In Colorado, there are a number of ways to transfer assets from one generation to the next. They fall into three basic categories. First, inheritance or probate transfers. Second, transfers by trust. Third, transfers by operation of law. Each has unique advantages and disadvantages.

Inheritance or probate transfers:

This is the transfer most people think of when that think about estate planning. A person’s estate is comprised of assets in the name of the decedent at the time of his death. The estate will pass to the decedent’s heirs if he does not have a will. Those people are typically his spouse and children. If he has a will his estate passes to the persons or charities named in the will.

Depending on the value and nature of the assets, the estate will pass through one of four levels of the probate process. The simplest is an “Affidavit for Collection of Small Estate.” This is a one page form and no court filing is involved. The next, and most common, level is “Informal Probate.” The process gets more complex with “Formal Probate.”  The highest level of judicial involvement is “Supervised Administration.” In Colorado, 95% of estates are in the two simplest forms. In some states (i.e. New York) probate can be very expensive. In other localities probate can have many delays, and take years. In Colorado, those risks are low.

The advantages of passing property in this way include: (1) the property remains in your name during your lifetime; (2) the estate plan is less expensive to complete; (3) you do not have to deal with the hassle of administering your assets in trust ownership; and (4) while informal probate involves some hassle, it is rarely onerous, and provides for judicial assistance if needed.

The disadvantages are the costs, delays, and procedural hassles assocaited with probate.

Check out our next blog to review other ways of transferring assets.

By: Richard M. Arnold, Esq. Arnold & Arnold, LLP