Inherited House With an Heir Living in It

Does the Heir Living There Have a Right to Stay?

The answer turns on one question: has the house left the estate or the trust yet?

While the house is still in a probate estate, the heirs do not control it individually. Under Probate Code section 8400, a person "has no power to administer the estate until the person is appointed personal representative and the appointment becomes effective," which happens "when the person appointed is issued letters," although a named executor may, before that, pay funeral expenses and take necessary measures to maintain and preserve the estate. After letters issue, Probate Code section 9650 gives the personal representative the right to take possession or control of the decedent's property, while allowing real property to "be left with or surrendered to the person presumptively entitled to it unless or until, in the judgment of the personal representative, possession of the property by the personal representative will be necessary for purposes of administration." The person holding the property "shall surrender it to the personal representative on request." So a sibling in the house during probate is generally there because the personal representative has left it with them.

Where a trust holds the house, the successor trustee holds legal title and administers it according to the trust's terms, which may include selling it.

After title passes to the heirs, the picture changes. Each co-owner generally has a right to possess the whole property, and one co-owner generally cannot shut out another without a court order. Ouster is the word for one co-owner wrongfully excluding another from possession; an excluded co-owner may then have a claim for a share of the property's rental value. Living there rent-free does not, by itself, generally make the occupying heir owe rent to the others, absent an ouster or an agreement to pay. If the occupying heir has been paying all the mortgage, taxes, insurance and upkeep, that may matter in any later accounting.

When siblings are already in open conflict over who stays, that is a contested matter handled by an attorney who litigates trust and probate cases.

Carrying Costs, Expenses, and Who Pays What

A house keeps costing money whether anyone lives in it, and a family coordinating from several cities often feels that first. While the house is in the estate, Probate Code section 9650 says the personal representative "shall pay taxes on, and take all steps reasonably necessary for the management, protection, and preservation of, the estate." The Judicial Council's Duties and Liabilities of Personal Representative (DE-147) adds that a personal representative should determine that there is appropriate and adequate insurance and keep it in force during the entire administration. A probate case does not stop county property taxes from coming due.

After distribution, tenants in common generally share expenses in proportion to their ownership shares unless they agree otherwise. A co-owner who pays more than a fair share of necessary costs, such as the mortgage, property taxes or insurance, may have a right to contribution, meaning repayment of the excess from the others. Those claims are usually settled by agreement when the house sells, often out of the sale proceeds, or in a partition action.

A mortgage does not disappear at death. The estate, and later the heirs who take title, remain responsible for keeping it paid, and Probate Code section 5652 says a transfer on death deed passes the house subject to any lien or encumbrance of record. Many loans carry a due-on-sale clause, a term that lets the lender call the loan when title transfers; some transfers to family at death are treated differently from a sale. The estate's attorney or the lender can say how a particular loan works.

Property Tax Reassessment and the Parent-Child Exclusion

For a sibling who lives in the house, Proposition 19 is often the question behind the question: will the tax bill jump? For transfers on or after February 16, 2021, the parent-child and grandparent-grandchild exclusion from reassessment is Rev. & Tax. Code section 63.2.

Under that section, the transfer must be "of a principal residence of the transferor, and become the principal residence of the transferee within one year of the transfer," and the transferee must file for the homeowners' or disabled veterans' exemption within a year of the transfer. The exclusion can apply "in whole or in part," so when one child moves in and others do not, how much of the tax base is protected depends on the facts, including who lives there and how the shares are held. The section also sets a value limit adjusted over time; the county assessor's office publishes the current figure.

The exclusion is not automatic. A claim must be filed with the county assessor, on a form the State Board of Equalization prescribes, within three years after the transfer, or before the property is transferred to a third party, or before an eligible transferee stops living there, whichever is earlier. A claim also counts as timely if filed within six months after the mailing of a notice of supplemental or escape assessment, and a later claim, where the house has not gone to a third party, can apply going forward from the lien date of the year it is filed. The timing matters to a family planning a sale, since a sale to an outside buyer closes one of those windows.

Separately, DE-147 says a personal representative files a change of ownership statement with the county recorder or assessor, in each county where the decedent owned real property, at the time the inventory and appraisal is filed. The county assessor's office answers reassessment and exclusion questions for a specific property.

The Stepped-Up Basis and What It Means When the House Is Sold

Basis is the starting number for measuring gain when property is sold. Under 26 U.S.C. § 1014(a), the basis of property acquired from a decedent is generally "the fair market value of the property at the date of the decedent's death." People call this a stepped-up basis when the house had risen in value, and a stepped-down basis when it had fallen.

In plain terms, if a parent bought the house decades ago and it was worth far more on the day they died, the heirs generally measure any gain from that date-of-death value, not from the old purchase price. For siblings who each inherited a share, each share generally carries its part of that value.

The statute gives alternatives to the date-of-death value: a value at the applicable valuation date where an election under section 2032 is made, a value determined under section 2032A where that election applies, and, to the extent the exclusion in section 2031(c) applies, the basis the decedent had. Apart from those alternatives, the basis is the figure the statute fixes, and later movement in the market does not rewrite it.

Whether a particular sale owes federal or California income tax depends on the price, the costs of sale, who sells and when. The California Franchise Tax Board administers the state income tax. A CPA, an enrolled agent or a tax attorney reviews basis and gain for a specific sale, including how a long stay by one heir, or a buyout of one share, fits in.

When Co-Owners Cannot Agree: The Partition Action

A partition action is a lawsuit in which a co-owner asks a California Superior Court to divide jointly owned property or order it sold when the owners cannot agree. With a single house, physical division is rarely practical, so the question is usually a sale or a buyout. The rules sit in the California Code of Civil Procedure.

California's Partition of Real Property Act took effect January 1, 2023, and it changed how courts handle many inherited houses held by family members. As the law now works for property it covers, co-owners who did not ask for partition may have a chance to buy out the share of the co-owner who did, at a value the court determines, before any sale is ordered. If no buyout happens, the Act generally points toward a sale on the open market, through a licensed real estate agent, rather than a quick auction.

Partition also settles the money between co-owners. The accounting can take up who paid the mortgage, taxes, insurance and repairs, and any claim for a share of rental value after an ouster, so the proceeds are divided with those claims taken into account.

Those are the provisions of the law, described here so a family can see the structure. Whether the Act applies to a given house, and how a contested case unfolds, is the work of an attorney who litigates trust and probate cases.

The Path to a Sale: Who Has Authority and What the Process Looks Like

Four situations cover most families, and each one hands authority to a different person:

• Will admitted to probate: the executor, once appointed and issued letters.
• No will: the administrator the court appoints; the self-help guide says the order of priority begins with a surviving spouse or domestic partner, then a child, then a grandchild, and continues from there.
• Trust: the successor trustee, acting under the trust's terms; beneficiaries do not individually control the sale.
• After distribution: the co-owners on title, who must agree or one may bring a partition action.

In probate, Probate Code section 10308 says sales of real property "shall be reported to and be confirmed by the court before title to the property passes to the purchaser," except as provided in Probate Code section 10503. That exception belongs to the Independent Administration of Estates Act: under Probate Code section 10503, the court-confirmation requirements, such as published notice of sale, court approval of agents' and brokers' commissions, the rule of sale at not less than 90 percent of appraised value and the court's examination of the sale, do not apply to a sale made with that authority. Whether a given sale needs a court's confirmation depends on the authority the court granted the personal representative and on whether anyone objects to the notice of proposed action. Selling inherited property during probate follows those steps in order.

Then comes the method. A listing with a licensed real estate agent exposes the house to the open market and often brings the highest price, but it usually means preparing the house, showings while a sibling may still live there, and waiting on a buyer's loan. A sale by the owner without an agent saves a commission but puts pricing, contracts and escrow on the family. A direct sale to a buyer who pays cash and takes the house as it is trades price for ease: the offer is often lower than an open-market price, because that buyer absorbs the repairs, the risk and the cost of reselling, and in return the family gets less preparation, fewer showings and less reliance on a lender. The estate's authority and the court's steps stay the same whichever buyer signs.

Comparing a cash offer and a listing side by side, as written offers and estimated net proceeds (the price less commissions, repairs, carrying costs, loan payoffs and closing costs), is how a family tells which way fits.

Disclosures a Seller Owes on an Inherited Property

Sellers of California homes generally must disclose known material facts that affect a property's value or desirability. An heir who never lived in the house may know little about its roof or plumbing, while the sibling who lived there may know a great deal, and that difference can matter.

Civil Code section 1102.2 lists transfers to which the Civil Code's residential transfer-disclosure article does not apply. They include sales "ordered by a probate court in the administration of an estate," and "Sales or transfers by a fiduciary in the course of the administration of a trust, guardianship, conservatorship, or decedent's estate." That fiduciary exemption "shall not apply to a sale if the trustee is a natural person who is a trustee of a revocable trust and is a former owner of the property or was an occupant in possession of the property within the preceding year." The same section also lists transfers from one co-owner to other co-owners, and transfers to a spouse or to people in the line of consanguinity of a transferor, meaning blood relatives in a direct line. That last list continues with other categories in the section itself.

For a family where the successor trustee is also the sibling living in the house, the occupant condition is worth noticing. An exemption from that article is also not a release from every duty, and the estate's or trust's attorney can say which disclosures apply to a particular sale.

"As-is" describes the condition a buyer agrees to accept; it does not cancel any disclosure the law requires. A house can be sold in its present condition, and selling a house that needs repairs sets out the tradeoffs between fixing first and selling as it stands.