Gifting a house to your child in San Diego may seem like a generous and straightforward decision, but it comes with legal and tax implications that should not be taken lightly. At Katzner Law Group, we regularly advise families across California and New York on the legal and financial complexities of estate planning, including how best to transfer real estate to loved ones.

In this blog, we’ll walk you through everything you need to know about gifting property to your children in San Diego, from legal steps to tax considerations, so you can make the most informed decision for your family.

Can You Gift a House to Your Child in San Diego?

Yes, you absolutely can gift a house to your child in San Diego. California law allows property owners to transfer their real estate to another person, including a child, either through a living gift or by bequeathing the property in a will or trust. However, the process is not as simple as signing over a deed, it involves important financial and legal consequences.

Since 2021, California’s Proposition 19 has changed how property transfers between parents and children are treated, especially in regard to property taxes. Previously, a child could inherit or receive a gifted home without reassessment of property taxes. Under the new law, the child must make the home their primary residence to qualify for a limited exclusion from property tax reassessment.

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What Are the Legal Requirements for Gifting Property in San Diego?

To legally gift real estate in San Diego, you must follow several formal steps:

1. Draft a new deed: Typically a Grant Deed or Quitclaim Deed is used to transfer ownership. 
2. Sign and notarize the deed: The current property owner must sign the deed in the presence of a notary public. 
3. File the deed with the County Recorder: In San Diego County, the deed must be recorded with the San Diego County Recorder’s Office to finalize the legal transfer. 
4. File a Preliminary Change of Ownership Report (PCOR): This must accompany the deed to notify the County Assessor of the transfer. 
5. Complete any state forms: If the value of the gift exceeds IRS annual gift tax exclusion thresholds, a federal Gift Tax Return (Form 709) may be required. 

Tax Implications of Gifting Real Estate to a Child

Transferring a home to your child may sound generous, but it can come with unintended tax consequences. Here are the key factors to consider:

1. Gift Tax

• Annual exclusion: For 2025, the IRS allows individuals to gift up to $19,000 per recipient per year without needing to file a gift tax return.
• Lifetime exclusion: As of 2025, the federal lifetime gift and estate tax exemption is nearly $14 million per person. Gifts above the annual exclusion count toward this lifetime amount. 

2. Capital Gains Tax

If your child later sells the property, they will pay capital gains tax on the difference between the sale price and your original purchase price (carryover basis). This can result in a large tax bill if the property has appreciated significantly.

• Alternative: Leaving the house to your child in your will or trust allows them to inherit it with a step-up in basis, reducing potential capital gains. The step-up in basis is often a massive income tax benefit, one not to be overlooked 

3. Property Tax Reassessment (Prop 19)

• If the child does not use the home as their primary residence, the property will likely be reassessed at market value, resulting in a major increase in property taxes. 
• If the child does move in, they may qualify for limited reassessment protection, but only up to a certain value. 

To learn more, you can visit the California State Board of Equalization Prop 19 page.

Should You Gift Now or Leave the House in Your Will or Trust?

When deciding between gifting during your lifetime versus leaving the house to your child in your estate plan, here are some pros and cons to weigh:

Gifting During Life:

Pros:

• Allows you to see your child enjoy the gift.
• Avoids probate if done properly.
• Can simplify your estate. 

Cons:

• Could trigger gift tax reporting.
• Child inherits your tax basis (higher capital gains later) – a massive downside!
• May result in property tax reassessment. 

Leaving the House in Your Will or Trust:

Pros:

• Your child receives a step-up in tax basis, reducing capital gains.
• If the home is held in a trust, it can avoid probate. 

Cons:

• Requires proper estate planning documents in place. 

Common Mistakes to Avoid When Gifting a Home

1. Not consulting a lawyer or tax advisor: This can lead to unexpected tax or legal problems. These missteps can later lead to ownership disputes between family members, situations that often require understanding how to win a partition action in San Diego: legal strategies that work. 
2. Failing to consider capital gains: Your child might owe tens or hundreds of thousands in taxes upon selling. 
3. Assuming property taxes won’t change: Prop 19 changes could lead to steep tax increases. 
4. Incorrect or unrecorded deeds: An improperly filed deed can make the gift invalid. 
5. Overlooking Medicaid eligibility: Gifting your home may impact your eligibility for long-term care programs like Medi-Cal. 

Call Katzner Law Group for Help with Property Transfers

Gifting your house to a child can be an act of love, but it’s one that should be carefully planned with professional guidance. At Katzner Law Group, we help families throughout San Diego and New York protect their assets, avoid costly tax surprises, and ensure their estate plans reflect their wishes.

If you’re considering gifting your home or including it in your estate plan, our team can:

• Evaluate your options based on current California laws.
• Draft and file the appropriate legal documents.
• Coordinate with your financial planner or CPA.
• Help avoid triggering unnecessary tax liability. 

Contact us today at 855-528-9637 or schedule a consultation online. A short conversation today could save your family significant stress and money down the road.

Katzner Law Group: Trusted estate planning attorneys serving families in San Diego and New York.