Why Every Colorado Adult Needs an Estate Plan

Imagine the unexpected: you suddenly pass away, without ever having written your last will and testament. Everything you’ve owned, cherished, and worked for is now subject to Colorado’s default state laws, not your personal wishes. This is the risk of not having an estate plan.

It’s a common misconception that estate planning is exclusively for the wealthy. The fact is – everyone needs an estate plan. Whether you have a big or small estate, a well-thought-out plan documented in either a will or a trust provides invaluable protection and peace of mind for you and your loved ones. 

This article will cover:

• Colorado’s default rules concerning intestacy;

• The difference between wills and trusts;

• E-wills in Colorado;

• Estate planning for blended families and minor children; and,

• The Colorado probate process.

Regardless of one’s personal financial situation, every Colorado adult should, at a minimum, have a will. If you die without a will, your estate is in “intestacy.” This means your assets will be subject to distribution in accordance with Colorado state law without consideration for what you may have wanted. 

Colorado’s Default Rules for Intestacy

In intestacy, Colorado law distributes your assets according to a predetermined formula that sets forth a specific order of priority: 

1. Surviving spouse: Becomes the exclusive heir under two conditions: 

   • No living descendants or parents of the deceased remain, and 

   • All surviving descendants are the children of both the deceased and the surviving spouse. 

   • Note: If other legal heirs exist, the estate then follows a prescribed order of distribution, which can become more complex. For example, if you have children with a previous partner, your current spouse may not inherit everything.

2. Descendants: Inherit per capita at each generation, as defined in C.R.S. 15-11-106

3. Parents or the surviving parent.

4. Descendants of the parents: Your siblings, nieces, nephews, etc.

5. Grandparents or their descendants: Your aunts, uncles, cousins, etc.

If you have no heirs or relatives as defined by Colorado law and you die intestate, everything you worked for and acquired during your lifetime becomes property of the state. 

Although creating a will on your own is possible, the prudent course of action is to contact a competent Colorado estate planning attorney to draft your will. This ensures your legal instrument achieves all your objectives for asset distribution. Writing your own will might save some money in the short run, but it can be extremely costly in the long run if it is not drafted properly or is contested by your heirs.

What is Probate?

Probate assets are those that are solely owned or titled in your name at the time of your death. These may include your car, house, checking and savings accounts, investments, and personal belongings like jewelry and furniture. Probate law dictates the process for managing an individual's estate following their passing. 

Even if the deceased left a detailed will and/or trust, courts in Colorado still play a role in determining how remaining debts are paid off, and overseeing how the remaining assets and possessions are distributed

The estate's personal representative must settle the decedent’s debts in a specific order of priority as outlined in C.R.S. 15-12-805. This includes administration costs, funeral expenses, taxes, and other claims. All such payments are subject to court oversight to ensure creditors’ claims and other legal obligations are met before assets are distributed to beneficiaries.

While these matters are typically handled routinely, there are times when the decedent’s intent is unclear, or legal conflicts arise, resulting in probate litigation.

The Pains of Probate

Going through probate to address the assets you leave behind can be an emotionally and financially taxing process for your loved ones. 

Time 

Distributing assets through probate can take a long time, sometimes months or even years. For instance, creditors typically have up to a year after someone's death to make claims against their estate. Because of this, you can expect the full distribution of assets to take anywhere from one to three years. 

Cost

Probate costs in Colorado can vary, including legal fees, court fees, and personal representative payments, depending on the estate's specific situation. While the Court fees may amount to a few hundred dollars, the cost to retain an attorney to navigate the process itself could easily amount to thousands of dollars. 

Lack of Privacy

In Colorado, as in most states, the probate process is a matter of public record, which can significantly impact a family's privacy during a sensitive time of loss. Many documents filed with the court become accessible to the public, including:

• The deceased's will;

• Inventories of assets;

• Lists of debts and creditors;

• Beneficiary and heir information; and

• Personal representative/executor details.

Once these documents and information become public, anyone can see how much you had in assets or how much debt you accumulated. Information that you likely kept private during your lifetime becomes available for anyone to see as a result of going through probate.

Furthermore, once this financial and personal information is public, it can attract unwanted attention. Families may receive unsolicited mail, phone calls, or emails from scammers, creditors seeking payment, businesses offering services, and individuals looking to challenge the will or make claims against the estate.

Family disagreements about the will, asset distribution, or the personal representative's actions play out in court filings. These arguments, accusations, and personal details shared during litigation also become part of the public record. 

Lack of Control

When an estate goes through probate in Colorado, a significant concern for families and the personal representative is the inherent lack of control due to inflexible court supervision. Because the court must adhere to strict procedures and deadlines, decisions and processes are not always as adaptable or swift as a family might wish. 

How a Trust Minimizes Probate Problems

Fortunately, there’s a relatively simple way to avoid probate: updating your estate plan to include a trust. A trust allows you to avoid probate, keep your financial affairs private, and ensure your wishes are followed even amid contentious family disputes. 

A trust can also be a good option for:

• Minimizing inheritance taxes for larger estates;

• Establishing care  for dependents or heirs who may be disabled or have special needs;

• Safekeeping inheritances until dependents come of age; or;

• Allowing family members immediate access to inheritances by bypassing the probate process.

