Inherited Investment Property

Understand the Stepped-Up Basis

For inherited property, the basis is generally stepped up to the fair market value at the date of the deceased owner's death (with alternative valuation dates possible), which can substantially reduce the capital gain if you sell. This is a significant advantage unique to inherited property, and a qualified tax professional should confirm how it applies.

Who Has Authority

If the property passed through probate, the executor or administrator controls it until the court distributes it to heirs. If it passed through a trust, the trustee controls it per the trust terms. Heirs cannot sell or sign leases until their authority is established. This is a legal question for a qualified attorney.

The Decision: Keep, Rent, or Sell

• Keep it: preserve family ownership, but arrangements among multiple heirs must be written
• Rent it: produce income, which requires management and operating capital
• Sell it: convert to cash, with stepped-up basis reducing the gain

If You Keep and Rent

Run the property through the same analysis as any rental: market rent, expenses, insurance, and management. Multiple heirs mean shared decisions about costs and income, and an operating agreement or management arrangement should be written down.

If You Sell

The sale proceeds split per the estate or trust documents. California's probate and trust sales have specific rules, and the property may be sold through a traditional listing while the estate is administered. The inherited property and probate guide on this site covers the process in depth.

An Education Note

This is general education, not tax, legal, or investment advice. Inheritance involves estate, probate, and tax rules that vary with the facts, and a qualified California attorney and tax professional should be involved from the start.