Selling inherited property in California starts with proving you have the legal right to sign for the deceased owner, and how you get that proof depends on whether the home sat in a trust, has to go through probate, or is small enough for a simplified transfer. Once authority is in place, the sale itself looks like any other California closing, but the tax picture is different: a federal step-up in basis usually wipes out most of the capital gain, while state withholding, transfer taxes, and (in probate) statutory fees still come off the top.
Who Has the Right to Sell
Title passes to heirs or beneficiaries the moment the owner dies, but no title company will insure a sale until you can document who is authorized to sign. The document you need depends on how the property was held.
If the Property Was in a Revocable Living Trust
The successor trustee named in the trust takes over at death and can list and sell the property with no court involvement. Proof of authority is a certification of trust handed to the title company and buyer. California law lets that certification stand in for the full trust document, and a third party who insists on seeing the whole trust in bad faith can be held liable for damages.
If the Property Has to Go Through Probate
Without a trust or a simplified option, the Superior Court issues Letters Testamentary (when a will names you executor) or Letters of Administration (when there is no will or the court appoints someone). Those letters are what the title company will ask for.
The letters also determine whether you can sell freely. An executor or administrator granted full authority under the Independent Administration of Estates Act can accept an offer and close after giving interested parties advance notice. Without that authority, every sale requires a court confirmation hearing.
If the Estate Is Small
California has two shortcuts for real property, both with amounts adjusted effective April 1, 2025 under Probate Code Section 890:
- A court petition to transfer a deceased person’s California primary residence worth $750,000 or less (Probate Code §§13151–13154). It’s still a court filing, but faster and cheaper than full administration. You must wait at least 40 days after death to file.
- A recorded affidavit for California real property worth $69,625 or less (Probate Code §13200), with no court proceeding at all.
The better-known small estate affidavit under Section 13100, with its $208,850 threshold, does not work here. It covers only personal property like bank accounts and vehicles.
Court Confirmation and Overbids
When a probate sale needs court confirmation, the deal you negotiated is not the deal that necessarily closes. The property must have been appraised within the past year, the accepted offer has to be at least 90% of that appraised value, and anyone can appear at the hearing and outbid the buyer.
The minimum overbid is set by formula: 10% of the first $10,000 of the original bid plus 5% of everything above that. On a $500,000 accepted offer, the first qualifying overbid would be $525,500. If more than one bidder shows up, the judge runs what amounts to a live auction. That protects beneficiaries from a low sale, but it can undo months of negotiation. Independent administration authority lets the personal representative skip the hearing entirely by giving advance notice and drawing no objections.
The Step-Up in Basis
The tax break that makes most inherited sales manageable is the step-up in basis. Under federal law, the tax basis of the property resets to fair market value on the date of death. A house a parent bought for $150,000 in 1990 and left behind at a $900,000 date-of-death value has a basis of $900,000 in the heirs’ hands. Sell for $920,000 and the taxable gain is $20,000, not $770,000.
Community Property Gets a Double Step-Up
California is a community property state, which gives surviving spouses something spouses in common-law states don’t get. When one spouse dies, both halves of community property step up, not just the deceased spouse’s half. A home a couple bought for $200,000, worth $1,000,000 at the first death, gives the survivor a $1,000,000 basis in the whole property. In a common-law state the survivor’s basis would be $600,000. The double step-up applies automatically to assets classified as community property.
What You’ll Actually Pay on the Gain
Any gain above the stepped-up basis is taxable. Federal long-term capital gains rates run 0% to 20% depending on income, with a possible 3.8% net investment income tax on top for higher earners. California taxes capital gains as ordinary income with no preferential rate, so the state rate ranges from 1% up to 13.3% on income above $1 million. A high-income seller can face a combined marginal rate above 33% on the gain. Because the basis resets to date-of-death value, sellers who close relatively quickly usually see only a modest gain to report.
Establishing that stepped-up basis is why the date-of-death appraisal matters. In probate, a state-appointed probate referee performs the appraisal and files it on the Inventory and Appraisal form. For trust-held property, the successor trustee hires a licensed private appraiser. Either way, get it done early, and keep it, because it’s what you’ll rely on if the IRS questions your basis.
