LA apartment building ownership is generational. Tens of thousands of buildings across Hollywood, South LA, Koreatown, and the Eastside were purchased by families in the 1960s through 1980s. As those original owners pass, their heirs are navigating an unfamiliar process while managing a complex asset. The inherited apartment building guide is a strong starting point. This blog provides the probate-specific layer that the guide does not cover.

Probate vs. Trust: Understanding What You Are Dealing With

The first thing heirs need to confirm is whether the property is titled in a trust or in the deceased owner’s name. These are fundamentally different legal situations with different timelines and processes.

Probate Sale (Property in Decedent’s Name Only)

If the apartment building is titled solely in the deceased owner’s name, the estate must go through California probate court. This process requires: filing a petition with the Superior Court, appointing a personal representative (executor or administrator), obtaining a probate referee appraisal, and receiving court confirmation before a sale can close.

The court confirmation hearing is the step most heirs do not anticipate. At this hearing, the court confirms the sale price. Any third party can appear and overbid the accepted offer by 5% plus $500. If an overbid comes in, the buyer who originally accepted the deal loses the property unless they outbid the new offer on the spot. Buyers in a probate overbid situation must bring cashier’s checks to the hearing.

Full probate timeline in California: 9 to 18 months from petition filing to closure, depending on the court calendar, the complexity of the estate, and whether any challenges arise.

Trust Sale (Property in a Living Trust)

If the apartment building were held in a properly structured revocable living trust, the trustee would have the authority to sell the property without court approval. This is significantly faster, typically 3 to 6 months from the time heirs are ready to proceed.

The trustee has a fiduciary duty to all beneficiaries. In situations with multiple beneficiaries, the trustee must document that the sale price represents fair market value, which typically requires a broker opinion of value or a formal appraisal. Beneficiaries who disagree with the sale price or the broker selection can challenge the trustee’s decision, which is one of the most common friction points in LA family trust sales.

The Probate Referee Appraisal: Where Most Inheritances Get Underpriced

California probate court requires a probate referee appraisal of the property’s fair market value. This appraisal is used to set the baseline for the court confirmation process. The minimum acceptable offer at a probate sale is 90% of the probate referee’s appraised value.

The problem: probate referee appraisals are frequently low. The appraiser typically uses a date-of-death valuation, may not have deep submarket expertise, and works from a limited comparable sale set. If the appraisal comes in below actual market value, the 90% floor is set artificially low, which means the building can be acquired at a discount by an aggressive buyer at the confirmation hearing.

Heirs who engage an experienced multifamily broker before the probate referee completes the appraisal can provide sale comps and income documentation to support a higher valuation. This directly protects the estate’s value. See the current cap rate data for LA submarkets for reference on current market pricing.

Measure ULA: The Tax Heirs Do Not See Coming

The most consistent financial surprise in inherited LA apartment building sales is Measure ULA. Even if the heir has no intention of profiting from the sale, the goal is simply to distribute proceeds among family, if the sale price exceeds $5,300,000, the estate owes 4% of the total sale price to the City of Los Angeles.

On a $7M apartment building sale, that is $280,000. On a $12M building, it is $660,000 at 5.5%. The ULA tax does not care that the property was inherited. It applies to all sales above the threshold, by all sellers, in all situations. Measure ULA Full breakdown.

Heirs who plan to distribute proceeds to multiple beneficiaries after a ULA-threshold sale need to model net proceeds with this tax factored in from the start, not discovered at closing.

Capital Gains on Inherited Property: The Step-Up Basis Advantage

One significant financial benefit of inheriting real estate is the step-up in cost basis. Under current federal tax law, when you inherit property, your cost basis steps up to the fair market value at the date of death, not the original purchase price. For an apartment building purchased in 1972 for $180,000 that is now worth $4.2M, the heir’s basis is $4.2M, not $180,000. Capital gains on a sale immediately after inheritance may be minimal or zero.

This step-up basis advantage makes inherited real estate one of the most tax-efficient wealth transfers available. However, it does not eliminate Measure ULA or depreciation recapture on improvements made during the ownership period. Consult a CPA familiar with California multifamily before finalizing sale timing.

If heirs intend to reinvest the proceeds rather than cash out, a 1031 exchange from an inherited building into a new investment property can defer capital gains taxes. The full 1031 mechanics for LA multifamily.

Choosing a Broker for a Probate or Trust Sale

Probate and trust sales have specific legal and procedural requirements that generic residential agents frequently do not know. A broker who sells condos and handles the occasional apartment building will not know the court confirmation process, the 90% floor rule, or the overbid mechanics. They will not know how to document fair market value for a trustee’s fiduciary file. They will not anticipate the Measure ULA exposure in your pricing strategy.

The broker you choose for a probate or trust multifamily sale should have: direct experience with court-confirmed sales, a track record of closed transactions in your specific LA submarket, and a clear understanding of RSO status, operating statement verification, and the due diligence process buyers will run. The inherited apartment building guide: what to look for when selecting representation for this type of sale.

Max Berger at Berger has represented multiple trust and estate sales across Los Angeles, including transactions involving multiple beneficiaries and contested trustee situations. If you are navigating an inherited apartment building in LA, a direct conversation about your specific situation is the best place to start.