What is Probate and What are Probate Assets?
When someone dies, it is not always clear to whom they intended to pass certain assets or property. That leaves the courts to account for all the decedent’s property and valuables, and to then decide who inherits what. This legal process is known as probate. Most of the deliberation concerns probate assets. But what is probate and what are probate assets?
This article aims to clear that up.
What is Probate Exactly?
Probate law determines how an individual’s estate is processed after their death. An estate is the total value of all the property and possessions your loved one has left behind.
Even if the decedent left a detailed will and trust, it is up to the courts to decide:
how their remaining debts are paid off, and
how their remaining assets and possessions will be passed on.
Most often, these matters are handled routinely. However, there are times when the decedent’s intent is unclear, and legal conflicts arise, resulting in probate litigation.
What are the Two Asset Classes?
People often make living wills without the aid of an attorney. Without having a firm grasp of what probate is in Colorado and what is subject to probate, individuals can cause inconsistency and confusion when it’s time to distribute assets, property, and other valuables.
The two classes of assets are probate assets and non-probate assets.
What are Probate Assets?
Probate assets are possessions or property not already assigned to specific beneficiaries in the deceased person’s estate. These assets tend to be items or property solely owned by your loved one. They may also include assets listed only in their name. These can include:
motor vehicles and boats
stocks and investments
bank accounts
real estate property that wasn’t jointly owned
other personal valuables, such as antiques, jewelry, etc.
Probate assets also include property bequeathed to a beneficiary who has already died.
For example: One elderly spouse preceded the other in death, but the remaining spouse died before listing an alternate beneficiary.
What are Non-Probate Assets?
Non-probate assets are often jointly owned property or property with a designated beneficiary.
In many cases, non-probate assets can bypass the legal process before they are distributed. Common non-probate assets include:
life insurance payouts
jointly-owned real estate
retirement plans
joint bank accounts
pensions or annuities
assets in trust
other accounts or assets with a designated “payable on death” beneficiary
Because trust assets are those bequeathed to designated beneficiaries in a will, they go directly to the intended person.
Policy Trumps Will
Sometimes a will names a different life insurance beneficiary than does the policy. In these cases, the law follows the policy, not the will. This rule applies to all assets with named beneficiaries. The document listing the beneficiary always trumps the will.
What if the Decedent Left Debts Behind?
Probate assets cannot be distributed until your deceased loved one’s debts are paid off. This includes settling credit card balances and final medical expenses. Often — but not always — the decedent has left enough money in the bank to pay off creditors. Otherwise, it might be necessary to liquidate certain assets to pay off debts. This is done through a probate sale.
What is a Probate Sale?
A probate sale sells property or valuables that are part of a deceased person’s estate. Often, the proceeds go to creditors or beneficiaries who would rather have the money than the valuables.
The process may involve an auction or bidding process, however, most property is sold “as is.” All probate sales are subject to court oversight and approval.
What Happens if My Loved One Did Not Have a Will?
When a person passes away without a will, they leave behind an intestate estate. This often occurs when an individual does not have a large estate. Most of the time, their property can be sorted in a small estate or informal probate process.
Small Estate and Informal Probate
Small estate probate applies when a decedent leaves no will and their valuables are less than $70,000 (as of 2020). This process requires filling out a small estate affidavit and getting the court’s approval. The deceased individual’s heirs may then collect the assets.
Informal probate applies to estates over $70,000 if no asset distribution disputes are expected. This is commonly used by smaller families where there is a clear, linear path of succession.
For example: if the decedent married only once and only had children inside that marriage.
What Happens After Probate is Closed?
There are specific tasks that must be completed after probate is closed in Colorado. Probate in Colorado can end when:
All assets are transferred from the deceased’s name.
All claims and debts are settled, and
Necessary tax returns are filed and paid.
The administrator or executor then does two things:
Gets signed Receipt and Release forms from all the beneficiaries, and
Files these forms with the court to close the estate.
Can the Probate Process be Avoided?
Most estate distribution disputes arise from inadequate or absent estate planning.
A well-considered plan can go a long way toward avoiding, or at least easing, the probate process. With the help of a seasoned probate attorney, you can bring clarity to the processing of your estate through:
a living will or trust
life insurance policies
payable-on-death bank and savings accounts, and
transfer-on-death real estate deeds and securities
In the end, the best answer to the question “what is probate?” will come from you. It can be a smooth and efficient process or a long and contentious one. It all depends on advanced planning and preparation.
Avoid Probate Confusion by Working With an Estate Planning Attorney
What is a probate attorney? He or she is your best chance at avoiding frustrating and protracted probate litigation. Estate planning is a personal process that can be difficult to confront, which is all the more reason to hire a legal professional to do it right.
If you or someone close to you needs to create a will, we’re here to help. Our estate planning team will ensure your true intentions are expressed when the time comes. Call (720) 927-5833 to begin your case assessment.