Planning for More Than How to Distribute Your Assets

An estate plan can do more than simply direct where and to whom your property should go.  For parents of minor children or children with special needs, for example, an estate plan can also include an appointment of guardianship that sets forth who it is you, as the parent, believe would be best suited to care for your children should you be unable.  In addition to planning for what should happen in the event of your death, an estate plan can address what might happen in the event you are incapacitated.  

Parents of Minor Children

Parents with minor children should have a plan for who would care for their children in the event the parent dies or becomes incapacitated.  There are many factors to consider when thinking about who to nominate as a guardian, including but not limited to what the court may consider should the matter end up being litigated.

Parents of Children with Disabilities or Special Needs

For parents with children who have disabilities or special needs, some long term planning may be needed to ensure the children have the support they will need during their lifetime.  This could require establishing a special needs trust to ensure the children have the continued care they need without jeopardizing their eligibility for government benefits.

Married Couples (especially blended families)

Under Colorado law, a married individual’s inheritance generally passes to the surviving spouse unless one’s estate plan specifies otherwise.  Remarriages, particularly those forming blended families, often present significant complications. Colorado law does not automatically recognize stepchildren as "children" for inheritance purposes unless they are legally adopted or specifically named in a will. Therefore, if an individual desires to bestow an inheritance upon stepchildren, explicit inclusion in a will or other estate planning documents is critical.

Without a will to specify who gets what, the surviving spouse could: 

• Favor their own children over their deceased spouse’s children. 

• Choose to gift away assets outside of their family.  

• Encounter problems with creditors and need to sell off assets to pay their remaining debt. 

• Remarry and accidentally disinherit the children from the previous marriage, meaning your assets could go to your spouse’s new partner instead of your children. 

Business Owners

Business owners have much to consider when drafting their estate plan. One of the biggest concerns is what will happen to their business when they pass away. Will the business operations be transferred to another party? If so, to whom? Is that transfer permitted by the documents governing the business?  Are there other requirements or obligations on the business owner with respect to his or her business interests in the event of the owners’ death?

Protecting the legacy of your business is imperative, so be sure to create a succession plan that works best for you.

Anyone with Assets

Almost everyone has assets of some sort. Whether it’s a large asset, such as a home or vehicle, or a small asset, such as books and dishes, everyone deserves to have their distribution wishes met. Perhaps you want a specific necklace to go to a friend, or your book collection to go to your niece. In either scenario, you would list these assets in your estate plan and choose for yourself how they will be distributed upon your death.  In doing so, not only are you ensuring that your things are given to those you choose, but you are not burdening the ones you leave behind with having to make those decisions on your behalf.

Defining Each

Will: A will is a legal document that states what your final wishes are for after you pass away. It can define your wishes regarding what you’d like to happen with your property (including animals), who should look after any dependent children, how debt will be paid, who should inherit what, and your burial and funeral preferences.

Trust: A trust is a legal arrangement where the grantor transfers ownership of certain assets from themselves to the trust. The grantor then appoints a trustee, who oversees the trust’s management for the benefit of the beneficiary. Depending on the type of trust, the grantor, trustee, and beneficiary can be the same person.

There are two types of trusts: revocable and irrevocable. In a revocable trust, the grantor retains the right to change or dissolve the trust. In contrast, in an irrevocable trust, once the grantor transfers property ownership to the trust, they cannot change their mind and regain ownership or make decisions regarding that property. 

Key differences

There are some key differences between wills and trusts that are important to understand when deciding what will work best for your unique situation. 

Probate - A will requires probate. A trust generally avoids probate.

Timing -  Wills are effective after death. A trust is immediate, including during life.

Privacy -  Wills are public record. Trusts are private.

Asset Management - A will doesn’t manage assets during life.  A trust allows for management of your assets during life and incapacity.

When to Choose a Will

You might consider a will if:

• You’re young and in good health.

• Your estate is of lower value.

• You have limited assets.

• Probate is not a concern,

• You assets will be distributed outright upon your passing.

• You would like to dictate any funerary wishes.

When to Choose a Trust

Consider a trust if:

• You want your beneficiaries to have immediate access to your estate after you die.

• You want to protect the assets your children inherit from their creditors.

• You wish to withhold inheritance until a beneficiary reaches a certain age or meets specific requirements.

• You want to prevent your financial affairs from becoming public record.

• You have a dependent with special needs or a disability.

Ideally, a comprehensive estate plan includes both a will and a trust. While a will is generally less complicated to prepare and thus cheaper upfront, the cost of setting up a trust is usually offset by its ability to avoid probate and the associated costs. For more information on the best option for your specific circumstances, contact our experienced team of will lawyers.

Our Estate Planning Team encourages you to talk to a will lawyer for guidance before you explore creating a will on your own.

Working with an estate planning attorney is imperative to ensure your will or trust fully meets your needs. Will attorneys work closely with you to understand your unique family dynamics, financial situation, and personal wishes. They help you explore various options to distribute your assets and protect your loved ones. They can anticipate potential legal hurdles, advise on minimizing taxes, and ensure your plan is legally sound and fully compliant with Colorado law. 

You have the power to decide how your property and assets are distributed. Don’t wait for trouble to arise – contact our knowledgeable Estate Planning Team today at (303)-688-0944 to start securing your legacy and providing peace of mind for your loved ones.