The Problem With Beneficiary Deeds

About 20 years ago, Colorado began recognizing transfer-on-death deeds for real estate. At the time, I was one of their biggest supporters. Today, I still use beneficiary deeds—but much more cautiously. Here’s why.

A beneficiary deed is simply a transfer-on-death deed for real estate. The deed must be properly recorded before the real estate owner (the “Grantor”) dies. Upon the Grantor’s death, the property automatically transfers to the named beneficiary.

Sounds great, right? No fuss, no muss. Unfortunately, it’s not always that simple.

A will or trust typically addresses contingencies. What if the beneficiary refuses the property? What if the beneficiary dies before—or shortly after—the Grantor? What if the beneficiary is a minor, incapacitated, or receiving Medicaid benefits?  Beneficiary deeds are rarely that detailed.

Multiple Beneficiaries Can Mean Multiple Problems

A beneficiary deed naming multiple beneficiaries can create significant issues. Typically, each beneficiary receives an undivided ownership interest in the entire property. That means they all own the whole house together, and each has an equal right to live there.

That arrangement works well—until it doesn’t.  If one beneficiary decides to move into the home rent-free while the others help pay property taxes, insurance, and maintenance, tension quickly builds. Disagreements over whether to sell, rent, remodel, or refinance are common. When the co-owners cannot agree, the legal remedy is often a partition action—a lawsuit asking a court to force a sale of the property.  Partition actions can easily cost tens of thousands of dollars in legal fees, significantly reducing the value of the inheritance.

The Insurance Gap Risk

Beneficiary deeds can also create an unexpected gap in insurance coverage.  In a Minnesota case, Dawn Strope-Robinson inherited a house from her uncle, David Strope, under a transfer-on-death deed. The home was insured under a homeowners policy issued by State Farm. Shortly after Mr. Strope’s death, his ex-wife intentionally set the house on fire, causing substantial damage.

Ms. Robinson filed an insurance claim. State Farm denied it.  The Eighth Circuit Court of Appeals agreed with the insurance company in Strope-Robinson v. State Farm Fire and Casualty Co. The court reasoned that because title transferred automatically to Ms. Robinson upon Mr. Strope’s death, his estate never owned the house. And because the estate had no ownership interest, there was no insurable interest under the existing policy. Ms. Robinson was not a named or additional insured.  While this was a Minnesota case, I confirmed with my insurance agent that the result would likely be the same in Colorado. That risk alone gives me pause.

A Tool — But Not a Complete Plan

Beneficiary deeds are not inherently bad. In the right circumstances, they can be a simple and cost-effective tool. But they are not a substitute for thoughtful estate planning.  Real estate is often a family’s most valuable asset. What appears simple on the front end can create unintended complications on the back end—conflicts among beneficiaries, costly litigation, or even a loss of insurance coverage.  Before signing a beneficiary deed, it is worth considering whether a properly structured will or trust might better address the “what ifs” that life inevitably brings.

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Colorado Prenuptial Agreement

A Colorado prenuptial agreement allows couples to agree in advance about how property is to be split upon divorce. Without a Colorado prenuptial agreement, the Colorado courts decide how property will be divided.

Colorado is a separate property state. In a separate property state, property is typically “owned” by the person who is in title. For example, real estate in the name of one spouse is usually considered to be the separate property of that spouse. An inheritance kept in a separate account is considered the separate property of the account holder. However, for purposes of divorce, Colorado uses the broad concept of marital property to equitably divide what would otherwise be considered the separate property.

The full definition of marital property is too complex for a quick an easy explanation. Generally, the increase in value of separate property is typically considered marital property and fair game for division by the divorce court. Property titled in both spouses’ names is often considered marital property subject to equitable division. The increase in value of an inheritance can also be subject to the marital property rules.

No couple with wedding plans likes to talk about the marriage failing.  However many couples are having frank conversations about how property is to be divided upon divorce. The conversation is driven by many factors. Parents often put conditions on inheriting property including the requirement of a prenuptial agreement. Individuals marrying a little later in life want to protect those hard-earned assets from their biggest creditor (their spouse-to-be). Individuals benefiting from tax-deferred earnings in retirement accounts recognize that post-marriage increases in account value are greatly impacted by pre-marriage contributions. All of these factors are pushing individuals to clearly define who owns what and what will or will not be shared upon divorce.

