Selling an Inherited House in California
By Adrian Pedraza | December 2nd, 2024
Inheriting a house in California can be complicated without the right guidance. The process involves gathering the right documents, understanding legal requirements, and making decisions that can significantly impact your financial outcome. Without the right information, what should be a straightforward transaction can quickly become a drawn-out and frustrating ordeal. That’s why it’s essential to know the steps involved and avoid unnecessary complications.
We will cover the basics of selling inherited property- particularly in California- including documents required for selling inherited property. Plus, if you’re looking to sell that house today, we buy inherited property fast and can provide you with a free cash offer.
Whether you’re preparing to inherit property in California or already own one and want to sell, then this article serves as a guide for you to know what to expect, how to avoid costly mistakes and errors, and how to get maximum value for your property. Let’s begin!
Understanding the Inheritance Process
The first step in making the best decision about selling your inherited property is to understand the process in which real estate is inherited. Formally known as “probate”, the inheritance process is a legal process that you must follow in order to transfer or inherit property after the person who owned the property has passed away. Simply put, probate is the act of proving a will and distributing assets according to the deceased's wishes. Probate law applies to most areas of real estate inheritance in California. Whether or not you need to go to court to inherit a house in California depends on the manner in which the house is to be inherited. For example, a property owned in a trust is much easier to inherit than a property that is not. More on that later.
After a person passes and you want to get access to your inheritance, you might need to go through the court, even if a will is available. Therefore, “opening probate” is the act of going to court to inherit a home in California.
A probate court judge will then appoint a personal representative who is responsible for managing and distributing a deceased person’s estate according to the terms of their will or, if there’s no will, under state intestacy laws. You can petition to be appointed as personal representative yourself, but understand that it comes with a lot of responsibility.
The job of the representative would be to take inventory of the real estate inheritance and calculate its value. After this, the personal representative can use the value received from the real estate inheritance to settle debts and bills. The representative will then distribute the remaining funds according to the deceased’s will.
However, if there is no will, the court would then distribute the funds according to California state laws. Note that this process can take months or even years, and this mostly depends on the family of the deceased or the complexity of the inherited property in California. So, to avoid the prolonged time, it is important to follow due process.
Can I Transfer My Property Without Probate?
Yes! Even though we have established that to have access to inherited property in California, you would have to go through the court process of “opening probate,” there is still another way of transferring title outside of it. California inheritance law favors the probate process, but provides for an alternative - transferring property outside of probate.
However, there are several conditions to meet and we shall be highlighting some of them below. Bear in mind that under California inheritance law, the property of the deceased has to fall into these categories:
- The deceased is a beneficiary. This happens in properties like pensions or life assurance.
- If the estate is valued under a set amount. Now, you might need the help of an expert to calculate the value as the amount changes every few years. Fortunately enough, you can find the current value at Maximum Values for Small Estate Set-Aside & Disposition of Estate Without Administration.
- If someone else's name is on the property, there is the option of transferring property without opening probate. For example in the case of joint tenancy, when one party passes away, their share of the property automatically transfers to the surviving joint tenant, bypassing probate. This arrangement ensures a seamless transfer of ownership to the surviving party.
- You can avoid the probate process if you regard the property as a benefit of the California Government. These can be cash aid, adult services, and social services.
What are the Documents Required For Selling Inherited Property?
There are essential documents you would require to sell inherited property under the California inheritance law. Without these documents, it would be extremely hard and even impossible to sell inherited property in California. However, the types of documents you need for selling inherited property are dependent on the type of processes you use.
A. Using Probate:
1. Death Certificate
If you intend to use the probate court, you need to provide enough evidence that the deceased is dead. Courts are very strict on this rule, so that they can prevent fraudulent people from inheriting the properties of someone who is still alive.
To obtain copies of a death certificate, you will need to contact the California Department of Public Health. Ensure to follow the instructions that the workers will give to you, and you will be sure to get your copies.
2. Debt Record
The court would need documents of the deceased’s debt record; fortunately, you do not need to bother yourself with this process unless you are appointed as a Personal Representative.
The court will appoint a Personal Representative when you open probate. The personal representative would be responsible for settling the debt of the deceased before distributing the property according to the probate.
3. A Copy of the Will
If you are inheriting a home in California through probate, you will need a copy of the will that clearly states the deceased has passed the property to you. This document is essential to provide proof of ownership to not only the court but to potential buyers, giving them confidence in the transaction.
Hopefully, the testator (the person who left the will) gave you clear instructions on where to locate the will. Without a copy of the will, probate will take much longer and will be more expensive.
