Colorado Beneficiary Deeds: An Introduction

Beneficiary Designations and Beneficiary Deeds in Colorado

Beneficiary designations have long been used to avoid probate upon death. Bank accounts, investment accounts, retirement accounts and life insurance can be transferred upon death by naming a beneficiary to the account or life insurance proceeds. However, when it comes to real estate, designating a beneficiary is not allowed in most states, until recently. To transfer real estate requires a probate proceeding and the associated expense.

Transferring Colorado Real Estate through Beneficiary Deeds

Transferring real estate at death is now easier in Colorado. The solution is something called a beneficiary deed. A beneficiary deed is executed by the property owner and recorded in the real property records. It works just like a bargain and sale deed, except no interest in the real estate is transferred until the death of the current owner. The beneficiary deed can be revoked anytime before death by recording a revocation. Upon death, the real property passes to the person(s) listed on the beneficiary deed.

If you are wondering why something so simple took so long to become a law, take a look at the written statutes – 15-15-401, C.R.S. through 15-15-415, C.R.S. There are many issues to consider before executing a beneficiary deed. For example:

• • Beneficiary Deeds and Medicaid Eligibility:
    A person who anticipates applying for Medicaid should not execute a beneficiary deed. Executing a beneficiary deed disqualifies that person from Medicaid eligibility so long as the beneficiary deed is in effect, without exception.
  • Beneficiary Deeds Surviving the Property Owner:
    Another consideration is surviving the property owner. For example, if a parent executes a beneficiary deed in favor of all three of her children, and one child dies leaving grandchildren, what happens then? Under the law, the other two surviving children will inherit the entire property. This may not be what the parent intended.
  • Beneficiary Deeds and Joint Tenancy:
    A beneficiary deed does not sever joint tenancy. Upon the death of a joint tenant, property held in joint tenancy will pass to the surviving joint owner(s). The beneficiary deed will have no force and effect unless it is executed by the last to die of the joint tenants.
  • Beneficiary Deeds and Debts and Claims Against an Estate
    A beneficiary deed cannot be used to avoid the debts and obligations of the deceased. If the probate estate does not have enough money to pay claims, the creditors can recover from the beneficiary named in the deed to the extent of the value of the property conveyed.

Avoiding Colorado Probate Through Beneficiary Deeds

A beneficiary deed is one way to transfer real property at death. It is one tool of many for the educated estate planner in Colorado. Used properly, it can avoid probate and the associated expense. Used improperly, it can cause far more expense than it saves or even cause unintended results. Before using a beneficiary deed, consult with legal counsel to be sure it is right, for you.