Inheriting a home in California comes with a mix of emotions and a long list of practical questions. One of the most common: how long do I have before I need to sell, and what happens if I wait?
The short answer is that California has no state inheritance tax and no hard deadline forcing you to sell. But there are financial consequences to holding an inherited property without a plan - especially under Prop 19, which changed the rules for inherited homes starting in 2021.
Understanding Prop 19 and Inherited Property in California
What Changed
Before Prop 19, children who inherited a parent's home could keep the parent's low property tax base regardless of how they used the property. That's no longer the case.
Under Prop 19, you can only keep the parent's tax base if you use the inherited home as your primary residence and file a homeowner's exemption within one year of the transfer. If you don't move in, the property gets reassessed to current market value - which in West Covina and the San Gabriel Valley can mean a property tax increase from $3,000/year to $12,000+ per year.
The One-Year Window
You have one year from the date of transfer (typically the date of death) to file for the parent-to-child exclusion and establish the home as your primary residence. If you miss this window, the reassessment happens automatically.
Capital Gains and the Stepped-Up Basis
Here's the good news: when you inherit a home, you receive a "stepped-up basis" equal to the fair market value at the date of death. This means if your parents bought the home for $150,000 in 1985 and it's worth $850,000 today, your basis is $850,000 - not $150,000.
If you sell relatively soon after inheriting (within a year or two), your capital gains tax exposure is minimal because the sale price will be close to your stepped-up basis. The longer you hold the property, the more it appreciates above that basis, and the more you'll owe in capital gains when you eventually sell.
Probate Timeline in California
If the home goes through probate (no living trust), the process typically takes 12-18 months in Los Angeles County. During this time, you're responsible for maintaining the property, paying the mortgage (if any), insurance, and property taxes.
If the home is in a living trust, you can typically sell much faster - sometimes within 60-90 days of the trustee taking control.
Holding Costs Add Up Fast
Every month you hold an inherited property without selling, you're paying property taxes (potentially reassessed to current value), homeowner's insurance (vacant home policies cost more), maintenance and repairs, utilities, and HOA dues (if applicable).
In the San Gabriel Valley, these costs can easily run $2,000-$4,000/month for a typical single-family home. Over a year of indecision, that's $24,000-$48,000 out of pocket.
What to Do Right After Inheriting a Home in the SGV
Step 1: Secure the Property
Change locks, check insurance coverage, and make sure utilities are active. A vacant home is a liability.
Step 2: Determine the Legal Path
Is the property in a trust or does it need to go through probate? This determines your timeline for selling.
Step 3: Get a Market Analysis
Know what the home is worth today. This helps you make informed decisions about whether to sell, rent, or move in.
Step 4: Decide Within 6 Months
The longer you wait, the more it costs. If you're not going to live in the home, selling within the first year maximizes your stepped-up basis benefit and minimizes holding costs.
FAQ
Q: Do I have to pay inheritance tax in California?
A: No. California has no state inheritance tax or estate tax. However, federal estate tax applies to estates over $13.61 million (2026).
Q: Can I sell the home before probate is complete?
A: In most cases, no - you need court approval or letters testamentary. However, if the home is in a trust, the successor trustee can sell without probate.
Q: What if multiple siblings inherited the home?
A: All parties must agree to sell, or one sibling can buy out the others. If there's disagreement, a partition action (court-ordered sale) is possible but expensive.
Q: Should I rent the inherited home instead of selling?
A: It depends on your financial situation and whether you want to be a landlord. Keep in mind that under Prop 19, the property tax will be reassessed to current value if you don't live there, which can significantly reduce rental cash flow.
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Richard Reyes | Broker/Owner, The Richard Reyes Network | 626-838-6830 | Richard@RichardReyesTeam.com | DRE# 01847699 | explore-homes.com
