California Proposition 19
Otherwise known as Proposition 19, the new tax measure, more or less replacing Proposition 58, implemented changes to the parent-to-child and grandparent-to-grandchild exclusion – with the base year value transfer measure going into effect April 1, 2021.
Although we’ve covered these rules and regulations previously in this blog it’s always worthwhile to hear what yet another California property tax specialist has to say, if only to verify what others have described as viable revisions to long standing property tax relief in California – so critically important to middle class and upper middle class residents.
Viewpoint From Los Angeles Tax Assessor Jeff Prang
So let’s take a quick look at what senior Los Angeles Tax Assessor Mr. Jeff Prang has to say about these changes to property tax relief in California, and see if his viewpoint is consistent with, or otherwise deviates from, other noted tax experts and property tax specialists in the state, some that we have reviewed or actually spoken to over the past tumultuous year.
Mr. Prang confirms that Proposition 19 tax base transfers allow seniors, age 55 and up, to transfer the taxable value of their existing home to a new “replacement home of any value” – anywhere in the state of California – up to 3-times, instead of only once, as previous property tax regulations allowed, prior to Feb 2021.
Interestingly enough, Mr. Prang mentions the former Proposition 50 and Proposition 171, and looks at the improvements brought about by Proposition 19 to those tax measures – concerning personal harm and property damage from natural disasters, or wildfire; and the subsequent transfer of base year value of a principal residence to any other county, which was much more limited before Proposition 19 took effect .
Mr. Prang also goes out of his way to point out that Proposition 19 allows homeowners to purchase a replacement home of greater value than their original home and transfer their tax base with an adjustment to account for the value difference in cases of homes destroyed or severely damaged by wildfire, which is ironically running rampant in 2021, or some other natural disaster such as flooding or an earthquake.
Parent-to-Child and Grandparent-Grandchild Property Transfer
As of Feb 2021, most tax experts and property tax consultants agree that in order to inherit a low assessment of a parent or grandparent’s property, under Prop 19, some new conditions must be met, and estate attorneys must get up to speed with these conditions – such as getting in the habit of informing clients that an inherited home has to be moved into within 12 months, retaining a parent’s low property tax base; as primary residence, plus to qualify for a base year value the inherited home must have been the primary residence of the parent or grandparent leaving the property to heirs.
In fact, there is now so much new information for estate and tax attorneys to get up to speed with – notably inheriting property while retaining a parent’s low property tax base, to avoid property tax reassessment – that many law firms more frequently, lately, have been sending clients who are inheriting real property from parents to a trust lender, as those particular lenders bridge the knowledge gap – and serve a purpose lawyers cannot serve, which is providing funding to irrevocable trusts if you as a beneficiary want to keep your parent’s home and, most importantly, retain their low property tax base – buying out sibling property shares while keeping your inherited home at a low Proposition 13 tax base… Basically, taking advantage of Proposition 19 (previously Proposition 58 benefits) in conjunction with an irrevocable trust to buyout one or more siblings’ property shares. Sounds simple, however it isn’t.
General consensus of tax experts in California is that the CA State Board of Equalization stipulates a concrete set of property tax rules and regs, despite the fact that there are still areas concerning Proposition 19 that remain vague and oddly non-specific, which is still causing accountants and other tax professionals a good deal of distress; and for their business and high net worth clients even more concern – particularly when there is a great deal of money at stake.