Chayet & Danzo, LLC Chayet & Danzo, LLC www.Coloradoelderlaw.com
Call for a Free Initial Consultation
Direct303-872-5980
Toll-Free 1-888-472-1088
Email Us
Compassion, talent and dedication: guiding colorado families and Their Trusted Advisors During Times of Need

A tax benefit of Colorado transfer-on-death deeds

For many couples in retirement, their main asset is their home. Frequently the property is jointly owned and the property smoothly transfers to a wife at the death of her husband or vice versa.

But what is the best way to transfer the property to the next generation? In many cases, especially in smaller estates a beneficiary (transfer on death) deed can solve many problems. In a previous post, we explained how these deeds work. Here, we will discuss how the manner of transfer can affect taxes.

Stepped-up basis

First, it is important to note that a beneficiary deed is not a completed gift. The owner continues to have the ability to do what he or she wants with the property and has the power to revoke the deed.

When a transfer occurs at death through the beneficiary deed, the heir takes the property with a stepped-up basis. This is the fair market value of the property at the death.

An example is helpful. Assume a couple purchased a property in the 80s for $125,000. They enjoy the neighborhood and made improvements over the years. The husband, now a widower, would like to give the home to his only daughter. The current value of the property is about $400,000. A beneficiary deed would allow his daughter to inherit the property with the higher basis. Deeding it to her during his lifetime would mean she receives the property with the lower basis and a later sale could incur capital gains tax.

Joint owners and Medicaid

Several words of warning need to be added about beneficiary deeds. First, a couple who owns a property in joint tenancy needs to be careful. Joint tenancy takes precedence over a beneficiary deed and renders it ineffective.

Another disadvantage is that a beneficiary deed can affect Medicaid benefit eligibility. If a long stay in a skilled nursing facility is required, property might need to be sold off to pay for those expenses.

Because each family has unique needs and goals, seek the review of an estate planning attorney to get the right plan in place that will protect loved ones.

 

No Comments

Leave a comment
Comment Information

Watch Our Firm Video

We are the premier Elder Law firm in the Colorado region. We set ourselves apart from other law firms in the area with our talent, dedication, compassion and ability of our attorneys to handle any case in Elder Law. We serve Colorado families with experience and dignity in your time of need.

View More Videos

Denver Office
650 S.Cherry St., Suite 710
Denver, CO 80246

Phone: 303-872-5980
Fax: 303-355-8501
Denver Law Office Map

Edwards Office
105 Edwards Village Blvd.
#D-201
Edwards, CO 81632

Toll Free: 888-472-1088
Fax: 303-355-8501
Edwards Law Office Map

Aspen Office
600 East Hopkins Avenue
Suite 301
Aspen, CO 81611

Toll Free: 888-472-1088
Fax: 303-355-8501
Aspen Law Office Map

  • Rated by Super Lawyers Macro Chayet SuperLawyers.com
  • Rated by Super Lawyers Frank J. Danzo, III  SuperLawyers.com
  • Member National Academy of Elder Law Attorneys, Inc. TM
  • Avvo Rating 10.0 Superb Top Attorney Elder Law
  • 2015 Five Star Professional Wealth Manager Multi-Year Winner
  • Our new 2015 Medicaid Book: how to protect your Family's Assets from devastating nursing home costs
  • Proud Sponsor 2015-Denver Colorado Senior Law Day
  • Peer Review Rated For Ethical standards & Legal Ability TM Martindale Hubbell
  • Haystack