Sell Your Inherited House in Colorado — Without the Stress

When a loved one passes away in Colorado, their estate typically goes through a legal process called probate. Understanding how probate works in Colorado is essential for anyone who has inherited property and is considering selling it. Colorado follows the Uniform Probate Code (UPC), which provides a flexible framework designed to simplify estate administration while protecting the rights of heirs and creditors.

What is Probate and Why Does It Matter?

Probate is the court-supervised process of validating a will, identifying and inventorying the deceased person's assets, paying debts and taxes, and distributing remaining assets to heirs. In Colorado, probate cases are handled by the district court in the county where the deceased person resided at the time of death. If the deceased owned real property in multiple Colorado counties, the probate will still occur in the county of residence, but ancillary proceedings may be needed for properties in other counties.

Types of Probate in Colorado

Colorado law (CRS 15-12-101 through 15-12-1302) provides several options for settling an estate, depending on its size and complexity:

Colorado Probate Timeline

The Colorado probate process has several mandatory timeframes established by law. After filing, the personal representative must notify creditors by publishing a notice in a local newspaper and mailing notice to known creditors. Creditors then have 4 months to file claims against the estate under CRS 15-12-803. This creditor claim period sets the minimum probate timeline at roughly 6 months for even the simplest estates.

Most informal probate cases conclude within 6-12 months. However, you do not need to wait until probate closes to sell property. Once appointed, the personal representative typically has authority to sell real estate immediately, with proceeds held in the estate account until final distribution.

Colorado inheritance laws determine who receives property when someone dies, how much they receive, and what legal requirements must be followed. Whether the deceased left a will or not significantly impacts how property is distributed.

Dying With a Will (Testate)

When someone dies with a valid will in Colorado, the will controls how property is distributed. Colorado recognizes several types of wills under CRS 15-11-502:

• Witnessed wills: Signed by the testator (will-maker) and at least two witnesses
• Notarized wills: Acknowledged before a notary public, with no witness requirement
• Holographic wills: Entirely handwritten and signed by the testator, with no witnesses required

Colorado courts will honor wills executed validly under Colorado law or under the law of the state where the will was executed. This is particularly relevant for people who moved to Colorado later in life.

Dying Without a Will (Intestate Succession)

When someone dies without a will, Colorado's intestate succession laws under CRS 15-11-101 determine who inherits. The distribution depends on surviving family members:

Property That Avoids Probate

Not all property goes through probate. The following assets transfer directly to beneficiaries:

• Joint tenancy property: Automatically passes to surviving owner(s)
• Transfer-on-death deeds: Colorado allows beneficiary deeds for real property under CRS 15-15-401
• Living trusts: Property held in a revocable living trust avoids probate
• Life insurance: Proceeds go directly to named beneficiaries
• Retirement accounts: IRAs, 401(k)s, and pensions pass to beneficiaries
• Payable-on-death accounts: Bank accounts with POD designations

Spousal Rights and Elective Share

Colorado protects surviving spouses from being disinherited. Under CRS 15-11-202, a surviving spouse can claim an "elective share" of the estate, typically 50% of the "augmented estate" (which includes certain lifetime transfers). This right exists even if the will leaves the spouse less or nothing at all.

Understanding the tax implications of selling inherited property can save you significant money. Colorado heirs benefit from several favorable tax rules, including the stepped-up basis and the absence of state inheritance taxes.

No Colorado Inheritance or Estate Tax

Colorado repealed its inheritance tax and estate tax in 2005. This means there is no Colorado state tax due simply because you inherited property. However, the estate itself may owe federal estate tax if it exceeds the federal exemption threshold (currently $13.61 million for individuals, $27.22 million for married couples in 2024). The vast majority of Colorado estates fall well below this threshold.

The Stepped-Up Basis Advantage

The "stepped-up basis" is one of the most valuable tax benefits for inherited property. Under IRS rules, when you inherit property, your tax basis is "stepped up" to the property's fair market value on the date of the deceased's death. This can dramatically reduce or eliminate capital gains taxes.

Determining Fair Market Value at Death

To establish your stepped-up basis, you need to determine the property's fair market value as of the date of death. Options include:

• Professional appraisal: A certified appraisal is the most defensible documentation
• Comparative market analysis: A real estate agent can provide comparable sales data
• County assessor value: Useful as a starting point but may not reflect actual market value

Keep documentation of the valuation in your records. If audited, you'll need to substantiate your basis.

Capital Gains Tax on Appreciation After Inheritance

If you sell the property for more than its value at the date of death, you'll owe capital gains tax on that appreciation. The rate depends on how long you held the property:

• Short-term (held less than 1 year): Taxed at ordinary income rates (10-37%)
• Long-term (held more than 1 year): Taxed at preferential rates (0%, 15%, or 20% depending on income)

Colorado also taxes capital gains as regular income at the state's flat 4.4% rate.

Depreciation and Rental Properties

If the deceased used the property as a rental and claimed depreciation, special rules apply. The stepped-up basis eliminates any depreciation recapture that would have applied if the deceased had sold during their lifetime. This is another significant tax advantage of inherited property.