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Which debts are top priority during Colorado probate proceedings?

On Behalf of | Nov 10, 2023 | Estate Administration & Probate |

Probate proceedings in Colorado are mandatory in many cases. When someone dies with significant property or certain types of resources, such as real estate, their assets generally need to pass through probate court.

Probate oversight helps ensure compliance with the law and can facilitate the enforcement of someone’s testamentary documents. However, there are sometimes issues that arise during probate that can undermine a testator’s wishes and lead to parties other than their chosen beneficiaries receiving much of the property from their estate. Someone dying with significant debt would be one such scenario.

Debts take priority over inheritance

The law requires that a personal representative handling the probate process repay the decedent’s debts before distributing their assets to beneficiaries. If there aren’t enough resources in the estate to cover all of the debts, then beneficiaries may not receive anything at all. Typically, certain creditors have a stronger claim to repayment than others. What is the order of priority for debts during the Colorado probate process?

Secured debts are one of the top priorities

When looking at someone’s financial obligations during probate proceedings, some debts have a stronger legal claim to assets from the estate than others. Technically, debts ranging from credit cards to court judgments have a stronger right to receive assets from the estate than beneficiaries someone chose in their estate planning paperwork.

The highest-priority financial obligations during estate administration include transferring assets held by the decedent if they served as the trustee of a trust. After handling those resources, the personal representative will need to address the costs of estate administration, including probate court costs. Funeral, burial and cremation costs are next, followed by medical costs related to end-of-life care.

After paying those balances, the representative of the estate will need to address any taxes and debts owed by the decedent or the estate itself. Secured debts, like mortgages, will take priority over unsecured debts, like credit card balances. Only after paying off all of the debts will family members and other beneficiaries of the estate receive property from it.

Understanding the order of priority for financial obligations can help everyone involved in both estate planning and estate administration to make more informed decisions. Seeking legal guidance is a viable option any time that questions or concerns arise.