Exactly what is Probate? Probate is generally defined as the administration of the decedent’s estate. Administration includes collecting the decedent’s assets, paying the debts, paying any taxes, and distributing the assets to the heirs. Commonly there is a great fear of probate. Prior to acceptance by most states of the Uniform Probate Code that fear was probably justified. Prior to that time probate was marked by very expensive court proceedings, high attorney’s fees, and long delays. Since incorporation by most states of the Uniform Probate Code all of that has changed for the vast majority of Probate proceedings.
Probate is required when there are assets to distribute to heirs which do not pass by some other means and require distribution under the Probate system. Some assets which do pass automatically and are not part of the Probate estate include several general classes. These assets pass automatically either by operation of law or by a beneficiary designation. The general classes are:
- Property owned “jointly.” A very common example is where a husband and wife own their house jointly. The more correct term is “jointly with right of survivorship.” When property is owned in that manner, when one party dies the other party becomes the sole owner by operation of law. Example: Wilma and Harry own their home “jointly.” When Harry dies, Wilma will become the sole owner automatically by operation of law.
- Beneficiary designation of accounts. The most common of this type is the bank account or brokerage account where the decedent has designated a beneficiary to receive the account upon their death. When opening an account, most banks and brokerage firms will ask if there is a beneficiary designation. Example: Wilma and Harry own a bank account jointly with a “Pay On Death (POD)” to her sister, Sarah. When Harry dies, Wilma becomes the sole owner of the account (because it was a “joint” account. If Wilma then dies the account would then be distributed to Sarah. Most stock and brokerage accounts holding stocks, bonds, or some other form of financial instrument will have a “Transfer On Death (TOD” designation which is essentially the same as a POD designation.
- Beneficiary designations for life insurance, IRAs, and 401(k). Life insurance benefits are paid to the policy’s beneficiary. Unless the insurance policy names the decedent’s estate as the beneficiary, the insurance money passes outside of Probate to the beneficiary. Example: Harry has a $100,000 life insurance policy with Wilma named as the beneficiary. When Harry dies, the $100,000 is paid to Wilma by the insurance company and it does not pass through Probate. IRAs and 401(k) s are governed under the federal Employee Retirement Income Security Act (“ERISA”) and as such are not subject to state law. The manner in which they transfer can be very technical and a Certified Financial Planner or other highly qualified financial or tax professional should be consulted.
- Motor Vehicle Beneficiary Deeds. Colorado Revised Statute (“C.R.S.”) §15-15-101 et seq. grants the ability to transfer on death any property controlled by or owned by the decedent before death. This arguably includes vehicles. In order to clarify this point regarding vehicles, in early 2016 the Colorado legislature passed C.R.S. § 42-6-110.5 which was later signed into law. This statute directed the Colorado Department of Motor Vehicles to issue a form whereby a person or persons could leave a vehicle to a beneficiary. Form number DR 2009 is readily available on their website.
All other assets are part of the probate estate and will need to be distributed according to the probate process. There are four general means of distributing the probate Estate:
Different Probate Processes
- By Affidavit: If the probate assets for a person dying in 2017 are less than $66,000 in value, a successor of the decedent may execute an affidavit, under the provisions of C.R.S. §15-12-1201, claim the assets, and then distribute them to the heirs. The limit on the value increases from year to year and is as follows: year of death (Y.O.D.): Y.O.D. 2017, $66,000; 2016, 2015, and 2014, $64,000; Y.O.D. 2013, $63,000; Y.O.D. 2012, $61,000; and Y.O.D. 2011 and 2010, $60,000.
- Informally: Over 90% of probate in Colorado is by this process. Informal administration means it is not supervised by the court. There are a number of filings with the court but very seldom are any court appearances required. Most people are able to accomplish most of the work themselves with minimal assistance by an attorney. However, it is strongly recommended the Personal Representative does utilize the help of an attorney to avoid some pitfalls and delays. An broad, general overview of the process is as follows:
- If there is a Will (testate), an Application for Informal Probate of Will and Informal Appointment of Personal Representative along with the Will is filed with the court in the county in which the decedent lived. If there is not a Will (intestate), an Application for Informal Appointment of Personal Representative is filed with the court in the county in which the decedent lived.
- For a testate estate, Letters Testamentary or, for an intestate estate, Letters of Administration are issued by the Clerk of the Court to the Personal Representative (the old term was Executor).
- The Personal Representative places a Notice to the Creditors by Publication of the death along with where and how to make a claim against the estate. The notice must run once a week for three consecutive weeks in a paper of general publication in the county where the estate is being administered and sends a Notice to all known creditors.
- The Personal Representative gathers all of the assets of the decedent and performs and inventory which is filed with the court.
- After four months from the date of first publication of the Notice to the Creditors by Publication, the Personal Representative may pay all of the creditors. However, there can still be claims outstanding against the estate for up to one year which could have a very adverse effect on the estate so caution should be exercised.
- No sooner than six months after appointment of the Personal Representative, the Personal Representative may prepare a Statement of Personal Representative Closing Administration which is filed with the Court.
The above process is in very general terms. There are other steps in between. If there are creditors or claimants of the decedent or estate there can be various time limitations and priorities in which creditors are paid. There are several small steps or other steps required if there are disputes.
- Formally: A formal testacy proceeding is litigation to determine whether a decedent left a valid will. A formal testacy proceeding may be commenced by an interested person filing a petition in which he requests that the court, after notice and hearing, enter an order probating a will, or a petition to set aside an informal probate of a will or to prevent informal probate of a will which is the subject of a pending application, or a petition for an order that the decedent died intestate.
- Supervised: Supervised administration occurs when there are major disputes with the estate. If the parties cannot agree upon distribution of the estate, someone is contesting the will, or for other reasons there are disputes that cannot be resolved without the intervention of the court, the court will supervise administration of the estate. This is done in full, open court. This usually entails much greater legal costs and attorney fees. The process is performed under full court supervision and orders from the court. Fortunately, this is a very small percentage of all probate cases. The use of well drafted wills by an attorney can frequently save many, many times the cost of an attorney drafting a will in court costs later. The basic steps are similar to Informal administration.
Probate today in those states that have adopted some version of the Uniform Probate Code is streamlined and efficient. In Colorado, which has adopted a version of the Uniform Probate Code, over 90% of Probate proceedings are performed without direct Court supervision. In those cases the vast bulk of the work can be performed by family members with little assistance from an attorney. An estate administration can take as little as six months, for a simple estate, or as long as several years for large complicated estates.
It is always strongly advised the heirs or Personal Representative seek the help of a competent probate attorney in administering an estate.
This brief article is not meant to be construed as legal advice and is meant for educational and information purposes only. The information is not legal advice or a particular legal opinion. The information is not intended to create, and receipt does not constitute, a lawyer-client relationship between The Law Firm of Bruce A. Danford, LLC and you. The law changes very rapidly and, accordingly, we do not guarantee that any information contained hereto is accurate and up to date other than the revised date. Additionally, the law differs from jurisdiction to jurisdiction, and is subject to interpretation of courts located in each county. Legal advice must be tailored to the specific circumstances of each case and the tools and information provided to you may not be an appropriate fit in your case. Nothing that you read or is provided on this web site should be used as a substitute for the advice of competent legal counsel. It is highly recommended that anyone seeking help in settling a decedent’s estate should consult with an attorney experienced in Probate.
Bruce Alan Danford is a Colorado attorney practicing in Broomfield, Colorado. Mr. Danford can be reached at (303) 410-2900 or via e-mail at BruceDanford@BruceDanford.com.