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What is the easiest way to buy my brothers interest in our shared condo. It is fully paid for and was inherited from our Mother.

San Luis Obispo, CA |

My brother and myself inherited a condo from our Mother a year ago.
He wants out, was expecting more income from it.
Grant Deed, Quit Claim,Transfer of equity.
Will there be any readjusting to property value ie taxes (Calif) ?
It is fully paid for, rented by a family member and we have the money. What's next ?

Attorney Answers 5


  1. The way I would structure it would be to form an LLC or Partnership with the two of you as the sole members. Transfer the title from each of you to this new entity (which is a non-event as far as Prop 13 taxes are concerned), and then buy his interest in the entity.

    The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change. Attorney is licensed to practice law only in the State of California. Responses are based solely on California law unless stated otherwise.


  2. There are any number of different ways to manage your transaction. Each of which is going to have its own tax implications. For example, Attorney Fink provides a perfectly suitable method of transferring your brothers interest to you which would minimize the tax implications of the transfer itself. However, forming and maintaining an LLC in the state of California has its own tax implications - even if the LLC has no income. In your situation, it sounds as if the property is an income generating property which may further complicate matters.

    You could also look at placing the condo in a trust, but you may be looking at some of the same tax issues. It would be helpful to know how you are currently holding title to the condo - though much of the analysis will remain the same. I am licensed in California and grew up in San Luis Obispo. I know the area well and would be happy to discuss this with you further.

    THESE COMMENTS MUST NOT BE CONSIDERED LEGAL ADVICE. Comments made on websites such as Avvo.com are provided for informational purposes only. The only way to determine whether how the law may apply to your particular situation is to consult with an attorney licensed in your jurisdiction. Answering this question does not create an attorney-client relationship or otherwise require further consultation.


  3. The simplest way would be for your bother to either sell you his interest outright or gift it to you. As the two previous posters point out this will result in a reassessment of the property tax basis for the portion that you purchase. However, this may prove to be the less expensive course to take when you consider the long-term income tax consequences of forming a business entity to hold the property, the set up and annual administration costs of such an entity. You should have this transaction looked at very carefully by a local attorney who principally focuses on this area of law who can discuss the relative pros and cons of these different choices.


  4. I don't want to assume anything just yet. You say you "inherited" the property from your mother. Did it go through probate? Has the property been formally transferred to you? That matters a lot, and it's an important first question.

    If not - if title is still formally in your mother's name - then the best step is to buy the condo from the estate and then distribute the money to your brother through the estate. That will avoid reassessment. (You still have to do the papers correctly. I would suggest having an attorney assist you.)

    If title has already been transferred, then your options are more limited. But, again, there is no "right" answer in general. The next issue is your mother's property tax basis. If it is very low compared to present value, then it's worth planning specifically to avoid reassessment. That could be a difference of several thousand dollars per year. On the other hand, if her basis is high, then why bother? It won't even matter.

    And, while an LLC is a perfectly fine way to hold this particular property, you might also want to look at a simple general partnership. Creating a general partnership and then transferring the property to the partnership will not increase the liability exposure you already have as a co-owner, and it would not be subject to the annual franchise tax requirement.

    If there is enough money at stake, get an attorney and an accountant in the same room and hash this out. You'll pay FAR less than typical realtor fees on a deal of the same size, and you'll come out way ahead.


  5. To avoid a property tax reassessment for your brother's half of the property (if that is a major consideration), go the LLC route. This also protects your personal assets from liabilities that arise in connection with the rental property, if properly set up and conducted.

    If the property has not been re-titled from your mother (or her estate) to you two, then I concur with the former comment about you taking the entire title from the estate and other consideration going to your brother. This will also solve the Property tax reassessment issue.

    It sounds like you will pay cash for your brother's interest, which makes the former paragraph possible if it is desirable.

    A "Quitclaim Deed" is safest for you as it carries no warranty of title on your part, if a title issue comes up later. A "Grant Deed" in Calif. carries a warranty of good title from the grantor.

    The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change. Attorney is licensed to practice law only in the State of California. Responses are based solely on California law unless stated otherwise.

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