What should you do first after a parent dies in Colorado?

Take care of the practical things first, and don't make any investment decisions yet. When a parent dies in Colorado, no inherited account needs action in the first few weeks, and people who move money too fast often end up paying taxes they could have avoided. The first month is for gathering documents and protecting what's there.

Most of this is the same in any state. What's different when a parent dies in Colorado is how probate works, how the taxes apply, and how real estate transfers. The next sections cover those.

How does probate work when a parent dies in Colorado?

Probate is the court process that confirms a will, pays the person's debts, and passes on whatever doesn't already have a named recipient. Many Colorado families skip it or use a short version. Accounts with a named beneficiary, property owned jointly with survivorship, accounts with a transfer on death designation, and assets in a funded trust all pass outside probate, no matter how big the estate is.

Colorado has three paths. The first is the small estate affidavit. If the estate has only personal property, no real estate, and it's worth no more than the annual limit, the heirs can collect it by signing a sworn affidavit, with no court case. The limit is $88,000 for a death in 2026. The Colorado Judicial Branch publishes the form, called JDF 999. The second path is informal probate, which is what many estates use. The court appoints a personal representative to manage the estate. The third is formal probate, which is for disputes and legal questions that need a judge.

If your parent lived in Denver County, the case goes to the Denver Probate Court. Most other counties handle probate in district court. A Colorado probate attorney runs the court side, and the financial decisions in this guide happen alongside it.

Beneficiary designations beat the will. If your parent named you on an IRA, it goes to you even if the will says something else. If the person named died first, or the form was never updated after a divorce, the account can end up somewhere nobody intended. Check every designation instead of assuming. Real estate works the same way. A home in your parent's name alone usually has to go through probate, unless it was in a trust or a beneficiary deed was recorded with the county clerk and recorder before the death.

Is there an estate or inheritance tax when a parent dies in Colorado?

No. Colorado has no state estate tax and no inheritance tax, and inherited cash and property usually aren't taxable income to you. The federal estate tax only applies to estates over $15 million per person for deaths in 2026. A surviving spouse can also add the deceased spouse's unused exclusion by electing portability on a federal estate tax return, even if no tax is owed.

The taxes that hit most families come later. One is income tax on inherited retirement accounts. The other is capital gains on anything that grows in value after the date of death. You control the timing of both, so make a plan before you sell or withdraw anything.

How does the step-up in basis work for inherited accounts and a home?

When a parent dies in Colorado and you inherit stock, a brokerage account, or real estate, the cost basis generally resets to the fair market value on the date they died. The gain from your parent's lifetime is never taxed. You only owe tax on growth after that date. Inherited property also counts as long-term no matter how soon you sell it.

Here's an example. Say your parent bought a house in Centennial in 1998 for $210,000, and it's worth $780,000 on the date of death. Your basis is now $780,000. If you sell it a few months later for $795,000, your taxable gain is about $15,000 before selling costs, instead of $585,000. A brokerage account works the same way. Shares your parent bought for $40,000 that were worth $400,000 at death now have a $400,000 basis.

Two things catch people off guard. The step-up doesn't apply to traditional IRAs, 401(k)s, or annuities, because the money in those accounts is taxed as income to whoever receives it. And if both parents owned the home, usually only the parent who died gets the step-up on their share, so ask your CPA how the home was titled. Save the paperwork too. Ask each custodian for date of death values and cost basis, and hire a licensed appraiser to value the home as of the date of death. If the IRS ever asks, the appraisal backs up your basis.

The step-up also gives you room to make changes. A holding with a big stepped-up basis can usually be sold with little or no tax, so the first few months are a good time to decide what you actually want to keep. Anything that grows after the date of death is taxable to you, so that room shrinks over time.

What happens to a parent's bank, brokerage, and life insurance accounts?

It depends on how each account was titled. Accounts with a payable on death or transfer on death designation go to the person named once you send in the death certificate and the company's forms, and they get retitled in that person's name. Accounts in your parent's name alone with no beneficiary are part of the probate estate, or go through the small estate affidavit. Joint accounts usually pass to the surviving owner. Life insurance goes to the named beneficiaries, and it usually isn't taxable income to them. Annuities pass by beneficiary designation too, but they don't get a step-up, so the growth is taxed as ordinary income when it's paid out.

Look closely at brokerage accounts before selling anything. Check whether the account holds employer stock, stock options, or any single position that makes up a big part of the account. Our guide on how to diversify concentrated stock explains how to handle that.

Should you keep, sell, or rent an inherited home in Colorado?

Add up what the home costs to hold and what it could earn before you decide. A house that feels like a family keepsake can drain cash fast. Property taxes, insurance, utilities, and upkeep keep coming whether or not anyone lives there, and many insurers limit coverage on an empty home.

