Why Transferring Your Real Estate to Family to “Avoid Probate” Is a Bad Idea — Especially in Colorado
Many Colorado families think they’re doing the right thing by putting their kids’ names on the house or land now to “avoid probate later.” It sounds simple, but in reality, it can create far bigger headaches than probate ever would.
You Lose Control — and Open the Door to Risk
Once you sign over your title, you no longer own the property. If your child later gets divorced, sued, or falls into debt, your family home can end up at significant risk. I see this mistake all the time — and once it happens, there’s often no fixing it.
Loss of Medicaid Eligibility for Long Term Care
If you transfer a valuable asset, such as your home, to a relative or third party without adequate consideration, you may create a loss of Medicaid eligibility for an extended period of time. This is called the Medicaid Look Back Rule, which creates a period of ineligibility based on the fair market value of assets given away for inadequate consideration within five years prior to the date you apply for Medicaid. If you do not have sufficient liquidity to ride out this period of self-created Medicaid ineligibility, you may find yourself in need of long-term care but without Medicaid payment protection.
It Can Create Big Tax Bills
If your adult children inherit your home after you pass, they usually get a “step up” in tax basis to the current market value, which can save them several thousand dollars in capital gains tax when they sell this inherited asset. Give it away now, and they lose that benefit.
It Can Make You a Fraud Target
Title fraud is on the rise in Colorado. Quick, informal title transfers make it easier for scammers to take advantage. Once your name is off the title, your legal protections are gone.
Check out the Colorado Property Fraud Alert Guide to help you protect yourself. It explains how to use free Recording Activity Notification services that many counties now offer. These simple alerts let you know any time a document is filed in your name or on your property.
Sign Up for Your County’s Fraud Alerts
You can sign up for a fraud alert in these counties:
Counties that do not offer fraud alerts yet: City and County of Broomfield, Adams County, Elbert County, Pueblo County, and Weld County.
👉 Click here to download the full Colorado Fraud Alert Guide.
There’s a Better Way to Avoid Probate
If your goal is to spare your family the time and expense of probate, there are much better ways to do it, like a properly drafted living trust. A trust helps you avoid probate and keeps you fully in control while you’re alive. A beneficiary deed is another way to avoid probate, as it gives a future interest in your home to a family member. I’d be happy to help you with both of these alternatives.
Let’s Talk
Before you sign away your biggest asset, talk to an experienced Colorado estate planning attorney. A little planning today can protect your family and your legacy tomorrow.