California property inheritance laws combine the state’s community property system, the intestate succession rules in the Probate Code, and a set of tax rules that treat inherited real estate very differently depending on how it was held and what the heir does with it. The state itself charges no estate or inheritance tax, but probate fees calculated on gross value and a property tax reassessment triggered by Proposition 19 can take a substantial bite out of what heirs actually receive. What follows is how the rules decide who inherits, how the property gets transferred, and what taxes and costs to plan for.
Who Inherits California Property
California is a community property state, and that classification shapes almost every inheritance question. Property acquired during a marriage while living in California is community property, meaning each spouse already owns an undivided half.1California Legislative Information. California Code Family Code 760 – Community Property Separate property is anything one spouse owned before the marriage or received during it as a gift or inheritance, plus any income that separate property later generates.2California Legislative Information. California Code FAM 770 – Separate Property
A decedent can only give away what they actually owned. For community property, that is their half; the surviving spouse already owns the other half. For separate property, the decedent controlled all of it, and either a will or the intestate rules decide where it goes. Disputes usually turn on tracing: down payments made with premarital savings, prenuptial agreements, and the source of funds all factor into whether an asset is community or separate. Getting the classification wrong can mean the difference between a surviving spouse keeping a home outright and sharing it with stepchildren.
If There Is No Will or Trust
When someone dies intestate, California’s succession statute takes over. The surviving spouse or registered domestic partner receives the decedent’s half of all community property outright.3California Legislative Information. California Code Probate Code 6401 – Intestate Share of Surviving Spouse The surviving spouse’s share of the decedent’s separate property depends on who else survived:
- All of it, if the decedent left no children, parents, or siblings.
- One-half, if the decedent left one child (or descendants of one deceased child), or left no children but left parents or siblings.
- One-third, if the decedent left more than one child, or one child plus descendants of at least one other deceased child.
Whatever separate property does not go to the surviving spouse follows a fixed order: first to children in equal shares, then parents, then siblings and their descendants, then grandparents and their descendants.4California Legislative Information. California Code Probate Code 6402 – Intestate Estate Distribution If there is no surviving spouse at all, the whole estate follows the same order.
When an heir in one of those categories died before the decedent, California uses “representation” to pass that person’s share to their own descendants. The estate is divided at the first generation with any living members, and each deceased member’s share at that level flows down to their children equally.5California Legislative Information. California Code Probate Code 240 – Distribution by Representation A decedent with three children, one of whom predeceased them leaving two grandchildren, would have those grandchildren split their parent’s one-third share.
Ways Property Passes Without Probate
Several transfer methods let California real estate skip probate entirely. Each has its own rules and limitations.
Revocable Living Trust
A revocable living trust holds title to the property during the owner’s lifetime and passes it to beneficiaries through a successor trustee after death. The key step people miss is funding: the property must actually be deeded into the trust’s name by recording a new deed with the county recorder. A trust that describes property it never received accomplishes nothing. Properly funded trusts are the most common way Californians avoid probate.
Transfer-on-Death Deed
The Revocable Transfer-on-Death deed lets an owner name a beneficiary who takes the property automatically at death. It only applies to residential property of one to four units, and it cannot be used for commercial real estate or agricultural land exceeding 40 acres.6California Legislative Information. California Code Probate Code 5642 – Revocable Transfer on Death Deed The deed must be signed, notarized, and recorded with the county recorder within 60 days of notarization, or it has no effect.7Los Angeles County Registrar-Recorder/County Clerk. Revocable Transfer on Death (TOD) Deed A will cannot override a recorded TOD deed, though the owner can revoke it during life. The current statutory authority is set to expire on January 1, 2032, but deeds recorded before that date remain valid.
Joint Tenancy
Property held in joint tenancy with right of survivorship passes automatically to the surviving owner when the other joint tenant dies. Transferring title takes only a recorded affidavit of death and a certified death certificate. Joint tenancy is simple but carries real risks: any joint tenant can sever the tenancy during life, and adding a joint tenant is a present gift that may trigger gift tax exposure and a Proposition 19 reassessment.
Small Estate Procedures
For personal property such as bank accounts and securities, an heir can collect using a small estate affidavit if the total value of the decedent’s California property is $208,850 or less (for deaths on or after April 1, 2025).8California Legislative Information. California Code Probate Code 13100 – Affidavit Procedure for Collection or Transfer of Personal Property The claimant must wait at least 40 days after the death and present the affidavit to whoever holds the property. Real property under the same threshold uses a separate court petition under Probate Code Sections 13150 through 13158. That petition is faster and cheaper than full probate but still involves a court filing and a hearing.
When Probate Is Required
If real property was not held in a trust or joint tenancy and no TOD deed applies, the estate goes through probate. A petition asks the court to appoint a personal representative and, if there is a will, to admit it.9California Legislative Information. California Code Probate Code 8000 – Commencement of Proceedings A court-appointed probate referee appraises the property, creditors are notified, valid debts and taxes are paid, and the representative then petitions for final distribution. A new deed is recorded to transfer title to the heirs. Start to finish, the process commonly takes 12 to 18 months.
Creditors have until the later of four months after the personal representative is appointed or 60 days after receiving direct notice to file claims.
