A person’s assets, such as investments or properties, are like life insurance. They cannot take these to the grave, but they can benefit the ones they leave behind.
But the legal process that governs the transfer can vary between states. It can also be complicated and involve arbitration and mediation services.
Anyone who wants to do someone estate planning or is likely to inherit some of these assets, knowing what happens to the estate after a person’s death is essential.
First, Estate Taxes
Taxes are everywhere, even in death. A person’s estate might also need to settle federal or state (or both) taxes. For those who live in Colorado, the state doesn’t levy it, so families only have to think about the federal estate tax.
Fortunately, the United States provides exemptions, and the amount is enormous. As of 2020, up to $11.5 million of one’s assets might not be subject to estate tax. If the total value of one’s investment is less than this, then the surviving family doesn’t have to pay anything.
As part of estate planning, people with assets can also explore many methods to protect these investments. One option is through a life insurance coverage equal to the potential value of estate tax.
If the total assets are more than the exemption, the estate needs to settle it first before the remaining investments become available to the rightful heirs or beneficiaries.
Note, though, that availability doesn’t imply that a family member can already withdraw money from the deceased’s bank account or lay claim to a home. Usually, it goes through probate.
What Is Probate?
Probate is a legal or judicial process that involves transferring ownership from the deceased to the rightful heirs or beneficiaries. A common misconception is it kicks in only when the deceased didn’t leave any will, administrator, or trust.
In reality, probate can also include a will. It’s more specific definition is to prove the validity of a person’s will in court.
In Colorado, this process can come in different forms:
- Small probate, which is for a small estate. In Colorado, an estate is small if the deceased doesn’t have real property, and the total value of the assets is not more than $50,000.
- Informal probate, in which no one is contesting the will or the persons who will be the heirs or beneficiaries of the estate
- Contested probate, wherein someone might dispute the contents or the validity of the will
While probates are common, the process can be draining and problematic for everyone involved. One, the assets remain frozen until the matter is resolved. Sometimes probates take months or even years to settle.
Second, probate can be emotionally taxing with families fighting over assets. Usually, this scenario becomes likely when different kinds of investments and many people are involved.
To help resolve the matter, they need the court’s assistance. This added stress isn’t something surviving families need.
The good news is that probate isn’t mandatory, and even if it happens, it’s still possible to avoid involving the court. For those claiming a small estate, an affidavit might be enough.
Otherwise, warring parties can seek professional help, such as arbitration and mediation services. In this setup, a neutral expert help resolve estate management or administration issues.
Death can mean many things for the survivors, ranging from new beginnings to legal battles. Everyone can avoid the latter by knowing and planning estates.