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Colorado Wills and Trust Requirements

When deciding between a will or trust in Colorado or making other estate planning decisions in Colorado, it is important to understand the key differences between these two primary different estate planning tools and the general rules regarding estate documents.

Colorado Statutes Pertaining to Wills and Trusts.

Wills:  Colo. Rev. Stat., Title 15, Arts. 11 and 12.

Trusts:  Colorado Uniform Trust Code, C.R.S., Title 15, Art. 5.

Colorado Will Requirements.

To execute a valid will, a Colorado testator must be at least 18 years old and “of sound mind.”  A testator is generally considered “of sound mind” if he or she has a reasonable understanding of his or her assets, family members and heirs, and the effects of a will’s provisions.

Colorado wills must be in writing and must be signed by the testator (or someone who signs at the testator’s direction while in the testator’s presence).  Wills in Colorado must also be either attested by at least two witnesses or acknowledged by the testator before a notary.   Witnesses must observe the testator signing the will or hear the testator’s declaration that the testator’s signature is genuine.  In either case, the witnesses must sign the will within a reasonable time after the signature or authentication occurs.

The only prerequisite to witness a will in Colorado is that the individual must be generally competent to act as a witness.  A Colorado will is not invalidated if a witness to the will is an interested party.  However, devises to an interested witness are deemed void to the extent, in the aggregate, total devises to the interested witness exceed the share of the estate the witness would have received had the testator died intestate.

Colorado law permits wills to incorporate by reference other documents in existence when the will is executed if the document is sufficiently described to allow identification.  Colorado law specifically authorizes incorporation by reference of written lists setting forth dispositions of tangible personal property (excluding money).  Often called a “memorandum of personal property,” the list must be signed by the testator or written in the testator’s handwriting and must identify with reasonable certainty the devised items and intended recipients.  A list of personal property can be created before or after a will is executed and can be altered by the testator.

Colorado wills can be made “self-proved” through the use of a notarized affidavit executed by the testator and the will’s witnesses.  The affidavit, which can be executed simultaneously with the will or afterward, serves in place of witness testimony before the probate court and must attest to the facts required to authenticate the will in probate.

In Colorado, a written document that does not technically meet the formalities required for a Colorado will may nonetheless be treated as a valid will if a proponent of the document can present clear and convincing evidence that the document was intended as the testator’s will.  The document must be either signed or acknowledged by the decedent—or clear evidence must show that the decedent erroneously signed a document intended as the decedent’s spouse’s will.

Amendment, Revision, and Revocation of Colorado Wills.

Amendment of a Colorado will can be accomplished by executing a codicil (a separate document that amends an existing will) or another will.  In either case, the document must satisfy all legal requirements for execution of the original will.

A Colorado will may be revoked by a “revocatory act” (such as by burning or tearing the will with the intent of revoking it) or by execution of a later will that expressly revokes the prior will or is inconsistent with the prior will.

A later will that does not expressly revoke a prior will is presumed to revoke the prior will by inconsistency if the later will completely disposes of the testator’s estate.  If a later will does not completely dispose of the testator’s estate, it is presumed to have been intended as a supplement to the earlier will, with the later-executed will controlling in the event of any conflicting provisions.

If a Colorado testator marries after execution of a will, the surviving spouse inherits the same share of the estate he or she would have inherited had the testator died intestate, adjusted for any distributions to children of the testator born before the marriage and who are not children of the surviving spouse.  A later-wed spouse’s share is inapplicable if the will was made in contemplation of the marriage, the testator intended the will to apply notwithstanding the marriage, or the testator made other provisions for the surviving spouse outside the will.

If a child is born to or adopted by a testator after execution of a Colorado will—and if the testator did not otherwise provide for or appear to intentionally omit the child—the child inherits a share of the estate.  If the testator has no other children, the share is equal to what the child would have inherited had the testator died intestate.  If the testator has other children provided for under the will, the share is calculated based upon the devises to other children.  An omitted child’s share is inapplicable if the will leaves substantially all of the estate to the child’s other parent.

If, after executing a Colorado will or revocable trust, a testator is divorced, any revocable provisions in the will or trust in favor of the former spouse are considered to have been disclaimed, unless the will, trust instrument, property settlement agreement, or court order expressly provide otherwise.  Colorado law also expressly provides that an individual who has been divorced from a decedent does not qualify as a “surviving spouse.”

Holographic and Oral Wills.

A document that does not fully satisfy the requirements for an attested Colorado will may be nonetheless valid as a holographic will if it is signed by the testator and all pertinent provisions of the will are written in the testator’s handwriting.  Evidence outside of the document itself can be used to establish in probate that a handwritten document was created with the intent to form a will.

Oral (or “nuncupative”) wills are not recognized under Colorado law.

Colorado Trust Requirements.

Colorado trusts are primarily governed by the Colorado Uniform Trust Code, enacted by the legislature at C.R.S, §§15-5-101, et. seq.  A Colorado trust can be formed for most any purpose under Colorado law; provided, however, the purpose of a Colorado trust must be lawful, capable of being achieved, and not in conflict with Colorado public policy. In general, the terms of a trust and the trust itself must be for the benefit of the trust’s beneficiaries.

