The general answer is yes, but it will depend on your individual situation. While beneficiary deeds are one tool for smaller estates, they cannot replace a comprehensive estate plan.
In 2004, the Colorado legislature approved the use and creation of “beneficiary deeds” and outlined basic requirements. This type of deed automatically transfers a property interest when the owner dies. Unlike other types of deeds, an individual must record a beneficiary deed with the County Clerk and Recorders Office before it becomes effective.
How Does The Process Work?
Here is an example that illustrates how a beneficiary deed works. Ann has owned a home for many years near the Cherry Creek mall. Her husband died several years ago and she would like to leave the home to her only daughter, Krista. Ann completes a deed naming Krista the beneficiary of the deed and records it as required. Krista will become the owner of the home when Ann dies. This happens automatically without the need for probate.
During Ann’s life, Krista does not have any right to the home. Ann can also revoke the beneficiary deed during her lifetime if it no longer serves her needs. Changing a provision in her will, however, cannot override the beneficiary deed. The deed operates much like beneficiary designations on a life insurance policy or retirement account.
Potential Pitfalls
A trust cannot transfer property interests with a beneficiary deed. Because transfer occurs on the death of the owner, the owner of a property must be a natural person and not an entity. This type of deed cannot transfer real property interests that are countable resources for Medicaid eligibility.
If you make a small mistake, it can result in unintended consequences. Beneficiary deeds can smooth the transfer of ownership and are useful in some circumstances. Because a home or vacation property may be one of the most valuable assets in your estate, consult an experienced estate planning attorney for individualized advice.