McRae, 39, his five-year-old son Johnny, the boy's six-year-old friend Ben Porcelli and Graeme Duncan, 37, all died when the aircraft came down near McRae's home in Lanark on September 15 2007 as he flew home from a trip to see a friend.
Sheriff Nikola Stewart, who heard a fatal accident inquiry over 12 days at Lanark Sheriff Court, concluded that the deaths could have been avoided if McRae had not engaged in low-level flying "when it was unnecessary and unsafe to do so".
In her written determination issued today, the sheriff concluded: "The deaths and the accident resulting in the deaths might have been avoided had Mr McRae not flown his helicopter into the Mouse Valley.
"Such a precaution would have been entirely reasonable. There was no necessity to enter the Mouse Valley. There were no operational or logistical reasons to enter the Mouse Valley.
"Mr McRae chose to fly the helicopter into the valley. For a private pilot such as Mr McRae, lacking the necessary training, experience or requirement to do so, embarking upon such demanding, low-level flying in such difficult terrain, was imprudent, unreasonable and contrary to the principles of good airmanship."
The ruling states that the accident happened when, due to an "unknown occurrence", the aircraft deviated from its intended flight path and crashed into trees lining the side of Mouse Valley.
The aircraft was in powered flight at the time of the crash and Mr McRae had attempted to recover from that unknown incident.
These attempts, the sheriff said, were unsuccessful because of the position and speed of the helicopter within Mouse Valley and the ensuing restrictions on opportunities to land the helicopter or fly it to safety.
Such options would have been available to him had he "adhered to rules of good airmanship and desisted from flying in the valley at low height and high speed", she said.
She stated: "It would have been a reasonable precaution to refrain from flying helicopter G-CBHL into Mouse Valley wherein the pilot engaged in low-level flying when it was unnecessary and unsafe for him to do so, and whilst carrying passengers on board."
Jimmy McRae, Mr McRae's father, said he hoped the family would be able to "move forward" following the findings.
He said: "The past four years have been extremely difficult for all the families concerned and we hope that now we can move forward.
"We still believe we will never know what caused the crash but we were never in any doubt as to Colin's prowess as a fine pilot.
"Everybody knows from Colin's rallying career that safety is always an issue and that his reactions and eye and hand co-ordination were world-class".
He said his family had wanted a finding that private aircrafts should be fitted with a flight data recorder.
He said: "Had a flight recorder been fitted to the aircraft, it may have been possible to determine what occurred in the final seconds of the flight and what actually caused the helicopter to crash.
"This would prevent uncertainty as to the cause of the crash and allow lessons to be learned from tragic accidents such as this."
The McRae family's solicitor, Peter Watson, said: "Although Colin's licence was out-of-date, this played no contributory factor whatsoever to the accident."
Mr McRae, who also had a daughter called Hollie, was regarded as a local hero in his home town of Lanark after winning the world rally championship in 1995.
He was from a racing family as his father was a five-times British champion and his younger brother Alister also raced in the world championships.
The father-of-two began his career in British rallies in 1986 before graduating to world championship events in 1987.
After moving to live in Monaco in 1995, he later returned to Lanarkshire with his family.
His fame as a rally driver also led to him becoming well-known on the high street as the computer game he lent his name to became a worldwide hit.
He was awarded an MBE by the Queen in 1996.