Why You Should Avoid Probate
dan • April 9, 2022
If you have heard anything about probate, it's probably that you should avoid it. But probate is different from state to state and has changed substantially over the years. So what you have heard about probate may be based on a different time and different place.
Colorado has made substantial changes over the years to try to take the probate process much more manageable and less like a typical court process than it used to be. Many probates are completed without the Personal Representative ever going to court. The court wants to see certain notifications get sent out to heirs and creditors, and wants confirmation that an inventory and accounting have been made available to those parties. But the court relies on the interested parties to let it know if there is any reason to conduct hearings. Unless a party requests such a hearing, the court assumes everything is going fine and lets the estate's Personal Representative administer the estate as he or she sees fit (within the confines of state law and the decedent's will if there is one, of course).
Despite this simplified process, there are still several scenarios in which we recommend to our clients that they consider creating a plan that would avoid probate.
1. Blended family
A blended family is a family that has some sort of step relationship in it (
i.e.
, a married couple with separate kids from prior relationships). Because blended families are so common, many people fail to appreciate the complex legal issues and tricky family dynamics that blended families can encounter in the estate administration process.
The problem we most often see is that the people making the plan do what most married couples do, which is to set their estates up so that the survivor between them will receive everything at the first death. The often-inadvertent consequence of this arrangement is that the children of the first person to pass away end up receiving nothing because the survivor's plan leaves everything to his or her kids.
When asked, most married couples with blended families want to create a plan that ensures that the survivor between them will be able to continue to live the lifestyle to which they have become accustomed, but also ensure that, at the second death, all the kids from both spouses will receive distributions from the estate. A trust is often needed to create this kind of multi-step distribution process. In addition to enabling control of distributions past one step, properly funded trusts also avoid probate.
The problem we most often see is that the people making the plan do what most married couples do, which is to set their estates up so that the survivor between them will receive everything at the first death. The often-inadvertent consequence of this arrangement is that the children of the first person to pass away end up receiving nothing because the survivor's plan leaves everything to his or her kids.
When asked, most married couples with blended families want to create a plan that ensures that the survivor between them will be able to continue to live the lifestyle to which they have become accustomed, but also ensure that, at the second death, all the kids from both spouses will receive distributions from the estate. A trust is often needed to create this kind of multi-step distribution process. In addition to enabling control of distributions past one step, properly funded trusts also avoid probate.
2. Property in multiple states
Sometimes people ask us whether their estate plan will control assets located in other countries. We have to let those people know that, not only do Colorado probate courts not control property outside the country, they do not control property outside the state. If you live in Colorado and have a vacation property in Arizona, for example, an "ancillary probate" will need to be opened in Arizona to deal with the property there.
An ancillary probate process does not necessarily require all the steps that typically comprise a full probate process, but even if it is abbreviated, it frequently still requires hiring another lawyer in that jurisdiction, paying another court filing fee, publishing another creditor notice, etc. And as mentioned above, the probate process is different in each state. If your other property is in a state with a slower, more court-intensive probate process, it will complicate things.
Again, our most frequently used solution to this problem is to set up a trust, and title all properties to it. That ensures that your trustee can step in and handle all properties through one trust administration process, as opposed to having to open multiple probate cases in different jurisdictions.
An ancillary probate process does not necessarily require all the steps that typically comprise a full probate process, but even if it is abbreviated, it frequently still requires hiring another lawyer in that jurisdiction, paying another court filing fee, publishing another creditor notice, etc. And as mentioned above, the probate process is different in each state. If your other property is in a state with a slower, more court-intensive probate process, it will complicate things.
Again, our most frequently used solution to this problem is to set up a trust, and title all properties to it. That ensures that your trustee can step in and handle all properties through one trust administration process, as opposed to having to open multiple probate cases in different jurisdictions.
3. An heir who would use a court process to torment your family
As explained above, although a probate really is a court case, with a judge, a case number, and a court file, most probate cases do not require anywhere near the amount of paperwork, court hearings, or other process typically required in civil litigation or criminal matters. Still, however, as also explained above, the court will get more involved in an interested party asks it to. If you have a difficult, abusive, or combative family member, it is very easy for them to use this process to gum up the works, or worse. All that person has to do is file an objection (the current fee for which is $12) and the process can suddenly become significantly more time-consuming and adversarial. We frequently see handwritten objections filed by people without the help (and expense) of lawyers. For people who enjoy "stirring the pot," there is little incentive for them not to do this.
Interested parties can also raise objections about transfers that happen outside the probate process too, but doing so is significantly more difficult. For one thing, they usually do not have access to anywhere near the amount of information they are entitled to receive through the probate process. And then to get a court process started, they typically have to file a lawsuit, which is a much bigger deal than filing an objection in an already-existing probate process. The filing fee alone is usually at least several hundred dollars, and the filing process is complicated enough that most people will find it too difficult to do without a lawyer who, in addition to charging them, will hopefully also talk some sense into them about how good of an idea this really is.
Interested parties can also raise objections about transfers that happen outside the probate process too, but doing so is significantly more difficult. For one thing, they usually do not have access to anywhere near the amount of information they are entitled to receive through the probate process. And then to get a court process started, they typically have to file a lawsuit, which is a much bigger deal than filing an objection in an already-existing probate process. The filing fee alone is usually at least several hundred dollars, and the filing process is complicated enough that most people will find it too difficult to do without a lawyer who, in addition to charging them, will hopefully also talk some sense into them about how good of an idea this really is.
4. Personal preference
We have many clients who do not have any of the scenarios listed above, but still want to create plans that would avoid probate. Many of those clients express a desire to maintain privacy or avoid government involvement in their affairs.
What Next?
If you think it might be time to think through your estate plan, you can:
- Give us a call at 720-821-7604 to schedule a "Discovery Session" at which we can determine whether our firm would be a good fit for your needs. Or fill out our contact form to have us call you.
- Visit our estate planning page to learn more about how proactively thinking through your estate plan can protect you and your family, minimize hassle, lower the chance of family discord, and minimize or eliminate taxes.
- Learn more by reading our blog or watching our videos .
Learn how the $250,000 Colorado homestead exemption protects your home equity and why "mortgage protection" products might not be the best choice for your family.
Learn how the five-year Medicaid rule and asset protection trusts can help you qualify for care while protecting your family's inheritance in the Denver metro area.
Learn how to protect your Social Security from creditors and bank levies. The McKenzie Law Firm explains the "two-month rule" and why separate accounts matter for Denver families.
Learn how estate planning helps Denver residents stay in control of their lives and homes. Discover why Power of Attorney and trusts are essential for your future.
Does Medicare cover nursing home care in Colorado? Learn the truth about the 100-day limit and how to protect your estate from long-term care costs.
Thinking about a reverse mortgage in Denver? Learn why coordinating this loan with your estate plan is essential to protect your spouse and your heirs.
Learn how the guardianship process works in Colorado and how adult children can legally make housing and medical decisions for parents.
Worried about your retirement income? Learn when the federal government can garnish Social Security benefits for taxes, student loans, or child support.
Discover how blended families in the Denver area can handle inheritance fairly. Learn why immediate gifts might be better than making children wait for years.
Think estate planning is only for parents? Think again. Learn why childless adults in Colorado need a solid estate plan — and what’s at stake if you don’t have one.