Legal Question in Real Estate Law in California

Re: Best way to hold title to property

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Re: Best way to hold title to property

You didn't say whether you own the property as joint tenants or as tenants in common. If you are joint tenants at the time of your mother's death, you will become owner of the whole property without necessity of probate or any further legal intervention. That's the good news. The bad news is that if you sell the property, you will be liable for capital gains taxes on the selling price minus the 1975 purchase price. The 1975 purchase price, plus adjustments for long-term improvements, is your basis. If you acquired your half interest without paying for it, there may be a gift tax issue as well.

Now, if you inherited the half interest your mother owns, which is what would happen if you hold title as tenants in common AND she leaves it to you in her will or trust, you would get a stepped-up basis in 1/2 of the house. This would be a big help, but there would still be more capital gains tax due than had you never been on title. (Note that when I say "1/2" this is just an example that assumes you have a 1/2 interest. Tenants in common can have ownership divided in any percentage, e.g. 90%-10%.)

Property tax issues might be a factor but generally there is an exemption from loss of the Prop. 13 tax rate hold-down benefit for transfers from parent to child.

The tax laws have additional complicating factors that cannot be explained in a lawGuru-length reply and really require the advisor to ask questions in a "live" setting and respond based upon your answers to those questions. The short answer is that you probably shouldn't have been on title in the first place, but now that you are, you want to make sure you aren't a joint tenant. Changing a joint tenancy to a tenancy in common is pretty easy, but my advice is to sit down with an estate-planning attorney in your town and get advice based on the particulars of your situation, which probably will include placing mom's interest in the property into a living trust with you as beneficiary and successor trustee.

Re: Best way to hold title to property

Mr Whipple is correct that it is not a question that can be easily answered. But before you see an attorney, you should probably read some real estate, tax panning, living trust, etc., books [Nolo Press puts some out in lay person's language]so you know what the attorney will talk about and you know what questions you should ask. You should also make a detailed list of what assets both of your have, dates of purchase, basis. You may also want to consider the$250,000 exclusion from capital gain taxes from the sale of a principle residence, etc.