Q: Single brother owned a house in CA and passed away without a will. The family is going through probate. Father is the
only beneficiary. I am Administrator under Independent Admin of Estates Act with limited authority. Can the house be transferred to father's name then sold (with court approval) before closing probate without losing the stepped-up basis tax advantage? Or must we wait until after probate close before we can do so?
A:
Dear Cary NC:
If you are going though a California probate, which is required to deal with real property located in California, you must get an order of the court to distribute any estate property to the beneficiary. While this is normally done when the estate is in a condition to close, you can seek an earlier distribution, called a preliminary distribution. However, there are certain rules about whether or not a court will allow a preliminary distribution.
As to the tax issue, all of a decedent's property receives a step up in basis at death. It is not dependent on whether or not the property is sold during administration. If a beneficiary receives property "in-kind", that is the actual property and not the proceeds of sale, the beneficiary takes the property with the date of death basis valuation. (Sometimes, an administrator will wish to use the IRS' alternative valuation date in an appreciating market.)
California probate and taxation issues are tricky and fact dependent. I recommend that you speak with a California attorney regarding the exact facts of your case and direction on how to proceed. If you do not know where to find an attorney, you can try the county bar association in the county where the Decedent's estate is being probated. Most California Bar Associations provide a lawyer referral and information service which matches you to an attorney who provides a consultation for no or a low fee.
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