Property Tax Reassessment After the Sale
California generally reassesses property to current market value whenever ownership changes. A home carried at a Proposition 13 assessed value from decades ago can see its property tax bill jump sharply once it transfers.
Proposition 19, effective February 2021, sharply narrowed the parent-to-child exclusion from reassessment. To qualify now, all of the following must be true:
- The property was the parent’s principal residence before the transfer.
- The child makes it their own principal residence within one year of the transfer and files for the homeowner’s exemption within that same year.
- The current fair market value does not exceed the parent’s assessed value plus $1,044,586 (the inflation-adjusted cap for transfers between February 16, 2025 and February 15, 2027). Anything above that gets added to the new assessed value.
If you plan to sell rather than move in, the exclusion doesn’t apply. The property will be reassessed at the sale price, and the buyer pays property taxes on the new value. That’s not a direct cost to you as the seller, but it affects what the property costs to own and can come up in negotiations.
When the deed is recorded, a Preliminary Change of Ownership Report (Form BOE-502-A) must be filed with the County Recorder. It asks whether any reassessment exclusion applies. Skipping it or filling it out wrong can trigger reassessment even when an exclusion would have applied.
Withholding, Transfer Tax, and FIRPTA at Closing
Several taxes come off the sale price at closing, some of them refundable later, some not.
California withholding. The escrow company withholds 3⅓% of the total sale price and sends it to the Franchise Tax Board on Form 593. You can claim an exemption if the property was the seller’s or the decedent’s principal residence, if the sale results in a loss, or if the total price is $100,000 or less. To claim any exemption, submit Form 593 to escrow before closing. If you’re selling as trustee or personal representative, the withholding still applies unless one of the listed exemptions fits. For out-of-state sellers, this is often the only mechanism ensuring California gets paid, and escrow companies treat it accordingly.
Documentary transfer tax. The county rate is $0.55 per $500 of sale price, effectively $1.10 per $1,000. Cities can add up to half the county rate on top, and some Bay Area cities have gone considerably higher through local measures. On a $750,000 sale in an unincorporated area, the county piece alone is $825. Check the rate where the property actually sits.
FIRPTA. If the deceased owner was a foreign person, or the estate or trust is classified as foreign for tax purposes, the buyer generally has to withhold 15% of the sale price under the Foreign Investment in Real Property Tax Act. This is federal, separate from California’s 3⅓%. Both amounts get credited against the actual tax owed when the return is filed, and any excess is refunded.
The Mortgage and Creditor Claims
Most inherited homes still carry a mortgage, and most mortgages have a due-on-sale clause. Federal law overrides that clause for inherited property. The Garn-St. Germain Act bars lenders from enforcing due-on-sale when property transfers at death to a relative or joint tenant, so you can keep the existing loan on its existing terms while you decide what to do. That matters when the rate is well below what’s available now. If you sell, the mortgage is paid off at closing from the proceeds like any other sale. Payments still have to be made in the meantime; lenders can foreclose on an inherited property whether or not it’s in probate.
Debts owed by the deceased are the other timing issue. In probate, creditors have four months from the date letters are first issued to file claims, and the personal representative must notify known creditors. Selling before that window closes isn’t prohibited, but the proceeds should stay in the estate account until the deadline runs and valid claims are paid. Distribute too early and the personal representative can be personally liable.
Trust property has no court-supervised claim process, but the successor trustee still owes a fiduciary duty to pay legitimate debts before distributing anything. Title searches catch recorded liens; medical bills and credit card balances won’t show up that way, so the trustee has to look for them.
What the Sale Costs the Estate
A cost that regularly surprises families is the personal representative’s statutory compensation in probate. California pays the executor or administrator on a sliding scale: 4% of the first $100,000 of estate value, 3% of the next $100,000, 2% of the next $800,000, and 1% of the next $9 million. The estate’s attorney is entitled to the same schedule. On a $1,000,000 estate that’s $23,000 each, or $46,000 combined, before any extraordinary fees. The money comes out of the estate and reduces what beneficiaries take home. A trust sale avoids this schedule entirely, which is one reason planning ahead with a living trust saves families real money at the back end.