The 750000 Primary Residence Rule

I had a client, Emily, come to me last month utterly devastated. Her mother had passed, and Emily was under the impression she’d inherit the family home in Escondido debt-free. Unfortunately, her mother’s estate plan relied on a simple pour-over will, and no specific codicil addressed the recent spike in property values. What Emily thought was a straightforward transfer quickly became a $30,000 probate entanglement. A properly drafted codicil, anticipating this scenario, could have avoided the entire issue.

What does the $750,000 Primary Residence Rule actually mean for California probate?

Many Californians assume a home automatically avoids probate, and for a long time, that was a reasonable expectation. However, AB 2016 changed the landscape with a simplified procedure for the ‘Primary Residence’ petition. This allows a surviving spouse or registered domestic partner to transfer the home directly to themselves without full probate, but it’s limited to properties valued under $750,000. This isn’t a blanket exemption; it’s a streamlined process for smaller estates. It’s essential to understand this threshold and plan accordingly.

How does Proposition 19 impact the tax basis of inherited homes?

Even if your home falls under the $750,000 limit and you successfully utilize the Primary Residence petition, Proposition 19 introduces another layer of complexity. Under Proposition 19, heirs only keep a parent’s low property tax base if they move into the home as their primary residence within one year. Critically, for 2026, the tax-free ‘basis boost’ is capped at $1,044,586 over the original taxable value; any value exceeding this adjusted cap results in a partial reassessment even if the child moves in. This means a home originally purchased for $400,000 with a current market value of $800,000 will likely experience a property tax increase unless Emily establishes residency within the one-year timeframe.

What happens if the estate exceeds the Small Estate Threshold?

If the overall estate, not just the home, surpasses the Small Estate Threshold, the Primary Residence petition might not be feasible. For deaths occurring on or after April 1, 2025, assets exceeding $208,850 generally trigger full probate. However, per Probate Code § 13050, this calculation MUST exclude all California-registered vehicles (regardless of value), boats, and up to $20,875 in unpaid salary. Furthermore, AB 2016 now allows a simplified ‘Primary Residence’ petition for homes valued up to $750,000, significantly expanding probate shortcuts.

As an Estate Planning Attorney and CPA, what are my recommendations?

Having practiced estate planning for over 35 years, I’ve seen countless scenarios where proactive planning could have saved families significant time, money, and emotional distress. My unique background as both an attorney and a Certified Public Accountant gives me a critical advantage. I can not only structure the estate plan to avoid probate, but also minimize potential capital gains taxes and maximize the ‘step-up’ in basis for inherited assets. Properly valuing assets, especially real estate, is paramount. A low valuation can lead to unintended tax consequences, while an inflated valuation can trigger unnecessary probate complications. It’s a delicate balance that requires expert guidance.

What does a California probate court look for when interpreting testamentary intent?

In California, a last will and testament is reviewed under probate standards that focus on intent, capacity, and execution. Clear drafting reduces ambiguity, limits misinterpretation, and helps families avoid unnecessary conflict during estate administration.

When a will is drafted with California probate review in mind, it becomes a stabilizing roadmap rather than a source of conflict. Clear intent, proper authority, and compliant execution protect both families and estates.

Controlling Legal Standards Governing California Estate and Asset Transfers

• Probate & Court Procedure:
  California Courts – Wills, Estates, and Probate
  The official judicial branch guide for navigating the probate process; it provides updated 2026 checklists for determining if an estate qualifies for “Summary Probate” under the $208,850 personal property limit or the $750,000 primary residence threshold (AB 2016).
• Property Tax Reassessment (Prop 19):
  California State Board of Equalization (Prop 19)
  The definitive resource for understanding the “Parent-to-Child” reassessment exclusion; it outlines the strict one-year deadline for heirs to move into an inherited home as their primary residence to maintain the parent’s low property tax base.
• Advance Healthcare Planning:
  California Attorney General – Advance Health Care Directive
  Provides the official California statutory form and legal guidelines for appointing a health care agent; this resource emphasizes the necessity of combining a medical power of attorney with a HIPAA release to ensure doctors can communicate with family during an emergency.
• Federal Estate & Gift Tax:
  IRS Estate Tax Guidelines
  The authoritative federal portal for estate and gift tax reporting; this page reflects the 2026 “OBBBA” permanent exemption of $15 million per person, effectively replacing the previously scheduled Tax Cuts and Jobs Act (TCJA) sunset.
• Digital Asset Access (RUFADAA):
  California RUFADAA Law (Probate Code §§ 870-884)
  Access the full statutory text of the Revised Uniform Fiduciary Access to Digital Assets Act; it explains why executors are legally barred from accessing encrypted accounts, email, or crypto-wallets unless the decedent provided explicit “prior consent” in their estate plan.