Probate

If you have recently lost a parent, sibling, child, friend, or business partner, you may be wondering how you are going to wrap up their affairs, pay off their debts, and get their assets transferred to the people entitled to receive them. The Colorado probate process may help you figure these issues out, and even if you don’t think probate will be needed, understanding what it does and when it is needed will be critical to getting things correctly addressed.
There is a misconception that when someone dies, the only question is: what do the kids get? If the person who died didn’t have kids, maybe other family members can get something instead. But that badly understates the number of tasks that need to be completed, and the people who need to be considered, in the wake of someone’s passing.
Before the family takes possession of the assets, they absolutely must make sure they know everything the decedent had, and everyone who might have a rightful claim to any of those assets. The people who have rightful claims includes not only the decedent’s heirs, but also his or her creditors. The nightmare scenario is that assets are distributed to the family, and then a creditor shows up with a strong claim to something that isn’t in the estate anymore. A second, almost-as-bad scenario is finding out, years after you thought everything was settled, that there is still something out there. To prevent either of these scenarios, the following steps should be followed.

Immediate Tasks

  1. See if there any estate plan documents, such as a will, powers of attorney, or memorial instructions. Sometimes, the memorial instructions are contained in the will. Sometimes, they are in their own document. If you are suddenly having to plan a funeral or memorial service, or having to make decisions about how to lay your family member to rest, those instructions can be a real help. Especially if family members are not seeing eye-to-eye on how any part of that should go.If you find a will — or, to be more accurate, a document “purporting to be a will” — Colorado law requires that it be “lodged” with the decedent’s county probate court within 10 days. Note that any document that appears to contain instructions from the decedent about what should happen to his or her assets after his or her death might qualify as a will, and maybe should be lodged, even if it does not appear to be official. Handwritten notes can qualify as wills in certain circumstances. Lodging a will does not initiate a probate process. It is done simply to ensure that the will is safe and cannot be lost or modified.
  2. Secure the decedent’s property. It is not unusual for families to immediately start taking personal property out of the residence. Maybe that is okay, but it should be done in some sort of systematic process in which it is determined who has a legal right to the property and a written record is kept of what each person is taking. People underestimate how often personal property can become the subject of fighting down the road. When that happens, it can be difficult because the value of the property is often sentimental, not monetary, and so you can’t necessarily split the difference with a cash distribution, or by buying a similar item for the other operation who wanted it.

Start Figuring Out What the Decedent Had

It may seem impolite to begin asking about money and finances soon after someone passes away, but the reality is that there may be things that need to be dealt with immediately. If there is real estate, someone needs to figure out whether there is a mortgage that needs to be paid and when the next payment is due. Even if there isn’t a mortgage, somebody needs to figure out how property taxes, insurance, and home owners association dues are being paid. You don’t want a house going into foreclosure, or having liens to be put on it, because no one was paying attention to the financial obligations associated with real estate ownership.
Plans also need to be put in place for ensuring that the house is maintained until decisions get made about what will be done with it. Is there a lawn that needs to be mowed and watered? Does the heat need to be kept on? Does the water need to be turned off? Is there food that needs to be removed? Are there pets that need to be re-homed? If there are other family members living there, will they need to pay the estate rent?
More broadly, someone needs to figure out whether a probate process will be necessary. Probate is the court-supervised process for transferring assets from a deceased person to the survivors entitled to receive them. It is not needed for everyone. Assets that the decedent owned jointly with a survivor transfer to that survivor automatically (a death certificate may need to be filed or recorded with the entity that keeps track of title). Assets that have designated beneficiary instructions attached to them (usually life insurance benefits and retirement accounts, but also sometimes real estate and cash accounts) get directed to the named beneficiaries. Assets that are inside of trusts or business entities are handled according to the entity’s governing document.
Now the question is, what’s left? If what’s left includes real estate or assets that, combined, are worth more than $50,000 (adjusted for inflation from 2000), a probate case will have to be opened to get those assets transferred. If neither of those conditions are true, it is possible that you will be able to get possession of the assets with a “small estate affidavit.” A small estate affidavit is a document that you sign on which you promise, under oath, that the estate does not exceed the thresholds above, that you have an interest in the estate, and that you will deliver the property to the people legally entitled to receive it (that last part is critical; a small estate affidavit sites not entitle the person who receives the property to keep it).

Even when an estate is not big enough to require a probate, there be reasons to open one anyway. Three such reasons are:

  1. A custodian is insisting on it. Sometimes, the estate can be well below the probate threshold, but a bank or other financial institution insists on receiving a court order before turning over an asset.
  2. The estate may be insolvent. If the estate might have more creditor claims than assets, you might want to put it through a probate process. Everyone thinks of the probate process as being a way to get assets to heirs, but addressing debt in a fair, predictable, orderly fashion is also an important purpose.
  3. There is a risk of family discord. Similar to settling creditor claims, a probate process can offer your family a way to resolve disputed matters in a fair, orderly process.

