UNDERWRITING Q&A: Is title derived from a Beneficiary Deed insurable in Colorado?

A:  Yes, provided certain underwriting criteria are followed.  Beneficiary Deeds, called Transfer on Death or TOD deeds in other jurisdictions, were created by Colorado statute in 2004.  The statutory form is found at C.R.S. 15-15-404.  The basic scenario is that A desires that real property owned by A pass to B outside of probate upon the death of A.  A executes and records a Beneficiary Deed granting the property to B upon the death of A.  Upon the death of A, the property passes to B outside of any probate of A’s estate. The Beneficiary Deed must be recorded during A’s lifetime in order to be effective.  C.R.S. 15-15-405 provides that the property then passes to B even if A’s will makes a different disposition of the property.  For this reason it is critical that the Beneficiary Deed meet statutory requirements and not be self-serving.  For example, during A’s lifetime A gives power of attorney to B and the power of attorney includes the authority to convey real property.  B then uses the power of attorney to create a Beneficiary Deed wherein B as agent and attorney-in-fact for A grants real property to B upon A’s death. This conveyance is completely self-serving in favor of B and will not be insurable.

After a Beneficiary Deed is recorded it may be revoked at any time by the grantor during the grantor’s lifetime.  The statutory form of revocation is found at C.R.S. 15-15-405.  In addition, C.R.S. 15-15-405 provides that the grantor revokes a prior Beneficiary Deed by executing and recording a subsequent Beneficiary Deed to a different grantor.  While a conveyance by Beneficiary Deed does not require any affirmative acceptance by the grantee, it is not unilaterally binding upon the grantee in the event that the grantee does not want the property.  In that scenario a grantee may execute and record a revocation or disclaimer pursuant to C.R.S. 15-15-414.  One of the most important underwriting requirements in insuring a conveyance by Beneficiary Deed is the statutory four month waiting period following the grantor’s death.  Pursuant to C.R.S. 15-15-407, a party wishing to contest a Beneficiary Deed must record a notice of interest in the subject property within four months of the date of the grantor’s death.  Accordingly, the title examination must not reflect a notice of interest in the property recorded by an adverse party during this four month period. 

As always you are encouraged to contact your regional underwriting counsel to discuss scenarios involving a conveyance by Beneficiary Deed.