California Trusts, Real Estate & Medi-Cal — Questions Answered

To transfer your California home into a living trust, you must execute a new deed — typically a grant deed — naming the trust as the new owner, then record it with the county recorder's office where the property is located. The deed must include the full legal name of the trust (e.g., "The John Smith Revocable Living Trust dated January 1, 2026") and be signed before a notary. Proposition 19 limits parent-to-child reassessment exclusions, so timing and proper documentation matter. A recording error can invalidate the transfer entirely.

When the trustor (owner) dies, real property held in a properly funded living trust passes directly to the named beneficiaries through the trust administration process — with no probate court required. The successor trustee records an Affidavit of Death of Trustee with the county recorder, obtains a date-of-death appraisal for stepped-up tax basis purposes, pays any outstanding debts, and then transfers or sells the property according to trust terms. The entire process is private and typically takes 6–12 months.

Yes. A revocable living trust can hold rental property in California. The trust becomes the titled owner on the deed, but you — as trustee — continue to manage the property exactly as before. Rental income flows through to your personal tax return (trusts are ignored for income tax purposes while you are alive). This avoids probate on that property at death while having no impact on your ability to rent, refinance, or sell during your lifetime.

As of February 16, 2021, Proposition 19 significantly limits the parent-to-child property tax exclusion. To avoid reassessment, the child must move into the inherited home as their primary residence within 1 year. The exclusion is now capped — if the market value exceeds the assessed value by more than $1 million, the property is partially reassessed. Inherited investment properties, vacation homes, and rentals are now fully reassessed at market value. Proper trust planning before death can preserve options under Prop 19.

When you inherit property in California, the tax basis is "stepped up" to the fair market value at the date of death — not the original purchase price. This means if your parents bought a home for $200,000 and it was worth $900,000 when they died, your basis is $900,000. If you sell it immediately for $900,000, you owe zero capital gains tax. This is one of the most significant tax benefits in estate planning, and it applies to property held in a revocable living trust as well as property passing through probate.

Yes, but it requires court approval under California's Independent Administration of Estates Act (IAEA). If the executor has full independent administration authority, they can sell property with a Notice of Proposed Action and a 15-day objection period — without a court hearing. If limited authority applies, a court confirmation hearing is required. The sale price must be at least 90% of the probate referee's appraised value. The process adds 2–4 months compared to a regular sale and requires a probate attorney.

The primary tool is a Medi-Cal Asset Protection Trust (MAPT) — an irrevocable trust that removes your home from your countable assets for Medi-Cal purposes. After California's 30-month look-back period for long-term care, the home is protected from Medi-Cal estate recovery after your death. You typically retain the right to live in the home for life. Planning must begin at least 30 months before applying for Medi-Cal long-term care benefits. After July 1, 2027, the Medi-Cal asset limit drops to $21,000 — making early planning critical.

Yes — through Medi-Cal Estate Recovery. California's Department of Health Care Services (DHCS) can make a claim against your estate for the value of Medi-Cal benefits paid during your lifetime. Your primary home is the main target. However, recovery is limited to your "estate" — property that goes through probate. A properly funded living trust removes your home from your probate estate, blocking recovery. A Medi-Cal Asset Protection Trust provides additional protection by removing the home from your countable assets entirely.

Exempt (not counted) assets for Medi-Cal long-term care eligibility include: your primary home (if you intend to return or a spouse/dependent lives there), one vehicle of any value, household furnishings and personal effects, life insurance with face value under $1,500, burial plots and prepaid burial plans, and retirement accounts receiving regular periodic payments. Countable assets include bank accounts, savings, stocks, bonds, additional vehicles, vacation homes, and most other property. Asset limits drop significantly on July 1, 2027.