There are two main types of probate in Colorado: formal probate and informal probate. Colorado also recognizes a probate process for a “small estate,” besides the two main types of probate. In this article, Ball Morse Lowe seeks to educate you on Colorado formal vs informal probate, explain what qualifies as a small estate, what qualifies as a large estate, how to tell which probate proceeding is right for you, and whether it is possible to avoid the probate process.
This article is not a substitute for legal advice. If you have questions about Colorado's probate process or estate planning, schedule your free consultation with Ball Morse Lowe now.
What Are the Differences Between Formal and Informal Probate?
When considering the Colorado formal vs informal probate processes, there are several key differences that must be pointed out:
- The informal probate process is overseen by the probate court, but the court is not quite as involved as with a formal probate proceeding.
- Intestate estates (those without a will) may still qualify for informal probate, but succession must be clear. For example, the decedent was not married but did have two children. Therefore the two children inherit the decedent's personal property and real property.
- Informal probate is used when no contest or other form of probate litigation is expected.
- Formal probate is a more hands-on probate process where the probate court pays closer attention to the probate case.
- Formal probate is chosen if it is believed that it is possible an heir may contest the matter or that probate litigation of some kind may occur because of interested parties.
- Formal probate is also used for intestate estates where there is no clear succession.
With that said, both the informal and formal probate processes are not the same as a small estate.
What Qualifies as a Small Estate?
For the purpose of probate in Colorado, small estates are classified as those with personal property that is worth less than $70,000 and no real property. When this is the case, the probate process becomes substantially easier and less expensive. Instead of entering into either the informal probate or formal probate process, the personal representative can complete a small estate affidavit and pay a filing fee.
Although the personal representative is still bound by probate law to follow the will (if there is one) and to complete certain requirements and steps, the small estate probate process is generally much simpler to complete since there are fewer assets. However, this does not mean that there are never problems. A probate attorney can still be very helpful even for small estates.
What Qualifies as a Large Estate?
"Large" is a subjective term. If an estate includes real property or has a value of $70,000 or more in personal property, it will not qualify under Colorado probate law as a small estate. From a personal standpoint, each person may have their opinion on what they may consider "large." One person may not consider an estate large unless they have a legitimate concern about the federal estate tax (which, as of 2020, is an estate consisting of gross assets exceeding $11.58 million).
However, as mentioned, with personal property worth $70,000 or more, or an estate with real property, an estate will not qualify as a small estate. It will require either the informal probate process or the formal probate process. Both types of probate require the appointment of a personal representative, notice to interested parties, and other important steps before assets can be provided to heirs.
Which Type of Probate Is Right for Me?
It can be difficult to determine in advance which type of probate is the right one to file in probate court. Often, the best thing to do is to seek legal advice. Probate law can be difficult to understand. Creditors can be difficult to deal with, and they must be paid before you, as the personal representative, can distribute the remainder of the assets. Missing any necessary step required to administer the estate can result in serious legal repercussions to you as the personal representative. Ball Morse Lowe provides free consultations. Our experienced probate attorneys can help you determine which type of probate is appropriate and also help guide you through the process. Schedule your free consultation now.
Can You Avoid Probate in Colorado?
If you are looking for ways to avoid probate, the best strategy is to start the estate planning process now. There are many tools that you may be able to take advantage of in order to protect your assets from passing through the probate process and preserve them for your loved ones.
Using estate planning tools do more than help you avoid probate. They help ensure that your assets are given to specific beneficiaries and heirs. This is an important concept because the Colorado probate process involves a legal concept and court process known as determination of heirship. A determination of heirship hearing informs potential heirs about your death. They can make a claim to whatever real property you have that is passing through probate. From a legal perspective, any of your real property that goes through probate must have the proper determination of heirship or the title could face potential legal issues. Whereas, certain estate planning tools can help certain property avoid the probate process altogether.
Here are a few examples.
- Life insurance. If you have life insurance, you may already be aware that its proceeds do not go through the probate process. However, you may not be aware that you are able to use the life insurance policy now to fund a life insurance trust.
- Living trust. A living trust enables you to place your personal property and real property inside of it during your lifetime. Any assets inside of the living trust when you die will not go through the probate process. A living trust can also protect the assets from being targeted by creditors of the trust's beneficiary or beneficiaries.
- Transfer-on-death. If your home and your vehicle are paid off and you would like to leave each of them to a specific person, you can use a transfer-on-death deed (for a home) and a transfer-on-death registration (for your vehicle). These documents only take effect when you die and any requirement to effectuate or evidence the transfer can generally be completed without probate administration. Transfer-on-death deeds and transfer-on-death registrations are also revocable during your lifetime if, for example, you decided to sell the property.
- Payable-on-death. Similar to transfer-on-death, payable-on-death refers to various financial accounts such as your bank account, savings account, retirement account, and certain investment or securities accounts. You can ask the financial institution for the proper documentation to complete. Fill out the name of the beneficiary and sign the document. Upon your death, the account will be paid out to the beneficiary.