When we die we leave behind a collection of things we own, money, property, and possessions, such as valuable jewelry, pets, furniture, and artwork. These are called assets and can hold great value. We also leave behind liabilities, which are debts and obligations that we have accumulated over time in exchange for money goods or services.
So, what happens to all of your assets and liabilities when you die? Well, you have probably already heard of a person's last will and testament (will).
A will is a document made by an individual, often with the assistance of an attorney, that sets out their wishes for the distribution of their property after they die. In legal terms, this property is called your estate and consists of all of your assets and liabilities.
Making a will is also important as it allows you to choose an executor, who is someone that will oversee the distribution of your estate. Furthermore, creating a will allows you to nominate a person to act as the guardian of your minor children when you die.
In Colorado, a will can be made by any person who is 18 years of age or older and possesses the testamentary capacity. Testamentary capacity essentially means that the will-maker must have the mental capacity to understand what they are signing.
To possess testamentary capacity, you must not suffer from any mental illness and be able to understand:
When a will is created, there are certain requirements that must be met to deem it valid. In Colorado, these requirements are as follows:
Essentially, you can include any legal instruction in a will. You can even attach conditions to the will, controlling when and how a beneficiary should receive an inheritance.
A beneficiary is a person who inherits from or receives benefits from the will such as money, property, or possessions that belonged to you. However, any condition you attach to the will must be lawful and in line with public policy.
As part of your will, you can appoint an executor. This is a person who will oversee the distribution of your estate in accordance with the instructions you leave in your will.
The duties typically performed by an executor include:
Usually, the executor is someone who you trust and who is capable of managing your estate.
Sometimes a will needs to be changed after initially being made. If you want to add something or make minor changes to your will, you can attach what is called a codicil. A codicil is an amendment to a will that must also be signed, dated, and witnessed.
If you need to make major changes to your will, you can revoke it and create a completely new will. A will is also revoked whenever a new will is made, when it is destroyed, or when you marry or remarry.
In addition, when you get divorced, it invalidates any gift you made to your spouse, as well as, his or her appointment as your executor. Because of this, you must usually create a new will after a divorce.
If you die without making a will or leave behind an invalid will, you will have died “intestate”. When you die intestate, your assets will be distributed according to Colorado “intestate succession” laws.
This basically means that the assets in your estate will pass on to your closest relative. This can be a huge drawback when it comes to estate planning because intestate succession laws do not take into account how you would like to have had your assets distributed nor the actual needs of your survivors.
For this reason, any comprehensive estate plan usually begins with either a will or a living trust that serves as its foundational document and that expresses your wishes, as they pertain to whom should get what from your estate after you die.
In the simplest terms, a will allows you to dictate how your estate will be disposed of after your death. Whereas, a revocable living trust is created during your lifetime and assists in the management of assets, both during times of incapacity and after your death.
Wills are attractive to many people because they are inexpensive to put in place and work well to govern the distribution of your assets after you die. But, while wills are often initially cheaper to set up and work well to govern how the assets of a small or simple estate will be distributed, they have several disadvantages.
One of the biggest disadvantages of a will, as a foundational estate planning document, is the fact that it needs to be probated upon your death. Probate is a court-supervised process of administering a deceased person's estate, including:
Probate can be costly, eating up money that would otherwise be able to be passed on to your beneficiaries. Probate also takes time, often a minimum of six months, but in some cases, probate can last for more than a year.
For this reason, if you have a sizable estate, own real estate, wish to structure distributions from your estate, provide asset protection for your heirs, and avoid probate, then a revocable living trust is probably a better foundational estate planning tool to have in place than a will.
There are many things to consider when deciding what to include in your Colorado will. Engaging the assistance of a knowledgeable estate planning attorney will ensure that you navigate the process successfully and can give you peace of mind, knowing that you have an effective and comprehensive will in place. For more information, contact an experienced Colorado estate planning attorney today!