Beneficiary deeds, also known as transfer-on-death deeds, can be used to leave property to loved ones upon your death. Before creating a beneficiary deed, however, it is important to understand the complexities and potential pitfalls of creating these forms in Colorado.
You can only transfer by beneficiary deed what you own, so you can't transfer the interest of someone who co-owns the property with you. Similarly, if the property has a mortgage or lien, or if you owe other debts the person named to receive the property will generally have to find a way to pay or settle the debt before he or she can claim full interest in the property.
One of the advantages of a beneficiary deed is, for many people, the opportunity to avoid going through probate. However, this is only true if you don't have other assets that must be probated, such as a bank account solely in your name.
Another possible disadvantage to use of a beneficiary deed is that you can leave multiple recipients tied to each other through ownership of the property. For example, if you want to leave your house to your four children, a beneficiary deed will give each child equal rights to the house. That means they will have to agree on whether to sell it, when to sell it, and how much is a fair sales price. If you use a will or trust to leave the house proceeds to your children, a personal representative or trustee would have the authority to make those decisions without requiring consensus from all four of your children.
Under Colorado law, the maker and beneficiary of a beneficiary deed may be ineligible for Medicaid benefits. That's why it's useful to make sure that you have a power of attorney in place giving someone the authority to revoke the beneficiary deed if necessary. You can revoke the beneficiary deed at any time, but if you are disabled then you need to have someone in place who can revoke for you. After all, if you are disabled that may be when you most need to be eligible for Medicaid.
While there may be beneficiary deed forms available, preparing any kind of deed requires precision and can have serious consequences. That's why it's a good idea to use an attorney to help you with the process.