Beneficiary Deeds & Timeshares: A Perfect Fit?
Ancillary Probate Can Cause Thousands
If a person dies owning real estate outside of their state of domicile, their heirs may needlessly pay thousands in ancillary probate expense. The expense of ancillary probate can be avoided by using a beneficiary deed, a trust or a company.
Colorado probate is a legal process by which title to property is formally transferred to heirs upon death. A primary probate proceeding is opened in the state where the deceased is domiciled at time of death. Ancillary probate is a probate proceeding opened in another state to transfer property owned by the deceased in that state. Typically, real estate is the property to be transferred in an ancillary probate proceeding. Sometimes the cost of a single ancillary probate proceeding can be thousands of dollars just to transfer a single parcel of real estate.
How to Avoid Ancillary Probate in Colorado
Avoiding ancillary probate is easy. By putting real estate into something called a nominee trust or living trust, ancillary probate proceedings and the associated expense can be avoided. As an alternative to a living trust, a limited liability company can be created, the real estate transferred to the company and then ownership in the company can be transferred to the heirs through the primary probate proceeding.
Recently, Colorado has enacted another method to avoid a Colorado probate proceeding just to transfer Colorado real estate. In Colorado, a person can create a payable on death designation for Colorado real estate. Colorado calls this a beneficiary deed. While a Colorado beneficiary deed is executed and recorded today, it passes no interest in the real estate until the death of the current owner. Since 1995, at least seven other states have enacted laws allowing some type of beneficiary deed. Hopefully, even more states will follow.
The cost of ancillary probate is easily avoided. If you own real estate outside of your state of domicile, consider using a trust or beneficiary deed to avoid an ancillary probate.