When someone dies, his or her debts must be paid and assets must be distributed to the named beneficiaries. The assets to be distributed include real estate, bank accounts, stocks and bonds, automobiles, furniture, jewelry, and other property.
The process by which the person's estate is processed, whether the estate is small or large, is called probate. In the simplest terms, probate prevents the decedent’s heirs, creditors, and other interested parties from claiming assets of the estate that may not rightfully belong to them.
The total value of all the property and possessions the deceased leaves behind is known as his or her estate. Put simply, probate is the court-supervised process of wrapping up a deceased person's estate and distributing the remaining assets to his or her heirs.
A person's last will and testament provides the probate court judge with a guide for the distribution of the assets. Before a judge will follow the instructions in the deceased person's will, the will's validity must be verified. However, if there is no will or the will is not valid, the deceased person's assets will be distributed according to Colorado intestacy laws during the probate process.
Probate is the court process of settling a deceased person's estate, whether it is with a will (testate) or without a will (intestate).
If you die with a valid will, probate will be carried out according to the instructions left in your will. If you die intestate, Colorado intestate succession laws will dictate how your estate will be distributed.
In general, probate is needed whenever a person dies with property titled in their name and that needs to be re-titled before being transferred to their heirs. However, probate is usually not needed if the deceased person held all of their property jointly with his or her spouse. In this case, no probate proceeding will be necessary as the property can be transferred into the sole name of the surviving spouse.
Furthermore, if the estate's assets are only those for which the deceased person had designated a beneficiary, then again, probate may not be necessary. For example, life insurance policies, 401Ks, IRAs, bank accounts, and some real estate may be transferred directly to a designated beneficiary without having to go through a probate proceeding. However, if the decedent neglected to name a beneficiary for a particular asset or if the beneficiary of a particular asset died before the decedent, then a probate proceeding may still be necessary.
Once a will is filed with the probate court, an estate is opened. At this time, the probate court freezes the assets in the estate until all of the proper procedures are followed to make sure that the decedent’s wishes are met and that any outstanding debts and taxes are paid. Anyone who stands to benefit from the estate, as well as creditors who were owed money by the decedent, will have to be notified and all the estate property will need to be inventoried and appraised.
Whether you die testate or intestate, having your estate avoid probate is a good thing for many reasons. Some of the most common reasons why people wish to avoid probate are as follows:
These are a few of the many reasons why you may want to avoid probate. But, how can probate be avoided?
Essentially, in order for your estate to avoid probate, you must own all of your property in such a way that upon your death, you own no property in your own name, i.e. you have no probate property. If there is no property, there will be no probate.
A trust is commonly thought of as something that people with a lot of money set up to support their family for generations to come, thus the term “trust fund baby”. But a trust, used in lieu of or in combination with a will, can also be an instrument that helps avoid the entire probate process.
Having a trust may also solve some of the issues that are often encountered during the probate process. Some of these issues include:
For the purpose of discussing probate avoidance, your property can be divided into two different categories:
Non-probate property is real or personal property that is not part of your estate. Because non-probate property is not considered part of your estate, it will not be a part of the probate process or suffer from any of the issues described above and:
Examples of non-probate property included:
When you die, each of these types of non-probate property will bypass probate and go directly to a named beneficiary or surviving joint tenant by contract or operation of law.
Probate property is real and personal property that will require probate without proper planning. Examples of non-probate property includes:
Generally speaking, any real or personal property that you own in your own name at the time of your death will be considered probate property and will need to pass through probate. The bottom line, however, is that if you successfully remove all of your probate property from your estate, then probate may be avoided.
When you place property in a revocable living trust, the property is removed from your estate. In addition to allowing the trust property to bypass probate, when you transfer title to your property to a revocable living trust, you will enjoy a number of other benefits. Perhaps the most important benefits are the ability to plan for someone to manage your assets in the event you become incapacitated, the ability to structure distributions in any way you choose, and creditor protection for the trust beneficiaries.
The person who administers the distribution of the deceased person's probate assets is called the personal representative or executor of the deceased's estate and is a key figure in the probate process. If there is a will, the will usually names the person chosen by the deceased to act as the personal representative and the probate court will usually go along with this choice.
If the deceased did not leave a will and/or failed to nominate a personal representative to handle their estate, the probate court will determine who will fulfill this role. In practice, this duty usually falls to the most suitable or willing family member.
The personal representative's job is to gather and assess all of the deceased person's assets and liabilities, pay his or her bills, and handle the distribution of the estate's assets to chosen beneficiaries, in accordance with the deceased person's will. In addition, the personal representative must see that the deceased person's final tax returns are filed.
