Inherited a Home in California? Your Options, Prop 19, and Taxes

Inheriting a home is rarely just a real estate decision. It usually comes during a hard time, with paperwork, siblings, and a house full of memories. The good news is that you do not have to decide everything at once. The key is knowing which decisions have deadlines and which do not.

I'm Diana Galvez, a REALTOR® with HomeSmart Realty Group's Homeverse Team. Here is how I walk heirs through their options. I'm not an attorney or CPA, so treat this as a roadmap for the right questions.

First, Find Out Where the Home Stands

Before choosing a path, confirm how the home passes to you. A home held in a living trust usually transfers without court, while a home with no trust may need probate. California's small-estate limit for avoiding probate is currently $208,850 for people who died on or after April 1, 2025, and the rules for a primary residence have their own details, so ask an estate attorney which route applies. Also ask who has legal authority to sell, whether there is a mortgage, and whether taxes and insurance are current.

Your Three Main Options

Most heirs choose one of three paths. You can sell, you can move in and keep the home, or you can keep it and rent it out. If there are several heirs, all of them become owners together, so everyone needs to agree on the plan. Disagreements among siblings are one of the most common reasons inherited homes sit empty and lose value.

Prop 19 and Your Property Taxes

California property is taxed on a base value that usually resets to market value when ownership changes. Proposition 19 allows a child to keep the parent's lower tax base only if the home was the parent's principal residence and the child moves in and makes it their own principal residence. According to the San Francisco Assessor's fact sheet, the child must file for the homeowners' exemption within one year, and the reassessment exclusion claim is due within three years of the transfer. There is also a value limit: the parent's current taxable value plus $1 million. If the home's market value is above that limit, the difference is added to your taxable value. Rentals, vacation homes, and other properties do not qualify. Deadlines and forms can vary by county, so confirm with your county assessor.

Income Tax: Stepped-Up Basis

Property taxes and income taxes are separate systems. For income tax, an inherited home generally gets a stepped-up basis, meaning your cost basis resets to the home's value on the date of death. If you sell for close to that value, you may owe little or no capital gains tax. If the home appreciates after the date of death, the increase can be taxable. A date-of-death appraisal is a smart, inexpensive step because it documents your basis. California does not have a state inheritance or estate tax, but your CPA should confirm your federal situation.

If You Sell

Selling often makes sense when heirs live elsewhere, the home needs major work, or the carrying costs are adding up. Taxes, insurance, utilities, and upkeep continue while you decide. I help heirs price the home from the date-of-death value, decide what repairs are worth doing, and handle personal belongings and timing. If probate is involved, there may be court steps that affect the timeline, so we plan around them.

If You Keep It or Rent It

Keeping the home can be a great choice if you will live in it or if the numbers work as a rental. Run the numbers honestly: after property taxes, insurance, repairs, vacancies, and management, rental income is often lower than it looks. A rental also resets your property tax to market value and starts a new depreciation schedule, so talk to a CPA before you commit.

A Simple First-30-Days Checklist

Secure the home and confirm the insurance is active. Locate the trust or will and contact an estate attorney. Order a date-of-death appraisal. Keep paying the mortgage, taxes, and utilities. Avoid making major repairs or giving anyone keys until you know who has authority. Then talk to me about what the home could sell for or rent for, so you can compare your options with real numbers.

If you have inherited a home and are not sure where to start, let's have a no-pressure conversation about the property, the timeline, and your options.

You can reach me at (323) 807-4184 or casasbydianag@gmail.com. I'm here to help you take it one step at a time.

Diana Galvez, REALTOR®
Homeverse Team, HomeSmart Realty Group | DRE #02040313
Serving Long Beach, and the greater Los Angeles & Orange County area

This post is general information, not tax, legal, or financial advice. Probate, property tax, and income tax rules are specific to each situation, so please consult a licensed estate attorney and CPA.