Evolution of Joint Tenancy Law in Colorado: Changes to Crs Section 38-31-101
| Jurisdiction | Colorado,United States |
| Citation | Vol. 38 No. 4 Pg. 65 |
| Pages | 65 |
| Publication year | 2009 |
2009, April, Pg. 65. Evolution of Joint Tenancy Law in Colorado: Changes to CRS Section 38-31-101
April 2009
Vol. 38, No. 4 [Page 65]
Trust and Estate articles are sponsored by the CBA Trust and Estate Section. Topics include trust and estate planning and administration, probate litigation, guardianships and conservatorships, and tax planning.
Coordinating Editors
David W. Kirch, of David W. Kirch, P.C., Aurora-(303) 671-7726, dkirch@dwkpc.net; Constance D. Smith, of Rothgerber Johnson & Lyons LLP-(303) 623-9000, csmith@rothgerber.com
About the Author
Carl G. Stevens practices primarily in the areas of estate planning, administration, and elder law. He is a partner with the Lakewood law firm of Brant, Stevens & Graf, LLC-(303) 238-9700, carl@brantstevens.com.
Joint tenancy is taken for granted as a simple probate avoidance technique; however, it offers some sophisticated planning options. The statutory changes of 2008 are controversial for reinstating the common law four unities and for codifying unequal interests.
On April 25, 2008, amendments to CRS § 38-31-101 regarding joint tenancy became effective.(fn1) Prior to the amendments, Colorado joint tenancy law, through statutory changes and case law, had evolved from a strict application of the traditional "four unities" (time, title, interest, and possession) for creation and termination of joint tenancies to a newer standard that relied on the intent of the parties in regard to creation and severance of a joint tenancy.(fn2) The 2008 amendments represent a return to the four unities.
The bill is the result of a compromise of members of the Real Estate Bar who believed the complete abolition of the four unities threatened the legal underpinnings of joint tenancy and estate planning, as well as elder law attorneys who use joint tenancy as an estate planning tool. In particular, based on case law, some planners had been creating joint tenancies with unequal interests and were concerned that an unfettered return to the four unities might be construed as a basis to invalidate that planning.
As with most compromises, there are practitioners from both sides who are unhappy with the result. One recent article(fn3) argues that there are significant problems regarding unequal joint tenancy interests and that the statute is defective because, as to unequal interests, it "does not in any manner transfer the interest of the deceased joint tenant or create a right of survivorship." This article discusses the objections to unequal interests and explains the operation of joint tenancy under the new statute.
In English feudal society, joint tenancy was the presumptive form of co-ownership. Property passing to two or more persons was expected to be held as a unit for the performance of feudal obligations.(fn4) The right of survivorship by which multiple owners remained in ownership after the death of a tenant helped facilitate this expectation by keeping the property undivided. Blackstone called survivorship the "grand incident" of joint estates.(fn5) Inherent to the right of survivorship is that a deceased joint tenant could not dispose of his or her interest at death by devise or inheritance and that, even at death, no interest passed from the deceased to the surviving joint tenants because all were originally vested in the whole.
Although joint tenancy lost some favor in this country and all states have abandoned the feudal presumption of joint tenancy for multiple ownership, joint tenancy is now popular as a convenient and inexpensive alternative to probate. Colorado has real estate beneficiary deeds and transfer on death procedures for financial accounts, but these techniques are subject to probate and creditor claims.(fn6) In contrast, joint tenancy real property is not. A survivorship interest in Colorado real estate is not subject to probate or creditor claims both by statute(fn7) and the common law (in the latter case because real estate survivorship is not the result of devise or inheritance).
During life (in contrast to after death) a joint tenant has an alienable undivided interest, but absent severance of the right of survivorship by conveyance or other involuntary circumstance during life, the right of survivorship controls and defeats all claims. As a result of the probate and claims-free survivorship feature, joint tenancy real estate is a useful planning tool in certain situations, with the caveat that it has inherent uncertainties if death of joint tenants in a particular order is required.
Initial motivation for the recent amendments was the 2004 case of Taylor v. Canterbury.(fn8) That case recognized the right of one joint tenant to sever (terminate) the right of survivorship by unilaterally conveying the interest from the joint tenant back to himself to create a tenancy in common with the other joint tenant. Prior to Taylor v. Canterbury, the right of severance existed but required a conveyance to a third-party "straw man" and reconveyance by the straw man to the tenant.(fn9)
The issue of severance by direct self-conveyance is not without controversy, and the dissent questioned the wisdom of unilateral severance.(fn10) However, the most controversial portion of the Supreme Court's opinion in the Real Estate Bar was the statement of the Court that the four unities of time, title, interest, and possession-the original common law requisites of joint tenancy-have been abolished by statute in Colorado and that, instead of looking to the four unities to see if joint tenancy exists, the courts are to look at the intent of the parties in the creation and severance of joint tenancy.(fn11) Concerns also arose among some in the Estate Planning and Elder Law Bar, because of language in the opinion that surviving joint tenants "automatically inherit"(fn12) rather than take by survivorship.
Shortly after the ruling in Taylor v. Canterbury, the Real Estate Section of the Colorado Bar Association (CBA) drafted a statutory proposal to reinstate the four unities. However, the initial bill was opposed by the Trust and Estate and Elder Law Sections, and the CBA did not approve sponsorship of the bill.
While the CBA sections were attempting to resolve their differences, an industry group (Land Title Association of Colorado) procured the introduction of a legislative bill to reinstate the four unities. After opposition developed, the initial bill was broadened to reflect concerns of interested parties, and the final amendments were the product of negotiations among sections of the CBA, representatives of the land title industry, and governmental interests represented by the attorney general, Medicaid administrators and, of course, legislators.
The amendments to CRS § 38-31-101 cover the following major areas:
* continue, but modify, the original common law for creation of joint tenancy through the four unities(fn13) of time, title, interest, and possession
* codify unequal ownership interests in joint tenancy
* codify rules for applicability of the race-notice statute to unequal interests
* codify how to calculate surviving unequal interests of owners on the death of a joint tenant
* codify Medicaid rules for unequal interests
* reaffirm the common law of survivorship that a deceased joint tenant's interest terminates and does not pass by inheritance or devise to the surviving joint tenants reaffirm unilateral severance on recording of a deed of severance
* provide that bankruptcy does not sever the right of survivorship
The following discussion provides an overview of each section.* preserve other case law regarding different means of severing.
CRS § 38-31-101(1.5)(a), (b), and (c) define and continue the common law doctrine of the four unities of time, title, interest, and possession, except subsections (1), (3), (4), (5), (6), and (7)(fn14) of the statute "shall be construed to clarify, supplement, and, limited to their express terms, modify the doctrine of the four unities." This section was intended to countermand Taylor v. Canterbury to the extent it could be interpreted as abolishing the four unities.
Modification of the four unities, rather than abolition of them, was a compromise to avoid inadvertent abrogation of joint tenancy common law on issues not addressed in Taylor v. Canterbury and to allow for a considered case-by-case analysis of the applicability of the rules to future issues. This approach continues to have its critics. Some in the elder law community particularly would have preferred a comprehensive statutory approach. However, interpretation of the four unities has occurred through case law, and modifications have been made by statute in some states without complete abolition. Even Blackstone is reported to...
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