Legal Question in Real Estate Law in California

There are at least three ways to make a gift of real property. Perhaps the most obvious and immediate is to write out a deed and deliver it to the donee. Beyond that, people frequently give awal real property by placing it in a trust for someone else as beneficiary (which also involves a deed, to be sure, but the deed is to the trust, not the beneficiary directly); and, of course, one can simply name the donee in your will, in which case the gift occurs upon your death. There are some blended concepts such as sharing ownership as joint tenants (by deed also).

Each of these methods has some drawbacks. The problems with giving property away, right now, by giving someone a gift deed, include triggering a "due on sale or other disposition" clause in your loan, gift, estate and capital-gains tax problems, and immediate loss of control over the property. Leaving property by will postpones or avoids these, but incurs the nuisance of probate. Use of a living trust is usually the best method, but will perhaps cost a little more to set up than a deed or will, but it's generally very much worth it.

You should see a tax or estate-planning advisor. Also, it is unwise and unlawful to transfer property by gift if the purpose or effect is to hide assets from existing or feared future creditors. See California's Uniform Fraudulent Transfer Act, Civil Code 3439 - 3439.12.

A present gift of real property with an existing loan on it is a tax and title disaster in 99.999% of cases. It triggers gift taxes payble by the person who makes the gift, it makes for very unfavorable capital gains taxes when the house sells, and it almost certainly will cause the lender to foreclose unless the person who receives the gift can refinance immediately. And those are just the three main problems. Other than that, it's a great idea.