Legal Question in Real Estate Law in California
Writing a deed
My husband & I (75 yrs of age)purchased a home and wish to include our daughter & her husband on the deed to avoid probate. We want the option of being able to sell the property if one of us ialone is no longer able to maintain the property.
2 Answers from Attorneys
Re: Writing a deed
By including your daughter and son-in-law on the deed, you are gifting part ownership of the property to them. If you want to avoid probate and negative tax consequences, you are much better off leaving them off the title and setting up a living trust that grants the property to them if you pass away. That way, you maintain full ownership and control and everybody avoid unnecessary tax problems. Consult a local estate planning attorney for more information.
Re: Writing a deed
Heirs are better off tax-wise to receive property by inheritance, which can be by will or living trust, rather than to receive a gift. The reason is that inherited property takes its tax value from the market value at the moment of inheritance, whereas a gift of property passes along the same value as the donor's cost. Later, when the heirs sell the property, they pay a lot less in capital gains tax due to the stepped-up value at the time of inheritance.
A revocable living trust is the way to go; it will accomplish all your goals, and while it might cost a little more to set up than to fill out and record a deed or have a will written, it's worth it. You keep full control while living, avoid probate, and minimize your heirs' future tax burden. Any tax advisor can give you a numerical example showing the capital-gains tax saving if you provide her or him your purchase cost and estimated current market value.