Date:
October 15, 2026
Author:
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Prepared October 15, 2026. General information for Colorado families; individual legal and tax advice depends on your circumstances.
‘Will my family pay tax on the inheritance?’ sounds like one question. It can involve several different taxes and several different returns. A useful estate plan separates those questions before deciding whether a trust or another strategy is needed.
Summary and contents
Colorado currently does not collect a separate state estate or inheritance tax. Federal estate-tax rules still matter: the 2026 basic exclusion is $15 million for U.S. citizens and residents, subject to the applicable calculation and prior taxable gifts. Income taxes, portability filings, and taxes connected with later sales are separate issues.
- Quick answer
- Separate state transfer taxes from federal estate tax
- Build the estate-tax picture before choosing a strategy
- Ask about portability after a spouse dies
- Keep income-tax returns on a separate checklist
- Preserve basis records before an inherited asset is sold
- At-a-glance comparison
- Visual guide
- Related video
- Frequently asked questions
- Sources and next steps
Quick answer
Colorado currently does not collect a separate state estate or inheritance tax. Federal estate-tax rules still matter: the 2026 basic exclusion is $15 million for U.S. citizens and residents, subject to the applicable calculation and prior taxable gifts. Income taxes, portability filings, and taxes connected with later sales are separate issues.
Separate state transfer taxes from federal estate tax
Colorado’s legislative estate-tax overview explains the state’s estate-tax history and the effect of the federal credit’s elimination. Do not assume that another state has the same rules; property or connections elsewhere can require a separate analysis.
The IRS’s current estate-and-gift-tax update identifies the 2026 basic exclusion as $15 million following the law signed July 4, 2025. Older articles predicting a 2026 sunset can therefore point families toward an outdated starting number.
This figure is not a universal statement that every person can inherit $15 million tax-free under every circumstance. Citizenship, domicile, prior taxable gifts, valuation, and other rules affect the analysis.
Build the estate-tax picture before choosing a strategy
Ask your tax adviser to identify the relevant property and prior gift history. The gross estate calculation is not simply the amount held in a probate bank account.
Bring real estate information, business interests, investment and retirement accounts, life insurance records, liabilities, prior gift-tax returns, and documents from a deceased spouse’s estate. Ownership and beneficiary arrangements can affect planning without removing every item from the federal calculation.
Avoid choosing an irrevocable structure solely because an old article predicted a lower exemption. The right discussion includes control, access, income taxes, family goals, administration, and the size and growth of the estate.
Ask about portability after a spouse dies
Portability can allow a surviving spouse to use an eligible deceased spouse’s unused federal exclusion when the required election is made. It is not something to assume happened automatically because the estate owed no tax.
The July 2026 Form 706 instructions explain filing thresholds and portability. The usual estate-tax return deadline is nine months after death, with an extension process and specific relief rules in some cases.
If a spouse has recently died, identify the date of death and ask a qualified tax professional promptly whether a return or election is appropriate. Do not treat this article as a determination that your estate qualifies for late-election relief.
Keep income-tax returns on a separate checklist
A final individual income-tax return covers the deceased person’s income for the relevant period. An estate or trust may also receive income and have its own filing obligations.
Colorado’s deceased-taxpayer guidance and fiduciary filing information describe these separate responsibilities. Having no estate-tax bill does not establish that no income-tax return is needed.
Before distributing all available cash, ask which returns remain outstanding, what records must be retained, and whether a reserve is appropriate. Income generated while an estate or trust is administered should be tracked separately from assumptions about the original inheritance.
Preserve basis records before an inherited asset is sold
Selling inherited property can raise a capital-gain question. The IRS explains inherited-property basis in Publication 551. Date-of-death value often matters, but exceptions and special situations require review.
A trust does not automatically make every inheritance tax-free or guarantee a particular basis result. Likewise, giving an asset away during life can have different consequences from transferring it at death.
Keep valuation records and ask for an asset-specific comparison before changing ownership. Legacy’s guide to gifting a home introduces those tradeoffs. Contact Legacy Law Group Colorado to coordinate legal planning with your tax adviser.
At-a-glance comparison
| Question | Tax or filing to review | Starting point |
|---|---|---|
| Tax on the transfer at death? | Federal estate tax | 2026 basic exclusion: $15 million; facts affect calculation |
| Unused exclusion from a spouse? | Portability election | Review Form 706 and deadlines |
| Income before or after death? | Individual / fiduciary income tax | Separate returns may be required |
| Sale of inherited property? | Capital gain and basis | Preserve valuations and tax records |
Visual guide
Related video
This existing Legacy video offers background on tax planning concepts. The written guide above addresses this article’s specific Colorado questions and current figures.
Watch the related video on YouTube.
Frequently asked questions
Did the federal exclusion fall back in 2026?
Current IRS guidance states a $15 million basic exclusion for 2026 following the 2025 law change. Use guidance for the actual year involved.
Does avoiding probate avoid estate tax?
No. Probate administration and the estate-tax calculation are different systems.
Does a revocable trust eliminate all taxes?
No. Tax treatment depends on the property, trust terms, transactions, and applicable rules.
Sources and next steps
- Colorado General Assembly: estate-tax overview
- IRS: current estate-and-gift-tax changes
- IRS: Form 706 instructions, July 2026
- Colorado fiduciary income-tax filing
- IRS Publication 551: basis of assets
Need help coordinating this with your own documents? Contact Legacy Law Group Colorado to discuss your estate planning questions.
