Legal Question in Wills and Trusts in California

You might speak with a tax consultant. There should be no tax consequence if the home is conveyed to the child, according to California Revenue and Taxation Code section 63.1(a)(1)(A).

However, rather than putting you on title, which could put the property at risk, your parents might consider creating a family trust that would give you full ownership when they are gone. I say "at risk" because, in the meantime, if you were to get into financial difficulty and you were on title, your creditor could attempt to collect the debt by executing against the property after obtaining a judgment.

the transfer, while likely excluded from real property tax reassessent by Proposition 58, would result in a taxable gift (based on the current fair market value) potentially subject to federal gift taxes. however, each of your parents can give up to $1,000,000 without actually incurring any federal gift taxes (plus $13,000 per year per donee). so if they have not previously used any of their $1,000,000 exclusion, they could give you a house with a value of up to $2,026,000 without incurring any gift tax. the only disadvantages are that future gifts to you or others in excess of $13,000 per person per year would be subject to federal gift tax (if they each used all of the $1,000,000 exclusion) and the exclusion from estate taxes at death would be also reduced (if the 2009 law is extended to 2010 as is likely the case, they would each have a $3,500,000 exclusion from estate taxes for transfers to nonspouses).