Estate Planning in Chatsworth

Estate Planning in Chatsworth, California

Most of the estate plans I draft for a Chatsworth homeowner are built around one asset: the house they live in. The planning gets more complicated, and more expensive to get wrong, the moment there’s a second property in the picture. A rental house you’ve held for years. A duplex you inherited from your own parents. A condo you bought as an investment and never got around to selling. If any of that describes you, the standard advice about leaving the house to the kids and calling it done does not cover your situation, and Proposition 19 treats a rental very differently than it treats the home you actually live in. Most people who own income property have no idea how differently until it’s too late to plan around it.

I’m Eric Ridley, an estate planning attorney working with Chatsworth homeowners and families across Los Angeles, Ventura, and Santa Barbara Counties. This page walks through what changes when your estate includes a rental or income property rather than just the roof over your own head.

The Proposition 19 gap that catches rental owners

Before 2021, a parent could leave California real property to a child and the child kept the parent’s old, lower property tax basis no matter what happened to the property afterward. Keep it as a rental, move into it, sell it in two years: none of that mattered for the tax reassessment. Proposition 19 ended that. The parent-child exclusion now requires two things to happen at once: the property has to have been the parent’s principal residence, and the child has to make it their own principal residence, filing for the homeowners’ exemption to prove it. Family farms have a separate track, but ordinary rental and income property does not.

Read that requirement again with a rental in mind. A rental is not the parent’s principal residence, and it will not become the child’s principal residence either, unless the child actually moves in and the property stops being a rental. So the exclusion that protects a family home passing to a child who will live in it does nothing for a duplex down the street, a unit you’ve been renting out, or a condo you’ve never lived in yourself. That property gets reassessed to its current market value the moment it transfers. This is the single biggest practical difference between owning your own home and owning income property, and it is where I see the most surprise after the fact.

Even where the exclusion does apply to a genuine principal residence, it isn’t unlimited. The protected value is the home’s factored base year value plus an indexed amount, currently $1,044,586 for transfers occurring between February 16, 2025 and February 15, 2027, adjusted every two years by the California State Board of Equalization. That limit applies to the qualifying residence itself, not to a rental down the street, and value above it gets added onto the new assessment even for a home the child moves into.

What this means for a rental you intend to leave your children: plan on property tax reassessment to current market value as the likely outcome, not the exception. A property tax bill that jumps to reflect today’s market value can turn a rental that cash flows comfortably into one that loses money every month for the child who inherits it. I’m not going to walk through depreciation schedules or 1031 exchanges here. Those belong in a conversation with your CPA. But the property tax consequence of Prop 19 is squarely an estate planning question, and it belongs in this conversation rather than something your children discover from the county assessor after you’re gone.

One thing works in your heirs’ favor on the federal side: inherited property generally gets a stepped-up basis at death, so your children don’t inherit your original purchase price for capital gains purposes. That’s real and it matters, but it’s a separate question from the property tax question above, and it deserves its own conversation rather than a paragraph on a city page.

Why a mortgaged rental still gets billed at full value in probate

If your estate ends up in probate, meaning there’s no funded trust holding your property when you die, it’s administered through the Los Angeles County Superior Court, and California charges a statutory fee to both the attorney handling the estate and the personal representative running it. Both fees are calculated on the same schedule under Probate Code §§ 10810 and 10800, and both get paid, one to the attorney, one to the personal representative, out of the same estate.

The schedule: 4% of the first $100,000, 3% of the next $100,000, 2% of the next $800,000, 1% of the next $9,000,000, and 0.5% of the next $15,000,000, with anything above $25,000,000 set by the court. Extraordinary services cost more and require separate court approval.

Here’s the part that catches rental owners specifically. This fee is computed on the gross appraised value of what’s in the estate, not on the equity you actually have. A rental appraised at $600,000 with a $450,000 loan against it is still counted at $600,000, exactly as if you owned it outright. Add that rental’s gross value to a $900,000 primary residence and the estate being probated is worth $1,500,000 for fee purposes, loan balances and all. Work the math: 4% of $100,000 is $4,000, 3% of the next $100,000 is $3,000, and 2% of the next $800,000 is $16,000. That covers the first $1,000,000 for a combined $23,000. The remaining $500,000 is billed at 1%, adding $5,000, for a statutory fee of $28,000. That’s $28,000 to the attorney and another $28,000 to the personal representative: $56,000 total, before anyone accounts for what’s still owed on the rental’s mortgage. None of that is negotiable. It’s set by statute, and it comes out of what your family receives.

Getting the rental itself into the trust

A living trust avoids that fee structure entirely because the property never goes through probate. But a trust only protects what’s actually been deeded into it. Your primary residence and your rental are two separate parcels, which means two separate deeds transferring title from you individually into the name of your trust. Sign the trust and stop there, and the rental you forgot to deed in goes through probate exactly as if you had never done any planning at all.

I want to flag something here rather than skip past it. Retitling real property, including moving it into a trust, can carry its own property tax and title consequences depending on how the property is currently held, whether there’s a loan on it, and how title is currently vested. Most transfers into a revocable trust you control are excluded from reassessment, but that review needs to happen before a new deed is signed, not after, particularly if a rental has a business partner, an LLC, or a co-owner attached to it. If the rental sits inside an LLC rather than your own name, that ownership structure raises a related but separate question, covered at Does Your Rental Really Need an LLC?

The documents that matter while you’re still here

Everything above addresses what happens to the rental after you die. Two other documents address what happens if you’re alive but unable to manage it yourself: a durable power of attorney, so someone can collect rent, pay the mortgage, and deal with a tenant if you’re incapacitated, and an advance health care directive for medical decisions. Without them, the person who would otherwise just step in and run the property needs a court-supervised conservatorship instead, which is slower and more public than naming your own person in advance.

Separately, check the beneficiary designations on your retirement accounts and any payable-on-death bank accounts. Those pass by the form on file with the institution regardless of what your trust says, and an outdated form is a common way for an account to land in probate even after the real property has been handled correctly.

What this costs and where to start

I work on a flat fee agreed before I start, not an hourly meter. The current schedule is posted at fees. If your estate is already headed toward probate because none of this is in place yet, probate explains what that process looks like, and the probate fee calculator will run the statutory fee against your own numbers rather than the example above. On the property tax side, Prop 19 planning and the Prop 19 reassessment calculator go further than this page does. For the core documents themselves, see living trust planning, wills, and trust funding, along with incapacity planning for the power of attorney and health care directive.

It also helps to compare local estate planning attorneys before you decide who handles a rental transfer like this. This list of estate planning attorneys in Chatsworth includes credentials and State Bar numbers so you can look into anyone you meet with.

Book a free 30-minute call at https://ridley.click/eric-60 or call 805-244-5291. I serve Chatsworth and the rest of Los Angeles, Ventura, and Santa Barbara Counties.

Chatsworth is in Los Angeles County, which sets where a probate would be filed and where your trust deed gets recorded. See living trust attorney in Los Angeles.