What Happens if there are Disputes Regarding a Will in Colorado?
Most Colorado estates are settled without troubling disputes; however, disputes frequently occur when the personal representative is dealing with a hand-written or outdated will. If disputes cannot be settled amicably among the warring parties, the Colorado probate court will do it for them - sometimes to the great dismay of all parties involved. The personal representative must be sensitive to all disputes (or potential disputes) and obtain releases from beneficiaries authorizing the distribution of estate assets before finally closing the estate. Failure to do so may result in personal liability.
To learn more about probate and how you can protect your family’s assets, click here receive our free guide to Colorado Probate.
What is a Conservatorship and What is the Process for Appointment of a Conservator in Colorado?
A conservatorship is a court proceeding where the court appoints an individual or entity to make financial decisions for a disabled person who is not capable of making these decisions for themselves. This process is usually not necessary if the disabled person had executed a durable financial power of attorney before his or her disability.
In the state of Colorado, a conservatorship proceeding is usually initiated by a member of the disabled person’s family. The court must be persuaded that the disabled person is unable to make prudent financial decisions for themselves and that the person asking to be appointed as conservator is proper, competent, and willing to take on the task. A conservatorship can continue for years, but terminates at the death of the disabled person.
If you would like to learn more about Colorado Probate click here to receive our free guide to Colorado probate.
What is a Guardianship and What is the Process for Appointment of a Guardian in Colorado?
A guardianship is a court proceeding where the court appoints an individual or entity to make medical, residential, and other personal-care decisions for a disabled person who is not capable of making these decisions for themselves. This process is usually not necessary if the disabled person had executed a durable medical power of attorney before his or her disability.
In Colorado, a guardianship proceeding is usually initiated by a member of the disabled person’s family. The court must be persuaded that the disabled person is unable to make proper decisions for his own care and safety and that the person asking to be appointed as guardian is proper, competent and willing to take on the task. A guardianship can continue for years, but terminates at the death of the disabled person.
Next time we will talk about conservatorship.
For more information on probate click here for access to our free guide to Colorado probate.
What is the Small Estate Affidavit and How Does it Impact the Colorado Probate Process?
Many smaller estates can be settled by family members without the need for a court probate or an attorney - quickly, easily, and economically!
The secret is the Small Estate Affidavit. If the value of the probate assets in an estate is $60,000 or less, a successor to the decedent can fill out a Small Estate Affidavit and present it to the holders of the ssets. The persons or institutions holding the assets will then release them to the successor without further action. This works for all assets except real estate- regardless of how little its value.
You can also transfer title of automobiles, boats, motorcycles, motor homes, and other titled vehicles with a specialized affidavit called a “Vehicle Small Estate Affidavit.”
You may also collect out-of-state accounts and deal with out-of-state- vehicles with the Small Estate Affidavit, provided the decedent was a resident of Colorado. You may, however, encounter some resistance from employees of out-of-state banks, credit unions, and DMV’s. If you can’t get past it, consult with an estate attorney.
Tomorrow we will begin discussing guardianships.
To learn more about probate and how you can protect your family’s assets, click here to receive our free guide to Colorado Probate.
What do I Need to Know About Getting into a Decedent’s Safe Deposit Box in Colorado?
Getting into a safe deposit box is easy if you have an experienced bank or credit union employee helping you.
You should visit the bank or credit union armed with the safe deposit box key and death certificate if at all possible. If you can’t find the key, you can still gain access, but the bank will charge you a “drilling” fee which can run as much as $200 and delay access to the box by a day or more.
If you are searching for the decedents will and/or burial documents, the credit union/bank employee must, by law, open the safe deposit box to see if a will is inside. If a will is found, the credit union/bank employee will take possession of it and file it with the proper court. The bank employee will make a copy for you.
If there are other assets in the safe deposit box that have an apparent value of $60,000 or less, the credit union/ bank employee will deliver the contents of the box to you upon your presentation of a Small Estate Affidavit (which we will discuss later). If the assets in the safe deposit box appear to be valued at more than $60,000, the employee will most likely refuse to deliver the assets to you until you present “Letters Testamentary” or “Letters of Administration” showing that you have been designated as the personal representative for the decedent’s estate by prior court order. In other words, a probate of the estate will be required if assets in the safe deposit box exceeds $60,000 in value
It is not uncommon to encounter resistance from an inexperienced employee when attempting to gain access to a decedent’s safe deposit box. If you run into this problem, show the employee the Colorado statute that deals with access to safe deposit boxes and try again to work with the employee as you both study the language of the law. If all else fails, consult with your estate attorney.
