This overview is intended to provide a summary of the process that occurs in most probate cases. It is always best to seek the representation of counsel with estate administration and other post-death matters, and we hope to receive the opportunity to assist you.
Probate vs. non-probate assets
When a person dies in Colorado, some assets may automatically pass by operation of law to another person or persons. These types of assets are sometimes referred to as “non-probate” assets. For instance, if a husband and wife own the family home together as joint tenants, full ownership of the home will automatically vest in the surviving spouse following. The same applies in most instances with other jointly titled assets such as bank accounts and cars.
The other primary categories of “non-probate” assets are life insurance and retirement accounts, including IRA’s. In these instances a specific person or entity is generally named as beneficiary by the owner of the account or policy, and these assets pass to the named beneficiary by operation of law in much the same manner as jointly held assets.
Most other assets are “probate” assets which generally will pass under the terms of the owner’s will or other planning documents, or, in the absence of such documents, in accordance with the priorities provided by the laws governing intestate succession. Assets falling in this category are titled assets held only in the individual owner’s name, such as real property, financial accounts, and cars, as well as assets that are not formally titled such as household furnishings and personal effects.
A note about Colorado probate
Much has been made in recent years about the supposed need to “avoid probate.” Truth be told, the Colorado probate system is quite streamlined and simple. Virtually all estates are administered “informally” as explained in more detail below, and it is rare that the personal representative or heirs will ever enter a courtroom during the estate administration process.
Colorado has joined a number of other states in adopting what is known as the Uniform Probate Code, one goal of which is efficient and inexpensive estate administration. There are some distinct advantages of participating in the probate process. By way of examples, the Colorado probate code provides for efficient determination and disposition of creditor claims, provides specific direction to the personal representative concerning his or her responsibilities, and except when administration is supervised (see below) places no restrictions on the timing and amount of distributions to heirs. There are often sound reasons for utilizing planning instruments other than wills, such as living trusts, under which probate can be avoided in some instances. However, “avoiding probate” just for the sake of it, is not ordinarily a goal on which Colorado residents should center their planning concerns.
How do probate assets get passed to the heirs?
“Probate assets” are generally administered and distributed in one of three ways:
a) By Affidavit: If the value of an estate’s assets is less than $64,000 (2014 – this figure is adjusted annually to account for inflation) and there is no real property, the heir(s) can generally simply complete a “small estate affidavit” (available from our office, through that of others who practice probate law, or on the Colorado Judicial Branch’s website at www.courts.state.co.us under the “Self-Help” center). The law directs the person or entity holding the asset(s) to pay or release any estate assets to the decedent’s heirs as set forth in the Affidavit without further action. Generally this can be done with little or no legal help, although a consultation to assist with preparation of the affidavit and to provide some guidance is generally recommended. There may also be other needs associated with wrapping up the decedent’s affairs, such as the potential need for filing final income tax returns, that require the assistance of an attorney or other professionals.
b) Informally: Even when the estate cannot be administered by affidavit, the vast majority of estates in Colorado can be administered “informally.” This means the administration of the estate is not court-supervised, and the personal representative, usually with the guidance of an attorney, handles the responsibilities associated with administering the estate without any express direction from the court, but subject to the requirements of the probate code. Most often, an attorney is engaged to represent and assist the personal representative. However, in many instances, much of the work can be done by the personal representative and family members with limited attorney involvement. The client (usually the personal representative) and attorney should discuss where help will be needed and the extent of attorney involvement at the first meeting.
Informal administration of an estate is commenced by filing the decedent’s original will, as well as an application for informal probate and associated documentation with the appropriate district or probate court. (Regardless of whether all of the paperwork is filed, the decedent’s original will must be deposited with the appropriate court within 10 days of death.) The forms are available from our office, through that of other attorneys who practice probate law, or on the Colorado Judicial Branch’s website at www.courts.state.co.us under the “Self-Help Center.” A consultation with an attorney who is well versed in the probate process before getting started is generally well advised. While the forms are not very complicated, there are a number of pitfalls for the unwary. Failure to complete the forms properly or provide the court with the necessary information and documentation will frustrate and delay the process.
Once the “application” has been accepted by the court, the personal representative will be issued a court certified document known as the “Letters,” which will allow the personal representative to act for the decedent and the estate on all financial and administration needs. Responsibilities include protecting and inventorying the estate’s assets, identifying and dealing appropriately with creditor claims, assuring ongoing bills, such as mortgages and utilities, are paid (usually from an “estate account” funded with the decedent’s liquid assets), keeping a thorough accounting, preparing and filing any necessary tax returns, and ultimately distributing the estate’s assets to the persons or entities entitled thereto.
It is not uncommon for a personal representative to require guidance from the court on a specific issue in the case, such as determining the validity of a will or, in the case of intestate estates, determining the estate’s heirs. In these instances, the personal representative can invoke limited involvement from the court to settle one or more specific issues such as these and others through the filing of a “formal” request with the court to obtain a ruling on the matter in question. Filing a “formal” request on an issue or issues does not cause the estate to be subject to “supervised administration” (see below), it just allows for court assistance to resolve issues where there may be questions or differing interpretations, such as those noted above.
It is important to note that the personal representative has a “fiduciary” responsibility to the heirs and others interested in the estate – that is, the personal representative has a duty to act with the “utmost good faith and loyalty” to assure the interests of the heirs are protected. While many of the personal representative’s responsibilities can be handled without legal assistance, it is important in most instances that legal counsel be sought to assure compliance with the fiduciary and other responsibilities imposed.
Most estates are fully administered within a year or less. At the completion of administration, an estate may be closed in informal administration by the personal representative’s filing a simple form with the court stating that he or she has fulfilled all of his or her responsibilities and distributed the estate’s assets to the persons entitled thereto.
c) Court Supervised Administration: Only a very small number of estates are court supervised. A supervised administration usually results from disputes among the heirs and/or other parties with a legal interest in the estate. In supervised estates, the court is required to settle the disputes and much greater involvement of the courts and legal counsel will generally be required. That said, the basic administration process is much the same as that described in the foregoing section, although the personal representative must generally seek court approval of any distributions or other significant actions.
A word about fees
An attorney’s help will usually be needed to handle the estate administration process. The amount of help will depend on a number of factors including the complexity of the estate and the willingness and ability of the personal representative and others to complete certain tasks. Fees are generally based on an hourly rate, although in some instances they may be based on a flat rate. Fees should never be based on the size of the estate (i.e., a percentage of estate assets), although larger estates will generally, but not always, require more legal help than smaller ones. There are usually some court filing and certification fees, but these tend to me fairly minimal. Assuming the estate in question is solvent, attorney’s fees and court costs associated with administration will be paid from the estate’s assets, not from the personal representative’s own assets.
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