How to Change Owners of Real Property in California After an Owner has Died 

Two key variables dictate how to change owners of California real property after the death of the owner. The two variables are:1) how the decedent owned or took title to the real property and 2) the fair market value of the property on the date of death. The options for owning are as an individual, as a co-owner, as a trust, as a business entity or as a revocable transfer on death deed. The less the appraised fair market value, the less involvement by the court.

The options for owning are as an individual, as a co-owner, as a trust, as a business entity or as a revocable transfer on death deed. Real property owned by one individual requires assistance from the probate court. The amount of involvement by the probate court depends on the real property’s appraised fair market value as of date of death.

The final word on the appraised fair market value is determined by an individual with the bewildering title of “probate referee.” The probate referee is an Officer of the Court appointed by the California State Controller. The less the appraised value, the less involvement by the court. The break out is less than $55,425; $55,425 to $166,250 and over $166,250.

Real property with a market value greater than $150,000 requires formal probate administration. Probate is the administration under court supervision of a decedent’s estate as directed in his or her Will or by the laws of intestacy.  Formal probate requires at a minimum two court hearings, three court orders and one year to complete.

If there is a surviving co-owner, that owner has the right of survivorship or does not. The right of survivorship automatically transfers the deceased co-owner’s interest to the survivor or survivors. This right must have very specific phrases on the deed to exist. The phrases are either “joint tenants” or “community property with the right of survivorship.” If either of these phrases is missing or the wrong phrase provided, such as “husband and wife” the deceased owner’s interest passes to his or her heirs through the probate court.

Even though the survivorship right is automatic, the public record is not automatically updated. For the survivor to sell or borrow on the real property, an affidavit of death must be submitted to the county recorder by the survivor. If there is only one survivor as is most often the situation, the survivor owns as an individual. On the death of the survivor an action in probate court is required.

For a trust, transfer is by affidavit death of trustee and deed recorded with the county recorder. The affidavit establishes the successor trustee identified in the trust as the person authorized to act on behalf of the trust. The successor trustee can then sell or transfer the real property to the beneficiaries of the trust by deed.

California’s legislature passed a new law for a five-year test of revocable, transfer on death deeds for real property. On death this deed transfers ownership to the heir named on the deed. The law ends on January 1, 2021. Revocable transfer on death deed executed before January 1, 2021 will remain valid after January 1, 2021.

Real property owned by a business entity such as a limited liability company or corporation avoid the probate courts and the recorder’s office. Ownership transfer is internal according to the procedures of the business entity.

Two key variables dictate how to change owners of California real property after the death of the owner. The two variables are:1) how the decedent owned or took title to the real property and 2) the fair market value of the property on the date of death. The options for owning are as an individual, as a co-owner, as a trust, as a business entity or as a revocable transfer on death deed. The less the appraised fair market value, the less involvement by the court.

Who Inherits California Real Property When There is No Will or Trust?

Without a will or trust the intestacy laws of California intervene. Intestacy law identifies who is the next of kin to inherit.

The surviving spouse is the default next of kin. If there is no surviving spouse, then the children of the deceased inherit. If there is no spouse or children, parents inherit and if no parents survive, brothers and sisters inherit. But this fairly straight forward order is complicated by California’s community property laws or the death of a person who is in a class of heirs, such as children.

The closet surviving next of kin creates a class of heirs. For example, the deceased has three children, two living and one deceased. Because there are living children, identification of heirs stops at the class of children. But deceased child’s own children, (grandchildren) become heirs and are part owners of the real property.  

The other complication is the distinction between community property and separate property. California is a community property state. Community property is property acquired during the marriage. Each spouse owns one-half. The default is on death of one spouse, the other inherits and becomes the sole owner.

Separate property complicates inheritance. Separate property is acquired either prior to the marriage, by inheritance or by gift. Separate property owned by a deceased spouse does not by default go only to the surviving spouse. For example, if the deceased had children, they inherit a portion of the real property. Both the surviving spouse and the children become owners of the property.

If the deceased did not have a will or trust for the transfer of real property, the intestacy laws of California intervene. The laws of intestacy identify who is the next of kin to inherit. Who is the next of kin is complicated if the real property is separate property or a next of kin has died with surviving children.

Variable of Fair Market Value as of Date of Death

Real property less than $55,425

California law has a shortcut, or expedited probate procedure for real property less than $55,425 in value known as “Affidavit Real Property of Small Value.” This procedure is primarily available for timeshares, mineral rights and land away from the coast.

Real property less than $166,250

On death a parent or relative with an estate less than $166,250 the heirs can obtain ownership of real property with one court order of "Succession to Real Property." Succession avoids lengthy and costly large estate probate administration and save heirs time, money, and stress.

Real property greater than $166,250

Real estate valued greater than $166,250 requires formal probate administration.  Probate is the administration under court supervision of a decedent’s estate as directed in his or her Will or by the laws of intestacy.  Formal probate requires at a minimum two court hearings, three court orders and two years to complete.

Probate and California

Probate Administration from Beginning to End

Probate administration begins with the filing of a petition for the court to appoint a personal representative of the decedent. If the proposed appointee is nominated in the will, the petition is for the appointment of an “executor.” If the proposed appointee is not named in the will, the petition is for appointment of an “administrator with will annexed.” If there is no will, the petition is for appointment of an “administrator.”

If the decedent owned real property the petition should request authorization to Administer under the Independent Administration of Estates Act. This authority allows for the sale of real property in probate without a court hearing and without a court auction. The probate court is required to have a hearing within 45 days of the date the petition is filed. Fifteen days prior to the hearing all heirs of the decedent and all beneficiaries of the Will must be provided written notice of the hearing and a copy of the petition. Notice of the court hearing must also be published in an adjudicated, local newspaper, three times over a period of 15 days prior to the hearing.

At the hearing and if no one objects, the personal representative is appointed.  “Letters” are signed by the judge and provided to the personal representative. These “Letters” authorize the personal representative to gather the decedent’s assets and to pay the just debts of the decedent.

Prior to issuing “Letters” the court may require the personal representative to post bond for his or her performance. A bond is not cheap and is in effect a credit application. A personal representative with a poor credit record may not be able to obtain a bond and may not be appointed. If the Will waives bond or if all beneficiaries waive bond the courts will generally honor the waiver.

After the “Letters” are issued the personal representative has four months to identify all assets and have those assets appraised. If all creditors have been paid, at the end of four months, the personal representative files a second petition.

This second petition provides; an accounting of all transactions in the estate, a proposal for distribution of assets of the estate, for authority to pay the personal representative’s fees and for authority to pay the attorney fees. Upon receipt of this petition the court sets a date for a hearing. At the hearing and if no one objects, the court approves the petition.

“Probate” is the transfer of California real property from a person who has died to that person’s heirs under the supervision and protection of the Superior Court of California. Probate begins with filing a Petition for appointment of a personal representative of the decedent.  Probate ends with a second petition to distribute all assets of the estate. The process takes one to two years.