Avoiding Probate
Probate is not always something to fear. Colorado’s process is comparatively streamlined, and for many local families a Will and an informal probate work well. Avoiding probate matters most where a family wants privacy, where the heirs live far away, or where a person owns real property in more than one state. In particular, an out-of-state owner who dies holding an Estes Park cabin in their own name may leave their family with two probates: one at home and a second (so-called “ancillary”) probate in Colorado for the cabin.
The Tools
Property passes outside of probate when it is owned in a way which names the next owner. The most common tools are:
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Beneficiary deeds. A Colorado beneficiary deed names who will receive real property at the owner’s death. The owner keeps full ownership and can sell or revoke during life, but the deed must be recorded with the county before the owner dies. See Property Deeds.
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Payable-on-death and transfer-on-death designations. Bank and brokerage accounts can name a beneficiary who receives the account directly.
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Beneficiary designations on retirement accounts, life insurance and annuities.
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Joint tenancy. Property held in joint tenancy passes automatically to the surviving owner.
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A revocable living trust. Property titled in a Trust is managed and distributed by the successor trustee without a court.
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An entity. A family property held in a Family Cabin LLC passes as a membership interest under the operating agreement and the member’s own plan.
The Trade-Offs
Each tool has drawbacks that should be weighed. Joint tenancy gives the other owner present rights in the property and exposes it to that owner’s creditors. Beneficiary designations must be kept current, and a designation that names only one child will override a will that divides everything equally. A beneficiary deed or designation does not plan for incapacity, nor does it allow a young or vulnerable beneficiary’s share to be managed over time. A trust handles all of this, but only for the property that is actually transferred into it.
Elkhorn Law reviews how each of your assets is titled and builds a plan that uses the simplest tool that works for each one.