Beneficiary deeds can help avoid the need to probate small estates. Under Colorado’s simplified probate process, Colorado's probate code allows the beneficiaries of an estate to collect the estate assets by using a small estate affidavit, rather than a going through a full probate procedure, if the estate consists only of personal property with a value not exceeding $64,000.00 in 2016.
No such procedure is available in Colorado to clear title to real property at death. However, if a beneficiary deed has been filed prior to the death of the property owner, marketable title to the beneficiary can be transferred after death, without the need for probate administration. The beneficiary deed transfers the property outside of the estate and the value is not included in the estate.
Colorado’s beneficiary deed statute carefully defines the interest of the beneficiary in order to protect the rights of other parties interested in the property. First, during the lifetime of the owner who grants the beneficiary deed, the beneficiary has no legal right or interest to the property whatsoever, and the owner retains full power and authority with respect to the property without the need to notify or obtain the consent of beneficiary for any purpose. The beneficiary deed also provides an alternative method to transfer real property to an owner's trust at death, avoiding issues with lenders that might occur when mortgaged property is transferred to a trust during an owner's lifetime.
Under Colorado’s beneficiary deed law, the beneficiary deed must be recorded before the death of the owner. If not recorded before the death of the grantor, the property will then eschew to the deceased’s estate. A beneficiary deed can be revoked during the owner's lifetime by recording a revocation of the deed, or by recording another beneficiary deed executed after the revoked deed. A subsequent beneficiary deed revokes all beneficiary designations in their entirety, even if the subsequent deed doesn't convey the owner's entire interest in the property. At the owner's death, the most recently executed beneficiary deed or revocation of all beneficiary deeds or revocations recorded before the owner's death controls. It is important to note that if there is an effective beneficiary deed in place at the owner's death, the owner's Last Will does not control disposition of the real property, regardless of the date of the Last Will.
An owner of an interest in real property in joint tenancy may execute and record a beneficiary deed, but the deed is only effective if the joint tenant-owner is the last joint tenant to die of all the joint tenants. If the joint tenant-grantor is not the last joint tenant to die, the beneficiary deed is not effective at his or her death, and the grantee-beneficiary does not become a joint tenant with the surviving joint tenants. The law specifically provides that a beneficiary deed does not sever a joint tenancy.
The grantee-beneficiary named on a beneficiary deed effective at an owner's death does not immediately receive marketable title. The grantee-beneficiary's interest is subject to all conveyances, encumbrances, assignments, contracts, mortgages, liens and other interests affecting title to the property, regardless of when they were created, as long as notice of the interest is recorded within four months after the owner's death. After this four-month period, the grantee-beneficiary can pass marketable title to a purchaser of the property. However, the grantee-beneficiary may remain accountable for the proceeds of the property to persons interested the owner's probate estate for up to three years. If the probate assets are insufficient to cover claims by creditors, by a surviving spouse or children for statutory allowances, or a Medicaid recovery claim, the personal representative may bring a proceeding against the grantee-beneficiary to recover a share of the equity in the property, to the extent necessary to discharge the claims. The personal representative must begin such a proceeding within one year after the death of the deceased owner. Other persons whose claims against the grantee-beneficiary might be brought as late as three years after the owner's death can be barred earlier, if the owner's death certificate is recorded in the real property records.
The beneficiary deed statute specifically provides that a person cannot qualify for Medicaid assistance if the person has a beneficiary deed in effect. To ensure that a revocation can be made should a person require Medicaid assistance, any person executing a beneficiary deed should also execute a power of attorney specifically authorizing an agent to execute and record a revocation of any beneficiary deed, if necessary for purposes of qualifying for Medicaid.
Shimer Law can answer your questions about the possibility of using a beneficiary deed in your estate planning to avoid probate and ensure that your real property passes as you intend it to.
Disclaimer -- Content is general information only. Information is not provided as advice for a specific matter, nor does its publication create an attorney-client relationship. Laws vary from one state to another. For legal advice on a specific matter, consult an attorney.