Chapter 4 - § 4.4 • SPECIFIC NONPROBATE TRANSFERS

• Jurisdiction: Colorado

§ 4.4 • SPECIFIC NONPROBATE TRANSFERS

§ 4.4.1—Gifts Causa Mortis

A gift causa mortis is a gift given under the following circumstances: (1) it is made by the donor in contemplation, fear, or peril of death; (2) the donor must die of the illness or peril that was feared or contemplated by the donor; and (3) delivery must be made with the intent that title vest only in case of death. Brind v. Int'l Trust Co., 179 P. 148 (Colo. 1919). The gift causa mortis doctrine is derived from the civil law. It permits one to dispose of personalty without the formalities of a written testament as would otherwise be required under the law of wills. The gift is effective if death occurs as contemplated. See 38 Am. Jur. 2d Gifts §§ 3, 7, 9, and 11.

§ 4.4.2—Unrecorded Deeds

A nonprobate technique to transfer real property is to have the grantor execute a deed that is recorded after the death of the grantor. If the deed was acknowledged properly, a rebuttable presumption of due delivery arises on the recording of the deed and relates back to the date of execution, except against persons who claim an intervening interest and who were without notice. C.R.S. § 38-35-101(4); Carmack v. Place, 535 P.2d 197 (Colo. 1975); Brown v. Bd. of County Comm'rs, 720 P.2d 579 (Colo. App. 1985). This does not avoid the requirement of delivery, but merely creates a rebuttable presumption that delivery occurred. Am. Nat'l Bank v. Silverthorn, 287 P. 641 (Colo. 1930); see also Estate of Barnhart, 563 P.2d 972 (Colo. App. 1977), aff'd, 574 P.2d 500 (Colo. 1978); Real Estate Title Standard No. 3.2.1. Based on the reported cases in other jurisdictions, the arrangement may not always be effective to transfer title. In re Estate of O'Brien, 749 P.2d 154 (Wash. 1988) (unrecorded deed effectively transferred title on death); First Nat'l Bank v. Bloom, 264 N.W.2d 208 (N.D. 1978) (unrecorded deed did not effectively transfer title on death). It would not be effective for a beneficiary deed, as C.R.S. § 15-15-402 requires that to be effective, the beneficiary deed must be recorded prior to the grantor's death. See Chapter 17.

The practice of using an unrecorded deed to avoid probate may be a hazardous device, especially from a tax viewpoint. If there is actual delivery and no consideration for the transfer, the donor may have an obligation, depending on the value of the gift, to file a gift tax return. If the property that is the subject of the transfer is income-producing, the donee may have to report the income on his or her personal income tax return, regardless of whether he or she receives the income. Note that this is a probate avoidance device only. The full value of the property may be includable in the gross estate of the decedent under I.R.C. § 2036 or 2038, or one of the other estate tax inclusion sections.

§ 4.4.3—Beneficiary Deeds

The practitioner should also examine Chapter 17, "Real Property," for a discussion of the "beneficiary deed" and the possible application to this section. C.R.S. §§ 15-15-401, et seq. ("Transfer of Real Property Effective on Death") are comprehensive and need careful analysis. Features governing application to joint tenancy, effects on purchasers, limitations on actions, and rights of creditors are some, but by no means all, of the sections that need close scrutiny. C.R.S. § 38-31-102, concerning supplemental affidavits, was amended in 2006 to encompass beneficiary deeds.

§ 4.4.4—Vehicle Beneficiary Designation Form

Effective August 10, 2016, the Colorado legislature enacted C.R.S. § 42-6-110.5(1)(a), which requires the Colorado Department of Revenue to create a form that allows an owner of a vehicle to pass that vehicle to a beneficiary upon the death of the owner. The Department of...