Legal Question in Real Estate Law in California

No. You should also be aware that the value of any equity in the property may trigger a gift tax levy on you unless she is paying fair market value. If it is a transfer without value it will also cause her to receive your capital gains tax basis, meaning she will pay capital gains tax on the full increase in value from the day you bought it to the day she sells it. That can be avoided by placing it in a trust for her that passes to her when you die. In that case her basis would be the value on the date you die and she would only pay capital gains on any increase in value after that. Lastly, if it is given to her without her paying fair market value, and it is done to put the property out of reach of your creditors, they can undo the transaction at potentially significant legal expense to you and her. Bottom line: gifts of property in your lifetime have major disadvantages compared with trusts and other planned estate giving, and few if any benefits.

While I agree with nearly all of what Mr. McCormick says, the answer to your specific question is YES, stepchildren qualify for the Prop. 58 reassessment exemption. See the following, quoted from an official L.A. County Web site:

"Proposition 58 -- Parent & Child Exclusion

"Proposition 58 allows that under certain circumstances the transfer by sale, gift, or inheritance of real property between parents and children may be excluded from the reappraisal that is normally required by Proposition 13. To qualify, the transfer must be between parents and children. Natural born children, children adopted before age 18, stepchildren, sons-in-law, and daughters-in-law qualify as "children." The transfer can be from child to parent as well as from parent to child.

"Claims must be filed timely with the Assessor's Office, usually within three years of the date of transfer or date of death, but before the property is transferred to a third party. Under certain circumstances, tax relief may be claimed after the three year period if an application is filed within 6 months after the date of mailing of a notice of supplemental or escaped assessment. Free claim forms and information are available at the Assessor's Public Service Locations. "

However, do pay heed to the rest of his advice!