Money and the law: ‘Child benefits’ can help pay bills after death | Business
Administering an estate in Colorado is a logical and efficient process. However, it may still take several months. In the meantime, the family of a deceased person may need money to pay the mortgage, put gas in the car and buy groceries.
To solve this problem, the Colorado Probate Code provides something called “child allowance”. It can get complicated, but the basics are: the allowance allows a surviving spouse, minor children that the deceased was legally required to support, and other children that the deceased actually supported (including adult children) to receive money from an estate while this area is still ongoing. The amount must be reasonable and the allowance can only be paid for one year if the estate does not have enough money to satisfy all creditor claims. The allowance is paid to the surviving spouse or, if there is no surviving spouse, to the children or to the person who has charge and custody of them.
The family allowance is capped at $35,000 per year. This can be paid in one lump sum or in installments. The Colorado Department of Revenue is required to adjust the amount for inflation each February.
The family allowance has priority over the claims of unsecured creditors. If there isn’t enough money left in the estate to pay unsecured creditors’ claims, too bad for them. However, claims from secured creditors (those who have security), claims for administrative costs and last-residential expenses (burial, cremation) have priority over the family allowance.
A person who receives a family allowance does not have to deduct it from any other distribution of the estate. For example, if a will indicates that the spouse of the deceased is to receive $200,000 after all prior claims have been paid and the spouse has already received a family allowance, the spouse of the deceased is still entitled to the $200,000.
In November, the Colorado Court of Appeals overturned a contrary probate court ruling and ruled that a surviving spouse was entitled to a family allowance – even if there was no “family”. In this case, Dowdy’s estate, the deceased (Alvin) had a whole bunch of children, but they were all adults.
He therefore no longer had the obligation to support them and did not support them. Consequently, the surviving spouse (Marie) left with the full family allowance, did not have to share it with anyone and did not have to credit the amount to other amounts came from the estate.
A surviving spouse or, if there is none, dependent children may withdraw additional monies from an estate during administration if the estate has assets free from creditor claims. This is called the “exempt housing allowance” and is also capped at $35,000.
Jim Flynn is with the Colorado Springs company of Flynn & Wright LLC; [email protected].