California’s New Law Promises To Simplify Inheriting a Home for Some

California's New Inheritance Law Makes Passing Down Homes Easier—For Some

April 12, 2025

A significant change to California's probate laws took effect earlier this month, offering relief to families inheriting modest homes while leaving owners of higher-value properties still facing the costly and time-consuming probate process.

Assembly Bill 2016 (AB 2016), which went into effect on April 1, 2025, expands the definition of "small estates" in California to include primary residences valued at up to $750,000. This marks the first time in the state's history that primary residences can qualify for expedited transfer without going through full probate proceedings.

"This change represents a major shift in how California handles property transfers after death," said Jennifer Moravec, estate planning attorney and founder of Moravec's Law in Los Angeles. "For many families whose main asset is a modest home, this could save thousands in legal fees and cut the transfer process from over a year to just a few months."

What's Changing

Prior to the new law, the threshold for "small estates" that could avoid full probate was approximately $184,500 in total probate assets—which typically didn't include real estate. This forced most California homeowners to either establish living trusts or leave their heirs facing a lengthy probate process.

Under the new provisions:

Primary residences valued up to $750,000 can now be transferred through a simplified "Petition to Determine Succession to Real Property" process
The expedited process typically takes 2-3 months instead of the 12-18 months common in full probate
Other assets up to approximately $200,000 can still qualify under existing small estate procedures
Heirs must notify all potential beneficiaries when filing a petition, increasing transparency but potentially inviting disputes
Only primary residences qualify—vacation homes, rental properties, and commercial real estate are excluded
The law applies to deaths occurring on or after April 1, 2025

Impact Across California

The $750,000 threshold captures a significant but limited portion of California's housing market. With the median home price in California hovering around $786,400 according to January 2025 data from Houzeo, many properties will still exceed the threshold—particularly in coastal urban areas.

"This is a great start, but in regions like Orange County where the median home price exceeds $1.1 million, many families won't benefit," noted Rob Werner, founder of The Werner Law Firm in Long Beach. "The impact will be most significant in inland communities where home values are more moderate."

For example, in Riverside County, where the median home price is approximately $628,000, a much larger percentage of homeowners will benefit from the new exemption.

Who Benefits

The law primarily benefits:

Heirs inheriting modest family homes valued under $750,000
Middle-income families whose primary asset is their home
Residents of inland and rural communities where property values are lower
Those who didn't establish a living trust but own a qualifying primary residence

"This is targeted relief for working and middle-class Californians," said Kirsten Howe, host of Absolute Trust Talk podcast. "Many families who couldn't afford comprehensive estate planning now have an affordable path to property transfer."

Living Trusts Still Recommended

Despite the new law, estate planning experts continue to recommend living trusts as the most comprehensive solution for avoiding probate, especially for those with higher-value homes or multiple properties.

"A revocable living trust remains the gold standard for estate planning in California," explained Jessica Colbert, an associate attorney at Absolute Trust Counsel. "The new law provides a safety net for those who didn't create a trust, but doesn't replace the benefits of proper estate planning."

Living trusts offer several advantages over relying on the new exemption:

Cover all assets, not just primary residences under $750,000
Provide privacy (probate proceedings are public)
Allow for more complex distributions and conditions
Address incapacity during lifetime, not just transfers after death
Avoid the notification requirements and potential disputes of the petition process

How the Process Works

The simplified process still requires court involvement, but is significantly streamlined:

Heirs file a "Petition to Determine Succession to Real Property" with the superior court
The petition must include notification to all potential heirs and beneficiaries
A probate referee performs an appraisal to verify the property qualifies under the $750,000 threshold
If there are no objections and the court approves, the property transfers to heirs—typically within 60-90 days

"While this isn't as simple as using a small estate affidavit for personal property, it's dramatically more efficient than full probate," said estate attorney L. Rob Werner. "For qualifying properties, we're looking at months rather than years to complete the transfer."

Looking Ahead

The $750,000 threshold is set to remain in place until March 31, 2028, after which the Judicial Council will adjust the amount based on factors including inflation and property values.

