Core excitation is included in the three-body hyperspherical formulati
on for systems of the type (core + n + n). We show that core excitatio
n generates a three-body attraction, improving on the common underbind
ing problem present in many inert-core models. The Pauli principle sig
nificantly influences both the binding energies and the wave functions
. A study of the effect of the different terms of the nn interaction o
n the three-body system is presented. The model is applied to Be-12, w
here one would expect that the inert-core approximation would not be a
ppropriate. A deformed pi-core interaction is determined by the proper
ties of the subsystem Be-11. Results for the binding energy, r.m.s. ra
dius, structure and momentum distribution of the ground state of Be-12
are presented, and very good agreement with experimental data is foun
d. A full comparison with the inert-core model is made. The results wi
th core excitation show a very small component of (p(1/2))(2) neutrons
in the ground-state wave function, in contrast to the inert-core mode
l where the Be-12 ground state is mainly (p(1/2))(2) neutrons relative
to the core. We point out the possible implications of this fact for
heavier Be isotopes, especially Be-13. The spectrum of Be-12 bound exc
ited states is calculated and compared with the measured values and so
me discrepancies are found. Following a recent proposal for an experim
ent, predictions for the Be-12(p,d) transfer cross sections are given.