While the probate process can take several months or even years to complete, following all procedures outlined in California inheritance law is crucial to avoid unnecessary delays and ensure a smooth resolution.
B. Without Using Probate:
1. Living Trust
Real estate owned through a living trust makes life much easier for the heirs. If the deceased has designated you as a trustee then you have the right to sell the property whenever you want to.
All you have to do is to present the trust document and that would be enough to satisfy the court and potential buyer. In comparison to other documents and methods, this is the fastest and most direct.
2. Tenancy Documents
If the deceased and their living partner were in a joint tenancy agreement, then when he/she dies, the property automatically becomes that of the survivor.
Therefore, the only document you might require to sell the property would be the joint tenancy agreement.
3. Beneficiary Deed
Experts also call this document the Revocable Transfer on Death Deed or Transfer on Death Deed. The Beneficiary Deed is not as common as the trust agreement but many Californians still use it. Moreover, the California law provides for it, making it a viable option for transferring property.
It is a legal document that allows the deceased to name beforehand beneficiaries that will inherit his property after his death. It is also a very direct way of transferring inherited property in California.
Even though a Beneficiary Deed might have lots of advantages including the fact that it is cheaper than the living trust, it also comes with its disadvantages. Some of these disadvantages are that the property is subject to claims from the Beneficiary’s creditors and the beneficiary must take formal and multiple steps before he can transfer the property after the deceased’s death.
Also, it’s advisable to use a Beneficiary Deed when a home is a person’s primary asset. On the other hand, you can use a trust agreement or living trust if you have a much larger estate.
4. Mortgage Documents
When you inherit a house that has a mortgage, you have to obtain the documents from the mortgage company. You will also need to provide the mortgage documents with other important documents so that the potential buyer identifies you as the owner of the inherited property in California.
In California inheritance law, a "successor in interest" is the person who inherits a property with a mortgage. This title comes with certain privileges like access to mortgage information. A successor in interest should also seek to tell a potential lender about the mortgage.
Note also that the County Registrar-Recorder/County Clerk in each county maintains property ownership information in California. The public can request and inspect property records in accordance with the California Public Records Act.
Do I Need to Pay Taxes?
Fortunately, the state of California does not have an inheritance tax. The only way a California resident may pay state tax is if the deceased left property for them in another state that requires an inheritance tax.
Also, note that there is a survivorship period in California, which requires that the person who inherits must outlive the deceased by 120 hours.
Furthermore, even though there are no requirements for taxes in California inheritance law, you still have a special type of taxes to consider. These special types of taxes are called “federal taxes”.
Here are some of them:
- Federal estate tax: This tax applies to estates that are more than a certain value. Note that this value changes over time. Currently, the federal estate tax return is due nine months after the death of the individual.
- Capital gains tax: This tax comes into play if you sell assets that were transferred through an estate plan. Here is a relatable example: if you sell your inherited home in California shortly after inheriting it for its market value, the grounds for calculating capital gains tax would be the stepped-up value.
- Foreign inheritance: If a U.S. citizen or resident receives a gift or bequest from a foreign person that exceeds $100,000 in a calendar year, they must report it to the IRS on Form 3520.
- Final individual federal and state income tax returns: Following the individual's death, these particular kinds of taxes are due by tax day of the year.
- Federal estate/trust income tax return: This is due by April 15th of the year following the death of the deceased.
It is very important to note that there are several exemptions when it comes to paying tax. Also, in the California inheritance law, there is an offer of exclusion. This goes up to the sum of $250,000. This exclusion only applies, however, to capital gains from the sale of a primary residence.
Can I Sell A House Before Probate?
One of the most common questions regarding property inheritance is “Can I sell a house before probate is completed?”, a process that can take months or even years to complete. Fortunately, California’s Independent Administration of Estates Act (IAEA) allows for the court appointed personal representative (executor or administrator) to sell the property before probate is fully settled.
So yes! You absolutely can sell your property before probate is completed.
What is the IAEA? (Independent Administration of Estates Act)
The IAEA is a California law designed to streamline the administration of estates, reducing the need for constant court supervision. If the probate court grants the personal representative authority under the IAEA, they can manage and settle much of the estate—including selling real property—with fewer delays.
The court may grant either:
- Full Authority: The representative can sell the property without prior court approval, provided certain procedural steps are followed.
- Limited Authority: The representative can still sell the property, but the transaction requires court confirmation.
