Questions sellers ask The family home, before and after

1. 01

   Should I put my adult child’s name on the deed to my California house?

   Usually not, and the reason is a number most people have never been shown. A house left to a child at death gets its cost basis reset to the value on that day, so decades of appreciation are erased for tax purposes. A share handed over during your lifetime is a gift, and a gift carries your original basis with it — so that share keeps every dollar of gain. On a Palo Alto house bought decades ago, putting a child on the deed can hand them a capital-gains bill that inheriting would have wiped out entirely. There are good reasons to want the house to pass smoothly. A living trust usually achieves them without that cost.

2. 02

   What will the property tax be if I inherit my parents' Palo Alto house?

   Far more than most families expect, even when everything is done right. On a house bought in Palo Alto in 1978 and worth $4M today, the parents' tax bill is around $5,600 a year. If the child moves in and files on time, Proposition 19's family-home exclusion brings the new bill to roughly $35,500 — about six times higher, not the same. If the child does not move in, there is no exclusion at all and the bill is roughly $48,000. So the exclusion is worth about $12,500 a year: real money, and about thirty percent of the increase rather than protection from it. The sentence "Proposition 19 protects the family home" is doing a lot of work that the statute does not do.

3. 03

   How do I sell an inherited or trust-owned home in Palo Alto?

   First establish who actually has authority to sell — a successor trustee under a trust, or an executor or administrator through probate — because nothing can be signed until that is settled. You will also need a written opinion of the home’s market value as of the date of death, which sets the stepped-up cost basis and is what keeps a sale from creating a capital gains bill that should not exist. Expect the whole thing to take longer than an ordinary sale, and expect most of the extra time to be paperwork rather than marketing.

4. 04

   Is it better to sell my parents' house now, or to inherit it?

   On tax alone, inheriting it is usually far better, and the gap is larger than almost anyone expects. A house bought in Palo Alto for $180,000 and worth $4M has a taxable gain of $3.82M if the parents sell it in their lifetime — around $1.2M in combined federal and California tax after the $500,000 married exclusion. Inherited, the cost basis resets to the value on the date of death, and a sale shortly afterwards produces almost no taxable gain at all. But tax is not the only thing in the decision: a parent who needs the money, needs care, or can no longer sign cannot wait, an empty house held for years costs real money under Proposition 19, and the reset is to whatever the house is worth on that day — which can be less. Work out the gap between basis and value first; it decides how much the rest of the conversation is even worth.

5. 05

   How do we split an inherited house between siblings?

   There are only three outcomes — sell it and split the money, one sibling buys the others out, or you keep it together — and the first is by far the most common because it is the only one that needs no ongoing agreement. What decides whether this goes well is not which option you pick. It is whether everyone is looking at the same number before anybody proposes one. Get an independent written opinion of value, in writing, that says what the house would fetch as it stands and what it would fetch prepared, because that difference is usually what siblings are really arguing about without having named it. Then ask the attorney about the order of the transaction before anything is signed: how a buyout is structured can change the property tax on the house permanently, and that question is almost always asked afterwards.

6. 06

   What is a step-up in basis, and why does it matter so much here?

   When someone dies, the property they leave behind is treated as though the person inheriting it had paid what the property was worth on the date of death. Decades of appreciation simply stop being taxable. On a Palo Alto house bought in the 1970s, that single rule is routinely worth more than a million dollars — and in California, when the first spouse of a married couple dies, the whole house usually steps up rather than half of it. The catch is that it applies to what you inherit, and not to what you are given while the owner is alive.

7. 07

   I’ve inherited a house. What do I need to do, and in what order?

   Three things are urgent and the rest can wait. Get a date-of-death appraisal while the date is still recent. Find out whether the house was in a trust, because that decides who can sign. And if you intend to live in it and keep the low property tax bill, you have one year from the death to move in and file — a deadline nothing else on this page comes close to in cost. Selling soon after inheriting usually produces very little income tax, because the basis resets to the date-of-death value.

8. 08

   I can’t afford to keep the house. Should I sell it, or leave it to my children?

   You are being told two true things that point in opposite directions. Selling a house you have owned for fifty years does trigger a large tax bill — on a $6M Palo Alto sale with a low basis, something in the region of $1.9 million across federal, state and the investment income tax. Leaving it to your children erases that tax entirely, because their basis resets at your death. What almost nobody mentions is the third set of consequences: Medicare premiums two years later, and Medi-Cal eligibility in the same year. Those can matter more to you than the tax does.

Maggie Ma Keller Williams Palo Alto · DRE #02117367 Last updated September 2026

Maggie is a licensed REALTOR® (DRE #02117367), not an attorney, an accountant or a tax adviser. Everything here is general information about how these rules work in California, current as of the date on the page, and none of it is legal or tax advice for your family. Decisions about title, trusts and taxes should be made with an estate attorney and a CPA.