Legal Question in Real Estate Law in California

If your mother deeds to children or grandchildren the property will be exempt from reassessment under amendments to Prop. 13. There is, however, a potential gift tax issue. You don't say what the equity is in the house, but if going on title gives anyone a gift of $13,000 or more in equity (their percent of the value of the house minus the same percentage of the mortgage) your mother could be liable for gift tax (the giver pays gift tax not the recipient). Is it possible for you and your brother to buy the house from her, either now or in three years? If you could qualify for the refinance if you were on title, it would seem you could qualify for the same loan as buyers. You would have to pay something at least close to fair market value, since a below-market value sale between family members will be treated like a gift by the IRS. Your mother could, however, do an owner carry-back loan for the difference so you wouldn't have to come up with cash, and of course she can will that debt forgiven whenever she passes away. That's the best I can think of off the top of my head, assuming you have already talked to some good mortgage brokers and know that a straight re-fi is not an option. Other than that the only other thing I can think of is suing that loan rep.