How to Close a Revocable Trust After Death

Dan Mckenzie • April 28, 2023

Revocable trusts are a commonly used estate planning tool. The trust gets created by someone known as a “grantor.” This person places assets into the trust and is the beneficiary during their lifetime. When the grantor dies, the trust does not automatically go away. Some steps must be followed to close the trust after the grantor dies. The trust still operates until all of the closing steps have been completed. 


The most important thing to know about what happens after the grantor’s death is that because it never dies, the trust does not have to go through the probate process.  After death, the assets of the revocable trust are distributed in line with the grantor’s directions, as specified by the trust agreement. After the debts and obligations of the estate are settled, the assets are distributed to the beneficiaries. However, to do this, the following steps must be taken.  A Denver estate planning attorney can help you execute these steps.


FAMILY NOTICE

The obligations that attach to a trust are assumed by the successor trustee after the grantor’s death. This trustee has to deal with the beneficiaries and has a specific responsibility to them to uphold. Each beneficiary has a financial interest in the disposition of the trust and will need to act to protect this interest during the trust's closing. 


The successor trustee must notify the beneficiaries that the trustee controls the trust.  This is done by sending a letter to each beneficiary. There may be legal requirements for the information in the letter. An attorney can help determine what must be in the letter because the notice may be invalid if the law is not followed, which can slow down the trust's closing.  How soon the notice must be sent varies depending on state law. If there are no requirements for what must be in the notice, use your judgment about what you need to tell the beneficiaries to allow them to exercise their legal rights. Trustees only need to send one notice to the beneficiaries.


NOTIFYING THE CREDITORS

When the estate is settled, and the trust is closed, it is the last opportunity that creditors have to be paid back the debts that they are owed by the deceased.  Death does not make the deceased obligations disappear; creditors can and will be paid back from the estate. Accordingly, they should also be notified that the trust has become irrevocable and that the trustee is now responsible for it and intends to close it. They will need the notice to look after their legal and financial interests and take the action necessary to protect themselves. 


Whether notice to creditors is required is also a matter of state law.  Many states will require the trustee to publish a notice of death in a newspaper or another publication. Some states do not require notice to creditors in the event of the grantor's death. However, creditors have the right to contest the estate distribution if they are not paid back, and if they challenge this, it will slow the process. Creditors generally have a limited period to file claims against the estate. However, if the creditors do have notice, in most states, it will give them a shorter period to file a claim than they would otherwise have.


SETTLING AND NEGOTIATING DEBTS

The deceased may have owed money. As mentioned above, the creditors can access the trust’s assets for repayment. It is essential to know that not all debts must be paid. Some debts do go away when the grantor dies. For example, student loan debts do not survive the grantor's death. Other loans, such as credit card debt, do continue to exist. 


The debts must be paid before the trust property is distributed to the beneficiaries. If not, both the trustee and the beneficiaries may be sued by the creditor for repayment of the debt. The trustee can use the trust's liquid assets, such as bank accounts, to pay the debt or sell assets to raise funds. The beneficiaries may receive money or property, usually only after all the creditors have been paid. Another of these obligations and debts is income taxes, which must be paid out of the deceased’s assets. Some states have laws that require that estate taxes be paid before the beneficiaries can receive assets. The trustee must be careful about distributing assets before debts are settled to avoid becoming personally liable.


DISTRIBUTIONS

The first thing that must be done before distributing the assets is valuing them to know how to distribute them. After the bills, expenses, and creditors have been paid, the pool of assets will be known. Then, the trustee must follow the directions of the grantor in either selling or deciding what to do with the assets. After all property that must be sold is sold, the group of assets needs to be distributed. To the extent that the assets are liquid, checks will be issued to the beneficiaries. If the property is not sold, it will be retitled to reflect the new ownership by the beneficiaries. Note that the trustee may be liable for any future expenses if new expenses arise after the trust assets are distributed, so that this final step may take some time. 


An estate planning attorney can advise on any issues relating to establishing or settling a trust. Many problems can arise in planning these trusts, and decisions made at this stage can affect what happens after the grantor passes away. Thus, it is essential to make sensible choices now to ensure that settling and distributing the trust goes as smoothly as possible and your family can better adjust after losing a loved one.


what next?

