Taxes When Selling an Inherited Property in Sonoma County: What Executors & Trustees Need to Know

One of the most common—and costly—mistakes executors and successor trustees make is misunderstanding the tax implications of selling inherited real estate.

In Sonoma County, where property values are often substantial, a lack of clarity around taxes can lead to unnecessary fear, poor timing decisions, or even beneficiary disputes.

This article breaks down what executors, trustees, and families need to understand before selling an inherited property.

The Biggest Misconception: “We’ll Owe Huge Capital Gains”

Many beneficiaries assume capital gains taxes are based on what the deceased originally paid for the home.

In most cases, that’s not true.

Step-Up in Basis: The Rule That Changes Everything

California inherited real estate typically receives a step-up in basis, meaning:

The property’s tax basis resets to its fair market value at the date of death
Capital gains are calculated from that stepped-up value — not the original purchase price

Example:

Original purchase price: $150,000
Value at date of death: $950,000
Sale price: $975,000

Capital gains are typically based on $25,000, not $825,000.

This single rule often determines whether selling immediately makes sense.

Probate vs Trust: Does It Change the Tax Treatment?

From a capital gains standpoint:

Probate and trust sales are generally treated the same
The step-up in basis still applies in most inherited situations

However, documentation requirements can differ, which is why accurate valuation and records matter.

Timing the Sale Matters

Executors and trustees often ask:

“Should we sell right away or wait?”

From a tax perspective:

Selling soon after inheritance often minimizes capital gains exposure
Delaying the sale can increase taxable gains if the market rises

That doesn’t mean rushing — it means selling with intention.

What About Property Taxes in California?

California property tax rules can be complex after inheritance.

Key considerations:

Reassessment may occur depending on beneficiary structure
Certain parent-child or grandparent-child transfers may qualify for exclusions
Incorrect filings can trigger unexpected increases

This is an area where coordination with a CPA or attorney is essential.

Why Real Estate Decisions Impact Fiduciary Liability

Executors and trustees have a duty to:

Preserve estate value
Act in beneficiaries’ best interests
Avoid unnecessary financial exposure

Selling too late—or without understanding tax implications—can expose fiduciaries to criticism or claims, even when intentions were good.

How a Probate & Trust-Focused REALTOR® Adds Value

A specialized real estate advisor helps by:

Coordinating with CPAs and estate attorneys
Timing the sale strategically
Documenting decisions and valuations
Reducing emotional decision-making

This isn’t about tax advice — it’s about execution that aligns with professional guidance.

Final Thoughts

Taxes shouldn’t paralyze estate decisions — but ignoring them can create avoidable problems.

Understanding how step-up in basis, capital gains, and timing work together allows executors and trustees to move forward with confidence and clarity.

Daniel Cronin | REALTOR
Certified Probate & Trust Specialist
Relocation Specialist
W Real Estate – Cronin Team
DRE# 02069254 | 707-543-6483
SonomaEstateServices.com
dannymcroninrealtor@gmail.com