Colorado Revised Statute 15-10-111 sets forth more detailed information on gaining access to a decedent’s safe deposit box.
Next, we will talk about the Small Estate Affidavit.
Click here if you would like to receive additional information on probate through our free Colorado probate guide.
Are there Specific Tax Forms that Need to be Filed While Going Through the Colorado Probate Process?
The answer to this question is yes. There are three tax returns that may need to be filled out after a loved one’s death.
Form 1040: This is the familiar income tax return that most all of us file reporting our income and deductions each year to the IRS. When a person dies, the surviving spouse or the personal representative of the estate must file a final Form 1040 and let the IRS know that there will be no further tax returns filed. Many times two 104’s must be filed for the decedent - one for the year just past and one for the year in which the decedent died.
Form 1041: This is the income tax return that trusts and estates are required to file each year they are functioning entities. In the eyes of the law, trusts and estates are separate taxpayers; the trustees and the personal representative, respectively, have the legal responsibility to report all income, expenses, and deductions that pertain to the entities they represent. In some cases there is interplay among this form, the Form 1040 discussed above, and the Form 706 discussed below. Because this interplay can become complicated, it is wise to retain the services of an accountant or an attorney to help in the preparation of all tax forms related to a decedent’s estate.
Form 706: This form is usually required only for estates of decedents who have died with assets in excess of the applicable exclusion amount. The applicable exclusion amount for years 2011 and 2012 is $5,000,000. For these larger estates, tax Form 706 is due within 9 months of the date of the decedent’s death, but can be automatically extended for an additional 6 months. Because this return is the most complicated return of the three discussed herein, it is imperative that you seek the assistance of an accountant or an attorney. Be prepared to provide your advisor with accurate information regarding all of the decedent’s assets, liabilities, expenses, and deductions., Since the IRS takes 35% of estate values over $5,000,000, the accurate preparation of Form 706 is critical.
Note: Colorado has no inheritance tax; however, some states do. If your family member died in another state or owned property in another state, consideration must be given to the estate and inheritance tax laws of those different states.
Our next post will provide information about accessing a decedent’s safe deposit box.
To learn more about probate and how you can protect your family’s assets, click here to receive our free guide to Colorado Probate.
What do I Need to Know About Taxes in Relation to Colorado Probate?
In Colorado, there is no state or federal death taxes if the decedent’s estate is $5,000,000 or less. Estates in excess of $5,000,000 are taxed at the rate of 35% on the overage. A Form 706 needs to be prepared and submitted with the tax payment 9 months after the date of death. Colorado has no inheritance tax (which is the tax imposed in some states on the actual inheritors of estate assets). Income taxes most always need to be addressed by the personal representative. There are income taxes that must be paid for the last year of the decedent’s life (Form 1040). There are also income taxes that may need to be paid from the decedent’s “estate” (Form 1041). And there may be income taxes that need to be paid from any trust created by the decedent that survives the decedent (Form 1041). We will discuss these forms at greater length later on.
Taxes are a virtual minefield for the personal representative to navigate within the probate process. Legal counsel is always advisable when venturing into this area.
It is also important to consider disclaimers. A disclaimer is a legal tax strategy that may reduce or eliminate numerous problems connected with taxes and creditors. Rather than detail the law of disclaimers here, simply be aware that this topic should be discussed between the personal representative and the estate attorney in most every situation.
Next time we will continue our discussion with regards to specific estate tax forms.
If you would like to learn more about Colorado Probate click here to receive our free guide to Colorado probate.
What Must be Done to Pass Probate Assets on to Heirs in Colorado?
After all non-probate assets are determined, the remaining probate assets are generally administered in one of three ways:
1. “Small Estate Affidavit:” If the value of probate assets in an estate is $60,000 or less, a successor to the decedent can fill out a “Small Estate Affidavit” and present it to the holders of the assets. The persons or institutions holding the assets will then release them to the successor without further action. This works for all assets except real estate - regardless of how little its value.
2. Informal Probate: The vast majority of Colorado estates are administered informally. Informal administration means the estate is not court supervised. A Colorado probate attorney would have a limited role in these proceedings.
