My wife is being presented with an offer intended to resolve "inheritance rights" and the ultimate establishment of the trustee responsible for administering her father's estate. The following proposal is made:
"1. An escrow will be opened wherein (the father) will quitclaim and cause to be transferred all title and interest to the property commonly being referred to as the (Named Property). In order for escrow to close, (my wife) will deposit into escrow the total sum of $350,000.00. The (Named Property) may be used as collateral for any loan which (my wife) may need in order to obtain the settlement funds. The existing trust will be amended to reflect that (my wife) has received the (Named Property) and shall be entitled to no further inheritance from (the father)."
Question: We are not financially able to deposit the escrow amount and our income:debt ratio will limit if not prohibit our ability to acquire a loan for that amount. We are carrying a second mortgage on our primary residence and while we have some equity there, it is nowhere close to the demand stated above. Additionally, my wife (formerly the named trustee to her father's estate) encumbered her dad's property through a loan supporting its remodeling and preparation for rental/lease. In the current market, the father's home's value is approximately $1M and it was purchased 30 years ago for $77,000. If we were to sell it we need to understand (1) What we are facing in terms of tax liabilities, ie, gift tax and capital gains (Federal and California State) should this quitclaim be enacted, and (2) a best recommendation/alternative solution to minimize the overall financial impact.
We're on a very tight lead time in this matter, so I hope you will respond quickly.

