Legal Question in Real Estate Law in California

Re: Property Tiltle

Concerning your question about "the bank," it depends upon whose name(s) is/are on the loan. If the loan is in your and your wife's names alone, and the deed of trust contains a due-on-sale clause, the bank could demand that the loan be paid in full.

Concerning your question about taxes, that also depends. Generally when a transfer of real property takes place, the county assessor will reassess the property and send the owner a supplemental tax bill. There are exceptions, however, depending upon the relationship between the transferor and the transferee.

There may also be federal and state income tax implications for you and your wife, as well as for your in-laws.

You should probably talk to your CPA and an attorney in your area to fully discuss the reasons why you wish to transfer your interests in the property to your in-laws, and to have then review any deeds of trust encumbering the property.

Re: Property Tiltle

There is a technical problem with your facts: if your sister-in-law and her husband are "in the title," that would suggest that, in some sense at least, they, not your wife and you, are the owners. Several explanations are possible. It could be that all four of you are shown on the record title as co-owners. Perhaps the sister-in-law and husband hold only what is called "bare legal title" and your wife and you are the equitable owners, entitled to conveyance of legal title on demand.

Then, when you ask "if we quitclaim them both" it is unclear whether you mean that you would grant to them, making them sole owners, or they would quitclaim to your wife and you, leaving you sole (legal) owners of record.

In any event, I think there would be a reassessment, which usually results in higher property taxes. As I understand it, the exemption is for generation-to-generation or spouse-to-spouse transfers within the same family, and sibling-to-sibling or more remote doesn't get the exemption. I suggest you verify this on the county level. Merely being related is not enough.

Loans often have due-on-sale clauses that usually treat gift transfers as sales. In order to avoid triggering such a clause, if you have one, and if it is the borrowers who would be the grantors here, you would need to ask your lender for a waiver. Lenders usually grant such waivers, but for a fee (ugh!).

You didn't mention income tax issues. This, however, is another obstacle to transferring interests in property. A gift tax liability may arise on a transfer of assets at below market value. It is worth paying a professional to examine the tax aspects.