The Problem with Pocket Deeds

A “pocket deed” is a nondelivered real estate deed executed by the current owner during their life where the current owner (the “grantor”) instructs the deed to be delivered to the beneficiary (the “grantee”) upon the current owner’s death or some other condition. The usual intent is to retain property ownership until death and to then have the pocket deed delivered at that time.

The problem with pocket deeds is that without delivery to the grantee, arguably nothing passes to the grantee. As a general rule, conveyance of title to Colorado real estate requires delivery and acceptance of the conveyance deed by the grantee. If the grantor dies after they execute the pocket deed but prior to delivery, the conveyance is probably ineffective. Delivery of a Colorado real estate deed can be accomplished in many ways. The most common form of delivery is recording the deed with the county clerk and recorder. Acceptance is presumed unless the grantee timely files a notice of disclaimer of interest.

Pocket deeds are used to save money, avoid lawyers, and avoid probate. In some cases, they work. In many cases, they don’t. The pocket deed can cost heirs thousands of dollars. The first problem is stated above. The pocket deed may not pass title. Another heir may contest the issue in court. There may be a cloud on title that a sharp title examiner catches, which is, the recording of a conveyance deed after the death of the grantor. If caught, the title company may list the pocket deed as an exception to insured title.

Perhaps the biggest problem with a pocket deed is the internal family strife it can cause. In our experience, the grantor executes the pocket deed, puts the deed in the safe deposit box or desk drawer, and gives instructions to someone to record after their death. Also in our experience, the grantor often forgets, changes their mind, or executes multiple deeds. The result is family members being angry with each other and lawyering up for court.

There is no need for a Colorado pocket deed. A Colorado beneficiary deed recorded before death accomplishes the goal while keeping title with the current owner. Beneficiary deeds are not my favorite tool, but they do have benefits when properly used. Another option is a living trust holding the real estate or a living trust as named beneficiary of a beneficiary deed.