Statutory Probate Fees
California’s statutory fees catch many families off guard because they are calculated on the gross appraised value of the estate, not the net equity. Both the attorney and the personal representative are entitled to fees on the same sliding scale:
- 4% of the first $100,000
- 3% of the next $100,000
- 2% of the next $800,000
- 1% of the next $9,000,000
- 0.5% of the next $15,000,000
- Above $25,000,000, a reasonable amount set by the court
These fees are based on appraised value before subtracting any mortgage balance.10California Legislative Information. California Code Probate Code 10810 – Attorney Compensation A home appraised at $900,000 with a $600,000 mortgage generates fees on $900,000, not on the $300,000 of equity. At that value the attorney fee alone would be $21,000, and the executor is entitled to the same. This is one of the main reasons estate planners in California push clients toward revocable living trusts.
Proposition 19 and Property Tax Reassessment
This is where most heirs of California real estate get blindsided. Before February 2021, Propositions 58 and 193 let parents pass a primary residence to their children at the existing assessed value with no dollar cap, plus up to $1 million in assessed value of other real property. Proposition 19 narrowed that benefit sharply.
A parent-to-child (or grandparent-to-grandchild) transfer now avoids full reassessment only if all of these apply:
- The property was the transferor’s principal residence.
- The child or grandchild makes the property their own principal residence and files for the homeowners’ or disabled veterans’ exemption within one year of the transfer.
- If the current market value exceeds the existing assessed value plus roughly $1,044,586 (the inflation-adjusted cap for 2025–2027), the excess is added to the assessed value.
The grandparent-to-grandchild exclusion applies only when all of the grandchild’s parents who would qualify as children of the grandparents have died.11California State Board of Equalization. Proposition 19
The practical effect is stark. Investment properties, vacation homes, and rental properties inherited from parents are reassessed to current market value with no exclusion at all. A family that rents out an inherited home rather than moving into it loses the exclusion entirely. For a home with a long-held Proposition 13 assessed value of $200,000 and a current market value of $1.5 million, reassessment can raise annual property taxes by $15,000 or more. To claim the exclusion, heirs need to file Claim Form BOE-19-P within three years of the transfer or before transferring the property to a third party, whichever comes first.11California State Board of Equalization. Proposition 19 If the homeowners’ exemption is filed after the one-year window, the exclusion applies only going forward, not retroactively.
Estate, Inheritance, and Capital Gains Taxes
California has not required an estate tax return since January 1, 2005, and imposes no inheritance tax.12California State Controller’s Office. California Estate Tax Heirs owe no state tax simply for receiving property.
Federal estate tax applies only to estates exceeding $15,000,000 per person in 2026.13Internal Revenue Service. What’s New — Estate and Gift Tax Married couples can effectively double that through portability by filing Form 706 for the first spouse to die, even if no tax is owed, to preserve the unused exclusion. The return is due nine months after death, with an automatic six-month extension available.14Internal Revenue Service. Frequently Asked Questions on Estate Taxes Estates above the threshold face a top rate of 40%.
The bigger tax issue for most inheritors is capital gains, and here the rules work in the heir’s favor. When you inherit property, your tax basis for a future sale is generally “stepped up” to the fair market value on the date of death rather than what the original owner paid.15Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent If a parent bought a house for $150,000 and it was worth $900,000 at death, the heir’s basis is $900,000. Selling for $920,000 produces only $20,000 of taxable gain.
California’s community property rules add a further benefit. Under federal law, when one spouse dies, both halves of community property receive a stepped-up basis, not just the decedent’s half.15Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent In separate-property states, only the decedent’s half steps up. For a surviving spouse who later sells the family home, this double step-up often saves tens or hundreds of thousands of dollars in capital gains tax.
Medi-Cal Estate Recovery
If the person who died received Medi-Cal benefits after age 55, the state may file a claim against their estate to recover the cost of nursing facility care, home and community-based services, and related hospital and prescription drug costs. For members who died on or after January 1, 2017, recovery is limited to assets that pass through probate. Property that transfers through a trust, joint tenancy, or TOD deed is not subject to recovery.16California Department of Health Care Services. Medi-Cal Estate Recovery
The state cannot pursue a claim at all if the decedent is survived by a spouse or registered domestic partner, a child under 21, or a blind or disabled child of any age. A hardship waiver process is also available where recovery would create substantial hardship for the heirs.16California Department of Health Care Services. Medi-Cal Estate Recovery Because recovery reaches only probate assets, a properly funded trust avoids it under current rules.
Inheriting a Home With a Mortgage
Federal law protects heirs who take title to a mortgaged home. The Garn-St. Germain Act bars lenders from calling the full balance due when property transfers to a relative because of the borrower’s death.17Office of the Law Revision Counsel. 12 USC 1701j-3 – Preemption of Due-on-Sale Prohibitions The same protection applies when a spouse or child becomes an owner, or when the property passes through joint tenancy or into a trust in which the borrower remains a beneficiary.
That means you can keep paying the existing mortgage at its current rate without refinancing. It does not erase the debt. If payments stop, the lender can foreclose. Federal regulations also require servicers to recognize heirs as “successors in interest” and to offer them the same loss mitigation options, such as loan modifications and forbearance, available to original borrowers.18Consumer Financial Protection Bureau. Definitions Heirs who contact the servicer early and document their ownership are in the strongest position to keep the loan current while the rest of the estate gets sorted out.