Inheriting a House in Colorado: What to Decide First

Somewhere between the funeral home and the first family dinner after, someone asks what the house is worth. Everyone at the table feels a little ashamed, because they were already wondering too.

That shame is misplaced. Asking about the house is not the same as not grieving. For a lot of families, that house is the largest thing anyone in the family ever owned outright. Somebody made that payment for twenty or thirty years so this moment would mean something. Treating it carefully is a way of honoring that, not a betrayal of it.

The hard part is that grief and the house run on different clocks. Grief takes as long as it takes. The house has a mortgage due on the first, an insurance policy with fine print about vacancy, and pipes that do not care what kind of month you are having. Some decisions can wait a year. A few cannot wait a week, and knowing which is which is most of the job.

The Decisions That Cannot Wait

In the first thirty days, the goal is not to decide what happens to the house. The goal is to keep the house from deciding for you.

• Call the insurance carrier. Many homeowners policies restrict coverage once a home sits empty for a set period. Tell the carrier what happened and ask exactly what the policy covers while the house is unoccupied.
• Keep the mortgage current. Call the servicer and keep the payments going. A missed payment during a hard month turns into a much harder problem later.
• Keep the heat on. In Denver, the first hard freeze does not wait for probate. An empty house with the thermostat off is a burst pipe waiting for a cold night.
• Get a date of death appraisal. Order it now, while the condition of the house still matches the date. That one document can matter more than anything else in the file when the house is eventually sold.
• Do not clear it out, give things away, or renovate yet. Until someone has legal authority over the estate, moving contents or starting work creates problems that are hard to unwind.

The Step Up in Basis, Plainly

This is the rule most families have never heard of, and it is often worth more than anything else in the estate.

When you inherit a home, your tax basis generally resets to the home's fair market value on the date of death, not the price your parents paid. Here is a hypothetical example. Your parents bought a house for $90,000 in 1994, and it is worth $520,000 on the day they pass. Your basis becomes roughly $520,000. If you sell for $535,000, the gain you are measured on is about $15,000, not $445,000. Decades of appreciation are generally not taxed as capital gain to the heir.

This is why the date of death appraisal matters so much. It is the number the whole calculation hangs on. Reconstructing it two years later, after the house has been cleaned out and painted, is harder and easier to challenge.

Source: Colorado Department of Revenue; IRS 2026 inflation adjustments; Colorado Probate Code

Colorado does not tax the inheritance itself, and the federal estate tax only reaches estates far larger than most families will ever see. For most heirs, the tax question is not the estate tax. It is capital gains, and the step up is what keeps that number small.

One warning for anyone reading this while their parents are still living. Adding a child to the deed during life, as a way to "make it easier later," can quietly give up the step up. Property given during life generally carries the original owner's basis with it. A beneficiary deed can pass the house at death without that cost. It is a conversation worth having with an estate attorney now, not after.

Title Comes Before Everything

You cannot sell, refinance, or transfer the house until the public record shows who has the right to do it. Families often reach for Colorado's small estate affidavit first, because it avoids court. It works for bank accounts and a vehicle title. It does not transfer real estate.

Probate sounds like years of limbo, but the house usually does not have to wait for the estate to close. Once the court appoints a personal representative, that person generally has authority to list and sell the home while the rest of the estate is still being administered. The sale proceeds stay in the estate until creditors and taxes are handled.

The Family Part

Three siblings, one house. One wants to keep it because it is the last place that still feels like Mom. One is already living there. One needs the money, and feels terrible saying so. Nobody in that scenario is wrong, and that is exactly why it gets hard.

The house holds memories and equity in the same walls, and families tend to argue about one while meaning the other. Separating them helps. The memories get honored in how the house is handled. The equity gets divided by a clear method that everyone agreed to before anyone got attached to an outcome.

The three paths

• Sell and divide. The cleanest financially and often the gentlest on relationships, because the number is set by the market instead of by a sibling.
• One heir buys out the others. This works when the price comes from an independent appraisal and the terms are written down, including when the money changes hands.
• Keep it together. This is possible, but only with a written agreement covering who pays for the roof, who decides on a tenant, and how anyone gets out later. Co ownership without an exit plan is a future dispute with a delayed start date.

If one sibling is living in the house rent free, name it early and kindly. Every month of free occupancy is value moving from all the heirs to one of them. It may be the right choice. It should still be a choice everyone made, not one that happened by default.

Waiting Is Also a Decision

An empty house costs money every month: property taxes, insurance, utilities, HOA dues, and whatever the next hailstorm decides. Families who let the house sit "until everyone is ready" are still making a decision. They are paying monthly to postpone it.

The opposite mistake is just as expensive. Selling in the third week, still in shock, to make the problem go away, often means selling below what the house was worth and regretting how it was done. The answer is not fast or slow. It is fast on the things that protect the house and slow on the things that decide its future.