If you sell soon after the date of death, the step-up usually means little or no taxable gain. In probate, though, the personal representative generally needs authority from the court before selling. If you rent the home, you'll collect income and take depreciation deductions, which start from the stepped-up basis. When you sell later, depreciation recapture adds to the tax bill. If you move in, you may eventually qualify for the home sale exclusion, but only after living there as your main home for two of the five years before you sell.

If you and your siblings inherit the home together, agree in writing on who pays the carrying costs, who makes decisions, and how a buyout would work before anyone moves in or calls a real estate agent. Buying out a sibling usually takes a loan or other assets, and a Front Range home that's gained value for decades can make that a big number.

How do inherited IRAs and 401(k)s work for adult children?

If a parent dies in Colorado with a traditional IRA or 401(k), most adult children have to empty the account within 10 years of the owner's death and pay ordinary income tax on what they take out. If your parent had already started required minimum distributions, the final IRS regulations also require you to take withdrawals every year in years one through nine. If your parent died before required distributions began, and for inherited Roth IRAs, there's usually no yearly requirement, but the account still has to be empty by the end of year 10. Qualified Roth withdrawals are generally tax-free.

Some beneficiaries get more flexibility: spouses, minor children of the account owner, disabled or chronically ill beneficiaries, and anyone not more than 10 years younger than the owner. The IRS calls these eligible designated beneficiaries. Our guide to the inherited IRA rules goes through each group.

Move the account with a direct transfer. A non-spouse beneficiary can't roll an inherited IRA into their own IRA, and if you take the money out to move it yourself, it becomes taxable income. The account has to be retitled as an inherited IRA, with your parent's name still on it, through a trustee-to-trustee transfer. Also find out whether your parent took the required distribution for the year they died. If they didn't, the beneficiary usually has to take it. Missing it can mean a 25% excise tax on the amount you should have withdrawn, which drops to 10% if you fix it quickly.

The 10-year deadline sounds simple, but when you take the money can change your tax bill by a lot. Waiting and taking everything in year ten can push a huge amount of income into one tax year. Spreading withdrawals over the years, or taking more in a lower-income year like your first year of retirement, can cut the total tax. Large withdrawals can also raise your Medicare premiums through IRMAA two years later, which matters if you're a few years from 65. If you're working through this now, see our inherited IRA planning page for how we work with these accounts.

Colorado taxes inherited IRA withdrawals as income, but there's a subtraction in some cases. The Department of Revenue's guidance lets someone under 55 subtract up to $20,000 a year of pension and annuity income received as a death benefit, but only when the payment goes straight to that person. If the IRA names a trust or the estate as beneficiary and the money is passed to you afterward, you can't use that subtraction. People 55 and older use the regular pension and annuity subtraction, and the limits depend on your age. The rules have changed in recent years, so have your CPA confirm the current limits and whether the subtraction applies to you.

How do you make an inheritance last after the paperwork is done?

Once the legal work is finished, the bigger questions start, and they depend on each other. How much should you spend, invest, or use to pay off debt? Which accounts should you draw from first? How do the inherited IRA withdrawals fit with your own retirement income? Change one answer and the others change too.

This work doesn't end after the first year. Markets move, tax laws change, and your goals shift, so the plan needs regular attention. Choosing which tax lots to sell, harvesting losses, and rebalancing without creating extra gains is ongoing work. It also helps to work with someone who already knows your family, your other accounts, and your plans, because whether you should sell a given holding depends on all of it. Our investment philosophy page explains how we invest.

How do you choose a financial advisor after a parent dies in Colorado?

Look for a fiduciary who gets paid only by you, has worked with inherited accounts before, and plans to work with you for years. With that setup there are no product commissions behind the advice, and the advisor gets to know your situation well enough to give you useful guidance.

Heirs often get calls from people selling annuities, insurance, and their company's own funds soon after a death. A fee-only fiduciary doesn't earn commissions on any of those, so the advice doesn't depend on what gets sold. You can read more about why fee-only matters, and our services and fees page shows exactly how we're paid.

Each professional handles a different piece. The estate attorney handles the court process. The CPA files your parent's final income tax return, and also the estate's income tax return if the estate earns more than $600 in gross income. The advisor ties the investments together with the rest of your finances and keeps the plan up to date.

A realistic first-year timeline after a parent dies in Colorado

First 30 days. Gather documents, order death certificates, confirm every beneficiary, lock up and insure the home, and leave the accounts alone.

Months one to three. The probate case or small estate affidavit gets started. Collect date of death values for every account and the home, retitle the accounts that pass by beneficiary, and move inherited IRAs by direct transfer.

Months three to twelve. Decide what to do with the home, make a plan for the investments and the inherited IRA withdrawals, go over estimated taxes with your CPA, and update your own estate plan and beneficiary designations.

If you're in the middle of this now, you can schedule a free 30-minute call or look at our services and fees. Inclinevest Wealth Management specializes in managing and opening inherited accounts, and the call is a good place to figure out which decisions to tackle first. You can also read more on our sudden wealth and inheritance planning page and in our guide on what to do with an inheritance.