06/01/2026
A Brentwood family called me last month. Their dad bought the house in 1965 for $75,000. It's worth $2,500,000 today.
Then they told me their financial planner had a "smart" idea: put the house in the kids' names now, to avoid probate.
That one signature would have cost them roughly $700,000.
Here's why, and it's the thing most Westside families never get told until it's too late.
When you inherit a house, the IRS resets your tax basis to the home's market value on the date your parents pass. It's called the step-up basis, thatโs Section 1014. So if the house is worth $2,500,000 the day they pass and you sell it for $2,500,000, your taxable capital gain is zero.
But the moment your parents gift you that house while they're alive, you inherit their original $75,000 basis instead. Sell it later, and you're taxed on $2,425,000 of gain. The "avoid probate" move quietly torched the single biggest tax benefit in the entire estate.
Three tax systems hit every inherited Westside home at the same time, and most families only understand one of them:
๐ฆ๐๐ฒ๐ฝ-๐๐ฝ ๐ฏ๐ฎ๐๐ถ๐ (๐ณ๐ฒ๐ฑ๐ฒ๐ฟ๐ฎ๐น). Resets the basis at death. In California, a community property state, when the first spouse dies, the entire property steps up, not just half. But only if it's titled as community property. A huge number of homes from the 60s and 70s are still in joint tenancy, which cuts that benefit in half. One title mistake, six figures gone.
๐ฃ๐ฟ๐ผ๐ฝ ๐ญ๐ต (๐๐๐ฎ๐๐ฒ). Inherit the home and you have 12 months to move in, or it's fully reassessed. On a $2,500,000 Brentwood home, the property tax bill jumps from about $3,000 a year to roughly $31,000 a year. Forever.
๐ฃ๐ฟ๐ผ๐ฏ๐ฎ๐๐ฒ (๐ฐ๐ผ๐๐ฟ๐). No living trust means California probate, thatโs roughly $76,000 in statutory fees on a $2,500,000 estate, plus 18 months of frozen assets. A revocable living trust costs $3,000 to $5,000 to set up. The math isn't close.
After that, the family has three real options: sell, rent, or move in. For most, selling is the cleanest path, full step-up, minimal tax, done in 30 days. Renting is almost always a trap post-Prop 19. Moving in works only when one sibling genuinely wants the house.
I'm not a CPA and I'm not an estate attorney, I'm a broker, 20 years on the Westside. But I've watched enough families navigate this to know the pattern: the ones who keep the most aren't smarter or richer. They just had the conversation early, with the right people in the room.
If your parents own a Westside home and you haven't had that conversation yet, the conversation is the work. Have it now, while everyone's healthy.
Already inherited, or see it coming? Email the team at [email protected], we'll help you think through what the house is worth and which of the three doors fits your family. No pressure.
Attorneys, CPAs, planners, what's the most expensive inheritance mistake you see families make? Always learning from the people in the room with these families.
