Legal Question in Wills and Trusts in California

If the mother conveys title to her house to her sons, reservling a life estate that she can live there until she dies, upon conveyance they are the new owners of the property. She should report it as a gift. They need to file a request with the Assessor's Office for an exemption fromre-assessment based upon a parent to child transfer. They take her basis in the house, so if it has gone up in value since originally purchased, they pay capital gains tax on the difference. They do not get to claim the $250,000 exclusion on profits from the sale of one's residence as it is not their residence. They do not get the stepped up basis as wehen they would inherit it from her on her death. The IRS might say that there should be an imputed rent she has to pay or her children are deemed to have received as ordinary income.

You need to go to an attorney who practices elder law and knows something about tax planning.

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