Probate is the court procedure by which a will's validity is determined. It is also the process by which estate assets are collected and used to pay debts and make distributions to beneficiaries. Nonprobate assets are assets that are not part of the probate estate and will therefore not be collected and used in the probate proceeding.
Typical nonprobate assets include: proceeds from life insurance policies, individual retirement accounts (IRAs), 401(k) accounts, joint tenancies with rights of survivorship, payment on death (POD) accounts, transfer-on-death (TOD) securities and revocable living trusts.
Some advantages of transferring property outside of probate include:
- Fast transfer of property. Because nonprobate structures such as joint accounts, payable-on-death (POD) accounts, transfer-on-death (TOD) accounts, trust accounts and life insurance typically only require the death certificate and beneficiary's identification to transfer, property can be transferred almost immediately.
- Nonpublic. Because no public proceeding, like probate, is required to pass nonprobate assets to beneficiaries, nonprobate transfers offer a level of privacy that is not available for property transferred through probate.
- Reduced or eliminated administrative costs. Because a probate proceeding is not opened with respect to nonprobate transfers, court costs, fees for a personal representative (administrator) and attorneys fees may be eliminated or reduced by passing property by way of a nonprobate structure.
- Some creditor claims may be avoided. Because nonprobate transfers are generally considered "nontestamentary," they are often not subject to the creditor claim provisions of the Colorado Probate Code (CPC).
- No need for out-of-state probate proceedings. When real property is located in a state or jurisdiction other than Colorado, it is generally necessary to initiate ancillary probate proceedings in that other state or jurisdiction to transfer the property. By placing real property located in another jurisdiction in a nonprobate device - such as a revocable trust, limited liability company (LLC) or limited partnership - probate in the other jurisdiction may be avoided altogether.
Speak to an estate planning attorney
If you are interested in managing your estate to avoid probate whenever possible, contact the Law Offices of Karen Brady, P.C., to schedule a consultation with a skilled estate planning attorney.