PROP 19 - Avoiding Property Tax Reassment
Prior to the passage of Prop 19, the law in California excluded transfers of real property from reassessment for property tax purposes under two exclusions:
Proposition 19 repeals the existing exemption for transfers between parents and children (and between grandparents and grandchildren whose parents are deceased) and replaces it with a much more limited exemption. Beginning with transfers occurring on and after February 16, 2021, the parent-child exemption is limited to transfers of a principal residence that the transferee will use as a principal residence, as well as to certain farm property. In addition, 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 immediately prior to 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. Starting February 16, 2023, and every February 16 thereafter, the $1 million threshold will be adjusted annually at a rate equal to the change in the California House Price Index for the prior calendar year.
If you are thinking about transferring real property in California to your family for estate planning purposes, making the transfer on or before February 15, 2021 may enable you to preserve the property tax value under the existing exemption limits.
Lifetime and/or Estate Gifts - Owners may want to leave to property to children or grandchildren before February 15, 2021, via wills or trusts, if they want to avoid property tax reassessment.
Proposition 19 will essentially end many owners' ability to transfer real estate (residential, industrial or commercial) to heirs free of property tax reassessment.
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