Coping with the death of a loved one can be both mentally and emotionally taxing. If you are an estate executor, personal representative, or have been named a trustee, you may feel as though your current responsibilities are overwhelming. We want to be a source for information for you as you navigate your way through this process. We have compiled the information below to provide you with the some of the important basic concepts of probate law and trust administration in an effort to provide you with useful information in your effort to better understand this often complex area of law.
For more information on Colorado Probate Law, download our Probate FAQ (Frequently Asked Questions) and take a look at our articles and videos on probate law and trust administration topics. To find an overview of the services offered by Baker Law Group, click here. If you have any further questions or would like to schedule a consultation with one of our attorneys, please do not hesitate to call us at 303.862.4564.
Beneficiary - A person who is eligible to receive distributions of an asset, often from a trust, will, or life insurance policy
Beneficiary/Transfer on Death (TOD) Designee: An individual designated to receive an asset, such as a financial account, upon the death of the asset’s owner. These designations are made with the financial institution where the account or policy is held
Creditor - A person or entity that may be entitled payment from an estate for amounts alleged to be owed
Decedent - A person who has died
Devisee(s) - Those who are named in a will as a recipient of a portion of a decedent’s estate
Estate - All of the decedent’s assets owned including land, real estate, possessions, financial securities, cash, and other assets that the individual owns or has an interest
Executor - an individual appointed to administer an estate of a deceased person; their main duty is to carry out the instruction of managing the decedent’s affairs and wishes regarding their estate.
Grantor - person that gives interest in or ownership rights of an asset to another person or entity, particularly,in the case of a trust.
Heir(s) - Those who receive funds from an estate under intestate succession laws due to their relationship to the decedent
Intestate - When a decedent does not have a formalized or valid will
Intestate succession laws -State laws that dictate the distribution of a decedent’s property if nowill is in place
Joint tenancy - A form of property ownership in which two or more people own property together with equal rights and obligations; when one of the owners dies, that owner’s interest passes to the survivors without the property having to go through a formal court process
Letters Testamentary - Document issued by a probate court that gives an executor the authority to act in a fiduciary manner on behalf of the estate
Living Trust - Trust created during an individual’s lifetime where a designated person (the trustee) is given responsibility for managing that individual’s assets for the eventual beneficiaries
Non-Probate Assets - Assets of the decedent that do not become part of the probate estate and are not subject to distribution according to the will. This includes assets that are jointly owned and pass directly to the joint owner or assets with named death beneficiaries,which pass directly to the designated beneficiary
Personal Representative - The individual who is appointed by the court to be responsible for administering the estate of a deceased person (sometimes also referred to as an executor)
Probate – Process by which a will is reviewed to determine whether it is valid and authentic; the general administering of a decedent’s will or the intestate estate of a decedent
Small estate affidavit - A document that effectively informs the court that a particular estate meets the requirements of a small estate, allowing the executor of the document to receive possession and ownership of the decedent’s property without going through the formality of probate
Survivors - Those who have outlived the decedent, which may have an impaction or distributions pursuant to a will, trust or the intestate statue.
Trust - A fiduciary relationship in which a trustor/grantor gives the trustee the right to hold title to property or assets for the benefit of another; provides legal protection for the trustor’s assets to make sure that they are distributed in accordance with the trustor’s wishes
Trustee - A person that holds and administers property or assets for the benefit of a third party
Trustor - Individual that gifts funds or assets to others and/or themselves via a trust
Uniform Probate Code - A comprehensive body of law that governs wills and estates in the United States. Some states have adopted the uniform probate code in-whole or in-part.
Will - A legal document that contains instructions as to what should be done with one’s estate following one’s death
Probate is the legal process used to distribute a person’s property following their death. A person, most often the surviving spouse or an adult child, is typically named as the executor or personal representative in a decedent’s last will and testament and appointed by the court and has the legal authority to gather,protect and value the assets owned by the decedent’s estate, to pay the decedent’s outstanding bills and taxes pursuant to priority, and to distribute the decedent’s assets to his or her heirs or beneficiaries.
The purpose of probate is to prevent fraud and to ensure that Decedent’s estate passes to those legally entitled, including to those in accordance with the Decedent’s wishes. To meet these goals, the decedent’s estate is theoretically“frozen”, so to speak, until a judge determines that the decedent’s will is valid, that all of the necessary people have been notified, that all of the property at issue has been identified and/or appraised, and the appropriate personal representative for the estate is appointed. The appointed personal representative handles of the affairs of the estate; some of the typical and tasks are protecting an preserving the estate during administration, settling and resolving any disputes relating to the estate, identifying and paying, as appropriate and with priority, the creditors of the estate, selling and distributing assets of the estate and closing the estate, to name a few.
When Probate Applies
Inmost cases, wills and intestate estates (estates without a will) must be probated, but the degree and complexity of the court’s involvement range from minimal to significant oversight. Probate is required if a person dies with or without a will and has real property, e.g. land, or property over certain threshold amount.
In Colorado, there are three main types of probate proceedings for wills and intestate estates – small estates (under $70,000 for the year 2020 and no real property), informal and formal. The general probate procedure is described in the Uniform Probate Code (UPC), which has effectively simplified the probate process.
