Legal Question in Real Estate Law in California

Re: quit claim or joint tenancy deed?

To some extent, conventional wisdom on this subject has been blurred by the recent and on-going decline in house values. This brings into question the assumption that homes always appreciate and hence future sales are likely to result in ever-increasing capital gains taxes unless the family members make sure the property passes to the next generation by will or trust, so there is a tax-saving step-up in basis.

Even so, I would bet on a return to rising home prices, and I believe families should use real property transfer methods that result in the younger generation getting a stepped-up tax "basis" (i.e., starting value) as of the time of inheritance, rather than being stuck with the probably much lower value at the time the gift or joint tenany was put "on the record."

These comments basically address the capital-gains tax that you, the recipient of the gift (whether outright or by setting up a joint tenancy, which makes it a two-step gift in effect) will be stuck with when you sell the appreciated property sometime in the future. There is also a current gift-tax problem which will arise if your father gives you either full title or half title by making you a joint tenant (I assume you aren't going to be paying him full market value, and hence there is a taxable gift).

Possibly the best way to handle this is for you to offer to do all the legwork of setting up a trust, saying that this would be a small price for you to pay for escaping the tax bite that would otherwise be extracted by Uncle Sam - the one guy you don't want to be your father's heir!

A joint tenancy may be better than an outright gift, but it's still a halfway measure and a foolish choice with better measures easily arranged. Push for a professionally-created trust.

We may be talking about tens of thousands of dollars difference in tax liability on a modest California home, so don't neglect getting local professional advice from a wills, trusts and estates attorney.

Re: quit claim or joint tenancy deed?

A trust would be so easy to do and you could probably really do it cheap. You will save money in the long run (avoiding probate). If you need some assistance, let me know.

Jillian

Re: quit claim or joint tenancy deed?

Mr. Whipple always seems to give comprehensive and through answers. We are lucky that he donates the time and skills that he does.

I can't fault his answer, nor can I improve on it.

Follow his advice!

Re: quit claim or joint tenancy deed?

Mr. Whipple gives great answers which should be followed; he should be congratulated fro putting so much thought, effort, and work into his responses.

When he staes that a trust is better than joint tenancy, he also means that it is better for your father. You do not state what his life expectancy is, but what if he gives you half ownership and you then get into a big argument, or your wife develops a hatred of him, so you want to sell the property. What if he re-marries? Should his new wife be cut out of his estate? A revocable Trust with him as trustee guards against these possible changes, but a gift of half the property does not. It should not take an experienced attorney very long to get all the information he/she needs and prepare the Trust. So that you understand what is going on, get or read a book tha is on an understandable level for you personally on trusts [see the Nolo Press books].