Disclaimer: This article is for informational purposes only and does not constitute legal advice.
Detailed Answer
Overview of Creditor Claims in Colorado Probate
When you administer an estate in Colorado, you must identify, notify, and resolve all valid creditor claims before distributing assets to heirs. Under the Colorado Probate Code, creditors have a limited window to present claims and the estate must pay claims in a specified order. Failing to follow these rules can expose you personally to liability.
1. Give Proper Notice to Creditors
The personal representative must publish notice to creditors in a local newspaper and mail notice to known creditors. This starts the clock for claim filing:
- Publication: At least one publication in a newspaper of general circulation within the county of administration.
- Mailing: Sent to any creditor with a known address.
Creditors then have four months from the date of first publication to present their claims. C.R.S. §15-12-801.
2. Classify and Prioritize Claims
Colorado law dictates an order of priority. Common categories include:
- Administrative expenses (e.g., court costs, executor fees).
- Funeral and last-illness expenses up to a statutory limit.
- Family allowances to surviving spouse and minor children. C.R.S. §15-12-703.
- Secured claims to the value of collateral.
- Priority taxes (federal, state, and local taxes).
- General unsecured claims (credit cards, medical bills).
3. Review and Allow or Contest Claims
After the filing deadline, the personal representative reviews each claim:
- Verify the decedent owed the debt.
- Ensure the claim is timely and properly documented.
- Negotiate reductions or contest invalid claims in probate court.
If a claim is barred for lateness, see C.R.S. §15-12-802.
4. Pay Claims According to Priority and Estate Assets
Pay allowed claims in priority order using liquid estate assets. If the estate is insolvent:
- Pay higher-priority claims in full first.
- Divide remaining funds pro rata among lower-priority creditors.
Do not distribute any remaining assets to beneficiaries until all claims and expenses are paid.
Helpful Hints
- Track all notices and deadlines in a calendar dedicated to probate tasks.
- Maintain detailed records of asset valuations and distributions.
- Set aside a reserve fund to cover unexpected claims or expenses.
- Obtain appraisals for real estate or unique assets before paying secured claims.
- Consult a probate attorney early to handle complex or disputed claims.