[Isabelle]

Hi, requesting some advice. My mom is about to pay off her house in CA. She wants to have the deed transferred to my brother and I instead of her.

Is there something we should be thinking about? Does this become a taxable event for my brother and me?

Will seek legal advice but I would like some help from you womderful people so that I will know what I should be thinking about and what questions to ask.

Thank you in advance!

[Matt]

I think the property taxes on the house would pretty much stay the same as long as she is the owner.

As soon as that deed gets transferred, the property taxes would “step up” and skyrocket.

[Jayme]

Transfer would cause property tax reassessment and loss of stepped up basis.

Better to inherit!

[Stephanie]

She should put the house in a trust and leave it to you, NOT transfer the deed.

You should do more research but I know this avoids taxes, like capital gains.

[Lori]

Don’t do this. Wait to inherit. As others said, you’ll lose a huge income tax benefit by taking ownership now, and have to pay larger property taxes.

Only way you’ll keep her property taxes is if one of you moves into it after you inherit. (New-ish law.)

[Maria]

Also keep in mind the Look-Back period in case she needs to qualify for Medicaid if she needs long-term care.

[Ron]

Another thing to think about is if your mom is getting a senior exemption or homeowner’s exemption or other exemptions on yearly property taxes that may no longer apply if your brother does not meet the conditions of those exemptions.

[Bill]

That’s very generous of your mother, but almost certainly not the best path forward. It’s not going to cost any taxes right now, but potentially will cost 20% when you sell it.

It also puts the house at risk if either you are your brother got into a car accident and potentially even lost in a divorce.

It’s almost always better to keep the house in her name and then leave it to you when she passes.

[Amber]

I’m in Arizona so not sure that it will be the same. My father inherited my grandmas house. He went through a lawyer who was able to set up the deed with my father and me as co owner.

The home is set up as my primary residence for property taxes, which I pay and take care of any maintenance.

If you are not willing to pay the taxes or the upkeep on the house, maybe rethink that?

Will you and your brother fight on what to do with the home after she passes?

I think your mother needs to talk to a lawyer to set it up fairly and see what each person wants to take on personally.

I would imagine property taxes in California would be a lot

Good luck!

[Devon]

I also recommend the suggestion to put it in a trust. CA resident here, and someone who had a very wise mother in law.

My mother-in-law put almost all of her assets into a trust, and the transition was extremely smooth when she passed, and there were no taxes because we were already on the trust as beneficiaries.

[Lacey]

When you seek legal advice, ask the estate planning attorney you engage to explain the step-up in tax basis that beneficiaries receive on inherited property, and how gifting the property while she is still alive will forego that date of death basis step up.

Then you can ask about estate planning options available to your mom to carry out her wishes for this property in the most efficient and beneficial way for all.

[Ron]

My amateur analysis of your situation. The deed transfer itself is likely not a taxable event. Selling the house is a taxable event and your brother would be taking on the original basis your mother had whenever it was bought.

If he inherited it, the basis would be the home value on the day your mother died, so a very likely higher basis, lower eventual tax.

Remember, this tax is the capital gains tax that occurs when the house is sold.

So, it’s generally better to get the step up basis through inheritance, but it might not have a great impact if the home value is relatively low and depending on the conditions when eventually sold (for example if it’s a personal home and the residence exemption is used and results in zero capital gains tax on the home sale).

I believe that the transfer of deed/ownership would probably be a gift from your mother to son.

This usually has no extra taxes for regular folk, but your mom should file a gift tax return with her taxes the year she deeds the property to your brother assuming the value of the property is over $18K or whatever the gift tax reporting threshold is.

So then if your mom dies with an estate valued over $10M or so (not sure the exact threshold), her estate would pay tax on the excess over the threshold.

If her estaate is less than the threshold, no tax on the “gift” or rather her estate. Congress makes you report large gifts so that rich people don’t gift away all their wealth to avoid federal estate tax.

As I mentioned, amateur attempt to address your question, which you should surely check against many other sources.

Have a good day.

[Lindsay]

Hi CA mortgage broker here.
Best advice is to put it in a trust and have it transfer to you and your brother upon her passing

If she’s owned it for a long time the taxes are probably very low and transferring it WILL lose them and bring it to a new assessed value
If she’s hasn’t owned it for very long and there’s no concern for the property taxes, you can transfer it now.

You would be subject to the new assessed value (it will take 6-9 months to catch up to you) and it may cause a taxable event for your mom- consult a CPA on that.

Side note- the transfer on death deed or trust will not help you avoid the new property taxes.

Ca changed the rules a few years ago. Parent child transfer will not be reassessed only if “child” resides in the home as a primary residence.

So, if only one of you lives in the home 50% will be at the new value and 50% at the old value.

[Ron]

California has transfer on death instrument for real estate to my knowledge, BTW.

I use this for my property in Illinois.

[Harmony]

As a claims adjuster, I see children brought into dog bite and slip and fall (usually ice) lawsuits just bc their name is attached to the property.

So just be mindful of someone older owning pets with this potential and property upkeep.

[Kathryn]

I’m not familiar with CA, but she could probably do a TOD- Transfer on Death deed.

That way, if you are in need of cash, or upset with her, you can’t sell it out from under her as well.

[Author]

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