Colorado’s Uniform Trust Code specifically authorizes trusts created for charitable purposes (such as the relief of poverty, advancement of education or religion, or promotion of health, governmental, or municipal purposes) and trusts for the care of animals.

To create a valid trust under Colorado law, the settlor must express an intent to create a trust and have adequate capacity (measured under the same standard applying to wills). Alternatively, a valid trust can be created through authorization provided under a statute, judgment, or decree.  A Colorado trust is void to the extent its creation was induced through fraud, duress, or undue influence.

Additionally, Colorado trusts must have a definite beneficiary (subject to exceptions such as for charitable trusts, trusts for the care of animals, and certain trusts created for noncharitable purposes) and a trustee with actual duties to perform.  The sole trustee of a Colorado trust cannot also be the trust’s sole beneficiary.

The trustee of a Colorado trust has a duty to administer a trust prudently, taking into account the trust’s terms, purposes, and surrounding circumstances. To the extent a trust is revocable, a trustee’s duties are owed exclusively to the settlor under Colorado law.

Colorado trusts can be created through transfer of property by a settlor to a trustee (either during life or through a will or other testamentary instrument), a declaration by the owner of property that it is owned as trustee, by exercising a power of appointment in favor of a trustee, or through a statute, judgment, or decree authorizing the trust.

Though most trusts are evidenced by a written instrument setting forth the trust’s terms, the Colorado Uniform Trust Code allows for oral trusts if the terms can be established by clear and convincing evidence.  However, certain types of trusts must be evidenced by a formal writing under Colorado law.  Unless a Colorado trust is expressly made irrevocable, the settlor is assumed to retain the power to revoke or amend the trust.

Colorado trusts terminate upon revocation or expiration under the trust’s own terms, when there is no purpose of the trust remaining to be achieved, or when the trust’s purposes become unlawful, contrary to public policy, or impossible to achieve. A trust may also be modified or terminated by a court upon the petition of the settlor, trustee, and/or beneficiaries.  Or, in some circumstances, modification or termination of a trust may be made upon the consent of the trustee and all beneficiaries. Upon petition, a court may also reform or modify the terms of a trust to conform to the settlor’s intent or tax objectives.

Special Considerations.

Estate Taxes: Colorado does not impose either estate or inheritance taxes.  Large Colorado estates may still be liable for federal estate taxes.

Simplified Probate:  Colorado law provides for a streamlined small-estates probate process for qualifying estates.  An estate is eligible for small-estates probate if the net value (after deducting liens and encumbrances) is not greater than the sum of exemptions and allowances, administration costs, final expenses, medical expenses from the decedent’s last illness, and the value of any personal property the decedent held as fiduciary or trustee.  Personal representatives of qualifying small estates can take possession of estate assets, make distributions to heirs, and close the estate by affidavit without the more onerous ordinary probate process.

Non-Probate Transfers:  Colorado law provides multiple means of transferring assets outside of the probate process.  In addition to living trusts, POD (payable-on-death) and TOD (transfer-on-death) designations, which provide for automatic transfer to a named beneficiary upon an owner’s death, may also be used in Colorado.  POD designations can be added to financial accounts and CDs. TOD designations can be used with registered securities, brokerage accounts, and some other similar assets.

Joint ownership can also be used as a means to bypass probate.  Assets co-owned as joint tenants with a right of survivorship automatically transfer to a surviving owner upon the other owner’s death.  In most states, joint tenants must own equal shares in a jointly owned asset.  Colorado, though, allows joint tenants to own differing interests.  Colorado law assumes that any tangible personal property jointly possessed or controlled by a married couple is owned as joint tenants with right of survivorship, unless a title says otherwise or the property pre-dates the marriage or was acquired via gift or inheritance.

Transfer-on-Death (TOD) Deeds and Vehicle Titles:  Colorado is one of the few states that recognize TOD designations on both real estate deeds (sometimes called a “beneficiary deed”) and vehicle titles.  In either case, an asset with a TOD designation automatically transfers to the named beneficiary upon the owner’s death, but the beneficiary does not acquire present rights in the asset until death actually occurs.

Spousal Shares: To protect against disinheritance, Colorado law affords surviving spouses a right (waivable by a valid prenuptial agreement) to claim a spousal elective share in the “marital property” portion of a decedent spouse’s “augmented estate.”  Along with wealth within the decedent’s net probate estate, the augmented estate includes non-probate transfers and property and transfers of the surviving spouse.  The portion of a decedent spouse’s augmented estate constituting “marital property” ranges from 10 to 100 percent, depending on how long the couple has been married.  The spousal elective share is then equal to one-half of the value of the resulting marital estate.  If an elective share amount is under $50,000, a supplemental elective share is permitted up to $50,000.

 

Creating a will or trust does not have to be difficult or intimidating.  However, certain circumstances—like second marriages, stepchildren, aging parents, special needs beneficiaries, guardianships, and business interests (to name a few)—can add a layer of complexity and result in unforeseen long-term consequences.  Whenever any out-of-the-ordinary issues are present, it’s a good idea to consult with an experienced attorney familiar with and licensed under the laws of the relevant jurisdiction.

 

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