Legal Question in Real Estate Law in California

Re: Real Estate owned by parents

#1. Whatever the child pays, plus any qualified long-term improvements made by the child after acquiring title, will be his/her basis. If the house is a gift, the basis is zero and 100% of the future selling price will be taxed as a capital gain. (Gift tax issues also need to be explored).

#2. Maybe yes. This sort of thing happens. Usually the taking is based upon a claim that the transfer from parent to child is fraudulent, as meant in the rather broad definitions given in the Uniform Fraudulent Transfer Act, the California version of which is codified as Civil Code sections 3439 through 3439.12.

The UFTA declares property transfers for less than fair market value to be presumably fraudulent if done with the intent, or with the net effect, to "hinder, delay or defraud" any current or prospective creditor of the transferor.

There is a statute of limitations for fraudulent transfer claims and suits; it is set forth in Civil Code 3439.09, which is a bit too lengthy to recite and describe here. In addition, I am aware of at least one court decision interpreting the statute of limitations in a way that was quite favorable to the plaintiff. (I believe it is Cortez v. Vogt).

I can't give you much help as to when an agency such as MediCal can and will go after houses and other property one of their patients has disposed of, because their rules and policies are always being tightened up to find and suck in more money from relatives, estates, etc. under UFTA and other reimbursement theories. There are probably a few specialists out there, but I'm not one of them.