Do You Need Probate To Transfer An Inherited Property? Understanding The Basics

Inheriting a home or other real estate can bring up a lot of questions, especially about what to do next. One of the most common is whether you’ll need to go through probate court to officially transfer the property. The answer depends on how the property was owned when your loved one passed away.

The synopsis below, for informational purposes only, breaks down the basics so you can better understand when probate is required and when it’s not. It describes the most common ways property can be titled, how that affects who inherits it, and what the process looks like in California. You’ll also learn about a recent law that protects families who inherit property without a will or trust, and how a Transfer on Death Deed can make things easier in the future.

By the end, you’ll have a clearer picture of what steps might apply to your situation and when you can skip the probate process altogether.

1/. Preliminary remarks

How you can transfer real estate in the estate to the new owner depends on how the title was held by the deceased.

If the estate you’re dealing with contains real estate, it’s probably the most valuable single asset in the estate, and surviving family members are going to be extremely interested in what happens to it. If more than one person inherits it, there are many opportunities for conflict. But first, let’s look at how the property can be transferred to its new owners.

You always need to find the deed that transferred the property to the deceased owner first. The reason is quite simple: the deed should state how the deceased person and any co-owners held title to the property. That will determine how the property can be transferred.

If the property was owned in the deceased person’s name alone, it will probably have to go through probate to be transferred to whoever inherits it. Who inherits is determined by the person’s will.

Likewise, when there is no will and no trust, whoever will inherit from the estate will be determined by state law, which in California is also the responsibility of the probate court. The probate court will determine a decedent's estate value and who will be the beneficiaries of the estate. The probate court will also appoint an executor who will be in charge of the estate distribution.

In both cases, probate is mandatory.

While probate is sometimes unavoidable, it’s important to know that in most other cases, especially when disagreements arise between heirs or co-owners, mediation can be a valuable tool. Mediation allows families to talk through differences with the help of a neutral third party, find fair solutions, and avoid the stress, cost, and time of going to court. It can be used to resolve questions about how to share, sell, or manage an inherited property, or simply to keep communication clear during an emotional time.

By understanding how inheritance and probate work, and by considering mediation when needed, families can often reach peaceful agreements and protect both their relationships and their loved one’s legacy.

2/. Below is a recap, for informational purposes only, of when the probate court will be involved and/or will not be involved when a person dies without a will or a trust.

2-1/ Joint tenants

If the deed says title was held in joint tenancy or joint tenancy “with right of survivorship,” then the surviving co-owner is now automatically the sole owner of the property. Ownership can be transferred without going through probate, though the new owner will need to complete some paperwork to make it clear that the property is now solely owned.

2-2/ Community property

In community property states like California, spouses can hold property in community property, meaning that it’s owned by the couple together. The deed may also say that they owned the real estate “as husband and wife”; that also shows an intent to hold the real estate as community property. In community property states, spouses are free to leave their half-interest in community property to whomever they choose; generally, if they don’t name a different beneficiary, it passes to the surviving spouse. Ownership can be transferred without going through probate.

2-3/ Community property with right of survivorship

Community property states like California offer the option of holding property this way. When the first spouse dies, it gives the survivor automatic ownership of the property. Ownership can be transferred without going through probate.

2-4/ Tenancy in common

Co-owners seldom own real estate as tenants in common, but you might come across this form of ownership if the co-owners inherited the land, for example, they were siblings who inherited a house from their parents, or were in business together. Each co-owner can name a beneficiary in his or her will; if there’s no will, the deceased co-owner’s interest in the property passes under state law to the closest relatives. Probate will be necessary to transfer the interest in the property.

On July 23, 2021, Governor Newsom signed into law Assembly Bill 633 which enacts the Uniform Partition of Heirs Property Act, AKA the Act, which is meant to enhance opportunities for intergenerational wealth accumulation and transfer to the heirs of a deceased person who, as mentioned above, did not have a will, a trust or any other method of conveying a property at the time of his/her death. Currently, if several heirs jointly inherited a property and there was no will, trust, or other method of conveying the property at the time of the owner’s death, the property is passed down to the heirs through an "intestate transfer”. This means that each heir receives a fractional interest in the undivided property. This type of ownership, known as tenancy in common, is highly volatile because a tenant in common who wishes to sell his/her ownership stake could petition the court to request a partition action in order to force the sale of the property.

Unfortunately, over the years, some real estate speculators and developers have taken advantage of some of these tenants in common by acquiring a small share of a property at below-market price and then forcing the sale of the entire property in order to purchase it under the fair-market value price. The aim of the Act is to prevent these abuses and put a brake on further loss of inherited real property wealth through forced sale practices. In other words, AB 633 aims to modernize the current partition law and implement a fair process, under court supervision, for “tenants in common” heirs during a partition sale.