Despite whether or not the decedent had a will, if he or she had $70,000 for the year 2020 or less and no real property, then the devisees or heirs of the decedent may collect assets by using an affidavit, which prevents having to involve the court in the distribution process. The devisee or heir collecting the property must swear that they are entitled to the property and that they will distribute it to anyone else who is also entitled.
In an informal estate, the applicant applies directly to the court and informs interested parties of their appointment after it occurs. Informal probate is generally allowed where the decedent drafted a valid will, where there are no expected contests to the distribution, or where there is a personal representative with priority ready for appointment. The process begins when you file an application with the probate court to serve as the personal representative of the estate. Once the application is approved, the representative has the legal authority to act on behalf of the estate. They then typically receive letters testamentary from the court. There are then numerous steps that the representative must take, a few of these include sending out formal notice, preparing an inventory and appraisal of the estate’s assets, and distributing the property when the estate closes. Once the property has been distributed, the personal representative can close the proceeding by filing a final accounting and closing statement with the court. The court has a limited role in administration under informal probate; it simply acts to ensure that the parties comply with the will or intestacy law.
When opening a formal case, the petitioner must send notice of their intent to be appointed as personal representative and allow for potential objections before being appointed. Generally, formal probate is recommended when a will is or likely will be contested, unclear, invalid, or where there are anticipated significant challenges in administering the estate. Formal probate also offer a little more protection to the personal representatives when it acts on behalf of the estate, especially if he or she requests and gets an order from the court prior to taking a specific action, as is he or she is getting court approval to take those certain actions, e.g. managing the assets, paying any debts, filing tax returns, and distributing the estate’s assets. A supervised formal probate is one in which the court supervises the entire probate process and approves the distribution of all property subject to the proceeding.
While Probate in Colorado is a simplified and less costly proceeding when compared to many other states, probate at times can be a lengthy and potentially quite costly,depending on the circumstances and the people involved. Fortunately, not all estates are required to go through probate, namely those estates with minimal assets or with non-probate assets. If an estate falls below a certain threshold monetary value, it is considered a “small estate” and does not require court supervision to be settled. Also, assets that are classified as non-probate assets, are not required to be probated. The most common kinds of assets that can be transferred without probate are joint tenancy assets, revocable or irrevocable living trusts, and beneficiary designations. Through proper estate planning, one can ensure that most, if not all, of one’s assets avoid probate,without subjecting their assets to the risks involved in co-ownership. For more information estate planning download our Estate Planning FAQ (Frequently Asked Questions) and take a look at our articles and videos on estate planning topics. To find an overview of the services offered by Baker Law Group, click here .
If an individual adds another person to his or her assets as a joint tenant owner,the individual’s property can pass to the joint tenant upon his or her death without having to go through probate. However, this may subject these joint tenancy assets to any claims against the co-owner and make them available to the co-owner’s creditors, even while the decedent is still alive.
Revocable Living Trust
A revocable or irrevocable living trust is a legal document that allows a person to establish a separate entity (the trust), during life, that has legal title to his or her assets while they are alive. In the trust, the grantor would name a trustee or trustees to manage the assets owned by the trust according to the terms of the trust. Most commonly,the grantor acts as the trustee while they are alive, but upon their disability or death, the terms appoint a successor trustee to manage and distribute the assets held in the trust. It is recommended that trustees and successors retain legal counsel for assistance when administering a trust to ensure that the trust is being properly administered.
Colorado allows for Transfer on Death (TOD) or Pay on Death (POD) beneficiary designations to be added to bank accounts. These designations are often preferable to creating joint tenancy assets in that they allow the decedent to transfer property only upon their death, avoiding the risks of co-owner liability to creditors. Note that if there are beneficiaries of assets listed,the assets will be distributed to the listed beneficiaries even if the person’swill states otherwise.
More on Trusts
Put simply, a trust is another type of agreement between parties. One party is the grantor, or the person who created the trust. Another party is the trustee, or the person or entity who administers or manages the trust pursuant to its terms(note that the grantor may also be the trustee). The remaining parties are the beneficiary(ies), or the person(s) who benefits from the trust.
If a trust holds real property, e.g. land, then the trustee may be required to file certain documents with the county in order to vest title in the trust and ultimately transfer the property in accordance with the trust. After all of the assets have been identified and transferred to the trustee, it must then pay valid debts, satisfy any tax liabilities owed, and file a federal estate tax Form 706 within nine months of the grantor’s death. Once all of the assets have been collected, the debts paid, the tax returns filed, and the tax liabilities satisfied, the remaining trust assets can be distributed to the beneficiaries pursuant to the terms of the trust.
We hope the above information provided you with additional insight into the world of Probate law in Colorado. For more information on this topic, download our Probate FAQ (Frequently Asked Questions) and take a look at our articles and videos on probate law and trust administration topics. To find an overview of the services offered by Baker Law Group, click here . If you have any further questions or would like to schedule a consultation with one of our attorneys, please do not hesitate to call us at 303.862.4564.