Not all Colorado prenuptial agreements are enforceable. For a Colorado prenuptial agreement to be enforceable there must be full disclosure of assets, debts, and rights upon divorce. The spouse-to-be must know exactly what he or she is giving up. Both individuals should have legal representation even if it means one individual paying for both lawyers. Skimping on financial disclosure, proper asset valuation, and proper legal representation can result in the Colorado prenuptial agreement being challenged at a later date.

Besides the division of separate property, a Colorado marital agreement can address many other issues regarding marital rights upon divorce. For example, gifts of family heirlooms (like grandma’s wedding ring), alimony, attorney’s fees, obligation for debts and how ownership of joint property is divided can all be addressed in a Colorado prenuptial agreement.

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Contracts: Indemnity and Illusory Insurance Provisions

This is something I see constantly in contracts that cross my desk: insurance requirements that look protective on paper, but are effectively illusory because of one-sided indemnity and subrogation clauses.

Indemnity is a contractual obligation where one party agrees to cover another party’s losses or damages. In plain terms, it means “If something goes wrong, I’ll pay for it—even if it wasn’t my fault.”

Subrogation is the legal right of an insurance company to seek reimbursement from the party that caused the loss after the insurer has paid a claim.

Here’s where the problem arises.

Many contracts first waive one party’s liability for nearly everything except intentional misconduct (and sometimes gross negligence). Then, in another section, the same contract requires the other party to indemnify that party for all claims, including claims caused by the indemnified party’s own negligence.

To make matters worse, the contract often requires both parties to carry insurance—but then:

• Allows subrogation in favor of the indemnified party, and
• Waives subrogation against that same party.

Even when subrogation is not expressly waived, a broad indemnity provision can make recovery by an insurance company practically impossible.

A Common Real-World Example

Consider a typical property management agreement.

The contract may:

• Waive the manager’s liability for all claims except intentional or grossly negligent acts;
• Require the property owner to indemnify the manager for all waived claims;
• Require the property owner to waive all rights of subrogation; and
• Require both parties to carry $2 million in insurance coverage.

At first glance, this looks like $4 million in total insurance protection.

In reality, it may be only the property owner’s $2 million that is available—because the indemnity and subrogation provisions shift the risk entirely to the owner.

Under the wrong set of circumstances, there may be no effective insurance at all, especially if:

• The property owner failed to name the manager as an additional insured, or
• The insurer never approved the contractual risk transfer.

Why This Matters for Small Business Owners

These provisions are often buried in boilerplate language and are easy to overlook. Changing them can be tedious, time-consuming, and sometimes impossible—particularly when dealing with large companies that have a “take it or leave it” contract.

However, when working with smaller companies or vendors that want your business, these provisions are often negotiable.

A more balanced approach might look like this:
To the extent insurance applies, each party agrees not to pursue recovery against the other.

If each party carries $2 million in insurance, there should be no subrogation claims up to the combined $4 million of coverage.

One-sided indemnity clauses have become increasingly common. Before signing a contract, make sure you understand who is actually bearing the risk—and whether the insurance you’re paying for provides real protection or just the illusion of it.

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An estate plan is more than a will or a living trust. It is a combination of many documents. Here is what you should expect to receive in any estate plan:

What to Expect from a Will-Based Plan

If your plan is a Will-based plan, you should receive a Will, a personal property memorandum, a medical power of attorney, an advanced medical directive, and perhaps a general financial power of attorney.