As a result, among other things, the new bill:

1). Enacts the Uniform Partition of Heirs Property. 2). Establishes that the Act will apply to actions to partition a real property that are filed on or after January 1, 2023. 3). Defines "heirs' property" to mean real property that meets all of the following conditions if a natural person dies intestate and a relative inherits their interest in real property, provided that the property a) is held in tenancy in common. b) Its partition is not governed by an agreement that binds all of the cotenants. c) One or more of the cotenants acquired title in the property from a relative, whether living or deceased. d) At least one of the following conditions applies: i) Twenty percent or more of the interests in the property are held by cotenants who are relatives. ii)Twenty percent or more of the interests in the property are held by an individual who acquired title from a relative, whether living or deceased. iii) Twenty percent or more of the cotenants are relatives. 4). Requires, in any action to partition real property, that the court first determine whether the property is heir's property. If it is heirs' property, the real property must be partitioned under the Act, unless all of the cotenants agree otherwise. 5). Defines "determination of value" to mean a court order that establishes the fair market value of heirs' property, using the Act's procedures. If the court orders an appraisal, the court shall appoint a disinterested real estate appraiser licensed in this state to determine the fair market value of the property. 6). Requires a court, once a determination of value is completed, to notify the cotenants that any of them (except those cotenants who requested the partition by sale) may buy the interests of the cotenants who requested partition by sale. In other words, provide an opportunity for all cotenants, other than the cotenants requesting sale, to purchase the interests of the cotenants requesting sale, at the established appraised price. 7). Order in kind partition if no buyout. Absent such a purchase, the court must order partition by kind unless the court finds that such a partition would cause "great prejudice" to the cotenants as a group. "Great prejudice" is statutorily defined to require an examination of the totality of the factors and circumstances involved, including how long the property has been held by the cotenant and prior owners, and a cotenant's attachment to the land. Please note that even under the terms of the Act, a property whose value lay primarily in its improvements would ordinarily go to an open-market sale, rather than partition in kind. 8). Order open market sale. If the court does not order partition in kind due to a finding of "great prejudice" to the co-tenants as a group, the court shall order partition by open-market sale, unless sealed bids in an auction would be more economically advantageous. Or, if no cotenant requested partition by sale, the court shall dismiss the action. 9). Appointment of broker. If the court orders an open-market sale and the parties, not later than 10 days after the entry of the order, agree on a real estate broker licensed in the State of California to offer the property for sale, the court shall appoint the broker and establish a reasonable commission. If the parties do not agree on a broker, the court shall appoint a disinterested real estate broker licensed in the State of California to offer the property for sale and shall establish a reasonable commission. The broker shall offer the property for sale in a commercially reasonable manner at a price no lower than the determination of value and on the terms and conditions established by the court. Any purchase entitled to a share of the proceeds is entitled to a credit against the price. The above information is given for informational purposes only. To understand how the new Uniform Partition of Heirs Property Act might impact your personal situation, please consult an attorney. Sources:https://trackbill.com/bill/california-assembly-bill-633-partition-of-real- B633

For partition actions initiated on or after January 1, 2023, the new Partition of Real Property Act applies, effective as of that date.

Beginning January 1, 2023, California adopted a new law called the Partition of Real Property Act, which expands and replaces many of the limitations under the earlier act.

The biggest change is that you no longer need to prove the property is “heir's property” to receive these protections. Now, any co-owned property can qualify for fair rules around appraisals, buyouts, and court-supervised sales. In short, the new law makes sure more property owners are protected during partition cases in California.

2-5/ Revocable Transfer on Death deed

The California transfer on death deed (RTOD deed) allows a property to be automatically transferred to a designated new owner when the current owner dies without the need to go through probate to Transfer ownership. It also gives the current owner retained control over the property, including the right to change his or her mind about the transfer.SB 315 extends until January 1, 2032, the revocable transfer on death deed (RTOD deed) law, which allows a homeowner to transfer to a named beneficiary 1-4 residential properties upon the death without a probate proceeding. Two witnesses are now required to sign the deed. Stock cooperatives are excluded from the types of property that may be transferred via RTODD, but agricultural land with up to four residential dwelling units is now included. As a reminder:

1). This law applies to: Residential one to four properties, condominium units, and single-tract agricultural land (40 acres or less) improved with a residential 1 to 4 dwelling. The stock cooperatives are excluded. 2). The RTOD deed must be signed, dated, and acknowledged before a notary public, and must be recorded within 60 days after execution. 3). The law may void a RTOD deed if, at the time of the owner's death, the property is titled in joint tenancy or as community property with right of survivorship. The law also establishes a process for contesting the transfer of real property by a RTOD deed.SB 315 is effective January 1, 2022. But the changes in SB 315 do not apply to RTOD deeds or revocations that were signed before January 1, 2022.

We hope this helps.