Navigating the legal intricacies of probate can be a daunting task, especially during a time of grieving. In Colorado, the probate process follows specific procedures to ensure the smooth distribution of assets and resolution of estate matters. Understanding these steps can alleviate stress and uncertainty for those involved. Let’s delve into the Colorado probate process and shed light on its key aspects.

Understanding Probate in Colorado:

Probate is the legal process by which a deceased person’s assets are distributed, debts are paid, and estate matters are resolved. In Colorado, probate can be necessary whether the deceased died with a Last Will and Testament (testate) or did not have a Last Will and Testament at the time of their death (intestate). The probate process is to ensure that the deceased’s wishes are respected and that their assets are distributed appropriately and in compliance with Colorado Law.

Key Steps in the Colorado Probate Process

Filing an Application or Petition

The probate process begins with filing either an application or petition in the county where the deceased resided. This application/petition typically requests the appointment of a personal representative to manage and administer the estate.

Appointment of Personal Representative

Once the petition is filed, the court will appoint a personal representative. The personal representative is responsible for administering the estate, including gathering assets, paying debts, and distributing property according to the will or state law. This individual is more commonly known as an “executor,” but the legal term for this individual in Colorado is personal representative.

Inventory and Appraisal

The personal representative must prepare an inventory of the deceased’s assets and obtain appraisals or other comparable valuations, if necessary. This step ensures that all assets are accounted for and properly valued.

Notice to Creditors

In Colorado, the personal representative must provide notice to creditors of the estate. This is done through a combination of publishing a notice to creditors in a local newspaper and notifying known creditors of the estate directly. Creditors have a specified period to file claims against the estate for any outstanding debts.

Payment of Debts and Taxes

Before distributing assets to beneficiaries, the personal representative must pay any outstanding debts and taxes owed by the estate. This may include funeral expenses, medical bills, and income or estate taxes.

Distribution of Assets

Once debts and taxes are settled, the remaining assets can be distributed to beneficiaries according to the terms of the will or state law if there is no will.

Final Accounting and Closing the Estate

The personal representative is required to prepare a final accounting of the estate’s financial transactions and distribution of assets. Once a final accounting has been prepared and provided to the beneficiaries, the estate can be closed, and the personal representative is relieved of their duties.

Challenges and Considerations

While the probate process in Colorado aims to streamline the distribution of assets, it can still present challenges and complexities. Disputes among beneficiaries, contested wills, and tax implications are common issues that may arise during probate.

Seeking Legal Assistance

Given the legal complexities involved, seeking guidance from an experienced probate attorney is advisable. An attorney can provide invaluable assistance in navigating the probate process, ensuring compliance with state laws, and resolving any disputes that may arise. 

Contact Colorado Law Group for questions or representation

The Colorado probate process is designed to facilitate the orderly distribution of a deceased person’s assets while protecting the interests of creditors and beneficiaries. By understanding the key steps involved and seeking appropriate legal guidance, individuals can navigate probate with greater confidence and peace of mind.

Should you have any questions about the probate process or have a need for representation, please contact our office.  We have attorneys that specialize in probate matters and can provide the necessary expertise and guidance as you navigate this complex process. 

The use of trusts in estate planning continues to be a hot topic among estate planning professionals and their clients. For example, whether or not to use a revocable living trust to avoid probate continues to be a widely discussed option in estate planning. The purpose of this article, however, is to discuss the use of trusts in another arena of estate planning. Specifically, how does a client leave his estate to his children and whether the use of a trust is appropriate. This article will discuss two types of trusts that parents can use when transferring their wealth to their children.

These trusts are called testamentary trusts, meaning that they are not established until the client is deceased. In other words, the trust lays dormant in a client’s will until it is effectuated at the client’s death. There are two types of testamentary trusts to consider. The first trust can be referred to as the “three strikes and you’re out” trust. The second trust can be referred to as the “stealth prenuptial” trust.

The “three strikes and you’re out” trust is typically used where a client has minor children. Since the children are minors, they are not legally able to own the assets transferred to them at a parent’s death. If a trust does not exist, then those assets would have to be held in a conservatorship which can be time consuming and expensive to establish and administer. The trust established for minor children under a parent’s Will would provide distributions for their health and education, maintenance and support. If a child is going to college, the trust would be paying for books, room and board, and tuition for the child. If the child needed a car to commute to and from college, the trust could buy the car; the child simply could not have the ability to choose a Lamborghini over a Ford Explorer. The type of car would be determined by the trustee of the trust, someone other than the child. The trust then would provide for distributions of principal free of any control by the trustee at specific ages. A common scheme to distribute is one-third of the trust at ages 25, 30 and 35. The theory of this trust is that if a child makes a mistake and unwisely spends the first third he or she receives, the child may be more mature and thoughtful when he or she receives the subsequent installments.

