Inheriting a house through a trust in California can feel both meaningful and overwhelming. While a trust helps families avoid probate and simplifies the transfer of property, it also introduces legal steps, financial responsibilities, and emotional decisions.
Understanding how trust inheritance works, what taxes apply, and what your options are as a beneficiary can help you make confident choices. If you’re looking for a simple, fast solution, we buy inherited houses as-is throughout California, handling all the complexities so you can move forward with peace of mind.
Key Takeaways:
- Trust property in California avoids probate court – transferring directly to beneficiaries through trust administration instead of a lengthy court process.
- Proposition 19 changed California’s property tax rules in 2021 – limiting the parent-child exclusion only to homes where the heir moves in within one year as their primary residence.
- Step-up in basis resets the home’s tax value to its market price at the time of inheritance – significantly reducing potential capital gains taxes when you sell.
- Beneficiaries have three main options – move in and qualify for tax benefits, rent the property for passive income, or sell for cash to eliminate maintenance and emotional stress.
What It Means to Inherit a House in a Trust in California
When someone inherits a house in a trust in California, the property transfers directly to beneficiaries through a legal process called trust administration, avoiding probate court. A trust is a legal arrangement created by someone (the grantor) to manage and distribute their assets after death. The grantor appoints a trustee to handle the trust’s assets and distribute them to beneficiaries according to the trust’s terms.
The key roles in a trust include:
- Grantor: The person who creates the trust and transfers property into it
- Trustee: The person responsible for managing the trust and distributing assets
- Beneficiary: The person who receives assets from the trust
Trusts in California offer major advantages over traditional wills. Since trust property bypasses probate, beneficiaries receive their inheritance faster, with lower legal costs and more privacy.
How the Trust Administration Process Works
The trust administration process in California includes notifying heirs, appraising the property, and transferring title via a Trustee’s Deed. Trust administration follows a specific sequence of steps that the successor trustee must complete.
1. Gather Essential Documents
The trustee collects the trust agreement, death certificate, property deed, and any related financial records. These documents establish the trustee’s authority and provide the roadmap for distributing assets.
2. Notify Beneficiaries and Heirs
California Probate Code Section 16061.7 requires the trustee to send written notice to all beneficiaries and heirs within 60 days of the grantor’s death. This notice includes information about the trust, the trustee’s contact details, and the beneficiaries’ rights.
3. Manage and Appraise the Property
The trustee handles ongoing bills, mortgage payments, insurance, and property maintenance. They also arrange for a professional appraisal to establish the property’s fair market value at the date of death, which is crucial for tax purposes.
4. Transfer the Property Title
Once all debts are settled and the trustee has authority to distribute, they transfer the property to beneficiaries using a Trustee’s Deed. This deed, along with a Preliminary Change of Ownership Report (PCOR), gets filed with the county recorder’s office to change ownership officially.
5. Distribute Remaining Assets
After the property transfer is complete and all trust obligations are met, the trustee distributes any remaining cash or other assets according to the trust’s instructions. This final step closes out the trust administration.
Tax Rules When Inheriting a House in a Trust
Under California law, inherited property in a trust may qualify for Prop 19’s tax exclusion and receive a step-up in basis for capital gains purposes.
Property Taxes and Proposition 19
Proposition 19, which took effect in February 2021, significantly changed how property taxes work for inherited homes in California. Children can keep their parents’ lower property tax rate only if they move into the home within one year and use it as their primary residence. The exclusion applies to a property value difference of up to $1 million between the parent’s taxable value and the current market value.
If the beneficiary doesn’t move in or if the value difference exceeds $1 million, the county assessor reassesses the property at the current market value. This often means a substantial increase in annual property taxes.
Step-Up in Basis and Capital Gains Tax
Step-up in basis is one of the most valuable tax benefits of inheriting a house in a trust in California. It resets the home’s cost basis to its fair market value on the date of the grantor’s death, rather than what they originally paid for it.
Here’s how it works:
- Your parents bought a home in 1980 for $100,000
- The home is worth $700,000 when you inherit it
- Your new tax basis becomes $700,000
- You sell shortly after inheriting for $710,000
- You only owe capital gains tax on the $10,000 gain, not the full $610,000 appreciation
This makes selling inherited property soon after receiving it much more tax-efficient. If you need guidance on the tax implications of selling rental property, check out our article on capital gains tax in California.
Federal vs. State Inheritance Tax
California does not impose a state inheritance tax or estate tax. Beneficiaries receive their inheritance without paying state taxes on the transfer.
Federal estate tax applies only to estates exceeding $13.99 million in 2025, per IRS inflation adjustments. Most California families won’t face federal estate tax, but high-value estates should consult with a tax professional to understand their obligations.
Your Options After Inheriting a House in a Trust
After inheriting a house in a trust in California, you have three primary paths forward.
1. Move In
Moving into the inherited home makes sense if you want to keep it in the family and take advantage of Proposition 19’s property tax benefits. To qualify for the parent-child exclusion, you must establish the home as your primary residence within one year of the transfer. This lets you maintain the lower property tax rate your parents enjoyed.
This option works well if the home is in good condition, located where you want to live, and you can afford the ongoing costs of ownership.