As California continues to grapple with high housing costs, the new law represents an acknowledgment that existing probate thresholds had become outdated in a state where even modest homes often exceed previous limits.

For now, families inheriting primary residences valued under $750,000 have reason to celebrate a simpler path forward, while those with more valuable properties still face the same estate planning decisions that existed before the law changed.

Sources:

California Assembly Bill 2016 (AB2016), California Legislative Information: leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240AB2016
California Lawyers Association, "AB 2016 — An Update to Small Estate Petitions": calawyers.org/real-property-law/ab-2016-an-update-to-small-estate-petitions/
Moravec's Law, "New Probate Exemption Amounts in California Under AB 2016": moravecslaw.com/post/new-probate-exemption-amounts-in-california-under-ab-2016-what-you-need-to-know
The Werner Law Firm, "New 2025 California Probate Laws for Property under $750,000": wernerlawca.com/new-2025-california-probate-laws-for-property-under-750000/
Absolute Trust Counsel, "Avoiding Probate Hassles: Understanding California's 2025 Law Change": absolutetrustcounsel.com/157-avoiding-probate-hassles-understanding-californias-2025-law-change/
Houzeo, "California Housing Market: Home Prices & Trends": houzeo.com/blog/california-real-estate-market/
Redfin, "California Housing Market: House Prices & Trends": redfin.com/state/California/housing-market
Zillow, "California Housing Market: 2025 Home Prices & Trends": zillow.com/home-values/9/ca/
Century Communities, "Southern California Housing Market 2025: Prices & Trends": centurycommunities.com/the-front-porch/southern-california-housing-market-trends-pricing/
Nolo, "How to Create a Living Trust in California": nolo.com/legal-encyclopedia/california-make-a-living-trust-32153.html
California’s New Law Promises To Simplify Inheriting a Home for Some—but Not All\

SIDEBAR: California's Inheritance Paradox - One Law Simplifies While Another Complicates

As California implements Assembly Bill 2016 to streamline property transfers for modest homes, many heirs face a contradictory challenge from Proposition 19, which significantly altered property tax rules for inherited properties.

Proposition 19: The Tax Reassessment Challenge

While AB 2016 makes it easier to inherit a primary residence valued under $750,000 without lengthy probate, Proposition 19 (passed in 2020) dramatically changed how inherited properties are taxed—potentially creating substantial new tax burdens for heirs.

Under Proposition 19's rules, which went into effect February 16, 2021:

Inherited properties are generally reassessed at current market value for property tax purposes unless specific conditions are met
Only a primary residence can qualify for property tax protection, and only if the heir moves into the home within one year
Even for qualifying primary residences, only the first $1 million in value above the existing tax assessment is protected
Rental properties, vacation homes, and commercial properties receive no protection from reassessment

"Proposition 19 created a significant change to California's property tax system by eliminating most parent-to-child exclusions that had been in place for decades," explains tax attorney John Balian. "Many families are caught by surprise when they discover their inherited property's tax bill may increase dramatically."

The Financial Impact on Heirs

The contrast between these two laws creates a paradox for California families:

Scenario 1: A home worth $700,000 with a tax assessment of $150,000 can now be transferred through simplified probate under AB 2016, saving time and legal fees. However, if the heir doesn't move in within a year, Proposition 19 would trigger reassessment to full market value, potentially increasing the annual property tax from approximately $1,800 to $8,400.

Scenario 2: A family-owned rental property valued at $1.2 million with a long-held tax assessment of $200,000 faces no probate simplification from AB 2016 and would be fully reassessed under Proposition 19, potentially increasing annual property taxes from $2,400 to over $14,000.

Planning Implications

Estate planning experts advise that families need to consider both laws when preparing for inheritance:

1. Living trusts remain essential for avoiding probate, particularly for properties exceeding $750,000 or for non-primary residences

2. Family discussions are critical to determine if heirs plan to live in the inherited property, as this decision now has significant tax implications

3. Alternative strategies are emerging, including family property LLCs and other arrangements designed to minimize the impact of Proposition 19

"What the state gives with one hand, it takes with the other," notes Kirsten Howe of Absolute Trust Counsel. "While AB 2016 reduces bureaucracy, Proposition 19 can create tax consequences that make inheriting property financially unfeasible for some families."

