What You Need to Know About Property Inheritance in Colorado

After closing on a new home, your first thought probably isn’t “What will happen to my property when I pass away?” But having a property inheritance plan in place—no matter your age or situation—ensures peace of mind for you and your family. Owning a home is a huge investment: In fact, according to the American Advisors Group, nearly three in four seniors (74%) say their home is now their most valuable asset. So it’s important to ensure that investment is in good hands if the unthinkable happens. 

In this article, we cover key points you need to know about property inheritance in Colorado, whether you’re the homeowner or the inheritor. But first, let’s define some common legal terms that come up throughout this process.

• Probate: The legal process by which a deceased person’s assets are distributed after death. Probate is also known as estate administration.

• Decedent: The legal term for the person who has died.

• Personal Representative: The person appointed by a Colorado court to administer a probate estate.

• Intestate: A decedent died without a will.

• Testate: A decedent died with a will.

Leaving Your Property to a Family Member

Bequeathing your property to a family member is a significant decision that requires careful planning to ensure a smooth and hassle-free transfer. Here are some key steps for homeowners to follow.

1. Create a will.

The most crucial step in preparing to leave your property to a family member is estate planning, or the process of designating beneficiaries for your assets in the event of your death. The key document in estate planning is a will that clearly outlines who will inherit your property, as well as any specific conditions or instructions. Once you designate your wishes in writing, the state is obligated to respect them. 

If you die without a will (known as “intestate”), the distribution of your assets will be decided in court, which can turn into a messy and costly legal process for your family. State laws will guide the process of finding viable heirs to inherit your estate. In Colorado, the law assumes that a decedent would want their assets to pass to their surviving spouse and children. If a decedent doesn’t have children or a surviving spouse, generally the assets would be inherited by their parents, if living, then siblings and other relatives. 

2. Seek legal counsel.

Consulting an attorney is crucial to ensure your estate planning documents adhere to Colorado's laws. With professional guidance, you can rest assured that all of the tricky legal jargon is properly navigated and your wishes are carried out successfully. 
3. Specify your beneficiaries.

Clearly identifying the beneficiaries in your will helps prevent confusion and familial disputes down the line. 

4. Understand probate in Colorado.

If you have a will, the probate process is simple—the court follows the asset designations based on what you’ve put in writing. If you don’t have a will in place, a probate estate must be opened to appoint a personal representative to administer the estate. Learn more about how the probate process in Colorado works here. 

5. Keep detailed records.

Maintain thorough records of your property and estate planning documents and use an organized method for filing them. This attention to detail will make the process much smoother for the inheritors of your property.

6. Communicate your wishes.

Having an open and honest conversation with your family and beneficiaries about your wishes for the inheritance of your property might make you feel uneasy at first, but it’s best to be transparent in order for your family to avoid confusion and strife in the future. 

Inheriting Property in Colorado

If you've recently inherited a property in Colorado or know you are a designated beneficiary in a loved one’s will, it's important to understand how the process works. Here are some steps to keep in mind. 

1. Confirm the inheritance.

Ensure that the property was legally bequeathed to you through a will or trust.

2. Seek legal counsel.

Just as the homeowner should seek counsel from a legal professional, so should the beneficiary or inheritor. Navigating the legal aspects of inheriting a property can be tricky, so it’s important to hire someone who is well-versed in the process and documentation. 

3. Determine the value of the inherited property.

Knowing the value of the home you’ve inherited will help you make smart decisions about whether you should keep or sell the property. There are a few ways you can do this, but to get the most reliable and legally defensible estimate, you should seek a formal appraisal conducted by a licensed real estate appraiser. 

4. Understand the tax implications.

Though Colorado does not have an estate tax (levied on the value of the deceased person’s estate) or an inheritance tax (levied on the value of inherited assets and paid by the inheritor), understanding the tax implications of property inheritance is vital to making informed decisions. It’s best to meet with a tax advisor, who can identify the taxes that could affect your inheritance. One important tax to keep in mind is the capital gains tax, which may be collected from the inheritor if/when they decide to sell the property. 

5. Communicate with co-inheritors about whether to keep or sell.

If there is more than one inheritor of the property (for example, if a parent leaves the property to multiple children), it’s important for the inheritors to discuss their wishes and plan for the property. Does it make the most sense to sell the property? Is their sentimental value attached to the property? If you keep the property, will you allow renters to live there? Do you have the time to maintain the property and keep it in good condition? This may require a series of tough conversations, and the decision won’t always be unanimous. Be patient with the process and make sure your wishes and concerns are heard. 

Whether you’re a homeowner or a beneficiary, property inheritance is a complex process that requires careful planning. The best way to ensure you’re making the right decisions for you and your family is to hire the appropriate legal, financial, and real estate professionals to make the process as breezy as possible.

Recently inherited a property? Iron Works can help sell it. 

If you’ve recently inherited a home that you’re unable to maintain or occupy, our experienced real estate professionals at Iron Works Realty can help you find the perfect buyer and get the most for your loved one’s investment. Learn more about our seller services here.