2. Rent It Out
Renting the property creates passive income but comes with landlord responsibilities. You’ll need to handle maintenance, deal with tenants, pay higher property taxes (since you won’t qualify for the Prop 19 exclusion), and manage all the administrative tasks of being a landlord.
This path makes sense if the property is in a desirable rental market and you’re prepared for the time commitment and potential headaches.
3. Sell the Property
Selling is the most common choice for beneficiaries who don’t want the responsibility, can’t afford the upkeep, or live far away. The successor trustee has legal authority to sell property directly from the trust, or they can first transfer title to beneficiaries who then sell individually.
Selling provides immediate cash, eliminates ongoing expenses and emotional stress, and lets you move forward with your life. For a detailed comparison of your options, read our guide on whether to sell or keep an inherited house in California.
Selling a House Held in a Trust in California
To sell a house held in a trust in California, the successor trustee must navigate multiple complex steps, coordinate with various professionals, and manage significant paperwork before the sale can close. The traditional sale process requires careful attention to legal requirements, property preparation, and market timing, all while managing the emotional weight of selling a family home.
Review the Trust Document and Obtain Legal Clearance
The successor trustee must carefully review the trust document to confirm they have authority to sell, understand any restrictions or special instructions, and potentially consult with an estate attorney. Most California trusts give the trustee broad powers to sell property when necessary, but interpreting trust language and ensuring compliance with all provisions requires professional guidance and creates potential liability concerns.
Prepare the Property and Obtain Required Appraisals
The trustee must obtain a professional appraisal to establish fair market value for tax purposes, then decide whether to invest in repairs, updates, or staging to maximize sale price. This creates a dilemma: spend money on a property you’re trying to sell, or accept a lower sale price. Either choice involves financial risk and significant coordination with contractors, inspectors, and real estate professionals.
List the Property and Manage the Traditional Sale Process
The trustee typically works with a real estate agent, pays listing commissions, coordinates showings and open houses, reviews offers, and negotiates terms. When selling from a trust, the trustee signs all documents in their capacity as trustee, not as an individual, which adds complexity to the purchase agreement and requires careful documentation at every step.
Navigate Escrow, Inspections, and Closing Requirements
Once a purchase agreement is signed, the transaction enters escrow, where buyers often request repairs after inspections, financing can fall through, and unexpected issues can derail the sale after months of effort. The title company prepares a Trustee’s Deed that transfers ownership from the trust to the buyer. After the sale finally closes and the contract is executed, the trustee distributes the proceeds to beneficiaries according to the trust’s terms.
Why Many Beneficiaries Choose to Sell As-Is
Many inherited homes come with years of deferred maintenance, outdated systems, or significant repair needs. Previous owners may have lived there for decades without updates, leaving beneficiaries facing five-figure repair bills, months of contractor coordination, and the stress of managing a traditional sale while grieving. The complexity of selling from a trust adds another layer of paperwork, liability, and uncertainty to an already overwhelming process.
There’s a simpler way. We specialize in buying inherited properties throughout California in any condition. We buy houses as-is for cash with a guaranteed purchase agreement, eliminating all the stress, costs, and uncertainty of the traditional sale process. You don’t spend money on repairs. You don’t coordinate contractors. You don’t pay commissions. You don’t deal with showings or open houses. You don’t worry about buyers backing out.
Our Simple 3-Step Process:
- Contact Us – Reach out for a no-obligation call where we learn about your property and situation
- Home Assessment – We evaluate your home and present you with a fair cash purchase agreement
- Close FAST – We handle everything and close on your timeline, often in as little as three weeks
For nearly 30 years, we’ve been handling purchases from trusts regularly. We close FAST and we provide certainty through a guaranteed sale and contract. We thoroughly evaluate if our solution is the right fit for each homeowner, and when it is, we eliminate every obstacle standing between you and moving forward.
For more information on preparing an inherited home, see our article on removing items from a house after death in California.
FAQs About Inheriting a House in a Trust in California
Do you pay taxes when you inherit a house in a trust in California?
No, there’s no state inheritance tax, but property and capital gains taxes may apply if you sell.
What happens to the mortgage on a house held in a trust?
The beneficiary or trustee can continue payments or use sale proceeds to pay off the balance.
How long does it take to transfer a house from a trust to a beneficiary?
Usually 30–90 days, depending on the complexity of the trust and county recording times.
Can you sell a house that’s still in a trust?
Yes. The successor trustee has authority to sell trust property, provided it aligns with the trust’s terms.
What is the benefit of a step-up in basis?
It resets the home’s tax value to market price at the time of inheritance, reducing potential capital gains taxes if you sell.
Sell Your Inherited California Home Fast
Inheriting a house in a trust brings legal responsibilities, tax considerations, and difficult decisions. Trust administration requires careful attention to detail, and the emotional weight of losing a loved one makes the process even harder. Selling doesn’t have to add to your stress.
We buy inherited houses throughout California in any condition. Our team handles all the paperwork, closes fast, and pays cash with no commissions or fees. You don’t make repairs. You don’t deal with showings. You move on your timeline. We thoroughly evaluate if our solution is the right fit for each homeowner, and when it is, we provide speed, certainty, and peace of mind through a guaranteed purchase agreement and sale.
