![]() ![]() Instead of listing one child as a joint tenant, all the children can be named as beneficiaries. No gift tax is owed due to a transfer before death (although a federal estate tax may be owed if the estate is large enough). There is no gift during life therefore, the real property receives a full step up in basis at death. A Colorado beneficiary deed functions like a Colorado transfer on death deed and avoids Colorado probate. The Colorado Beneficiary Deed: A Better AlternativeĪ Colorado beneficiary deed avoids many of the problems listed above. Keep in mind that the creditor is sometimes a soon-to-be ex-spouse. The lien will ultimately be satisfied when the parent dies. While a foreclosure sale of joint tenancy property can be difficult, it is a lien all the same, extending to the entire interest of the joint tenant. The creditors of a joint tenant can place a lien on real property. Sometimes it happens because the child on the deed just decides to keep the real estate or sale proceeds. Sometimes it is because the parent tells different children different versions of the “plan”. It is not unusual for the child on the deed to keep the property and not split any sale proceeds. This can cause conflict between the children. The parent will then tell that child to sell the real property after the parent dies and split up the proceeds with the other children. In some cases, a parent will execute a Colorado quitclaim deed putting the real property in joint tenancy with one of several children. If the capital gain tax is 20%, that is a $60,000.00 tax bill incurred to avoid a $5,000.00 Colorado probate. If that same home is transferred to the “heir” just before the owner dies, a sale shortly after death will result in a capital gain of $300,000.00. If the home is sold shortly after the death, there will be no capital gain reported on the sale. For example, a home purchased 20 years ago for $100,000.00 and now worth $400,000.00 will have a new income tax basis of $400,000.00 on the day the owner dies. At death, all property of the deceased is revalued for income tax purposes. A gift to a new owner does not get a stepped up basis for income tax purposes. Transferring real property to another by a Colorado quitclaim deed is a gift. Under the wrong set of circumstances, this can result in either estate or gift tax being owed now or in the future. However, a gift of more than $12,000.00 should be reported on a gift tax return. In most cases, that gift does not trigger any transfer tax. The transfer is considered a gift to the other joint tenant. The problems with using a Colorado quitclaim deed as a transfer on death deed are numerous. The Disadvantages of a Quitclaim Deed in Colorado This technique is especially popular for vacation homes and timeshares. Upon the death of the joint tenant, the real property passes to the surviving joint tenant, automatically. For example, A executes a Colorado quitclaim deed from A, as grantor, to A and child of A, as grantees, in joint tenancy with right of survivorship. To avoid probate, many people will quit claim the property from themselves to themselves and a child in joint tenancy. The Colorado Quitclaim DeedĪ Colorado quitclaim deed* transfers property from the current owner (the Grantor) to a new owner (the Grantee). In most cases, however, the better alternative is a Colorado beneficiary deed. In the case of real estate, Colorado quitclaim deeds (note: not “Colorado quit claim deeds”, as erroneously written at times) are often used. To avoid a Colorado probate proceeding upon death, Colorado real and personal property must pass to the heirs by other means. Many people try to avoid Colorado probate because of the perceived expense.
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