Should my parents transfer the house to me now to avoid Prop 19?

The bigger problem is income tax basis. When you inherit a house at your parents' death, your tax basis is reset to the value on the date of death, so decades of appreciation simply vanish for capital gains purposes. When you receive the house as a lifetime gift, you take your parents' basis instead. On a San Jose home bought for $150,000 and worth $2,000,000, that difference is roughly $1,850,000 of gain that becomes yours to pay tax on if you ever sell — a federal and California bill that can easily run into the hundreds of thousands of dollars and dwarf any property tax savings you imagined. There are two further costs people overlook. The house becomes your asset, which means it is exposed to your creditors, your divorce, and your bankruptcy, and your parents lose control of the roof over their heads. And a gift of this size requires a federal gift tax return, using up part of your parents' exemption even though no tax is due. In almost every case the better answer is a properly funded revocable living trust that passes the house at death, preserves the basis step-up, and keeps your parents in charge while they are alive.