Legal Question in Real Estate Law in California
Transfer of Title and Deed
My grandmother wants to transfer the title to her home to me, her
granddaughter. However, in order to retain the property tax levels,
she must transfer the ownership of her home to my father. How long
does he need to retain ownership before he can transfer the title, and
the current tax level, to me?
1 Answer from Attorneys
Re: Transfer of Title and Deed
Is this a re-phrasing of a question asked an hour or so earlier? I started to answer the earlier version, then saw the rewording and got a little confused.
In possible answer to the earlier wording, it is indeed possible for a grandparent to transfer title to a grandchild, even perhaps to an unborn great-grandchild. However, lawyers advise against vesting title in youngsters because (a) they cannot sell without a court order, even in a family emergency, cannot finance, etc., and (b) they usually lack the wisdom to manage major assets to their long-term advantage.
As to reappraisal, I'm not sure your supposition is correct. I believe I've heard that a transfer from grandparent to grandchild can now escape reappraisal and reassessment under Jarvis-Gann (Prop. 13) rules; but don't rely on me, ask the local assessor. Also, each county seems to have its own paperwork and rules for protecting yourself from reassessment, so local inquiry is very important in any case.
Before your family does any property transfers, all of you need to consider a bigger picture, and that is federal and state taxation of income, gifts and inheritances. Transferring property across a generation is looked upon with great disfavor by the IRS, which thinks such transfers are avoiding not one, but two, inheritance taxes. Further, property that has appreciated will acquire a stepped-up "basis" if it is inherited rather than transferred during the lifetime of the (grand)parent, meaning a much lower capital-gains tax when it is eventually sold - maybe tens or hundreds of thousands of dollars of tax savings to the family.
So, I think the logical family strategy is to see an estate-planning attorney for advice on how to assure that granddaughter ends up with the property with a small, rather than a huge, income-tax liability hanging over her head.
Most likely, this will revolve around creation of a trust. They're cheap (relatively) to have designed, and fleximble enough to assure the outcome (as far as ownership, possession and benefits) everyone wants, and far cheaper than making gifts in the longer run.