1. Will
   The Will is the document that gives your property to your beneficiaries upon your death.
2. Durable Medical Power of Attorney
   The durable medical power of attorney identifies the person to make medical decisions for you when you are unable to make the decision yourself.
3. Personal Property Memorandum
   The personal property memorandum is an informal document allowing you to give away specific items of personal property to specific people.  You can update this document without going back to the lawyer.
4. Advanced Medical Directive/Living Will
   The advanced medical directive instructs the doctors what to do when your condition is terminal with no hope for recovery.
5. General (Durable) Financial Power of Attorney
   A general financial power of attorney identifies a person to make financial decisions for you. Unlike the medical power of attorney, the financial power of attorney is typically a live document.  The power holder has the ability to make financial decisions for you as soon as you sign the document.  For that reason, sometimes a general power of attorney is not recommended.

What to Expect from a Living Trust Plan (a/k/a Revocable Trust Plan)

If your plan is a living trust plan, you should receive all of the Will-based plan documents and a few more. However, the Will in a living trust plan directs that your assets be given to the trustee of your living trust instead of directly to your beneficiaries. For this reason, it is commonly called a “Pour-over Will” because it pours assets into your trust.

A living trust plan usually includes the above documents plus a living/revocable trust, a bill of sale, a power of attorney, and a statement of authority.

1. Pour-over Will
   The “Pour-over Will” is your Will in a Trust-based plan.  The Will directs your assets be given to the trustee of your living trust rather than directly to your beneficiaries.
2. Living Trust/Revocable Trust
   The living trust directs how your property is to be used during your life and then who receives your property at your death.
3. Bill of Sale
   The bill of sale transfers your personal property into your trust.
4. Durable Special Power of Attorney or General Power of Attorney
   The durable power of attorney identifies a person who can fund your living trust if you become incapacitated.
5. Statement of Authority
   A statement of authority is a document identifying the trustees of your trust.  It is typically recorded in the Colorado real property records when transferring Colorado real estate.

What to Expect from Any Estate Plan

Whether your plan is a Will-based plan or a living trust plan, the following documents are usually part of the plan. You should receive an engagement letter, a joint representation letter if you are married, a disposition of last remains document, a tax letter, and an exit letter:

1. Initial Consultation and Estate Planning Questionnaire 
   Your attorney needs information about you, your personal situation, and your finances in order to make any initial meeting worthwhile.  Meaningful initial consultations usually require a modest fee because there can be up to 2 hours of legal time involved in setting up the consultation, reviewing your information, and then having an actual meeting either in person or by video.
2. Engagement Letter
   The engagement letter is the contract between you and your lawyer. It should identify the flat fee (if any) and the hourly rates for the law firm.
3. Joint Representation Letter
   The joint representation letter is a disclosure letter. It discloses that as spouses, you are potentially adverse parties and that if your relationship deteriorates, your lawyer may have to withdraw from representing either party. The joint representation letter may also disclose that anything you tell your lawyer may have to be disclosed to your spouse.
4. Disposition of Last Remains
   The disposition of last remains document is also known as burial instructions.  This document identifies your wishes about how your body is to be treated after your death, your wishes regarding memorial services, and who is in charge.
5. Exit/Estate Plan Summary/Trust Funding Letter
   An estate plan summary letter instructs you about funding your trust plan or will-based plan. Perhaps the most overlooked (and most difficult) portion of any estate plan is funding the plan.  Follow up with things like mutual funds, bank accounts, and beneficiary designations are addressed in this letter, usually straight forward, and can be accomplished by you.  Other items can require attorney assistance like conveying real estate and entity interests to a trust.

Additions That We Typically Include

In addition to the above and when executed in our office, we usually review the executed documents one final time looking for missed signatures, missed initials, and confirm the proper notary acknowledgement.  The estate plan is scanned to file, placed in a binder, and a digital copy included on a flash drive in the binder.

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It’s Not Just AI

It’s not just AI causing the problem. It’s the combination of open-record laws, the ease of accessing public information online, and AI’s ability to constantly scour and analyze that data. Real estate records are a good example. In most Colorado counties, we can pull up a copy of your property holdings while we’re on the phone with you. Real estate documents, voter registration records, and business filings are all just a keystroke away.

AI Causing Increased Probate Filings

We have reports of increased contested filings in probate matters. Laypeople are using a mix of state-provided self-help materials and AI-generated content to draft pleadings themselves, avoiding expensive legal fees. While far from perfect—and often riddled with mistakes—these filings can still significantly increase the cost and duration of probate proceedings.

