Legal Question in Real Estate Law in California

Re: Purchasing house from parents?

The best way would be to turn the clock back ten years and start over with professional advice on tax and estate planning. Since the transaction through which you came onto title is probably public record, reversing the process unfortunately probably isn't an option.

How was your name added? In other words, are you a joint tenant with your parents' marital community owning the other half interest? Are you perhaps a tenant in common, and if so, what is your percentage?

The basic concept here is that it is alomst always better to pass appreciated or appreciating real property from generation to generation by inheritance under a will, or even better, a living trust, than by gift, particularly a gift that sets up the donee as a joint tenant. The reasons have to do with gift, inheritance and most of all capital gains taxes. Inherited property receives a "step up" in tax basis so the heir will (eventually) pay capital gains only on the increase in value from the time of inheritance to the time of sale, rather than from the time of purchase to the time of sale. This can be a saving of tens of thousands of dollars on typical California homes held for a decade or more, even with a capital gains tax rate of only 15%.

You can still inherit the portion of the house (if any) you don't own, and that would be my recommendation. See a local estate-planning attorney.

Of course, there may be other reasons why you need to become the full owner of this house before your parents die, but as a broad general rule families are better off using well-designed trusts to pass property rather than joint tenancies, inter vivos gifts and the like.