If you think it might be time to think through your estate plan, you can:


  1. Give us a call at 720-821-7604 to schedule an "Attorney Evaluation Session" at which we can determine whether our firm would be a good fit for your needs. Or fill out our contact form to have us call you.
  2. Visit our estate planning page to learn how proactively thinking through your estate plan can protect you and your family, minimize hassle, lower the chance of family discord, and minimize or eliminate taxes.
  3. Learn more by reading our blog or watching our videos.

Consequences of Dying Without a Will in Colorado

February 12, 2025
Consequences of Dying Without a Will in Colorado

What Types of Assets Can Be Included in a Colorado Trust?

January 30, 2025
What Types of Assets Can Be Included in a Colorado Trust?

What is a Guardianship and When Do I Need One?

December 2, 2024
What is a Guardianship and When Do I Need One?

What Are the Required Documents to Create a Will in Colorado?

October 28, 2024
What Are the Required Documents to Create a Will in Colorado?

Probate in Colorado: A Guide for Families and Executors

October 1, 2024
Dealing with the death of a loved one is never easy, and navigating the legal process that follows can add stress during an already difficult time. In Colorado, probate is the legal process by which a deceased person’s estate is administered, their debts are paid, and their assets are distributed to beneficiaries. Whether you’re an executor, beneficiary, or family member, understanding how probate works in Colorado can help you anticipate the steps involved and your potential responsibilities. This blog post will provide an overview of the probate process in Colorado, outline when probate is necessary, and offer guidance on how to navigate the system effectively.  What is Probate? Probate is the legal process that occurs after someone dies to ensure their assets are distributed according to their will or, if there is no will, according to state law. The probate process includes validating the will, inventorying the deceased’s assets, paying off debts and taxes, and distributing the remaining assets to the rightful heirs. While probate is often associated with lengthy court proceedings, not all estates require formal probate. Colorado offers several options depending on the size and complexity of the estate, which can help simplify the process in many cases. When is Probate Necessary in Colorado? Probate is not always required in Colorado. Whether an estate must go through probate depends on the types and value of the deceased’s assets. Generally, probate is necessary if: The deceased owned real estate solely in their name. The deceased’s assets, such as bank accounts or investments, were not held in joint tenancy or designated to transfer on death. The deceased had personal property valued at over $74,000 (as of 2023). If an estate falls below this threshold and does not include real estate, the beneficiaries can often use a Small Estate Affidavit to claim the assets without going through probate. Types of Probate in Colorado Colorado has three main types of probate procedures: small estate procedures, informal probate, and formal probate. The type of probate required depends on the estate’s value and whether there are disputes among heirs or creditors. Small Estate Procedure (Collection by Affidavit) The small estate procedure can be used if the value of the deceased’s assets is less than $74,000 and does not include real estate. This process involves filling out a Small Estate Affidavit, which allows the heirs to collect and distribute the assets without opening a probate case in court. It is the simplest and fastest way to handle a small estate. Informal Probate Informal probate is used when there is a valid will and no disputes among heirs or creditors. The process is overseen by a court-appointed Personal Representative (executor), but there is minimal court supervision. Most of the process, such as distributing assets and paying debts, is handled by the Personal Representative, with only basic filings required with the court. Informal probate is less time-consuming and costly than formal probate. Formal Probate Formal probate is required when there are disputes regarding the will’s validity, disagreements among heirs, or if the estate is complex and needs court intervention. The process is supervised by the court, and all major decisions, such as approving the distribution of assets, must be approved by a judge. Formal probate can take much longer and involve more legal fees than informal probate. Steps in the Colorado Probate Process While the specific steps in probate can vary depending on the type of probate and the complexity of the estate, the general process in Colorado typically includes the following: Filing the Probate Petition The process begins with filing a Petition for Probate with the appropriate Colorado probate court. The petition is usually filed by the executor named in the will or an interested party if no will exists. Appointment of the Personal Representative