Legal Question in Real Estate Law in California

Re: Names removed from mortgage/real estate

Removing a borrower's name from a loan (note and deed of trust) generally requires refinancing. Sometimes that's advantageous in its own right, if you get better terms or at least terms that fit your finances and financial objectives better. If you can't refinance advantageously, you (or your parents) might try negotiating their release from the loan; this may work if the only loan is a purchase-money loan, since the lender is limited, in the case of a default, to the proceeds of the sale of the collateral and can't go after the borrowers personally. So, as to the loan, there's no form, and unless you refinance you'll have to deal with the lender.

Changing record title would be accomplished by your parents executing a deed before a notary, delivering it to you, and your recording it with the county recorder of the county where the property is situated. Filling out a deed properly, even a pre-printed form deed, takes a little knowledge, and I recommend using an attorney, a title company, or at least an experienced real-estate broker to assist you.

You can use either a grant deed or quitclaim deed. The former carries warranties of good title, etc., with it; the quitclaim doesn't promise the grantee anything except the grantors' surrender of their rights in the property, if any, to the grantee.

A more important set of issues the three of you should research before transferring ownership is the possible side-effects of the transfer on property taxes, income taxes (gift, estate and capital gains), and the rights of creditors. In a transfer from parent to child, you can often avoid a reappraisal and stepped-up assessment, but check with your county tax assessor regarding local policies and forms. You probably can't avoid some gift tax problem, and the property may not get a stepped-up basis as it would if you acquired it by inheritance. This suggests maybe it's wiser to use a living trust than simply to gift it over now. Finally, if the transfer from your parents to you has anything to do with keeping the property out of the grasp of creditors, consult a lawyer about the Uniform Fraudulent Transfers Act before transferring any property for less than fair market value!