What happens when a father dies with ten billion pesos and no structure

Pedro Pérez and Juan Pérez do not exist. The story does, and it repeats more often than one would like.

Pedro had everything in his own name. He never formed a company, never made a will, never checked how his U.S. assets were titled. He worked forty years, did well, and died on a Tuesday. His only heir is his son Juan.

The figures are illustrative. What happens is not.

What he left

The house he lived in, COP 1.5 billion. A rented commercial unit, another 1.5 billion. A portfolio of U.S. stocks in a New York account, one and a half million dollars, about 6 billion pesos. And 1 billion between the bank and a term deposit.

Ten billion pesos. No debts.

Of those ten billion, one billion is available cash. The rest is bricks and a portfolio in another country. That sentence explains everything that follows.

The Colombian bill

In Colombia, inheriting does not pay an estate tax. It pays capital gains tax (ganancia ocasional), currently 15%. Until 2022 it was 10%, and many people still run the numbers with the old rate.

Before applying the rate, the exemptions the law recognizes in an estate are deducted. In Pedro's case there are three and they add up: COP 680 million for the house he lived in, 340 million for the commercial unit, and 170 million for Juan's share as heir. About COP 1,192 million exempt.

On ten billion, that is barely 11.9%. The exemptions help; they do not rescue.

That leaves a base of COP 8,808 million. At 15%, COP 1,321 million.

And there is something about timing that surprises almost everyone: that bill does not arrive during the probate process. It arrives afterwards, once the assets have been distributed, in the income tax return Juan files the following year. By then the debt is not the father's or the estate's. It is Juan's, and it is in cash.

The U.S. bill

This is the part that is never in the family conversation.

The United States charges estate tax on what is located there, even if the owner never set foot in the country. And shares of U.S. companies count as property located there, regardless of where the account holding them is. Pedro's portfolio goes in entirely.

A U.S. citizen can leave fifteen million dollars free of that tax. A non-resident foreigner has an exemption of sixty thousand dollars. Two hundred and fifty times less, with the same schedule and the same rates, which reach 40%.

On Pedro's one and a half million, the tax is USD 532,800. About COP 2,131 million, 35.5% of the portfolio. And until that process is closed, the brokerage firm will not release a single dollar.

The same six billion pays in both countries. The United States charges because the shares are there. Colombia charges because Pedro lived here, and that reaches what he had inside and outside the country. There is no treaty between the two countries to resolve the overlap.

What shows up afterwards

This is where it stops being rosy, especially if the estate is mostly real estate.

The registration tax, which each department charges at between 0.5% and 1% of what is registered. On Pedro's COP 3 billion in real estate, between 15 and 30 million.

Notary fees, calculated on the value of the estate. On ten billion, that is not small.

The lawyer's fees, because the process cannot be done without one.

And property tax, valuation charges, building fees and maintenance on the properties, which keep coming while the process moves forward.

If Pedro had everything in real estate, this part would be much bigger and the available cash much smaller.

And here is the problem

Adding up: COP 1,321 million in Colombia, 2,131 million in the United States, and a few tens of millions in registration, notary and lawyer.

Close to COP 3,470 million on a ten billion estate. 34.5%.

Juan has one billion in cash, and the costs of the process have already come out of it. He is more than two billion short.

What would solve the problem is the portfolio, and the portfolio is exactly what is frozen.

So he has only one way out: sell a property. In a hurry, unable to wait for the best buyer, facing a market that knows perfectly well why he is selling.

The tax authority does not take apartments or promises. Estate taxes are paid in cash. An estate can be enormous and the family still end up squeezed, because these are two different things: how much the assets are worth, and how much of that turns into cash on the day it is needed.

What this case leaves

Pedro did nothing wrong. He simply did nothing, and by the time the family understood the problem there was no room left.

Everything that changes this outcome is decided during life, with time and with the numbers on the table. After a death, the only thing left is to liquidate as well as possible.

Three questions worth being able to answer today:

If the estate opened this year, how much would have to be paid and in which countries. What money it would be paid with, without selling what the family wants to keep. And how long the assets would stay frozen, while someone covers the expenses.

If any of them has no answer in numbers, that is the work still to be done.

The figures are illustrative and the names invented. Informational content only. It is not legal or tax advice and does not create an attorney-client relationship; each case depends on its own facts.

Responsible for this content: Camila Giraldo Bolívar, attorney admitted in New York and Colombia. GB Partners, Calle 5 A # 39-93, oficina 702, Medellín, Colombia. Phone and WhatsApp +57 305 234 6543. www.gbpartnersllc.com