Chapter 18 - § 18.8 • WHAT ARE NOT ASSETS

• Jurisdiction: Colorado

§ 18.8 • WHAT ARE NOT ASSETS

The inventory should include all property owned by the decedent at the date of death,⁹ including attempted but invalid gifts,¹⁰ that is subject to the jurisdiction of the probate court or that reasonably might become subject to its jurisdiction if the transaction whereby the decedent disposed of it were set aside. Property not filling this description should be omitted. Since the probate court can have no jurisdiction over, or enter effective orders with respect to, real property in other states or countries,¹¹ such foreign real estate should be omitted. In 1977, C.R.S. § 15-12-706 was amended to clarify that non-probate assets need not be inventoried.¹²

The attorney for the Colorado representative should consider the necessity or advisability of causing ancillary administration to be started in a foreign jurisdiction in order to perfect the title to the property or to have it sold and the proceeds transmitted to the Colorado domiciliary administration.

Workers' compensation death benefits are paid directly to the dependents of the decedent; such amounts will not be treated as assets.¹³ Likewise, the right to sue for wrongful death is not an asset,¹⁴ but the occurrence of such an event may give the representative certain independent causes of action (see § 15.3). As a result of a fatal automobile accident in Colorado, an administrator for the nonresident decedent was appointed to recover on an indemnity insurance contract owned by the survivor of the accident. It was held that the situs of the decedent's claim was at his domicile and would not support a grant of letters here.¹⁵ This result may be reversed by the jurisdictional provisions of the C.R.S. § 15-10-301(b).

Joint bank accounts pass directly to the surviving depositor and are not assets,¹⁶ but the statute does not prevent the representative from treating as an asset a joint account created under an agreement for disposition of the funds after the death of the supplier of the funds if the transaction is contrary to the statute of wills,¹⁷ and evidence is admissible to show the circumstances under which the account was opened in order to show that there was no intention that the funds in the account belong beneficially to the survivor.¹⁸ Joint credit-union accounts¹⁹ and jointly held shares of savings and loan associations²⁰ would appear to be subject to about the same rules as joint bank accounts since the statutory language permitting the relationship is quite similar in the several statutes. Registered securities in the name of joint tenants with right of survivorship, and not as tenants in common, pass to the survivor or survivors on the death of one of them and are not assets in the hands of the representative of the deceased joint tenant.²¹ Co-owner government bonds belong to the survivor and not to the estate of the one furnishing the consideration,²² and since the regulations under which U.S. savings bonds are issued control their devolution, bonds payable to another on the death of the decedent pass to the payee. Real property in the names of joint tenants, the deed expressly so stating, is not an asset for the representative on the death of one of them.²³ It should be kept in mind that transfers to joint tenants, like other transfers, when not supported by consideration, are subject to being set aside by creditors under the fraudulent conveyance statute, and by heirs and others by reason of undue influence and other forms of fraud, and hence the existence of title in that form should not preclude inquiry by the representative to satisfy himself or herself that things are what they appear on the surface to be.

It should be noted that the Colorado Probate Code deals specifically with the rights of successors and creditors to multi-party bank accounts (see §§ 19.4 and 19.5) and recognizes the use of TOD (Transfer on Death) registration of securities. Where the statutory requirements are met, the bank accounts and securities so covered will not be inventoried as probate assets.

One anomaly is this: Although C.R.S. § 15-15-215 creates a limited right in probate creditors against multiparty bank accounts, a creditor has no convenient access to information as to the existence and amount of such accounts. This is because such accounts are not required to be inventoried (and if they were so required, the personal representative has the discretion under the statute not to file the inventory with the court).²⁴

A valid transfer in trust is not an asset in the hands of the personal representative, even though the grantor retained broad powers of revocation and control over the activities of the trustee, as well as the income for life,²⁵ and even though the grantor of an irrevocable trust could use it in such a way as to revoke it indirectly by incurring liabilities, which the trustee was bound under the terms of the trust to pay from the trust.²⁶

A decedent executed a trust instrument and signed a pour-over will immediately thereafter. The will contained a gift over in the event the trust was not in effect at the time of her death. The court of appeals had held that, as a matter of law, the trust, although unfunded, was in effect at the date of death. The supreme court reversed, finding that there was sufficient parol evidence regarding the decedent's intent not to create a trust.²⁷

The personal representative of the pledgor of personal property has no more rights in the property than did the decedent.²⁸ Where the decedent was a member of a partnership and the surviving partner claimed all the partnership assets under a lost written instrument, it formerly was held that the testimony must be clear and convincing that such an agreement existed, but the quantum of proof has been changed by statute.²⁹

Property over which the decedent had a power of appointment, general or special, is not thereby an asset of the estate. It is held universally that a representative has no claim on property subject to a special power, i.e., a power to appoint only among a class, whether exercised or not.³⁰ The general rule is that property subject to an unexercised general testamentary power, i.e., a power to appoint to anyone, including the estate of the donee, is not an asset of the estate, but if exercised, the property is subject to the debts of the donee.³¹ A Colorado Supreme Court decision, in what may be dictum, departs from the general ruling by holding that the exercise of a general testamentary power does not make the property subject to the power available for the debts of the donee.³² In a later Colorado Court of Appeals case, however, there is a statement that appointive property is available to creditors once the power is exercised.³³

Advancements are not assets since there is no liability to repay, even though they will be taken into account in determining the distributive share of the person to whom they were made (see § 12.7). Property that the decedent held as trustee or bailee is not part of the estate and hence is not an asset.³⁴

There are still cases...