Legal Question in Real Estate Law in California

There cannot be a deed of trust on a house that is paid for. A deed of trust is a kind of mortgage. There should not be a mortgage on a house that is paid off. If there is, there are proceedures for removing it.

I think your use of the term "deed of trust" was inadvertent. As Mr. McCormick says, paid-off properties don't have effective deeds of trust. (There will be deeds of trust still on the record, because nothing is ever removed from the record, but when they are paid off and reconveyed, they are just ancient history.)

Instead, it is clear that what you are referring to is "title" to the house. OK, let's take a deep breath and then talk about this idea your mother and you have....

First, your mother and you would need to consider how title shows on the record currently, i.e., how your mother and father held title. It does not necessarily follow that your mother is the sole owner now. Proof of your father's death only establishes that he is no longer a co-owner. IF your parents held title as joint tenants, your mother is probably sole owner now (and title could be modified to remove your father's name by recording an affidavit of death of joint tenant), BUT with other forms of co-ownership, other results are possible. For example, under Probate Code section 6101(b), your father could have disposed of his half interest in community property by will, and for all I know, the Little Sisters of Charity could now own half of the house.

So, handling the step of getting the title shown as 100% your mother's is not necessarily a slam dunk, although it's probably not going to be too difficult, either. We would need some basic information, such as how title was held, whether your father had a will, whether it was probated, etc. Maybe the family has handled this already and knows the answers, but your question doesn't mention it.

Next, once your mother is reflected as sole owner (if she is, of course), she is in a position to decide how best to pass the property on to her heirs. One possibility is to enter into a joint tenancy with you. This is accomplished by deed. She would execute (before a notary) and deliver to herself and you a deed (grant or quitclaim) granting the property from herself as sole owner to herself and you as joint tenants with right of survivorship. Professional help with the deed clauses and the property legal description is suggested.

Going into joint tenancy with a "prospective heir" will bypass probate. That accomplishes one, not terribly important, goal. However, passing property by joint tenancy is generally the least advantageous of the three major ways to pass real estate to the next generation. The other two possibilities are by will and by trust.

A will has the disadvantage of requiring probate. However, it has the important advantage of giving rise to a so-called "step-up in basis" at the time of inheritance. This means that for computing capital gains, the initial value of the property is its value on the day you inherit, not its value on the date mom and dad bought the house, back in 1956 (or whenever). So, if they bought way-back-when for $40,000, and mom dies in 2016 when the house is worth $750,000, and you sell it in 2020 when it is worth $900,000, your gain is $860,000 as a joint tenant (900,000 - 40,000) but only $150,000 (900,000-750,000) if you inherited it by will. At a 15% capital-gains tax rate, that's $22,500 of tax instead of $129,000 -- over $100,000 of tax savings! The fact that the property is paid for further suggests that it was bought a long time ago and may have a lot of built-in appreciation that could be taxed upon a future sale.

Then, the third and generally the best way to pass appreciated property -- a living trust. If the house were in a living trust, it would bypass probate AND qualify for a step-up in basis.

Prospective heirs sometimes like the joint tenancy method, because they become part owners right away, and mom can't change her mind. However, as you said, she wants to remain in control while she's alive. She can remain in control with either a will or trust, because either can be modified, at least while she remains competent.

So, my advice is to see an estate-planning attorney and spend $1,000 or so on a living trust, which will be best for the both of you unless there are unusual circumstances.

I would just add to Mr. Whipple's analysis, if in fact he is correct about what you meant in your question, is that a joint tenancy deed would result in possible gift tax liability to your mother (yes, the giver, not the recipient pays gift taxes).