To ensure a fair and fast sale, you can sell the inherited house to a cash buyer like The California Homebuyer at a great price without any hassle. We can provide you with a cash offer within 24 hours and close the property in 10 days.
Selling an Inherited Property Under the IAEA
If the personal representative is granted full authority they can utilize the IAEA to achieve a faster sale. In turn this can allow heirs access funds sooner and while also taking advantage of favorable market conditions without waiting for the probate process to conclude.
Here's how it works:
1. Notice of Proposed Action: The personal representative must send a "Notice of Proposed Action" to all interested parties, such as heirs and beneficiaries. This notice includes details about the property sale, such as the proposed buyer, sale price, and terms.
2. Objection Period: Beneficiaries have a designated period (typically 15 days) to raise objections to the sale. If no objections are raised, the sale can proceed without court approval.
3. Completion of Sale: Once the notice period expires, the property can be sold, even if probate is not finalized.
For representatives with limited authority, the process is more involved. The sale must go through court confirmation, which requires additional steps such as obtaining an appraisal, advertising the sale, and attending a court hearing. That’s why it’s always a better idea to petition for full authority instead of limited authority. However, even in these cases, the IAEA provides a more efficient framework compared to traditional probate procedures.
Why the IAEA Matters for Sellers
If you've inherited a property and are considering selling, it's important to understand whether the personal representative has IAEA authority. At The California Homebuyer, we specialize in helping homeowners sell inherited properties quickly and with minimal stress. Whether probate is complete or ongoing, our cash offer process allows you to move forward confidently, knowing that the sale of the property is in good hands.
Navigating probate can feel overwhelming, but the IAEA makes it possible to sell an inherited property efficiently. With the right guidance and a reliable cash buyer, you can simplify the process and focus on what matters most: settling the estate and moving forward.
Preparing the House for Sale
Whether you decide to sell your house as-is or invest in major repairs, there are different options you could explore when preparing the house for sale. The most important thing is that you need to be transparent about the entire process, especially if there are any known issues..
- Selling the Property As-is
When preparing the house for sale, getting the home to a pristine look can feel overwhelming. Plus, it could be quite expensive. So, instead of pumping money into the home when all you really want is to get rid of it, there’s another option to consider - selling the property as-is.
That way, buyers are aware that there’ll be no concessions, bargaining, or changes made to the room. It will be a clear case of ‘what you see is what you get.’
When marketing the house for sale, highlight the positives. Focus on the home's location, size, layout, amenities, and potential. Also, decide if you want to make any minor repairs before putting the house up for sale.
- Selling The House if it’s in Good Condition
When selling a house in good condition, you need to consider cleaning, making minor repairs, and presenting the property in the best light.
Clean both the interior and exterior of the property, including the garden. Consider making minor repairs to issues like peeling paint, stained flooring, or outdated light fixtures.
Ultimately, presentation matters. Make sure the house looks respectable to potential buyers.
- Selling The House if it’s in Poor Condition
If the property is in a poor condition, you can explore the option of outrightly selling it for cash to The California HomeBuyer. That way, you save yourself stress. But, ensure you disclose any necessary information about the house's condition.
- Selling After Making Repairs
This is the most expensive and time-consuming option but it could also have the biggest payout. You will need to spend a lot of money renovating your home, from fixing the plumbing to the electrical system.
Also, you’ll need to consider which cosmetic upgrades you want to invest in to attract potential buyers. Truth is, it can be hard to strike a balance between appealing to potential buyers visually and making extensive repairs that are attractive to them logically.
Buyers can picture themselves living in your home and modifying it based on their needs. However, major repairs give them confidence. A buyer can feel good about purchasing a house with a new air conditioning system because they won’t have to spend money on replacing it in the future.
What Next?
This is the part where you would need to decide whether you want to make the necessary repairs or sell the property as-is. Of course, we also recommend that you hire the services of a probate lawyer to help you navigate through the probate court process.
However, at The California Homebuyer, we know that this might be a tough period for you and the entire process of repairs and additional negotiation might be strenuous for you. This is why we buy inherited property in California for cash so you don't have to worry about making any repairs.
In other words, as long as the documents required for selling inherited property in California are available, we are always available for you!
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Adrian Pedraza is a Southern California native with a passion for residential real estate. Since 2016, Adrian has been actively investing in properties across the region. He founded The California Homebuyer, a company dedicated to offering homeowners a quick cash sale option. Adrian's enthusiasm for exploring the diverse neighborhoods and unique pockets of SoCal has made him a local expert in various markets and real estate trends. He has been featured on CNN, U.S.News, Realtor.com, Newsweek, and more.