Can I Sell Inherited Property in California?

Selling Inherited Property Through California Probate

The first step is letters. Under Probate Code section 8400, a person has no power to administer the estate until appointed personal representative and issued letters, the court document that makes the appointment effective; a named executor may, before then, pay funeral expenses and take necessary steps to maintain and preserve the estate. The case is heard in the probate division of the superior court, generally in the county where the decedent lived.

The general rule, in Probate Code section 10308, is that a sale of estate real property is reported to and confirmed by the court before title passes, whether the sale is private or at auction, except as Probate Code section 10503 provides. If the personal representative does not file the report and petition within 30 days after the sale, the buyer may file them.

The exception is authority under the Independent Administration of Estates Act, a law that lets a court grant a personal representative power to act with less court supervision. Under Probate Code section 10503, the court-confirmation requirements, such as published notice of sale, court approval of commissions, the appraised-value rule and the court's examination of the sale, do not apply to a sale made with that authority. With full authority, a sale generally goes forward on a notice of proposed action, a written notice to the people entitled to it; if someone objects, or the court granted only limited authority, the sale goes to a confirmation hearing.

The steps, the timing and the paperwork are generally the same whoever the buyer is, and so are the estate's liens and tax obligations, with one notable limit: except as the Probate Code provides, the personal representative and the personal representative's attorney may not purchase estate property, directly or indirectly, or be interested in such a purchase. The guide to selling during probate goes further into the steps. Where heirs disagree about the sale or misconduct is suspected, the matter becomes a contested one handled by an attorney who litigates trust and probate cases.

Selling Inherited Property Held in a Trust

A house titled in a revocable living trust generally does not go through a probate case. After the person who created the trust dies, the successor trustee manages and sells the property under the powers the trust document grants. The authority comes from that document, not from the beneficiaries' consent, and a title company will typically want to see the trust and proof of the trustee's role before it insures the sale.

California law also sets duties a trustee owes to every beneficiary, so a trustee selling a house is acting for all of them, not for one. A dispute among beneficiaries, or a question about how a trustee is acting, is a matter for an attorney who handles trust litigation.

A transfer on death deed works differently again. Under Probate Code section 5652, it transfers the owner's interest at death to the named beneficiary, subject to the beneficiary's right to disclaim it, and subject to recorded limitations such as a lien, easement or lease. If more than one beneficiary is named, they generally take as tenants in common in equal shares. That beneficiary, or those beneficiaries together, hold title and can sell.

California's simplified procedures, which the California Courts' page on simple transfers says are updated every three years, can also put title in a successor's name:

• Petition to determine succession to the decedent's primary residence. Probate Code section 13151 allows it once 40 days have passed since the death; the Judicial Council's form DE-300 gives a limit of $750,000 for a death on or after April 1, 2025.
• Affidavit for real property of small value. Probate Code section 13200 allows it no sooner than six months after the death, with a probate referee's appraisal attached; the Judicial Council's form DE-305 gives a limit of $69,625 for a death on or after April 1, 2025.
• Spousal or domestic partner property petition. It is used where property passes to a surviving spouse or registered domestic partner.

The Step-Up in Basis and What It Means When You Sell

Basis is the starting number used to measure gain or loss when property is sold. For inherited property, 26 U.S.C. § 1014(a) generally makes it the fair market value at the date of the decedent's death. It may instead be the value at an alternate valuation date if the estate elects one under section 2032, a value determined under section 2032A, or, to the extent the exclusion in section 2031(c) applies, the decedent's own basis.

In plain terms, if a parent bought a house decades ago and it was worth much more at death, the heir's basis is generally that date-of-death value, not the old purchase price. Gain is measured from there. The same rule works the other way: if the house was worth less at death than the decedent paid, basis can step down, and a sale below basis produces a loss.

Fixing the date-of-death value usually means a written appraisal. The California Courts' page on inventory and value notes that a formal appraisal may be needed if the estate goes to court. How basis applies to a particular sale, and whether any tax is owed, is a question for a CPA, an enrolled agent or a tax attorney.

