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Types of Income Property

• Single-family rentals — easiest to finance, easiest to sell
• Duplex / multi-family (2–4 units) — residential financing, multiple income streams
• 5+ unit apartment buildings — commercial financing, higher yield potential
• Short-term rentals (Airbnb, VRBO) — higher gross income, local regulation risk
• Mixed-use property — commercial + residential, complex but rewarding

Who This Guide Is For

Buying Income Property — Step by Step

• Define your investment criteria (location, property type, budget)
• Get pre-approved for investment financing
• Analyze deals using NOI, cap rate, and cash-on-cash return
• Conduct property inspection and review rent rolls
• Open escrow and complete due diligence
• Close and transfer title

California Landlord Considerations

• AB 1482 rent control applies to many multi-family properties
• Tenant eviction protections are extensive — plan before buying
• Security deposit limits and habitability standards are strictly enforced
• Local rent control (Los Angeles, Riverside, etc.) may add restrictions

When Probate Is Required

• Decedent owned property in their name alone (no trust, no joint tenancy)
• Estate value exceeds $184,500 (California 2024 threshold)
• There are creditors' claims or disputes among heirs
• No valid beneficiary designation was made

Who This Guide Is For

Court Overbidding Explained

California probate sales include a court confirmation hearing where outside buyers can overbid the accepted offer. The minimum overbid formula is:

At the hearing, buyers must appear with a cashier's check for 10% of their overbid amount. The highest bidder wins.

Common Probate Challenges

• Multiple heirs with conflicting interests about sale timing or price
• Property sold in as-is condition — limited disclosures
• Court scheduling delays can extend the timeline 3–6 months
• Creditors' claims must be satisfied before heirs receive distributions
• If the estate owes back taxes, these must be resolved at closing

Who Should Consider a 1031 Exchange

The 5 Types of 1031 Exchanges

• Delayed Exchange — most common; sell first, then identify and buy replacement
• Reverse Exchange — buy the replacement first, then sell your current property
• Improvement Exchange — use exchange proceeds to renovate the replacement property
• Simultaneous Exchange — both properties close on the same day
• Personal Property Exchange — limited applicability post-2017 Tax Cuts and Jobs Act

Common Mistakes That Disqualify a 1031

• Missing the 45-day identification deadline — there are no extensions
• Receiving funds directly ("constructive receipt") immediately triggers taxes
• Identifying more than 3 properties without meeting the 200% or 95% rules
• Moving into the exchange property as your primary residence too quickly
• Failing to use a licensed qualified intermediary

Why Trust Sales Are Different

A revocable living trust becomes irrevocable the moment the settlor dies. The successor trustee steps in with full fiduciary authority — but also full fiduciary responsibility. Unlike probate, there is no judge, no court confirmation, and no mandatory waiting period. The property can typically be listed within 30–60 days of death once the key legal steps are complete.

A probate sale in California typically takes 9–18+ months and requires court approval. A properly administered trust sale can close in as few as 6–10 weeks from date of death — a decisive advantage for families navigating grief while managing an estate.

Who This Guide Is For

The 10-Step Process Under California Law

• Step 1 — Confirm Your Authority: Locate the trust document and confirm you are named successor trustee. Obtain multiple certified death certificates — title, escrow, the IRS, and the County Assessor each require one. Sign a formal Acceptance of Trusteeship.
• Step 2 — Obtain an EIN: Apply for a federal Employer Identification Number (IRS Form SS-4) immediately. The trust is now a separate taxable entity. Apply at IRS.gov — approval is typically instant. Without an EIN you cannot open a trust bank account or file tax returns.
• Step 3 — Open a Dedicated Trust Bank Account: Title the account in the trust’s name using the EIN. All sale proceeds, expenses, and distributions must flow through this account. Commingling trust funds with personal funds is a breach of fiduciary duty.
• Step 4 — Send §16061.7 Notice: Notify all beneficiaries and heirs-at-law within 60 days of death. This mandatory notice starts a 120-day contest clock — after which trust challenges are time-barred. Failure to send this notice can expose the trustee to personal liability.
• Step 5 — File BOE-502-D with the County Assessor: The Change in Ownership Statement — Death of Real Property Owner must be filed within 150 days of death. Evaluate whether a Proposition 19 parent-child exclusion applies to prevent property tax reassessment.
• Step 6 — Verify and Clear Title: Confirm the property is titled in the trust’s name. Record an Affidavit of Death of Trustee with the County Recorder to establish successor trustee authority. If the property was never formally transferred into the trust, a Heggstad Petition (Probate Code §850) may retroactively fund it — avoiding a full probate proceeding.
• Step 7 — Order a Date-of-Death Appraisal: A qualified appraiser establishes fair market value as of the date of death. This becomes the beneficiaries’ new stepped-up cost basis under IRC §1014, potentially eliminating capital gains tax entirely if the property sells near the appraised value. This step is frequently overlooked and is one of the most consequential.
• Step 8 — Prepare and List the Property: Maintain insurance, pay property taxes, and keep HOA dues current. The listing agreement and all purchase contracts must identify the seller as “Trustee of the [Name] Trust.” The TDS is not required for trustee sales, but all known material facts about the property must still be disclosed.
• Step 9 — Close the Sale: Provide escrow with a Certification of Trust and a certified death certificate. The trustee signs all closing documents in trustee capacity. File IRS Form 8971 with Schedule A if the estate requires a federal estate tax return.
• Step 10 — Distribute Proceeds and Close the Trust: Deposit net proceeds into the trust bank account. Pay outstanding debts, liens, and trust expenses. Distribute the remainder to beneficiaries per the trust terms. Provide a final written trust accounting. File IRS Form 1041 and California Form 541 for the year of final distribution.

The Stepped-Up Basis Advantage

Common Mistakes That Create Liability

• Missing the §16061.7 deadline: Failing to notify beneficiaries within 60 days can restart the contest clock indefinitely and expose the trustee to personal liability.
• Depositing proceeds personally: Even temporarily depositing sale proceeds into a personal account is a breach of fiduciary duty and grounds for removal as trustee.
• Skipping the date-of-death appraisal: The IRS can challenge the stepped-up basis, resulting in a dramatically larger capital gains tax bill for beneficiaries.
• Selling before clearing title: If the Affidavit of Death of Trustee is not recorded before closing, title may not transfer cleanly — creating post-close legal problems for buyer and heirs.
• Ignoring the Heggstad option: A Heggstad Petition under Probate Code §850 can often bring a mis-titled property back into the trust — saving months and tens of thousands of dollars in probate costs.