Solutions:  A Trust?

There is no quick solution to the loss of personal privacy.  You can limit the information you share and advocate for change to open-record laws. There is a solution to the increased cost of probate.  Avoid probate altogether with a revocable trust.  Colorado, revocable trusts are not required to obtain an employer identification number, register with the courts, file with the Secretary of State, or be made publicly available. Real estate held in the trust can also obscure the identities of the individuals behind it.

A trust is not a complete answer to the privacy problem.  A trust can help slow the erosion of your personal information and reduce the risk of costly, contested probate proceedings. If you’re concerned about privacy or the rising cost of probate, consider reviewing your estate plan and exploring whether a trust makes sense. A little planning now goes a long way toward protecting your information and your family.

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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.

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A client recently contacted me after receiving unexpected business mail at his home. When we checked the Colorado Secretary of State’s website, we discovered that a business had registered using his address—without his knowledge or consent.

Unfortunately, this isn’t an isolated incident.

According to the Colorado Bureau of Investigation (CBI), there’s been a rise in fictitious businesses registering with random addresses—often residential homes or downtown hotels—where they have no actual presence. These fraudulent registrations can cause serious headaches for the unsuspecting property owners or legitimate businesses whose addresses are misused.

Why This Matters

If a fraudulent business registers using your address, you could face:

• Legal and financial risk – Law enforcement or creditors may wrongly associate you with illegal activity.
• Unwanted mail and subpoenas – You may receive collection notices, court documents, or tax correspondence not meant for you.
• Reputation damage – Customers or vendors could mistakenly believe your business is connected to a scam.
• Business credit or IRS confusion – Erroneous address records can interfere with your financial and tax identity.

What You Can Do

If you start receiving mail addressed to a person or business you don’t recognize, take action:

• Check the Colorado Secretary of State’s website to see if a business has listed your address.
• Report the fraudulent registration to:
  • Colorado Secretary of State
  • Colorado Attorney General
  • U.S. Postal Inspection Service
  • And send an email to: reportbusinessfraud@state.co.us

Additional Protection: Lock Down Your Credit

To further protect yourself, consider freezing your credit with the three major credit bureaus (Equifax, Experian, and TransUnion). This is free and can be done online:

• You’ll need to create accounts with each bureau.
• They may make it hard to find the free credit freeze option—but it’s there.
• Once frozen, you can temporarily lift the freeze when applying for credit, then re-lock it as needed.

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An O&E report, available from a title insurance company, provides a snapshot of your property’s legal status. It includes the most recent deed in the chain of title, any recorded liens, and the legal description of the property. In the Denver metro area, this report typically costs less than $10. In mountain or rural areas, it may run between $30 and $100.

In most cases, the O&E is straightforward. But in our experience, roughly 1 in 20 reports reveals a problem.

Common Issues We Find

• Deceased Individuals Still on Title:
  If the property was held in joint tenancy with right of survivorship, removing the deceased is usually a simple process. However, if the property was owned as tenants in common, it can be more complex and may require a probate proceeding.
• Unreleased Liens:
  Occasionally, a lien—such as an old deed of trust—was never properly released. If the real estate transaction was handled by a reputable title company and involved a recognized lender, resolving the issue typically involves working with the title company.
  If the closing was recent, it’s more tedious than difficult. But if it happened years ago, the process becomes more complicated. That’s why it’s crucial to keep your closing documents and title insurance policy in a permanent file.

How to Get an O&E Report

You can usually order an O&E report directly from a title company, although you may need to create an account. Our office can also assist and will add a $20 fee to the title company’s charge.

Keep in mind: Understanding an O&E report requires some knowledge of real estate terminology and legal documents. An O&E is not insurance or a guarantee.  If you need help interpreting your report, we’re happy to assist.

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Buy in the Trust’s Name

When you buy your home, make sure the buyer is your trust and not you.  The purchase contract should list the trust as buyer.  Most trusts have an obvious clause explicitly stating how to title property or contracts in the name of the trust.  There was a time when mortgage rates for individuals were slightly lower than rates for trusts.  If you find an experienced mortgage broker, the rates should be the same.