As California's housing market continues to see high valuations in many regions, these contradictory inheritance laws create a complex planning landscape that requires careful navigation by families hoping to preserve generational wealth.

Sources:

California State Board of Equalization, "Proposition 19" - boe.ca.gov/prop19
Cunningham Legal, "California Prop 13 & Prop 19: Strategy Plan" - cunninghamlegal.com
Nomad Capitalist, "California Prop 19: How To Protect Your Estate in 2025" - nomadcapitalist.com
Lucas Real Estate, "Navigating New California Proposition 19" - lucas-real-estate.com
Schneiders & Associates, "How California's Proposition 19 Interferes with Gift-Giving of Real Estate" - rstlegal.com

SIDEBAR: Marriage and Trusts: The Spousal Safety Net Amid Tax Law Changes

While California's inheritance laws create a complex landscape for many heirs, married couples with living trusts enjoy significant protection from reassessment thanks to a long-standing spousal exclusion that remains intact despite recent changes to property tax laws.

The Spousal Exclusion: A Crucial Protection

Unlike the parent-child exclusions that were dramatically limited by Proposition 19 in 2021, the spousal transfer exclusion provides complete protection from property tax reassessment when real estate passes from one spouse to another, regardless of property value or use.

"The spousal exclusion stands as one of the most powerful property tax protections in California law," explains Steve Hartnett, education director with the American Academy of Estate Planning Attorneys. "This exclusion was untouched by Proposition 19, providing married couples with a critical planning advantage."

How It Works in Living Trusts

For the typical married couple with a living trust:

When the first spouse dies, their share of the property passes to the surviving spouse without triggering reassessment
The property retains its original tax basis even if the trust technically becomes "irrevocable" for the deceased spouse's share
The surviving spouse continues to enjoy the same property tax rates they paid before their partner's death
The tax implications only come into play when the property eventually passes to non-spouse heirs

"The trustee is totally immaterial to property tax status," notes estate attorney Chelsea Suttmann. "What matters is who has beneficial ownership of the property."

Planning for the Second Death

While the spousal exclusion provides immediate protection, careful planning remains essential because:

When the surviving spouse dies, the trust typically becomes fully irrevocable
At this point, property passing to children will face Proposition 19's restrictions:

The heir must use the property as their primary residence within one year
Only $1 million in value above the tax basis remains protected
Properties not used as primary residences face full reassessment

Strategic Considerations for Married Couples

Estate planning experts recommend that married couples:

Review trust provisions to ensure clear documentation of spousal transfers
Consider lifetime gifting strategies if children might want to inherit rental properties
Explore family limited liability companies (LLCs) for investment properties
Document primary residence status with homeowner exemption filings
Maintain accurate property tax basis records for potential partial exclusions

"When one spouse passes, the survivor has a window of opportunity to implement additional tax planning before the second death triggers Proposition 19's more restrictive rules," advises John Balian, tax planning attorney. "This intermediate stage is often the ideal time to reassess and possibly restructure the estate plan."

While California's new inheritance laws have created challenges for many families, the preservation of the spousal exclusion provides married couples with a valuable planning tool that can help preserve lower property tax rates for longer periods and potentially create more options for eventual property transfers to the next generation.

Sources:

California State Board of Equalization, "Proposition 19" - boe.ca.gov/prop19
San Francisco Chronicle, "How Prop. 19 property tax measure will (or won't) affect real estate held in a trust" - sfchronicle.com
BDS Law Inc., "California Property Tax Transfers and Proposition 19" - bdslawinc.com
California Board of Equalization, "Frequently Asked Questions: Change in Ownership" - boe.ca.gov
Blacksburg Law, "Inherited Property & Prop 19: A Guide for California Homeowners" - blacksburg-law.com

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