Administration of an estate is commenced by filing special documents with the Colorado probate court. While the initial documents may appear uncomplicated, they contain many traps that may complicate an estate settlement later. Anyone attempting to settle a probate estate may find it beneficial to consult with a probate attorney before getting too deep in the process.
Once the estate is “opened,” the personal representative (formerly known as an “executor”) is responsible for paying the bills and taxes and distributing the remaining probate assets to the beneficiaries. All creditors must be paid in accordance with statutory priority.
Estate administration can take as little as 6 months for a simple estate or as long as several years in complex cases. Most Colorado estates are administered in 6 to 12 months.
3. Formal Probate: A supervised administration, or formal probate, is needed when there is a dispute among the parties who have an interest in the estate. In causes like these, the Colorado Probate Court Judge will resolve disputes and issue orders which all parties must follow.
An Estate may be closed informally by filing a document stating that the personal representative has paid all debts and taxes and delivered the property to those entitled to it.
Be aware that Colorado law requires a decedent’s will to be filed with the Colorado Probate Court within ten days of death, even if there is no need to actually probate the estate.
Tomorrow we will begin our discussion on tax issues that will affect Colorado estates.
For more information on probate click here for access to our free guide to Colorado probate.
What is Colorado Probate? And What Are Probate Assets?
Simply stated, probate is the process of proving the validity of the decedent’s will, paying their creditors, and distributing the decedent’s assets to the rightful beneficiaries. Colorado has a simplified, unsupervised probate system; therefore, over 90% of estates in Colorado never see the inside of a courtroom. Court-appointed Personal Representatives do most of the routine administrative tasks such as paying bills, selling assets, and distributing personal possessions.
However, when a person dies, it is important to remember that some of the assets will automatically pass by operation of law to certain designated beneficiaries (e.g., by joint tenancy and POD designations). These assets are called non-probate assets. For instance, if a husband and wife have a joint account and the wife dies, the husband gets the funds in the account automatically - regardless of what the will says.
The other major categories of non-probate assets are life insurance and retirement accounts that name a specific person as beneficiary.
All other assets are called “probate assets.” Probate assets do not pass automatically to the rightful beneficiaries; they must be disposed of through probate.
Contrary to popular belief, wills do not avoid probate in Colorado. They are the documents that are actually probated. If avoiding probate is an estate-planning goal, consider the classic probate-avoidance strategy: the revocable living trust.
Tomorrow we will talk about the three ways to settle a Colorado estate after delineating probate from non-probate assets.
To learn more about probate and how you can protect your family’s assets, click here to receive our free guide to Colorado Probate.
Not Every Colorado Estate Must Be Probated
It’s interesting to see how many people come into our office with probate forms in hand that they purchased from the Denver probate court. They come to us for help because the process of filling out the forms is somewhat daunting. More often that not, there was no need to buy the forms or even get started on a probate process since the estate they are dealing with doesn’t need to go through a Colorado probate at all.
Surviving spouses usually think the estate of their deceased spouse must go through a Colorado probate. They don’t understand that jointly titled assets will pass directly to the surviving joint tenant when one spouse dies. All that is necessary to clear title to that property into the name of the surviving spouse is simply the filing of the spouse’s death certificate. Ninety five percent of married couples own their real estate in joint tenancy.
Automobiles are usually owned between spouses as joint tenants. Even when cars or trucks are owned only in the name of the deceased spouse, title can be switched to the surviving spouse at the DMV with only a one page form called a small estate affidavit. This does not involve probate and can be done ten days after the deceased owner’s death.
Credit union and bank accounts held in joint tenancy can be changed to the name of the surviving spouse simply by tendering an original death certificate. The same thing can be done with jointly titled mutual funds or brokerage accounts.
Many estates are more complicated than what I have just described; however, the vast majority of estates that we see are relatively simple and do not involve a probate–particularly between spouses when one spouse survives and most of the property was in joint tenancy.
When the second spouse dies and the property passes down to the children, it’s another story. Proper planning to avoid probate through a Colorado living trust, PODs, TODs and beneficiary designations on life insurance, IRAs and 401(k)s is relatively simple.
Our firm offers FREE guides for anyone who wants to know the basics of probate and how to avoid it…Get your copy of The Colorado Guide to Probate and The Colorado Guide to Living Trusts today!