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CalAttorney2, Lawyer
Category: Real Estate Law
Satisfied Customers: 10244
Experience:  I am a civil litigation attorney with experience representing HOAs, homeowners, businesses and others in real estate matters.
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My mother put my brother and his wife on the title as joint

Customer Question

My mother put my brother and his wife on the title as joint tenants to her home in California to allow them to use the property to get a loan to finish a home they were building. My mother passed away, leaving a will naming me as executor, before the loan was paid off. In settling the estate it was determined that I, another son, should inherit the home. The loan is now paid off. My brother and his wife are willing to file a quit claim to give up their interest in the property. My goal is to transfer the property to me and my wife and exempt it from a property tax reassessment. If we file the quit claim will this force the estate into probate or is there a way to avoid that?
Submitted: 11 months ago.
Category: Real Estate Law
Expert:  Damien Bosco replied 11 months ago.

Hello. My name is***** am an attorney. I am here to help you with your question. I will review it. What is your name?

Customer: replied 11 months ago.
Expert:  Damien Bosco replied 11 months ago.

Hi Dan: Was the property as joint tenants with rights of survivorship? It appears not to be from your question, but I want to be clear.

Customer: replied 11 months ago.
Expert:  Damien Bosco replied 11 months ago.

Great. Therefore, there appears to be no need for probate because the property transferred directly to your brother and wife. There would be a step up basis so there would be no capital gains tax. Let me look into the property tax issue for you.

Customer: replied 11 months ago.
Thank you
Expert:  Damien Bosco replied 11 months ago.

Unfortunately, it appears that there may be a new assessment when your brother and his wife quick claim deed it to you. Also, there are rules for your brother and wife about how to be exempt from the assessment with the transfer to them (see below.) There does not look like there is away around it, if you get the property. We can discuss more if you want.

  • Transfers of the principal residence between two cotenants that occur upon the death of one of the cotenants, provided that:
    • The two cotenants together owned 100 percent of the property as tenants in common or joint tenants.
    • The two cotenants must be owners of record for the one-year period immediately preceding the death of one of the cotenants.
    • The property must have been the principal residence of both cotenants for the one-year period immediately preceding the death of one of the cotenants.
    • The surviving cotenant must obtain a 100 percent interest in the property.
    • The surviving cotenant must sign an affidavit affirming that he or she continuously resided at the residence for the one-year period preceding the decedent cotenant's date of death.
Customer: replied 11 months ago.
Can my brother quit claim it to my mothers estate to allow it to go into probate?
Customer: replied 11 months ago.
The exemption in California would come under a parent to child transfer. We are both her children.
Expert:  Damien Bosco replied 11 months ago.

Hi Dan: If the property was not held as joint tenants with rights of survivorship, ironically, you could go through probate for the decedent's share of the house and transfer that part of the house, possibly not having a reassessment. But, I never heard of an estate purchasing assets or a piece of property, then distributing it as an inheritance. I would recommend you speaking with the attorney who would handle the estate before attempting to do those type of transactions or activities to make sure you do not verge on some type of tax avoidance scheme. I can open this question up to another attorney to brainstorm with you if you want. It does, though, appear that there would be a reassessment if you purchase or are gifted the share of the house by your brother and his wife.

Customer: replied 11 months ago.
Is there an attorney available who specializes in California property tax reassessment law specifically California prop 13 and parent child transfers?
Expert:  Damien Bosco replied 11 months ago.

Hi Dan: Would you like me to open this question up to another expert? There may be someone who has direct experience with tax assessments. Or would you like me to find a legal referral number in your county so you can call to ask for one?

Customer: replied 11 months ago.
If there is another attorney available who specializes in property tax assessment in California I would like to talk with him.
Expert:  Damien Bosco replied 11 months ago.

I will repost your question in case there is.

Expert:  CalAttorney2 replied 11 months ago.

Dear Customer,

Thank you for using the forum. My name is ***** ***** I hope to assist you today.

I reviewed your conversation above, and while I am concerned that the majority (2/3s) of this transfer ultimately will result in a property tax reassessment (and therefore, before making this transfer, I would strongly recommend meeting with a local attorney to discuss further strategies - I can go over much of the "general information" associated with this, but you will want a local tax attorney to review the matter for you).

Just to confirm a couple of issues:

  • Did your brother and sister in law own the property 100%, or did they own it as joint tenants with your mother?
    • (I am assuming they owned it with your mother, but I do not want to try to give you information based on an assumption)
    • If your mother still owned a portion, that portion would pass to you under the parent/child transfer and remain at the existing Prop 13 rate - so your remaining dispute would be limited to the 2/3s ownership of your brother and sister in law.
  • Did your brother and sister in law use the property as their primary residence?
    • If so, when was the last time they used it as their primary residence?
  • When your mother passed away, did she have a trust established?
    • (I believe you noted that there was a will, but a trust provides a very different vehicle for dealing with assets)
  • Transferring the property back to the estate in probate requires payment of some bona fide debt or obligation (the BOE may be concerned if you are fabricating one) - if probate has already closed, you would be forced to reopen probate, again, this is a very complex operation at this point - may not be perfect, and you are definitely going to want counsel (in this case a probate attorney with at least some experience (if not a lot) in tax law (this is usually not a hard combination of skills to find, just make sure that you do your due diligence when hiring counsel). If there is no contest to this action, it usually will keep costs down, but ensuring that you actually have the facts to support it will take a review of your specific case file (which I cannot do on this forum).

