Legal Question in Real Estate Law in California

First, I suggest you contact a family-wealth planning advisor to inquire about the income tax side of the deal. If all the property transfers are done at current market value, or close to it, and the current values are pretty close to the values on the date of inheritance, there may not be any capital-gains or gift tax issues, but otherwise your son might be better served in the long run to obtain his share of the house by inheritance (as opposed to an inter vivos gift). However, the income tax impacts may be negligible here.

OK, to the main question. Transfers from parent to child don't trigger Prop. 13 reassessment provided some qualificationsare met. However, a transfer from aunt to nephew is not exempt from reassessment, nor is a transfer between brother and sister exempt. So, it looks pretty bleak for avoiding reassessment altogether.

If there is a possibility, it might be through your sister establishing a trust to hold her interest for the ultimate benefit of her nephew. Such a trust would probably have to be irrevocable, and determining its terms and whether it would indeed work is well beyond my expertise. If the property tax increase would be more than, say, $1,000 a year, it could well be wirth your while for the three of you to retain an attorney who does family trusts to advise you.