Maintain Insurance and Utilities, and Pay Taxes on the Property

C.R.S. §15-12-709 states: “The personal representative shall pay taxes on and take all steps reasonably necessary for the management, protection, and preservation of the estate in such representative’s possession.” One of the most important things to remember when someone dies is to maintain insurance coverage and utility service to the decedent’s house. It also is important to pay the property taxes on the house during probate.

Failure to maintain insurance coverage might cause a substantial uninsured loss to the property (for which the personal representative could be held liable). Unoccupied residences are natural targets for thieves and vandals, so it is important that the house (and its contents) be properly insured during the period of estate administration and the selling process. Unoccupied houses also are more likely to experience a major disaster like a water pipe break leading to flooding, or a fire. Maintaining adequate levels of insurance on the decedent’s house can mitigate any of these types of losses.

As soon as possible after the decedent dies, the personal representative or successor trustee should contact the current homeowners’ insurance carrier to notify them of the decedent’s death. Most carriers will allow the current homeowners’ insurance policy to continue in full force while the estate or trust is being settled, or at least until the policy expires. You might need to pay extra if the house will be vacant during administration. Important questions to ask the insurance agency when you notify them of the decedent’s death:

Will the current policy continue in full force, or will a new policy in the name of the estate be required? (Request a copy of the current policy.)

If the current policy will remain effective, when does it expire? Will the estate need to obtain a new policy upon expiration?

If the house will be unoccupied during administration, will there be a premium increase due the house being vacant?

When are the premiums due on the policy, how much are they, and how can payment be made?

If possible, it is good practice to get these answers in writing so there is no confusion about coverage for the house.

If the house must be sold to satisfy estate obligations, having the property properly insured can allow insurance proceeds to supplement or take the place of sales proceeds when settling debts on behalf of the estate. For example, if the house burns down, it obviously can’t be sold. However, if it is properly insured, the estate will receive funds from the insurance company which can then be used to pay estate creditors or beneficiaries.

As with homeowners’ insurance, the personal representative should notify utility providers of the decedent’s death as soon as possible. When speaking to the utility provider, ask the following questions:

What is the current status of the account? Is it current or delinquent? Request a current statement be sent.

Will the account for utilities need to be transferred into the name of the estate, or can it remain in the decedent’s name during administration? Request that all correspondence be sent to the personal representative moving forward.

When are payments due?

Request copies of statements for the past 12 months. (This will be useful in providing information to a potential purchaser when the house is listed for sale.)

If the utilities to the house are discontinued, it could cause significant damage to the property. For example, if the heat is shut off during winter, the water pipes could freeze and cause flooding. Additionally, it will be difficult for brokers representing buyers to show the property if the heat and lights are not working. Payments for all utility services are an expense of the estate or trust, and not the personal obligation of the personal representative or successor trustee.

The personal representative should obtain a current property tax statement for the house as soon as possible. This can be obtained from the county assessor’s office; it is usually available online without charge.

Staying current (or at least staying out of default) on property taxes is important because the property could be lost to a tax lien sale if the taxes fall more than three years behind. If you must prioritize payments because the estate or trust lacks the funds to stay current on all obligations, it is imperative to at least pay the taxes that are three years old.

Colorado provides for a delinquent property tax sale of property for property taxes that are more than three years in arrears. Not paying at least these taxes could cause the property to be lost to a public trustee sale investor, often losing thousands of dollars in equity.

An accountant or your estate attorney can assess these obligations and estimate if the estate can pay them.