consent or knowledge of the named Beneficiary. The use of a BD greatly benefits small estates. Before the availability of the BD, the decedent's last will and testament had to be presented to court for probate and a personal representative (or executor) appointed by the court in order to convey title to the beneficiary named in the will. Also, if an owner placed their home in a living trust in order to avoid probate, lenders would often refuse to refinance a loan on the property unless the trustee made a transfer of title back to the original owner. Use of the BD eliminates both problems. Before BDs were available, an owner often would attempt to avoid probate by putting title to their property in joint tenancy with a son or daughter or other relative. Afterword the owner couldn't sell or mortgage their own property, without the agreement and cooperation of their relative and creditors of the relative could legally assert claims against the property. Similarly the relative was in a position to sell their interest in the property to someone else without the owner's knowledge or permission. The BD avoids all of these complications. One minor drawback to the BD is that an owner can't receive Medicaid benefits with a BD in place on their property. So if Medicaid assistance becomes needed, the owner can be required to revoke the BD. Also, if a named Beneficiary predeceases the owner, the BD is no longer effective, unless a secondary beneficiary was also named in the BD or a new BD is executed and recorded. For these and other reasons not fully covered here, it can be dangerous to attempt to make use of a BD, without consulting an attorney who is familiar with their use and has a full understanding of the needs and expectations of the owner of the property. Even so, the cost of consulting an attorney to prepare a BD, where appropriate, is considerably less than having to probate a decedent's will, and much safer than loosing control of your own property by a joint tenancy transfer to a relative who proves to be uncooperative or is being pursued by creditors. (C) 2010 John W "Jack" Weaver, Attorney Greenwood Village, Colorado

Additional Resources

Colorado Revised Statutes 15-15-401 et seq

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