Real Estate – When a Joint Tenant Dies
Real Estate – When a Joint Tenant Dies
Most checklists about what to do when someone dies focus on general estate matters. Very few, however, address the specific steps required when a joint tenant in Colorado real estate passes away.
Joint Tenancy vs. Tenancy in Common
In Colorado, real estate co-ownership is usually structured as either tenants in common or joint tenants with right of survivorship. When a joint tenant dies, their ownership interest automatically transfers to the surviving joint tenants by operation of law. Even so, certain documentation must be recorded to establish the transfer.
Recording the Death Certificate
To reflect the change in ownership, a redacted death certificate must be recorded in the real property records. In many cases, a sworn statement is also filed to confirm that the individual named in the death certificate is the same person listed on the property title. While the sworn statement may not always be required, we recommend recording it to prevent potential title issues.
Ordering an Ownership & Encumbrance Report
Before recording these documents, it is best practice to order an Ownership & Encumbrance Report (O&E) from a title company. An O&E typically costs under $10 in metro areas. Although not as comprehensive as a full title search, it is an inexpensive way to uncover title issues that may need to be addressed before moving forward.
Tax Basis Step-Up
Upon death, the deceased joint tenant’s share of the property generally receives a stepped-up tax basis equal to the fair market value on the date of death. The tax basis is used to calculate taxable gain upon sale and is typically what was originally paid for the property. To establish this step-up, it is best to obtain a professional appraisal, rather than relying on county assessor valuations or realtor market comparisons.
Practice Tip: If the property is jointly owned by a married couple who acquired most or all of their wealth in a community property state (such as Texas or California), the entire property may qualify for a full step-up in basis, not just the deceased spouse’s share.