Title Company Handles Deed & Title Insurance

When you buy your home in the trust’s name, a title company will draft the deed of conveyance to the trust and issue title insurance directly to the trust.  The title company may ask for a complete copy of your trust.  Resist that request.  Your trust is private.  Keep it private.  All the title company needs is a Certification of Trust which any qualified estate planning lawyer provides as part of your trust plan.  Sometimes the name is different.  Look for something that is a sworn, notarized statement about the trust name and the trustees.  As an alternative, some title companies will accept the first couple trust pages and the signature pages or something called a Statement of Authority.  If the title company insists on the entire trust, call Chicago Title or First American in Evergreen, Colorado.  And that is how this plays out every time.  Front line title company person insists on the entire trust.  We get a call.  We send an email or phone call that the entire trust is not required, and we have another title company we’d like to use.  Fifteen minutes (and $200) later the title company changes its tune.

Refinancing

Sometimes refinancing is desired or a home equity line of credit (HELOC) after your trust takes title.  The lender may request that you convey your home out of the trust and into your name.  Again, resist that request.  If you initially financed your home in your trust, you shouldn’t have to take your home out of your trust to refinance. Where you might have an issue is if the original financing was in your individual name and then after the home is conveyed to your trust, you want a HELOC.

The Colorado Beneficiary Deed Option

There are exceptions to the general rules listed above.  If it is necessary to take title in your individual name, consider leaving the home in your individual name and naming the trust as the transfer on death beneficiary using a Colorado beneficiary deed.  Not my favorite option because of privacy concerns, but sometimes the best alternative.

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What is an NGO?

NGO stands for non-governmental organization. One type of NGO is nonprofits. Within nonprofits, one category is public charities or 501(c)(3) organizations. Contributions to 501(c)(3) organizations are tax deductible.

Brief Background of NGOs

NGOs have been around for a long time. NGOs accelerated in the early 2000s with the G.W. Bush administration’s push to expand the work of faith-based initiatives and community programs. https://georgewbush-whitehouse.archives.gov/government/fbci/qr3.html. Concurrently, more of the uber rich figured out that rather than giving a large portion of their wealth to the government through taxation, wealth and power could be retained through 501(c)(3) private foundations. Both of these vehicles have been instrumental in improving the lives of millions around the globe. And both of these vehicles have been abused to circumvent political anti-corruption laws.

Vetting Your Favorite NGO

So, how do you check out your favorite 501(c)(3) charity? Start with the IRS website. https://apps.irs.gov/app/eos/. Confirm it is a public charity. Take a look at the IRS Form 990. If the charity has less than $50,000 in gross receipts, it came into existence through a simplified Form 1023-EZ filing which is seldom denied by the IRS. All you may find is confirmation that the charity filed the annual Form 990-N, which is an electronic postcard with no financial data. In this situation, you must ask the charity for their financial information.

If the charity has more than $50,000 in annual gross receipts, the charity should be filing a full Form 990 detailing receipts and expenses. While not perfect, this is a good place to start. Review the income, expenses, and assets. If a smaller charity, you should be able to see what the major players pay themselves, whether they have expense accounts, and where the money goes. If a large charity, you will need better financial disclosures directly from the charity. Keep in mind that nonprofit does not mean no financial benefit. Salaries can range from $0.00 into the millions of dollars. Expense accounts can be substantial and sometimes buried. In the case of NGOs funded by government dollars, figuring out who is benefiting can be a challenge.

Review the Articles of Incorporation and Bylaws. Some NGOs have members. In my experience, most do not and instead have a Board of Directors that controls every aspect of the organization. How those directors are chosen and removed gives you insight into who controls the organization and who financially benefits.

Good NGO or Bad NGO?

There is no standard test for what is or isn’t a “good” charity. Some 501(c)(3)s have no wages and minimal expenses. That doesn’t necessarily mean it is a well-run organization. Other 501(c)(3)s can have significant wages and expenses. That doesn’t mean the money is being wasted. You must know your charity and do your homework.

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