What assets go through Probate? A good shorthand answer is that all assets which you own in your personal name will go through Probate when you pass except assets that are otherwise designated. As an example, the following assets can be considered “otherwise designated” and can generally pass outside of the Probate system:

• Financial Accounts With Beneficiary Designations or Joint Ownership. Any retirement account, life insurance policy, bank account or other financial account that has a beneficiary designation can generally pass directly to the named beneficiary without the need of a Probate case. Similarly, any account having a joint owner will pass automatically to the surviving owner.

• Real Estate in certain cases. By law, all real estate will go through Probate when a person passes unless an exception applies. The most common exceptions are (i) real estate owned in Joint Tenancy with another party; (ii) real estate not held in the person’s name, but instead held in the name of a Trust, LLC or other entity; or (iii) real estate with a Beneficiary Deed put in place while the person was still alive.

• Assets owned in the name of a Trust, LLC or other Business entity. Any asset held in the name of a Trust, LLC or other Business entity will still be held in the name of that Trust, LLC or entity when you pass. No Probate or title transfer is necessary.

• “Small Assets”. If an estate consists of (a) less than $82,000; and (b) no real estate, then the assets of the Estate can be collected using what is called a “Small Estate Affidavit” without opening up a Probate case. This is true whether or not the Decedent made a Will.

Beware of these common pitfalls and exceptions. Also note that any of the remedies or solutions named below may only be put in place when an individual is still living.

• Bank and other Financial Accounts.

  • When a person is added to a checking, savings or similar account that person has complete access to the funds in that account. In general, any person on a bank account has the right to use those funds however they choose. Further, the creditors of any person on a bank account can seize the money in the account.

  • Powers of Attorney die with the person that made them. Therefore, giving a person Power of Attorney over an account has no effect on what happens at death.

• Assets held in LLC’s or other Business entities.

  • While assets held in an LLC or other business entity will not go through Probate, the LLC or entity itself often will. In other words, if you own a house in the name of “Bob’s LLC” you will not need to go through Probate to transfer title to the house, but you may need to go through Probate to transfer ownership of the LLC. An Operating Agreement that specifies ownership succession is the best way to address this.

• Real Estate held as Tenants-in-Common. The fact that two names are on the title of a property does not necessarily mean that it will pass to the survivor on death. In Colorado, by default, real estate held in the name of more than one person is held as tenants-in-common. This means that the ownership interest will go to a person's estate, through Probate, rather than the other person named on the deed. For the property to pass to the survivor, the deed must specifically state that it is held as “Joint Tenants”, “JTWROS” or a similar designation. The tenants-in-common issue can be remedied or avoided with a Beneficiary Deed.

• Gifts to Minors. Gifts to individuals under the age of eighteen often require court approval even if there is a beneficiary in place. The most practical way of avoiding this is through a Trust.

• Spousal Right to a certain percentage of the Estate. Even if beneficiary designations, Wills, Trusts and other measures are put in place, a surviving spouse has a right to inherit a certain percentage of the Estate. Calculating this percentage is extremely complicated and varies by the case. If you do not plan to leave everything to your spouse if you pass first, this should be considered and addressed in your estate documents and beneficiary designations.

Does making a Will avoid Probate? No. The purpose of your Will is to tell the Probate court how you want your assets distributed when you pass.

There are four basic types of Probate cases:

• Informal Probate (with a Will)

• Informal Probate (without a Will)

• Formal Probate (with a Will)

• Formal Probate (without a Will)

Probate begins when a party files with the court to open one of the above probate cases. The filing party can also request whether or not to have additional “court supervision” of the matter.

In the case of Formal Probate, notice must be given to any interested party (defined in C.R.S. 10-12-201(27)) prior to the appointment, and each interested party will have a right to object. In the case where an individual has the right to be appointed as discussed below, these objections are not likely to be successful.

How does the Probate case begin? The Probate case begins when an individual who believes they have the right to do so files with the court to open the Probate. The vast majority of the time the person filing to open the Probate case is also the person applying to be the Personal Representative of the Estate.

What is a “Personal Representative”? The Personal Representative is the individual appointed by the court in a Probate case to oversee the Decedent’s estate. This includes the obligation and authority to pay the Decedent’s debts and distribute the Decedent’s assets in accordance with the Decedent’s Last Will and/or Colorado law.

What is the difference between a “Personal Representative” and an “Executor”? The is no difference. For whatever reason, Colorado uses the term “Personal Representative” instead of “Executor”, but they mean the same thing.

Who can be appointed Personal Representative of an Estate? First priority goes to an individual nominated to be the Personal Representative by a Decedent’s Will. If the Decedent did not leave a Will then default Colorado law applies. See C.R.S. 15-12-203. The practical effect of this statute is that the surviving spouse usually has the first right to be Personal Representative, with second priority going equally to the Decedent’s children. However, there are many caveats to this statement.

Authority of Personal Representative. After the Probate case is opened, the Personal Representative has the legal authority to collect and distribute the Decedent’s assets in accordance with the terms of the Last Will or default Colorado law. This includes the authority to collect and distribute financial accounts, sell and assign real estate and manage tangible personal property.

Duty of Personal Representative. The Personal Representative owes a fiduciary duty to both the Devisees/Heirs of an Estate, as well as the Creditors of the Estate.

Creditor Notice. Unless more than a year has passed since the Decedent died, notice needs to be given to all potential creditors of the decedent. This is done by publishing notice in a local newspaper for three consecutive weeks and filing the supporting documents with the court.

Inventory and Accounting. In general, the Personal Representative will need to file Inventory and Accounting forms stating (a) what assets were collected; (b) what debts were paid; and (c) what was distributed to heirs/devisees.

Additional Elements. The elements above are common to almost all Probate cases. However, the remainder of the case will generally be specific to the facts at hand. The length, cost and difficulty of each case will generally depend on:

• Do the heirs/family members of the Decedent get along?

• Are there out-of-state assets?

• Are there a large number of business or real estate assets?

• Did the Decedent have tax or other debts?

• Did the Decedent leave behind minor children other than children of a current marriage?

• How many heirs are there?

• Is a disinherited spouse (or partially disinherited spouse) challenging the overall distribution?