What is Probate?
Probate is a legal proceeding whereby a court appoints a personal representative to administer the estate of a deceased person (the “decedent”). However, not everyone who dies has their estate go through probate. So how do you know if a decedent’s estate must be probated?
What is an “Estate”?
First, let us clarify some terminology. A common misconception is that only wealthy people have an “estate”. The reality is, that anyone who dies owning anything, has an estate. No matter how small the value of the assets, the decedent had an estate. Not all estates go through probate, though, so how do you know?
When Is an Estate Required to Go Through Probate?
Notwithstanding a few exceptions, anytime a person dies owning property in their individual name, the estate must be probated.
So, We Ask the Questions:
How Were the Assets Owned?
When determining whether assets will need to be probated, the first thing we determine is how were the assets owned. The most common ways assets are owned is:
- as joint tenants with a right of survivorship,
- as tenants in common, where each owns a proportionate share, but there is no right of survivorship
- in an individual name with no beneficiary designation,
- in an individual name with a beneficiary designation
- in a trust
What Type of Assets are in the Estate AND What is Their Value?
Real Property: The asset that lands most people in probate is real property; this can include mineral interests. If a decedent owned a home or some land or a mineral interest in Colorado, regardless of the value of the real property, and it was not owned in joint tenancy and it did not have a beneficiary designation on it, the property must be probated in order to transfer it to the rightful person or to sell it.
Personal Property Greater than $70k: If a decedent did not own real property, or the real property passed by some other means, but dies with assets valued at greater than $70k, regardless of the type of assets, the estate must be probated.
No Real Property and Total Assets Valued under $70k: If a person dies owning no real property and the total value of the estate is less than $70k total, the assets may be able to transfer by small estate affidavit.
And Clients Ask Us:
What if There is a Mix of Assets Owned in Different Ways? How Do you Determine Whether A Probate Needs to Be Opened?
It is fairly simple. Only assets held in the decedent’s individual name will need to be included in the probate estate. That means, the following assets will be EXCLUDED from the probate estate:
- assets held in joint tenancy with a right of survivorship
- assets like life insurance that have a beneficiary designation on them
- assets like bank accounts if a “pay on death” or “POD” designation has been added to them
- assets like brokerage accounts if a “transfer on death” or “TOD” designation has been added to them
- assets titled in the name of a trust
- real property for which a beneficiary deed was executed and recorded in the county records
What is Trust Administration? Do Trusts Go Through Probate?
Trust administration is following the instructions in the decedent’s Revocable Trust to transfer the assets owned in the name of the trust in accordance with the trust’s instructions. Oftentimes, trust administration does not require court involvement, however, if the decedent failed to change the title of any of their assets into the name of the trust before they died, then that asset or those assets may have to go through probate to put them into the trust.
Author: Charlotte R. Landvik