Before You Give Your Children the House, Read This

By Betty Wang Real Estate Team

“Why wait? I'll just give the house to the kids now.”

It sounds like a loving decision.

You've owned the house for 30 years. Maybe you paid $250,000 for it. Today, it's worth $2 million. You don't need to sell it. Your children will eventually get it anyway.

So why not put their names on it now?

Because when your children receive that house, it can matter almost as much as the house itself.

And for California families who have owned real estate for decades, the difference can be significant.

Same House. Same Family. Two Very Different Stories.

Let's imagine one house.

Mom and Dad bought it in 1992 for $250,000.

They raised their children there. They remodeled the kitchen, planted the trees that now tower over the backyard, and watched the neighborhood—and the value of the house—change around them.

Today, it's worth $2 million.

There is roughly $1.75 million of appreciation sitting inside that house.

Now imagine two versions of what happens next.

In the first, the parents decide:

“Let's give the house to our daughter now.”

In the second, they keep the property, and their daughter eventually receives it through inheritance.

Same parents.

Same daughter.

Same $2 million house.

But potentially a very different tax result.

And the reason is a painfully boring phrase with a surprisingly important consequence:

step-up in basis.

The Number Nobody Thinks About

Most homeowners know what their house is worth.

Far fewer know their tax basis.

Very simply, basis is one of the numbers used to determine taxable gain when property is sold. It generally begins with what you paid for the property and can be adjusted by certain improvements and other items.

Our parents bought the house for $250,000.

That old number matters.

If they gift the property during their lifetime, their daughter will generally receive their existing basis, subject to the applicable tax rules.

She may receive a house worth $2 million...

with decades of appreciation still attached to it.

But if she instead inherits qualifying property after a parent's death, federal tax law generally adjusts the basis to the property's fair market value at death.

If the house is worth $2 million at that time, her basis may be adjusted to approximately $2 million.

Same house.

Different path.

Very different starting point if she eventually sells.

Now You Can See Why Timing Matters

Suppose the daughter inherits the house when it's worth $2 million and sells it relatively soon afterward for $2.05 million.

Her potential gain isn't simply calculated as

$2.05 million minus the $250,000 her parents paid decades ago.

The stepped-up basis may mean the calculation starts much closer to the property's value when she inherited it.

Suddenly, $1.75 million of historical appreciation is a very different tax conversation.

This is the moment when most people understand why I care about something as unglamorous as “basis.”

It's not really about tax terminology.

It's about preserving what a family spent decades building.

The Most Expensive Decisions Often Sound Innocent

“We'll just put her on title.”

“Let's transfer it now so it's easier later.”

“The kids are going to get it anyway.”

I've heard variations of these sentences many times.

The intentions are usually good.

But highly appreciated California real estate is not something I would casually transfer because the paperwork seems simple.

A deed can be simple.

The consequences behind the deed may not be.

Before transferring a valuable property, the conversation should include the family's estate-planning attorney and tax professional.

Not afterward.

Before.

And California Makes the Story More Complicated

There is another issue families frequently mix together.

A step-up in basis for capital gains purposes and a California property-tax reassessment are not the same thing.

Proposition 19 changed important rules involving certain parent-child property transfers. Whether an inherited property can retain favorable property-tax treatment depends on circumstances that are separate from the federal step-up-in-basis rules.

So don't assume:

“I inherited Mom's house; therefore, I inherited Mom's property tax bill.”

You may not have.

This is precisely why I don't like making real estate decisions in isolation.

The Realtor sees the market.

The CPA sees the tax consequences.

The estate attorney sees the ownership and estate structure.

A family making a major decision may need all three perspectives.

Then comes the question everyone asks me

“Okay, Betty. We inherited the house. Should we sell it?”

Maybe.

But not necessarily.

And certainly not simply because I'm a real estate broker and selling houses is what I do.

I want to know more first.

What is the house worth today?

What was its value when it was inherited?

Does anyone in the family actually want it?

Would it make sense as a rental?

Does one sibling want to buy out the others?

Does the property need $150,000 of work—or would today's buyer happily purchase it as-is?

And perhaps the most underrated question:

Does the family even have the emotional bandwidth to deal with this house right now?

Because inherited real estate doesn't arrive like an investment property you deliberately chose to buy.

It often arrives during one of the hardest periods of a family's life.

The Photographs Are Still on the Wall

This is the part spreadsheets don't capture.

I've walked into longtime family homes where the photographs are still hanging in the hallway.

The dishes are still in the cabinets.

There are boxes in the garage nobody has opened in 20 years.

The backyard tree that looked small in an old family photograph is now three stories tall.

One sibling sees a valuable piece of real estate.

Another sees Mom's house.

Neither is wrong.

And somewhere between those two perspectives, the family has to make a financial decision involving what may be one of its largest assets.

That's why I don't think inherited property should begin with:

“How quickly can we list it?”

Sometimes the first thing I can do for a family is help sell the house.

Sometimes it's helping them understand what the house would sell for before they spend money renovating it.

And sometimes the most valuable advice is

Don't do anything yet.

Get the valuation.

Find the documents.

Talk to the CPA.

Talk to the estate attorney.

Understand the trust.

Understand the property tax consequences.

Let the family talk.

Then decide.

A House Can Carry More Than Equity

For decades, we have talked about real estate as a way to build wealth.

Buy carefully. Hold. Let time and appreciation do their work.

But eventually, every long-held family property reaches another chapter:

How does that wealth pass to the next generation?

That's when the details matter.

Not just what the house is worth.

Not just who gets it.

But how and when do they get it?

So if your parents bought a California house decades ago for a fraction of what it's worth today—or if you're the parent thinking about transferring that house to your children—don't begin with the deed.

Begin with the questions.

Because sometimes the difference between “I'll give you the house” and “you'll inherit the house” is much bigger than it sounds.

And sometimes the smartest real estate decision a family makes is the one they don't rush into.

Betty Wang | Associate Broker Team

Betty Wang Real Estate Team: Where Art Connects People and Real Estate Builds Legacy

If you are navigating an inherited property in Los Angeles, I'm happy to help you understand the real estate side of the decision—what the property is worth, whether improvements make financial sense, and what selling, holding, or renting could look like—while your CPA and estate attorney advise you on the tax and legal side.

This article is for general educational purposes only and is not tax, legal, or accounting advice. Tax laws are complex, individual circumstances vary, and laws may change. Please consult qualified tax and estate-planning professionals before making property-transfer or estate-planning decisions.