Legal Question in Real Estate Law in California

they need to complete the grant deed and preliminary change of ownership form. Both the forms are available online on title company's website for free. Grant deed needs to be notarized.

Either one works fine, the differences are subtle and probably have no meaning in your situation. HOWEVER, there may be very serious adverse tax, estate planning, and other financial consequences of the transaction you propose, regardless of the form of deed you use. A gift from your parents to you and your wife, instead of just to you, would trigger all kinds of tax consequences. Even a transfer just to you would be potentially subject to gift tax. If it is not subject to gift tax, that would mean there is very little equity in it, which would mean there is a mortgage. The transfer would probably be a default on the mortgage and could trigger a foreclosure. There are a LOT of problems with this kind of gift. I cannot emphasize strongly enough the need to consult with a CPA at a minimum, and preferably a CPA AND an attorney who knows estate planning and taxation, before you do this. The taxes now and in the future could be huge if the transaction is not carefully planned and alternatives considered.

Mr. McCormick is very correct that you must look very closely at the tax consequences, along with the problems that can occur if you divorce, their giving up the $250,000 capital gains exemption on sale of primary residence, any falling out you might have with your parents, etc. It is worth the money to go to an expert for advice. In many cases I suggest relatlively smart people can save money by not going to an expert, but here it would be penny wise and pound foolish.

I agree with all of the above. There are better ways of handling this than what you are planning, and will be more beneficial to you in the future from a tax standpoint.