What If Colorado Probate Is Needed?

If you determine that a probate will be needed, you will need to decide when to start the process. Colorado’s Probate Code only says that a probate needs to be started within three years of a person’s death, but we have started many probated even after that anniversary when previously unknown assets have been discovered. But you will likely find that you want to begin things sooner because you won’t be able to legally access, sell, or otherwise dispose of property or money until you get a probate court’s authorization to do so. Meanwhile, mortgages, insurance, and taxes may need to get paid.
Moreover, if the decedent owed anybody money, his or her creditors can open a probate case if the family doesn’t do so within a certain period of time. People often fail to consider. Ensuring that creditors are found, properly notified, and satisfied is the most treacherous part of the probate process for a personal representative.
Finally, there are certain tax decisions that need to be made within a certain period of time. If those deadlines are not met, opportunities can be lost or fines can be incurred. Some of those deadlines can come up quite quickly depending on what time of year the decedent passed away. For example, the decedent may have an income tax return that needs to be filed (or extended) immediately.

How Long Does Colorado Probate Take?

Colorado requires a probate matter to remain open for a minimum of 6 months, but in our experience, probates frequently take 15 months, give or take three. Why does it take so long? Again, people frequently underestimate how long it will take to be sure all creditors have been found and properly addressed. A personal representative should be extremely careful about distributing assets or closing an estate if he or she feels any uncertainty about creditors.
Another reason that the probate process can take longer than you might think is due to challenges getting rid of certain assets. If you have ever sold a house, you know how much work often needs to be done before it can be put on the market. Also if there is a significant amount of personal property, it can take a while to figure out what to do with it.

Should You Use the Formal or Informal Colorado Probate Process?

For estates in which it is clear who the heirs are and what the assets are, and where there is not expected to be any fighting among heirs or creditors, Colorado offers an “informal” probate process. The informal process allows the personal representative of the estate to carry out his or her duties relatively quickly and with minimal court oversight. For more complicated estates, a “formal probate” process must be utilized, and more court oversight will be required.

Other Considerations

Even where there is a will, omitted spouses and children may have the right to collect more than what the decedent left to them. Colorado law permits spouses and children from prior marriages to claim a family allowance against the estate. If authorized, these payments are made before any creditors are paid and before the other heirs receive their distributions so that these family members are compensated during the administration of the estate.
Some family members may also obtain an exempt property allowance. For example, the decedent’s spouse is entitled to exempt property from the estate in the amount of $26,000. If there is no surviving spouse, then any dependent children may claim this amount. The amounts received are in addition to any funds or property they may receive under the will. There are other circumstances where a family allowance can be claimed.

What About Assets Inside A Trust?

Many people put assets into a living trust specifically to avoid probate. In these situations, the decedent frequently had significant assets, and yet, no probate will need to take place. Does this mean that nothing needs to be done? Definitely not! In fact, the initial administration of a trust looks a lot like a probate in many ways. The first things a trustee should do is identify, secure, and inventory the trust assets, find out whether there are any creditor claims or debts, and figure out what tax returns are due and when.

Does the Colorado Probate Process Require An Attorney?

Maybe not. The Colorado probate process can be simple enough to complete without an attorney’s help, and the Colorado courts have provided forms and instructions to get it done. The Colorado Bar Association has also provided informational pamphlets on serving as a personal representative and trustee.
It can, however, be difficult to predict how complicated a probate process will be at the beginning, and by the time you have realized things have gone off track, it can be more difficult to clean up mistakes. We have seen probate processes that seemed as though they would be very simple (modest assets and a traditional family), but which became complicated for reasons that could not have been predicted at the beginning. This can happen when:
  • The will makes distributions that are unequal, or unexpected in some other way.
  • The will makes equal distributions, but the heirs expected something else. There are many situations in which this can happen, but some common scenarios are when:
    • one of the children provided end-of-life care to parents and thinks they should receive extra compensation.
    • one of the children lived with the parents and the other siblings think they should have to pay the estate back for the free room and board they received.
  • Non-liquid assets make up a significant portion of the estate. The personal representative will frequently need cash to open the probate matter, clean up and sell the house, pay the decedent’s last bills, etc. When the estate only contains real estate, retirement benefits, or other assets that don’t provide immediately available cash, this can create challenging and stressful situations.
  • The testator had multiple spouses or children from different marriages, or had children born out of wedlock who are challenging the will.
  • The personal representative is mishandling the administration of the estate. This can include failing to move diligently or failing to keep beneficiaries up to date about what is going on.
The McKenzie Law Firm can properly advise you on the Colorado probate process and represent your interests in both contested and non-contested situations.

What’s next?

If you think it might be time to think through your Probate, you can: