Trust vs Probate When Selling Inherited Property

Quick Comparison: Trust Sale vs. Probate Sale

The table below is a quick reference. The sections that follow explain each row.

Selling a House Held in a California Living Trust

A revocable living trust is an arrangement in which the person who created it, called the settlor, moved title to property into the trust during life. After the settlor's death, the successor trustee steps in. Under Probate Code section 16226, "The trustee has the power to acquire or dispose of property, for cash or on credit, at public or private sale, or by exchange." The trustee uses that power within the trust's terms and owes duties to the beneficiaries, including accounting for the proceeds and following the trust's distribution instructions.

In practice, a trustee usually works through a few steps:

• Find the trust and every amendment. The terms control what the trustee may do.
• Confirm the deed. The county recorder's office holds the recorded deed that shows whether the house was actually titled in the trust.
• Prepare a certification of trust. Under Probate Code section 18100.5, this is an acknowledged declaration signed by all currently acting trustees that a trustee can give a title company or buyer instead of the full trust. It may confirm facts including the trust's existence, the acting trustees and their powers, and need not contain the trust's distribution provisions.
• Serve the notification by trustee. Under Probate Code section 16061.7, when a revocable trust becomes irrevocable at a settlor's death, the trustee serves it on each beneficiary and each heir not later than 60 days after that event, or 60 days after learning of a person entitled to it, and if the trustee's office was vacant, the period starts when the new trustee begins serving.

Because no court confirms the sale, a trust sale generally moves sooner than a probate sale, though that is a pattern, not a promise.

Selling a House Through California Probate

Probate is the court-supervised process in which a California Superior Court appoints a personal representative and oversees the estate until distribution. An executor is the person named in the will. An administrator is appointed when there is no will or the named person cannot act. The California Courts overview of formal probate says the case is filed in the county where the decedent lived. If the decedent lived outside California but owned property here, it is filed in the county where that property sits. The personal representative also contacts a probate referee, a court-appointed appraiser who values non-cash assets such as real property.

What the personal representative may do depends on the authority the court granted. Probate Code section 10308 generally requires every sale of real property to be reported to and confirmed by the court before title passes. The exception is section 10503. Under Probate Code section 10511, a personal representative with full authority under the Independent Administration of Estates Act can sell estate real property. Under Probate Code section 10503, the court-confirmation requirements, such as publication of notice of sale, court approval of agents' and brokers' commissions, sale at not less than 90 percent of appraised value, and court examination of the sale, do not apply to a sale made with that authority.

Under full authority, the personal representative sends a Notice of Proposed Action (form DE-165). The form explains that anyone who does not object in writing, or obtain a court order, is treated as consenting. If someone does object, the sale may go forward only under court supervision. The form also notes that limited authority does not include selling real property without court supervision.

When confirmation is required, the court holds a hearing, and higher bids may be presented there. If the personal representative fails to file the report and petition within 30 days after the sale, section 10308 lets the purchaser file them. Those steps generally make probate the longer path. Selling inherited property during probate walks through them in more detail.

Smaller estates may qualify for simpler procedures. Under Probate Code section 13151, a successor may file a petition to determine succession to the decedent's primary residence once 40 days have passed since the death. This applies when the residence's gross value does not exceed $750,000, as adjusted periodically. The successor must notify each heir and devisee named in the petition within five business days of filing. The Judicial Council's form DE-300 lists $750,000 for that petition and $69,625 for the affidavit for real property of small value, both for deaths on or after April 1, 2025. The California Courts simple-transfer page publishes the current limits.

Tax Basis and Property Tax: What Changes, What Doesn't

Neither tax question turns on whether the house passed through a trust or through probate.

Basis is the starting value used to measure gain when property is sold. Under 26 U.S.C. § 1014(a), the basis of property acquired from a decedent is generally its fair market value at the date of death. The section lists alternatives, including the value at the applicable valuation date when an election is made under section 2032. Gain or loss on a sale is measured against that basis. A CPA, an enrolled agent or a tax attorney reviews how it applies to a particular sale.

Property tax reassessment is a separate matter. Under Rev. & Tax. Code section 63.2, beginning on and after February 16, 2021, a transfer of a parent's principal residence to a child can be excluded from reassessment when a claim is filed. The same is true of a grandparent's residence passing to a grandchild whose parents are deceased. The exclusion requires that the home become the transferee's principal residence within one year and that the transferee file for the homeowners' or disabled veterans' exemption within a year. If the fair market value equals or exceeds the prior taxable value plus $1,000,000, the excess is added to the taxable value. The claim is generally due within three years after the transfer, or before transfer to a third party, or before an eligible transferee stops living there, whichever is earliest. Alternatively, it counts as timely if filed within six months after a notice of supplemental or escape assessment is mailed. The section counts transfers through a trust. The county assessor's office handles these claims.

Ways to Sell: Listing, Owner Sale, and Direct Sale

A trustee or a personal representative can choose among three ways to sell, within their authority and any court steps that apply.

A listing with a licensed agent. The house is marketed and shown, and the market sets the price. The seller pays a commission and usually prepares the property. This tends to fit when there is time and money to ready the house and the family wants the widest pool of buyers.

A sale by the owner without an agent. The seller handles pricing, marketing and negotiation. Commission costs drop, but the work shifts to the trustee or personal representative. This tends to fit when the seller lives nearby and is comfortable running a sale.

A direct sale to a cash buyer who takes the house in its present condition. A direct offer is often lower than an open-market price, because the buyer absorbs the repairs, the risk and the cost of reselling. In exchange, the seller gets less preparation, fewer showings and no dependence on a buyer's loan. This tends to fit when the house needs work, the decision-maker is far away, or occupants or belongings complicate showings. Silver Lining Inherited Property can make an offer on an inherited property for a direct as-is sale, and asking carries no obligation to sell.

Whoever the buyer is, the trust's terms, the court's steps, required notices, liens and taxes stay the same. A house can be sold in its present condition. Civil Code section 1102.2 says its disclosure article does not apply to sales under court order, including probate court sales, or to sales by a fiduciary administering a trust or decedent's estate. That exemption does not cover a trustee who is a natural person, is trustee of a revocable trust, and is a former owner or was an occupant within the preceding year. The estate's or trust's attorney can say which disclosure duties still apply. An inherited house that needs repairs raises its own condition questions. Comparing written offers and estimated net proceeds, meaning the price less commissions, repairs, carrying costs, loan payoffs and closing costs, is how a family tells which way fits. A cash offer versus a listing sets those numbers side by side.

When the Path Is Contested or Unclear

The path is sometimes unclear. The trust may be missing, the deed may never have been moved into the trust, or relatives may disagree about who holds authority. If the recorded deed still shows the decedent's name rather than the trust, the trust may not control the house, and a probate case or a court petition may be needed. The estate's or trust's attorney confirms which applies.

Siblings who inherit shares of one house each own part of it, so a voluntary sale generally needs every co-owner to sign. California's partition statutes give co-owners a legal remedy when they cannot agree. When heirs, a trustee or an executor are in conflict, or misconduct is suspected, that is a contested matter handled by an attorney who litigates trust and probate cases.

If the decedent also owned real property in another state, that state's law may apply to it.