How a Living Trust Can Help Your Family Avoid Probate in Colorado

Probate. While it is a seven-letter word, for many families in Colorado, it is akin to four-letter curse word. A word that evokes dread, conjuring images of lengthy court battles, fighting families, public records, attorneys, fees, costs and ultimately, dwindling inheritances. Is there any way around probate when a person passes? Fortunately, yes, there are ways around probate, so long as you plan. A Revocable Living Trust in Colorado offers a powerful and private solution to help your family avoid probate, ensuring your legacy is handled efficiently and exactly as you intend.

At The Law Office of Kevin Hancock, we specialize in helping Colorado families navigate the complexities of estate planning, and understanding how a living trust works is key to avoiding probate and achieving peace of mind.

What Exactly Is Probate in Colorado?

In Colorado, probate, in short, is the court process of transferring a decedent’s probate assets when they pass. Part of that process is validating a last will and testament (if one exists), identifying and inventorying assets, managing and paying creditors, and, finally, distributing all remaining assets to the rightful heirs/beneficiaries. This process is overseen by the probate Court in the county where the deceased person resided.

While some assets can pass outside of probate (like property owned in joint tenancy with rights of survivorship, or accounts with direct beneficiary designations), other assets like real estate, personal property (valued at more than $82,000 in the aggregate), and bank, investment, retirement or life insurance accounts without a beneficiary, etc., individually owned by the decedent are required to go through probate.

The probate process in Colorado generally involves several steps:

1. Petitioning the Court: An “interested person” (often a family member or the nominated Personal Representative/Executor) files paperwork to open a probate case.
2. Lodging the Will: This is simply filing the original Will with the Court. Once filed, the original Will is held and maintained by the Court.
3. Appointing a Personal Representative: The court officially appoints someone to manage the estate, known as a “Personal Representative.”
4. Notifying Heirs and Creditors: All heirs, beneficiaries, and potential creditors must be formally notified of the probate proceedings.
5. Inventorying Assets: The Personal Representative identifies and values all of the deceased’s probate assets.
6. Paying Debts and Taxes: Valid creditor claims and any outstanding taxes are paid from the estate’s assets.
7. Distributing Assets: Finally, the remaining assets are distributed to the beneficiaries according to the will or Colorado’s intestacy laws if there is no valid will.
8. Closing the Estate: The Personal Representative files final paperwork to close the probate case.

Why Do Colorado Families Want to Avoid Probate?

While probate serves a necessary function, it comes with several significant downsides that many Coloradans wish to bypass:

• Time-Consuming Delays: Probate in Colorado can take anywhere from 6 months to 2 years, or even longer if there are disputes or complex assets. This means your family could face significant delays in accessing their inheritance.
• Costly Fees: Probate is expensive. Costs can include court filing fees ($225 for the initial filing fees plus $12 for every other document filed with the Court), attorney fees (ranging from $6,500 to $10,000, but potentially much higher for complex and/or contested estates), appraisal fees, and personal representative compensation. These expenses are paid directly from the estate, reducing the inheritance for your loved ones. Some estimates suggest probate can consume 3% to 10% of an estate’s total value.
• Lack of Privacy: Probate is a public court process. Once a probate case is opened, details about your assets, debts, and who inherits what become a matter of public record, accessible to anyone seven years after the estate is closed.
• Loss of Control: During probate, a court-appointed Personal Representative (even if it’s someone you named in your will) must follow strict court rules and procedures, limiting flexibility and potentially delaying critical decisions.
• Potential for Disputes: The public nature, structured timeline and contentious nature being in front of a probate Court serves to invite challenges from disgruntled heirs or creditors, leading to family conflict and even more delays and costs.

How a Living Trust Bypasses Probate in Colorado

A Revocable Living Trust is a legal entity that holds your assets during your lifetime. When you create and “fund” a living trust (by retitling assets into the trust’s name), you effectively transfer ownership of your property from yourself as an individual to yourself as the trustee of your trust. You maintain full control over these assets during your lifetime, just as you did before.

The key difference is what happens upon your passing. Because the living trust legally owns the assets, those assets do not go through probate. Instead, your chosen successor trustee—the person or entity you designate to manage the trust after you—can immediately step in and distribute assets to your beneficiaries according to the instructions you laid out in the trust document. This process is private, efficient, and avoids court involvement.

Here’s how a living trust helps you avoid probate:

• Private Administration: The distribution of assets occurs outside of the public court system, maintaining your family’s privacy.
• Faster Distribution: Your successor trustee can typically distribute assets to beneficiaries within weeks or a few months, rather than the lengthy probate timeline.
• Reduced Costs: By avoiding probate, your estate can save significantly on court fees, attorney fees, and other administrative expenses associated with the probate process.
• Continuity of Management: If you become incapacitated, your successor trustee can seamlessly manage your assets without the need for a costly and public conservatorship proceeding. This provides protection during your lifetime as well.
• Control Over Distributions: A living trust allows you to set specific conditions for how and when your beneficiaries receive their inheritance, offering greater control than a will, especially for minor children or those who may not be ready for a lump sum inheritance.

Other Probate Avoidance Strategies in Colorado (And Why a Living Trust is Often Superior)

While a living trust is generally the most comprehensive solution for avoiding probate, Colorado law offers other methods for specific assets:

• Joint Tenancy with Right of Survivorship: Property owned this way automatically passes to the surviving joint owner(s) upon death, bypassing probate. However, for spouses, this is only effective to avoid probate when the first spouse passes.
• Beneficiary Designations (POD/TOD): Bank accounts can have “Payable-on-Death” (POD) designations, and investment accounts can have “Transfer-on-Death” (TOD) designations, allowing those accounts to pass directly to a named beneficiary. While useful, these only cover specific assets and do not provide the comprehensive planning or incapacity protection of a living trust. Moreover, if the designated beneficiary passes prior and no other beneficiary is named, these accounts have to go through probate.
• Beneficiary Deed: A beneficiary deed is a tool available to people in Colorado that can be used to transfer title of real estate upon a person passing, but there are inherent limitations. Specifically, like a beneficiary designation on an account, if the beneficiary(s) designated on the beneficiary deed pass prior, the real estate is subject to probate. Moreover, Colorado law prevents beneficiary under a beneficiary deed from selling or otherwise transferring title of the real estate for a four month period after the date of death to allow creditors, specifically Medicaid, to put liens on the property before it is transferred.
• Small Estate Affidavit: If a decedent’s total probate personal property is less than $82,000 (and no real estate is owned individually), heirs may be able to collect assets using a small estate affidavit without formal probate. This is limited primarily to personal property and small accounts, but if real estate is involved, probate is required.

While these methods can be part of an overall estate plan, a living trust provides a holistic approach, encompassing all your assets and offering control, privacy, and incapacity planning that individual designations cannot.

Secure Your Family’s Future with a Colorado Living Trust

Avoiding probate is a primary goal for many of our clients, and for good reason. A Living Trust in Colorado empowers you to keep your family’s financial matters private, ensure a swift transfer of assets, and significantly reduce the time and expense associated with the probate court. A revocable living trust in Colorado is an investment in peace of mind for both you and your loved ones when you pass.

If you’re ready to learn more about how a living trust can benefit your unique family situation and help you avoid probate in Colorado, don’t hesitate to reach out. Our experienced estate planning attorneys at The Law Office of Kevin Hancock are here to provide personalized guidance and help you create a comprehensive plan that protects your legacy and provides you peace of mind.

Contact The Law Office of Kevin Hancock today to schedule a consultation and take the first step toward securing your family’s future.