Understand that this transaction carries risk, the way in which you describe the property ownership does not create a very clear path to utilizing Prop 13 tax protection, and there is a very good chance that you are going to have the property reassessed.

So, prior to engaging in these very complex legal maneuvers, evaluate what the cost of the increased tax liability may be, against the cost of the proposed legal process, and then make a business judgment decision as to whether or not pursuing this is worthwhile (i.e. is it worth a shot to try to keep the tax debt down, or are we going to spend a bunch of money and end up with a higher tax liability anyway).

I am not telling you not to attempt these steps - and there is nothing wrong with using legitimate legal mechanisms to try to reduce your tax liability, but I am trying to caution you not to lose sight of the cost/benefit analysis at the outset (I have had clients who refuse to do this and ended up paying me much more than they save simply because they want to prove a point). But, I also know that different communities in our state have had property value increases so great that it is worth at least trying one or more of these steps to keep a Prop 13 tax assessment in place.

And once again, if your mother still owned 1/3 of the property, that 1/3 would remain at the current Prop 13 assessment value.

Customer: replied 11 months ago.
Thank you for your help. To answer your questions, my mother and brother and his wife were joint tenants and though my mother has passed, the title still reflects this. They used it as a primary residence until they were able to move into the house they were building. The house in question has been our family's primary residence since 1962. Finally, there was no trust. My name was removed from the title when they acquired the loan at the request of the bank that loaned them the money.
Expert:  CalAttorney2 replied 11 months ago.

Based on this information - I am going to make an assumption that your brother and sister in law are no longer using it as their primary residence (they probably moved out when their home was completed) - you are going to be left with the following:

  • Transfer of 1/3 belonging to your mother (and now her estate) can be transferred to you and retain the current Prop 13 assessment value
  • The 2/3 that belongs to your brother and his wife are almost certainly going to be reassessed - whether you try one of the legal gymnastics above or not (there is no "child to parent" exemption), but again, if you live in one of the communities that has a very high increase in property value (for example parts of the SF Bay Area), it may be worth at least talking to a local tax attorney and seeing if you can come up with a strategy to attempt it - once again, keeping in mind, no matter how much money you spend on it, you may lose the argument and end up not only spending the money to try, and still pay the increased tax rate. - it just works out in some of these communities that the increase is so great the legal expenses of an attempt is worth at least trying.

You can also consider other options - I don't know what the estate is worth, or what other assets are there, but if the taxes are a big enough consideration to you, you could maintain the home as joint tenants with your brother and his wife, and have a property owners agreement spelling out property interests should the home be sold, refinanced, or otherwise divided. (If you do this, definitely have an attorney help you draft up the agreement - not because you think you might have a problem or a dispute with these two now, but because a lawyer will help you draft the document to help you both anticipate and prevent, or if necessary, mitigate problems that arise in the future (part of our job is dealing with anticipation of problems).

I do know that customers do not come to this site to be told "go hire a lawyer" and I also recognize that I have told you to do just that a couple of times here, but there are good reasons for this - if you are going to try to beat the BOE on a tax question, you need to make sure that you are doing so properly, the last thing you need is to end up with both a property tax reassessment and penalties, and with the property owner's agreement, you can probably find these agreements online or in your law library, but for a couple of bucks and an hour or two of an attorney's time, you can get one drafted that is specific to your property and the three of you, and help you deal with problems specific to your property ownership needs (and in particular, if you are going to be deemed entitled to 100% of the equity in the property, you will want to make sure this document is drafted properly).

Customer: replied 11 months ago.
Since they owned the title as joint tenants how does my mother retain 1/3 after she passed? My brother and his wife are willing to abandon their share of the estate, what would happen in that case?
Expert:  CalAttorney2 replied 11 months ago.

Your mother would own 1/3 as joint tenant, and the other two would each own their respective 1/3.

As the property was not owned as "joint tenants with rights of survivorship" - your mother's 1/3 interest passes to her estate.

In her will, you said that your mother granted her interest in the real property to you, therefore in probate, you would have received her 1/3 interest.

If your brother and his wife are willing to abandon their portion of the estate, that means that whatever other assets that your mother owned (clothes, cars, cash, bank accounts, etc.) would be given to you, even if the will said they were to go to your brother or his wife.

But this would have to be handled in the probate court proceeding. (Outside of probate court, your brother and his wife could simply give these items to you, but it can create some tax issues - since they are the beneficiaries for tax purposes from the estate, and you would then be receiving a gift from them. (Unless your mother had a lot of assets outside of the real property, this probably isn't a significant issue).

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