California Property Tax and Proposition 19

Inheriting a house is generally a change in ownership, and in California a change in ownership can mean the property is reassessed to current market value. For transfers on or after February 16, 2021, the parent-child and grandparent-grandchild exclusion approved with Proposition 19 is Rev. & Tax. Code section 63.2. The grandparent-grandchild version applies only if all of the grandchild's parents who are the grandparents' children have died by the date of transfer.

The exclusion has firm conditions. The house had to be the parent's principal residence, it has to become the child's principal residence within one year of the transfer, and the child has to file for the homeowners' or disabled veterans' exemption within a year. The old taxable value carries over in full only up to a value limit the statute ties to that prior taxable value; above it, part of the value is added. That limit is adjusted over time, and the county assessor's office publishes the current figure.

A claim is generally filed within three years after the transfer, before the property is transferred to a third party, or before the heir stops living there, whichever is earlier; it is also timely if filed within six months after a notice of supplemental or escape assessment. If no heir moves in, the exclusion does not apply, and a sale to an outside buyer is a new change in ownership. For a reassessment or an exclusion claim, the county assessor's office is the place to ask.

Selling When Multiple Heirs Own the Property Together

When two or more heirs inherit a house, each generally holds an undivided share, meaning a percentage of the whole rather than a particular room or half of the yard. No single co-owner can sell the entire property alone; that takes all the owners signing or a court order. This is often the hardest part for families spread across states, where one sibling lives in the house and another needs the money.

Any co-owner can sell or transfer their own share. A buyer of a partial share, though, steps into shared ownership with the remaining family, which few buyers want.

When co-owners cannot agree, California's partition law lets a co-owner ask the superior court to divide the property, called partition in kind, or to order it sold and the proceeds divided, called partition by sale. A contested partition, or a dispute over how a co-heir is acting, is handled by an attorney who litigates partition and probate cases.

Families that do agree often line up written offers side by side and work out estimated net proceeds: the price less commissions, repairs, carrying costs, loan payoffs and closing costs. That comparison is how co-heirs see which sale path fits them.

Ways to Sell Inherited California Real Estate

A house can be sold in its present condition, and the person with authority to sell chooses how. Each path has a real tradeoff.

• Listing with a licensed real estate agent. This reaches the widest pool of buyers and is usually aimed at the highest gross price. It generally means preparing the house, holding showings, paying a commission and waiting on a buyer's loan approval.
• Sale by owner without an agent. The seller handles pricing, marketing and negotiation and saves the listing commission, but takes on the work and the risk of finding and qualifying a buyer.
• Direct sale to a buyer who pays cash and takes the house as it is. The buyer takes on the repairs, the risk and the cost of reselling, which is why a direct offer is often lower than an open-market price. The seller gets less preparation, fewer showings and no dependence on a buyer's financing.

The comparison between a cash offer and a listing and the choices for an inherited house that needs repairs are where the details of condition come in. Whatever the path, the probate or trust steps, the required notices, the liens and the taxes stay the same, and disclosure duties follow the rules in the next section. Comparing written offers by estimated net proceeds, as above, is how a family sees which path fits.

Disclosures and the Due-on-Sale Rule

California's statutory seller disclosure rules have exemptions that matter for estates and trusts. Under Civil Code section 1102.2, the article containing those rules does not apply to sales under court order, including sales ordered by a probate court in administering an estate, or to sales by a fiduciary administering a trust or a decedent's estate. The fiduciary exemption does not apply if the trustee is a natural person who is trustee of a revocable trust and a former owner of the property or an occupant within the preceding year. Other disclosure duties may still apply depending on the facts.

A mortgage does not disappear at death. Many loans have a due-on-sale clause letting the lender demand full repayment if the property is transferred. Under 12 U.S.C. § 1701j-3(d), for residential property with fewer than five dwelling units, a lender may not use that clause on certain transfers, including a transfer to a relative resulting from the borrower's death and a transfer where the borrower's spouse or children become owners.

That protection covers the inheritance transfer itself. When the house is later sold, the loan is still paid off from the sale under its own terms. Questions about an existing mortgage and the sale belong with the estate's or trust's attorney. Families selling in a particular county, such as San Diego County inherited property, meet these same statewide rules.