The personal representative is accountable to the estate's beneficiaries, to whom he or she owes a fiduciary duty to properly supervise the administration of the estate and to safeguard the estate's assets for their benefit. The job of an executor is thus an important one. This is because the personal representative can preserve peace in the family and facilitate the transfer of wealth and property to the estate's heirs and beneficiaries.
All wills and intestate estates must be probated to legally pass possessions and assets to heirs named by will or by law. Due to the simplification of the probate process in Colorado, only about 10% of estates now have to go through a court-supervised probate proceeding. Colorado law now provides for three types of probate proceedings.
Small Estates: Colorado permits an inheritor to claim certain property by merely filing an affidavit if the total value of the deceased's estate is less than $66,000. The person can be entitled to the assets simply by preparing a short document signed under oath called a Small Estate Affidavit and presenting it to the institution in possession of the assets.
This process will allow for the probate process to be completely avoided. For example, presenting a Small Estate Affidavit to a bank that holds the deceased person"s bank account, along with a death certificate, should be enough to have the funds in the bank account released to you. The small estate must not include any real property, such as homes or land that would have to legally pass to an heir by transfer of a deed.
The informal probate procedure involves the following steps:
Many people are familiar with the word “probate,” but relatively few can accurately define it or the underlying processes it describes. This is unfortunate because death is an unavoidable fact of life.
At some point, your parent, spouse, or sibling will die, and the process of settling their estate will begin. Being familiar with some basic probate terms will help you get through settling their estate more easily.
Bequest And Devise - Both bequest and devise refer to language used in a will that names someone as the beneficiary of the decedent's estate. However, bequest is usually used in reference to a gift of personal property from the estate, while devise is used in reference to a gift of real property.
Competency - Means that a person is of legal age (at least 18) and has sufficient mental capacity to enter into a particular transaction or execute a particular document.
Creditor Protection Trust - A creditor protection trust is one that prevents or severely limits a creditor’s ability to bring legal action to gain access to the assets of a trust, while simultaneously allowing the trust maker to retain some control over the trust assets, and even to retain access to those assets.
Decedent - The term decedent simply refers to a person who has passed away.
Elective Share - The portion of a decedent's estate that is given to his or her spouse by law. In Colorado, the surviving spouse is entitled to 50% of the marital property component of the decedent’s “augmented estate”, which can include the value of non-probate transfers and gifts made by the decedent during the last few years of his or her life. Elective shares protect a surviving spouse from being disinherited by a decedent’s will.
Estate - For probate purposes, an estate is everything the decedent owned at the time of his or her death, including houses and land, business interest, cars and RVs, financial assets, jewelry and art, clothing and furniture, collectibles, insurance, and inheritances.
Estate Planning - Estate planning is the process of
Fiduciary - A person or entity who is under a duty to act in the best interests of another person or their estate, such as the executor, administrator, or personal representative of a person's probate estate.
Heir, Distributee, and Beneficiary - An individual or entity that is entitled to inherit parts of a decedent's estate. These terms are often used interchangeably, but strictly speaking, an "heir" is someone, besides the surviving spouse, who is entitled to inherit part of an estate in accordance with state intestacy law; a "distributee" is someone entitled to inherit in accordance with a will; and a "beneficiary" is someone entitled to receive distributions from assets held by a trust.
Holographic Will - A will that is written entirely in the testator's (the will maker) handwriting and then signed without any witnesses. Generally speaking, a will must be witnessed in order to be legally valid. But in some states, such as Colorado, a valid will may be created without witnesses, as long as the material portions are written in the testator's own handwriting, it is signed, and there is some evidence that the testator intended the document to be a will.
Joint Tenancy With Right of Survivorship - Joint tenancy is a form of joint ownership in which the owners each own the property equally. If one dies the other automatically inherits the entire property. This automatic inheritance is known as the right of survivorship. Thus, probate of a particular piece of propery is not necessary if the property is owned under joint tenancy. A joint tenancy cannot be created by law. Therefore the parties must make it clear that they intend to share ownership through joint tenancy in the conveyance document. A joint tenant has the right to sell, mortgage, or transfer their interest without the consent of the other joint tenants, but doing so may sever the joint tenancy. When joint tenancy is severed, the property will no long be automatically inherited.
Letters Testamentary - A formal document issued by a probate court giving the executor or personal representative the authority to carry out the administration of the decedent's estate according to the terms of the decedent's will.
