I Inherited a Property in California — What Are My Options?

Inheriting a property in California can feel overwhelming — especially when you're grieving a loss and suddenly responsible for a major asset. The good news is that you have options, and understanding them clearly will help you make the best decision for your family's financial future.

This guide covers everything you need to know about what happens when you inherit a home in California: the probate process, Proposition 19's impact on property taxes, your three main choices (sell, rent, or move in), and what to do first.

Step 1: Determine How the Property Was Held

The first thing you need to know is how title was held on the property, as this determines the process you'll go through:

Living Trust

If the deceased held the property in a revocable living trust, the transfer to beneficiaries happens outside of probate — typically within a few weeks to months. This is the fastest and least expensive path. The successor trustee handles the transfer directly.

Joint Tenancy with Right of Survivorship

If the property was held in joint tenancy (common for married couples), it transfers automatically to the surviving joint tenant upon death. You'll need to record an Affidavit of Death of Joint Tenant with the county recorder along with a certified copy of the death certificate.

Sole Ownership or Tenants in Common

If the deceased owned the property alone or as a tenant in common, the property likely must go through probate before it can be transferred or sold.

Understanding California Probate

California probate is the court-supervised process of transferring a deceased person's assets to their heirs. For real property, probate is required unless the property was held in trust or transferred via another mechanism (joint tenancy, community property with right of survivorship, etc.).

Key facts about California probate:

• Timeline: Typically 9-18 months, sometimes longer for contested estates
• Cost: Attorney and executor fees are set by statute — 4% of the first $100K, 3% of the next $100K, 2% of the next $800K, etc. On a $700K home, fees can exceed $28,000
• Public record: Probate filings are public, which is why many estate planners recommend living trusts
• You can still sell during probate — with court approval (called a "probate sale")

Proposition 19 and Property Taxes

California's Proposition 19 (effective February 2021) significantly changed the rules for inherited property and property taxes. This is one of the most important things to understand:

Before Prop 19

Children could inherit a parent's home and keep the parent's lower property tax base (Prop 13 protection) regardless of whether they lived in the home.

After Prop 19

The property tax exclusion for inherited homes is now much more limited:

• The heir must move into the inherited home as their primary residence within one year
• If they move in, they can exclude up to $1 million of increased assessed value from reassessment
• If they do NOT move in (rent it out or sell it), the property is fully reassessed at current market value — which can dramatically increase annual property taxes

Example: A parent bought a Rancho Cucamonga home in 1990 for $180,000. Today it's worth $750,000. Under Prop 13, the parent paid taxes on ~$200,000 assessed value. If a child inherits and doesn't move in, the property is reassessed to $750,000 — potentially tripling or quadrupling the annual property tax bill.

Your Three Main Options

Option 1: Sell the Inherited Property

Selling is often the most practical choice, especially when multiple heirs are involved, when the property needs significant repairs, or when no heir wants to move in or manage a rental.

The stepped-up basis tax advantage: One of the most significant benefits of inherited property is the "stepped-up basis." When you inherit a home, your cost basis for capital gains purposes is reset to the fair market value at the date of death — not what the original owner paid. This means if you sell the home shortly after inheriting it, you may owe little to no capital gains tax even if the home has appreciated significantly over decades.

Example: Parent bought home for $150,000 in 1985. At death, home is worth $700,000. You inherit it and sell for $720,000. Your gain is only $20,000 (not $570,000) because your basis stepped up to $700,000.

Option 2: Rent the Property

If the home is in good condition and you want ongoing income, renting can be a strong option — especially in SoCal's tight rental market. However, be aware of:

• Prop 19 reassessment — your property tax bill will increase to current market value
• California landlord-tenant laws, which heavily favor tenants
• Ongoing maintenance, property management costs, and vacancy risk
• Rental income is taxable at ordinary income rates

Option 3: Move In

If the inherited home suits your needs and you can move in within one year, you may be able to maintain the parent's lower property tax base under Prop 19 (subject to the $1M exclusion limit). This can represent significant ongoing savings in a high-value SoCal market.

What to Do First When You Inherit a Property

1. Secure the property — Change locks, ensure utilities are active, check insurance coverage
2. Get a copy of the death certificate — You'll need multiple certified copies
3. Identify how title was held — Review deeds, trust documents, or contact a probate attorney
4. Consult a probate attorney — Even if probate isn't required, an attorney can help you navigate the transfer efficiently
5. Get a professional home valuation — Establishes the stepped-up basis and helps you evaluate your options
6. Consult a CPA — Understand your tax position before making any decisions
7. Decide on your path — Sell, rent, or move in — ideally within the first 3-6 months