It is almost better to ask, “why do I need a Will?” Most of us know that a Will is a legal document. It leaves instructions to your representative, or secondary, or third representative, and if the Will is used properly it is used by your representative to establish the authority to carry out your wishes after you’ve passed away. They must enter the Will, Death Certificate, and petitions and other documents, to start a Probate, to qualify for the letters that allow them to transfer land, vehicles, and other valuable items in your estate. Usually this takes an attorney to manage well, and costs $1000 or more even if it is a simple process.
The representative must follow your Will, because if it is challenged or reviewed by the probate court, the truth will come out. They do usually have wide latitude to settle disagreements about who gets their favorite memorable object from the decedent’s estate (the person who passed away) but let themselves open to a lawsuit by the other beneficiaries if they don’t conform to their duty to take care of all the beneficiaries according to the Will. A challenged Will, or representative, or probate without a Will, must be done formally, and except for simple probates that means a judge oversees the administration of the estate. This takes longer than informal probates, or estates by affidavit, and is much more expensive. THAT is why you need a Will:
- To avoid pain and suffering to your beneficiaries.
- To remove a beneficiary for whatever reason.
- Just in case your Trust fails.
- Because you don’t want a court to decide what happens to your stuff.
- Because without one your kids, or siblings, or parents will get stuff, and you don’t want that, and its your stuff and you can decide what happens with it.
You need a Will if your assets exceed $74,000 in 2022, because then your representative will be required by law to complete probate. If there is a probate, then notices will go out to all the interested parties and yes, that includes debtors. For that reason, if you are high in debt, it may be better to go through your real properties (land, home, houses, etc.) and accounts and make them all “joint tenancy” with your beneficiary, to take them out of probate. An attorney can create the deeds to make this happen, and banks, 401k’s, and investments can all be put in both names easily. If the vehicles and other non-land property left are worth less than $74k, then you can devise that by affidavit (form JDF 999 in Colorado).
However, if you don’t have much or any debt, its better to make a Will, and go through probate, so that your home and other properties get something that is called “step-up basis in value”. This has to do with capital gains taxes, which can be quite high depending on your income. Capital gains is calculated from the day you purchased the property to the day you sell it, sold price minus purchase price, and for many of us we bought a property for less than $100k, and now its worth $500k, and that means losing a big chunk to taxes. However, when the owner passes away, their portion gets a step-up basis, meaning reset to current value. If they owned 100%, and you sell the property immediately, goodbye capital gains taxes. If you don’t have a good reason for avoiding probate, this is the best way to go, from single owner to beneficiaries, no capital gains. Joint tenancy takes the property out of probate, but with two owners only ½ of the property will receive the step-up basis in value.
Now, there are other reasons why you would or wouldn’t want a Will. If you have a revocable Trust, you need a pour-over Will, to keep the Trust going after you pass away, and to change who the Maker, the Trustee, and the Beneficiaries are. Also, there is no estate tax in Colorado, and the devises from estates are technically gifts, but the lifetime gift exemption is currently 11.6 million dollars; therefore, having more than 11.6 mil means you have other reasons for or against. You might then decide upon a flawed trust, or a number of trusts and LLC’s set up to gradually gift devalued assets (legal to devalue down to 40% as a transfer of interest through an LLC – Limited Liability Company). Pretty complicated, so if you need an attorney, please call me at 720-249-7852 or contact me through www.mcmechanlaw.com.
REMEMBER, whether there is a Will or not, probate or not, you must take the death certificate (from your county Vital Statistics or in the county of the decedent’s residence) and if there is one, the Will, and have them filed with the county clerk’s recording office. However, I’ve never heard of any serious consequences from not doing so. My office is in Aurora, CO. and my advice is intended to reach people in my surrounding areas: Arapahoe, Adams, Denver, Douglas, and Elbert counties. Look up the statutes online, Title 15 sections 10+