The court will appoint a Personal Representative (executor) to manage the estate. If there is a valid will, the person named as executor is typically appointed. If no will exists, the court will appoint someone, usually a family member, to serve as the Personal Representative. Notice to Heirs and Creditors The Personal Representative must notify all potential heirs and creditors of the probate proceeding. This step is essential for providing an opportunity for interested parties to come forward and make claims against the estate. Inventory and Appraisal of Assets The Personal Representative must create an inventory of all the deceased’s assets and have them appraised if necessary. This inventory will include real estate, personal property, financial accounts, investments, and any other assets owned by the deceased. Paying Debts and Taxes Before distributing assets, the Personal Representative must pay off the deceased’s debts and any taxes owed. If the estate does not have enough assets to cover all debts, Colorado law dictates the order in which creditors are paid. Distribution of Assets Once all debts and taxes have been paid, the Personal Representative can distribute the remaining assets to the beneficiaries according to the will or, if no will exists, according to Colorado’s intestacy laws. Closing the Estate After all assets have been distributed and all required filings have been made with the court, the Personal Representative can file a Petition for Final Settlement to close the estate. Once approved, the Personal Representative’s responsibilities are complete. Challenges and Disputes in Colorado Probate Unfortunately, probate can sometimes become contentious, especially in cases involving high-value estates or when family members disagree on how assets should be distributed. Some common challenges in Colorado probate include: Will Contests Heirs or beneficiaries may challenge the validity of a will, claiming it was signed under duress, there was undue influence, or the deceased lacked the capacity to create the will. Will contests can significantly delay the probate process and require formal probate to resolve. Executor Misconduct If an executor is not fulfilling their duties or is mishandling estate assets, beneficiaries can file a complaint with the court and request the executor’s removal. Disputes Among Beneficiaries Disputes can arise over specific bequests, how assets are divided, or even the valuation of estate property. Mediation or formal court intervention may be necessary to resolve these disputes. How a Colorado Probate Attorney Can Help Navigating the probate process can be overwhelming, particularly when dealing with the emotional aftermath of losing a loved one. An experienced probate attorney can help in several ways: Guiding You Through the Process An attorney can explain the probate process, help you understand your rights and responsibilities, and ensure all legal requirements are met. Managing Court Filings and Deadlines Probate involves numerous legal documents and deadlines. An attorney can handle these tasks, ensuring that everything is filed correctly and on time. Resolving Disputes If disputes arise, an attorney can provide representation in negotiations, mediation, or court hearings to protect your interests and work toward a fair resolution. Minimizing Costs and Delays With the guidance of a skilled attorney, you can often minimize the time and expense associated with probate, helping ensure the process goes as smoothly as possible. How The McKenzie Law Firm, LLC Can Help At The McKenzie Law Firm, LLC, we understand the complexities of the probate process and are committed to helping families navigate it with compassion and expertise. Whether you’re an executor needing assistance with your duties or a family member looking to understand your rights, our experienced probate attorneys can provide the support you need. If you have questions about probate in Colorado or need legal assistance, contact us today to schedule a consultation. We are here to guide you through the process and ensure your loved one’s wishes are honored.

Understanding the Notice to Creditor Form in Colorado Probate: Pros and Cons

By Dan McKenzie • September 10, 2024
Explore the pros and cons of mailing Notice to Creditor forms in Colorado probate. Learn how this decision impacts estate administration and creditor claim periods.

Understanding Special Needs Trusts in Colorado

August 30, 2024
Understanding Special Needs Trusts in Colorado

Protecting Your Legacy: Beneficiary Deeds vs. Life Estates in Colorado

By Dan McKenzie • July 17, 2024
Explore the differences between beneficiary deeds and life estates in Colorado estate planning. Learn the pros and cons of each method for transferring property and avoiding probate, and discover when to use each option for your unique situation.

The Importance of Estate Planning in Colorado

July 16, 2024
The Importance of Estate Planning in Colorado

A Guide to Forming an LLC in Colorado

June 30, 2024
A Guide to Forming an LLC in Colorado
More Posts
Share by: