Legal Question in Wills and Trusts in California

Re: Revocable Deeds

I would be reluctant to use a "revocable deed" or "Tennant deed" in California to tranfer property because that sort of transfer is relatively unusual and likely to be unfamiliar to many courts, attorneys, and title companies. There is case law which suggests they can be effective, but I personally would be hesitant to be the test case that proves it's still good law. It may be that local practice in your area is to use these deeds - but I would not use one unless you are very confident about the skill and judgment of the attorney who drafted it.

Also, you should consider the income tax effects of such a transfer - if the property is gifted to you during your parents' lifetime, your basis in the property will be your parents' basis. If you someday sell the property, you will need to pay income tax on the difference between their basis and the sales price, less any applicable exclusion for a personal residence sale.

However, if you inherit the property upon your parents' death, you get a step-up in basis to FMV on the date of the second parent's death, which likely means that your income tax bill will be much smaller if you eventually sell the house; or your depreciation deduction will be much bigger if you use the house as a rental or business property.

Further, if you anticipate that your siblings will challenge the transfer to you, you should take steps to eliminate claims of undue influence.

I would be inclined to use a revocable living trust (or a defective grantor trust, if the concern here is Medi-cal planning) to plan for this situation - wills would be effective to transfer the property at death, but would incur filing fees based upon the fair market value of the real estate as well as a full probate on the second death, which seems like an unnecessary expense.