Who Will Be the Head of YOUR Household When You Die?

Some people claim that Colorado is  “probate friendly” state and therefore, families don’t need to avoid probate. I’m here to say, as clearly and boldly as I can, that’s a bunch of who-ha.

Who’s the head of my household when I die? One of my seven sisters will have that enviable job!

I’ve heard lawyers say that because Colorado adopted the Uniform Probate Code, its “streamlined” process means that probate is easy and doesn’t take much time at all. That’s an oversimplification at best.

Here’s why:

1. Probate replaces the head of your household with a court system—a judge or probate registrar. Nothing embodies the utter and complete loss of sovereignty over one’s own family more than putting an unfamiliar, far-reaching system at the head of your family. A court (or probate registrar) becomes the decision-maker for your family’s financial life through the pendency of probate. Yes, the judge or registrar must use the Probate Code to guide their decisions. Nevertheless, it’s someone else, using someone else’s rules to manage your family’s financial lives.
2. Your family gets a pittance to live on during probate, a puny “family allowance” of $2500/mo in Colorado (and a couple other small exceptions). If your family needs more than that, they have to argue for more before a judge, which means a hearing, which costs money!
3. Your family has to WAIT for the leftovers! Your family only gets what’s leftover after your creditors have been paid and they have to wait to get that until after the statutory four-month claims period. When you add time in for opening a probate, and closing a probate, they’ve likely waited easily six months. If there are any snags in the process at all, it will just take longer to iron them out. Some estates are many years old…with no end in sight.
4. Probate is costly, even when streamlined. I’ve tried. I cannot find even one lawyer who is willing to open a probate for less than a $1500 retainer. Remember that probate, even informal probate, is a detailed statutory process requiring the personal representative and his or her attorney to hit precise marks without fail (lest the probate stall or be challenged). Any attorney worth their salt will charge $150+/hour to probate an estate. Even at that low hourly fee, that’s only ten hours of work before the retainer is gone and has to be replenished. Just taking an inventory and opening probate can take ten hours easily. It does not take much at all to wrack up a probate bill of $5,000 and more, even with insolvent estates!
5. The exact same steps that have to be taken in “formal” probate have to be taken in “informal” probate. I hear lawyers say that probate isn’t expensive because we can do it informally. But “informal” probate only means that probate isn’t overseen by a judge, but by a probate registrar. All great people, by the way. The probate registrars in our state are very good at what they do and helpful too. But the process is identical regardless of who is overseeing it. What you get to avoid are court appearances, which by their nature, can drive up the probate bill markedly.
6. Many lawyers choose to formally probate some or all of an estate even when informal probate is available. Now here’s a dirty little secret you wouldn’t find out until you’re actually in a probate. With good reason, many probate lawyers will close an estate formally, which requires a hearing. The reason is that a formal closing, before a judge, shortens the time frame a personal representative’s (and their lawyer’s) liability runs from three years to one year. So the idea that informal probate avoids court appearances is often just plain wrong.
7. A Will is not a “hall pass” from probate, it is only the replacement of your wishes for the probate code defaults. Many, many people believe that having a Will avoids probate. It does not. A Will assures probate. There is only one solid way to avoid it and that is by deliberately, consciously taking your probate assets out of the courtroom and placing them in a fully-funded revocable living trust.

A trust is a private contract controlling your financial life if you’re incapacitated and when you die. By dealing with your financial life privately, you keep your family needs of primary importance. Of course, we want your debts to be paid, be we do not want them to take priority over your family.

A revocable living trust has the effect of putting creditors where they belong (at the back o’ da bus) retaining sovereignty of your financial life within your family and with whom you choose to “entrust” your finances. A trust-based plan puts the onus to pay creditor claims on the creditors themselves. If they’re not satisfied with the debt payment they receive, they can take your fiduciary to court, rather than your fiduciary going to court and inviting them to the table.

That is the proper, family-centric way to handle your financial resources and has the added bonus of clearing our already overcrowded court system from cases that we can handle privately. Win-win-win for everyone. (And I haven’t even addressed the asset protection features a trust can give!)

There are exceptions to this, though. For some families, probate is actually the favored way to deal with creditors. I bet you can guess when that might be. Yes, that’s right. When there’s not enough money to pay those creditors. An insolvent estate is the only estate where we truly do want the protections that formal probate closure can offer. When creditors are not going to get paid, we do want to shut off their claims forever, which is the ONLY benefit to probate. So, if you’re solvent, you should consider a revocable living trust as the more powerful, more loving, more complete planning tool available to you.

If you’d like to learn more about anything you read here, call our office today to schedule a time for us to sit down and talk.  We normally charge $750 for a Family Wealth Planning Session, but because of the importance of solid probate planning, I’ve made space for the next two people who mention this article to have a complete planning session at no charge.  Call 303-747-3909 today and mention this article.