Californians voted to pass Proposition 19, the Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disaster Act (“Act”). While the Act helps homeowners over 55 years of age, disabled or victims of natural disasters, homeowners looking to transfer assessed values in properties to their children need to carefully consider their options before the effective date of the Act.
Proposition 19 essentially terminates your ability to transfer your California real property to your children free of property tax reassessment except under limited circumstances.
Proposition 19 repeals the existing exemption for transfers between parents and children (and grandparents and grandchildren), and replaces it with a much more limited exemption for transfers occurring on or after February 16, 2021, as explained below.
Must be a Personal Residence. The parent-child exemption is limited to transfers of the parent’s primary residence. The child must make the property the child’s personal residence as well. Certain farm property may also qualify.
Limited to $1 million. If a transfer qualifies for the exemption, a principal residence with an assessed value in excess of the taxable value of the residence as of the date of the transfer, plus $1 million, will trigger a partial property tax reassessment, even if the property will continue to be used as a principal residence by the transferee.
Effective February 16, 2021, the Parent Child transfer will no longer be available on non-residence property. If you are considering transferring property prior to February 16, 2021, you should seek legal advice. There are good reasons to do these transfers such as there is currently no limit to the assessed value of the residence transferred and you can transfer up to $1 million dollars of assessed value in other properties. A transfer of a vacation rental or commercial property may make sense. However, there may be good reasons not to do the transfer such as the tax consequences of your child taking your carry over basis, asset protection issues and you losing right to income from your properties or title to your own property.
The implications of the Act are tremendous and there is very little time before February, 2021 to determine what should be done. There are a number of options to consider including irrevocable trusts, Proposition 19 irrevocable trusts (with the aim of preserving the step-up in basis and prevent reassessment), outright gifts, or perhaps none of the above.
Because of the complexities of Proposition 19, we are doing consultations on Proposition 19 for a flat fee of $750. If you determine that further action is needed, there will be an additional charge. This article provides only general legal information and not specific legal advice. Information contained is not a substitute for a personal consultation with an attorney.
Click the link below to schedule your Proposition 19 Strategy Session. Don’t delay, the new law takes effect on February 16, 2021.
This article is a service of Jill Gregory Law, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life and Legacy Planning Session™, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Get Acquainted Call or your Life and Legacy Planning Session. Mention this article to find out how to get this $750 session at no charge.