Personal Representative - The person, often named in a will, who is responsible for administering the decedent’s estate and ensuring that all the steps of the probate process are properly completed, also called an executor or administrator.
Personal Property - Essentially, any property that you own that is not real estate, including both tangible and intangible property.
Petition For Letters of Administration - A document filed by the personal representative of a person who has died without a will (intestate) requesting letters of administration that legally authorize that person to administer the decedent’s estate.
Petition For Probate - A petition filed with the probate court asking that the court open probate, validate the decedent's will (if there is one), nominate an executor or personal representative, and (if the decedent died intestate) determine how the estate should be distributed.
Probate - From a technical perspective, probate is understood to be the legal process of verifying a deceased person's last will and testament, if he or she created a one before dying. But most people recognize probate to be the general process of distributing someone's estate after they have passed away. Under that interpretation, there are three specific phases of probate:
Validating the Will (if one has been left behind), and choosing an executor or administrator;
Gathering and liquidating the deceased’s estate, paying creditors, and filing the deceased’s final tax returns; and
Dispersing what's leftover to the deceased’s heirs and beneficiaries in accordance with the deceased’s will or state intestacy law.
Real Property - Also called real estate, includes all things attached to land and all rights inherent in that land. Real property generally describes things that are considered immovable, such as homes and buildings, but could extend to other things such as fixtures, crops, and minerals not yet extracted from the land.
Surviving Spouse - A person that survives the death of someone to whom they were lawfully married, and, in doing so, acquires the legal rights to their deceased spouse's property.
Tangible Personal Property - Tangible property is physical items that can be physically touched, measured, or weighed, as opposed to intangible property, such a patent, trademark, trade secret, or copyright that does not exist physically and is essentially just a bundle of rights.
Tenancy By The Entirety - A married couple can sometimes be considered one single entity, sharing equal ownership of a piece of real estate. This is called tenancy by the entirety or tenancy by the entireties and only applies for couples who are married to each other. Similar to joint tenancy, tenancy by the entirety allows a spouse to automatically inherit the real estate of the deceased spouse. Divorce will sever a tenancy by the entirety.
Tenancy by the entirety has the potential to affect a number of different legal issues. For example, tenancy by the entirety prevents one spouse from selling the property without the consent of the other. In addition, if someone sues one of the spouses in an attempt to reclaim a debt, anything owned through tenancy by the entirety will be off limits to the creditor.
Furthermore, when it comes to issues involving probate, the surviving spouse automatically gains full control of the deceased spouse's share of any property owned through tenancy by the entirety.
Tenancy in Common - Tenancy in common is the most common type of joint ownership. Unless stated otherwise, ownership is assumed to be a tenancy in common. Tenancy in common is a form of joint ownership of title to real estate by two or more persons in which, although they each have a right to possess all of the property, they have separate and distinct titles to the property. In the event that one of the tenants in common dies, his title passes not to the other tenant in common, but to his or her estate or heirs.
Transfer On Death Deed - A special deed containing a named beneficiary that causes ownership of real estate to transfer to the named beneficiary automatically upon the death of the owner
Testacy - Testacy refers to a person dying “testate”, meaning that they died leaving a will behind. This is in contrast to intestacy, meaning that the person died “intestate” or leaving no will behind.
Will - A will is a document that is created by a person during their lifetime, according to specific legal requirements, and that is left behind after they die to express, amongst other things, how they wish for their estate to be distributed.
Wealth Management - Wealth management is the process of implementing financial, investment, tax, and accounting strategies, as well as, legal and estate planning tools to build and sustain wealth, so that the wealth can then be passed on to the next generation.
An experienced estate planning attorney will be familiar with the difference between probate and non-probate assets, as well as, other ways to remove probate property from your estate. In addition, a good attorney will also be sensitive to the reasons why you may wish for your estate to avoid probate.
When someone in Colorado dies, they leave behind an estate. An estate can be worth millions of dollars or can be as simple as the title to a car, a bank account, or even a few family belongings that still have be transferred to someone other than the decedent in a manner that satisfies the law.
People often want to avoid probate at all costs. This is because probate can be both time-consuming and expensive. In many cases, probate avoidance can be achieved. But it's important to use an attorney who has knowledge of Colorado probate processes to be sure that everything is done correctly. Having to correct mistakes months or years later can result in considerable cost and inconvenience.
Even though Colorado law has simplified the process, it may still be difficult to determine which estate planning strategy is the best for you. Consulting with an attorney about the best Colorado trust for your situation is recommended. For assistance with this, or any other estate planning or probate matter, contact an experienced Colorado estate planning and probate attorney through the contact link on our website.