California’s New Partition Law Creates Buy-Out Window for Inherited Properties
Insights April 12, 2022
In 2021, California adopted the Uniform Partition of Heirs Property Act (AB 633, codified at Code of Civil Procedure §874.311 et seq.). The Act affects the ownership and division of real property following the death of family member.
Take the following scenario. An elderly parent passes away, survived by three adult children. The parent had a living trust which names the three children as equal beneficiaries. The children have different ideas of what they want to do with the family home. Two of them want to keep the property; the other wants to sell.
Under prior law, the sibling who wanted to sell had more leverage. By bringing a partition action under CCP §874.320, that sibling could force the sale of the property, unless the property was large enough to be physically divided (a partition in kind) or the parties negotiated a different agreement.
Under AB 633, when one heir files for partition by sale, the other heirs are given the opportunity to buy-out the property at fair market value, as determined by an independent appraisal. The buying parties must make a timely buy-out election and must timely deposit the purchase money with the court. If the procedural and funding requirements are met, the court will re-allocate the property interests to the buying parties and disburse funds to the selling parties. If not, the court must order a partition in kind, unless it would cause “great prejudice,” in which case the court will order a partition by sale.
AB 633 effectively gives heirs or beneficiaries who wish to keep an inherited property an opportunity to arrange a buy-out before the property is sold.
If you have questions about California’s Uniform Partition of Heirs Property Act, contact one of our California trusts and estates attorneys.
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Joseph Ferrucci is a hands-on trusts and estates attorney with more than a decade of experience. He regularly assists his clients with estate planning related not only to ordinary wills and revocable living trusts, but also sophisticated estate planning strategies with respect to gift tax, estate tax and the generation-skipping transfer tax. He has experience establishing and administering irrevocable gift trusts, irrevocable life insurance trusts, qualified personal residence trusts, and charitable trusts. He also advises clients on real property matters and Prop 13 property tax planning. Read more here.