The “stealth prenuptial” trust can be established for adult children who are in a risky business or profession and the parent wants to provide some asset protection for the child. This trust can also be used for a financially immature adult child or an adult child that cannot say no to a financially immature spouse. In both instances (i.e., asset protection and financial immaturity), the trust is for the life of the child.

In the first instance where the client is trying to provide asset protection for the surviving child, the child is typically his or her own trustee upon reaching a certain age, e.g., age 35. In the second circumstance, where an adult child is not financially immature or cannot say no to a financially immature spouse, the child is a co-trustee along with a third-party trustee. The co-trustee would be either a trusted family member, an advisor, or an institution such as a bank trust department. The advantage of a third-party trustee is that they will act as a governor over the child in making bad financial decisions. Again, the income and principal of the trust would be distributed for the child’s health, education, maintenance and support. In the context of a thirdparty co-trustee, the trust should end up augmenting the child’s life style for his or her entire life.

In selecting a third-party trustee, a preference can be to use a corporate trust department. Corporate trust departments are very effective managers of money in this type of planning for an adult child. It is important to provide that the adult child can always replace the corporate trustee with another corporate trustee. This allows for effective negotiation of trustee fees and flexibility in who the child wants to work with in administering the trust.

The use of trusts in estate planning can be confusing. There is no right or wrong answer to many of the questions and concerns facing clients. The two trusts described in this article are simply two examples of what a client and an estate planning professional should be discussing to see what fits the client’s particular situation.

The goal of estate planning is to provide for the management and transfer of a person’s property in the event of their death or incapacity at the smallest financial cost to their family. A properly structured estate plan allows someone to choose his/her beneficiaries, provide for the management of their assets, and eliminate or reduce taxes. Without careful planning, a person’s property may pass to unintended beneficiaries or may be reduced in value by unnecessary taxes.

Estate planning also addresses such questions as how property should be held, whether it should be owned jointly or separately, whether trusts are needed for management, control or tax savings, whether lifetime gifts should be made, and who should make legal, financial and medical decisions if a person cannot make them.

For the past several years the general public has been inundated with information regarding the use of revocable living trusts as an estate planning tool. Many attorneys and financial planners have promoted the revocable living trust as superior to a tax planning will as an estate planning tool. This has resulted in many clients, especially senior citizens, demanding revocable trusts for their estate without understanding the possible results or alternatives. This will be especially true in the future since, as discussed below, the federal estate tax will affect many less taxpayers under the American Taxpayer Relief Act of 2012 recently passed by Congress and signed by the President as part of the “fiscal cliff” negotiations.

For example, many clients find that they can adequately provide asset management in cases of illness or incapacity through the simpler step of implementing a General Durable Power of Attorney, rather than a revocable living trust. This document enables a trusted individual to manage your assets in the event you are no longer capable of doing so.

Also a Medical Durable Power of Attorney allows each spouse (or other parties, i.e., children) to make medical decisions on behalf of the other spouse in the event the injured or ill spouse can no longer make those decisions.

Finally, Colorado allows an individual to execute a document that will instruct family and medical providers as to how he/she is to be treated in the event he/she is unable to communicate, and they are in a terminal condition or in a persistent vegetative state. This document is commonly called a Living Will.

The above documents and a Will can be a less expensive alternative to a Revocable Living Trust.

The federal government imposes a gift tax on lifetime gifts and an estate tax on transfers at death. Under the American Taxpayer Relief Act, this tax is at a maximum rate of 40%. The best way to understand federal estate taxes is to focus on the exceptions from estate taxation. The general rule is that every time an individual transfers property or money (including via beneficiary designation for life insurance and retirement plans), either during his or her lifetime or at death, to another individual, there is imposed gift and/or estate taxes. The three exceptions to this general rule are the basis for most estate planning steps taken by taxpayers.

The first exception is the unlimited marital deduction. Husbands and wives can make gifts to each other in unlimited amounts on unlimited occasions without incurring any gift or estate taxes.

The second exception is the $14,000 annual exclusion ($28,000 for husband and wife) per donee.

The third exception, which is the primary basis for implementing a tax planning will or revocable living trust, is the amount of property, life insurance and retirement plans that a taxpayer can pass to a non-spouse (i.e., children) estate tax free. Sometimes this exclusion is called the “unified credit.” Again, under prior law, this exclusion was going to be reduced to $1,000,000 after 2012. At the conclusion of the “fiscal cliff” negotiations, the applicable exclusion was allowed to remain at $5,120,000. In addition, under the new rules, married couples are entitled to use each other’s unused unified credit, effectively eliminating any estate tax for married couples up to $10,500,000. This ability to use a prior deceased spouse’s exclusion is called “portability.” Finally, beginning in 2013, the exclusion is $5,250,000 and is indexed for inflation.

In summary, although the federal estate tax will affect fewer taxpayers, all individuals should have an appropriately drafted Will, Durable Power of Attorney, Medical Power of Attorney, and Living Will.

– John M. Stinar, Esq.