PART TWO: The Home Protection for Seniors, Severely Disabled, Families & Victims of Wildfire or Natural Disasters Act

Move Anywhere in California and Avoid Property Reassessment 

General consensus of California property tax experts who have been watching Proposition 19 even before it was voted into law on Nov 3, 2020 confirm that property owners age 55 or older who are “severely disabled” are eligible for special property tax relief benefits…

And, with all due respect, this is precisely one of those items that Californians in talk about as being a bit vague – in other words, what exactly constitutes a “severe” disability versus a disability that is perhaps “not so severe”. The California State Board of Equalization (BOE), who defines rules and regulations for Proposition 19, hasn’t yet fully determined certain fine-tuned details. 

However, even though trust loans in conjunction with Proposition 19 as well as trust lenders and the CA parent-child exclusion are not discussed in great detail, we still know with a great deal of certainty  that you can still receive a large loan to an irrevocable trust to  buyout a co-beneficiary’s inherited property shares, while at the same time keeping a family home at the parents’ low property tax base.  It doesn’t need to be discussed into the ground to know that these tax breaks are still alive and well, like many others.

The same applies to victims of a “wildfire”, such as we see throughout  California these days; or a “natural disaster” such as an earthquake or a flood.  Point being, how is one to determine how much damage from a natural disaster or wildfire is “sufficient damage” to qualify a homeowner over the age of 55 to be fully eligible for certain property tax relief benefits?

At any rate, one can move as many as three times statewide during a lifetime. This is an increase from the previous property tax law that allowed only one move. During this move, or these moves, one can transfer their lower property value to recently purchased property – moreover, this can done in any of the 58 counties statewide, whereas previously permitted counties were limited to pre-approved counties only.

Therefore if you are over 55, as far as property taxes are concerned, the world is yours, as it were.  This is somewhat ironic, as older Americans usually find themselves at the short end of the stick when it comes to age bias… Not any more, when it comes to real estate.

 Moving to a New Home, While Taking Advantage of Prop 13?

Prop 13 instituted a base-year value for property tax assessments and limitations on the tax rate and assessment increase for real property. While Prop 19 changed some of the 1978 property tax breaks protected by Prop 13, there are certain things you can do to retain its’ original intentions when moving to a new home in California – and make sure you are aware that:

a)  the purchase of your new home, or new home construction, occurs within two years of the sale of the prior property;

b)  your original property is reassessed when it’s sold;

c)  even though the goal is to avoid property tax reassessment on an inherited home – if the new property costs more than the old property, the difference will be reassessed.

d)  The BOE has stated formally:

The transfer of the base year value must be on or after April 1, 2021, and not the purchase or sale of either the original or replacement property. If the replacement primary residence is purchased or newly constructed on or after April 1, 2021, the primary residence may be sold either two years prior to or after the purchase or new construction of the replacement primary residence and qualify.

Critical Facts Concerning Proposition 19 

An inherited home must be a primary residence to be eligible for property tax breaks.   Moreover, $1,000,000 of the other property is eliminated.  As a primary residence, the assessed value plus $1,000,000 will not be reassessed (and according to BOE will be adjusted for inflation starting Feb 16, 2023).

•  Heirs (children of parents leaving real property as a gift or an inheritance) has to file a homeowners’ exemption or disabled veterans’ exemption within 12-months instead of 3-years as stipulated previously; and the inherited home must be a primary residence.

•  If the current property value is larger than the assessed value plus $1,000,000 , the property will be reassessed at fair market value (i.e., existing property tax rates) minus $1,000,000.

Proposition 13 Rules & Regs Still Alive and Well in California

The BOE confirms that only one heir has to move into an inherited house.  That heir (i.e., child of the parent leaving the property to the heir) is expected to move into that primary home within twelve months of the date of the parent’s death.  The heir is also expected to complete and file a “homeowner’s  exception claim” within one year of the parent’s death. Even if the parent does not own 100% of the property, a $1,000,000 exclusion will apply to their share.  It is essential that the heir understands that the inherited home must be  a primary residence; however, a period of “temporary absence” is allowed.

It is crucial for those families involved with agricultural activities, and inheriting a family farm, to take note of the fact that a family farm does not have to be a primary residence.  If the date of parental death, or transfer, is prior to Feb 16, 2021 – it preserves Proposition  13.  Naturally, all the correct documents must be  completed, and filed within the proper deadline. 

Gift deeds signed by Feb 15, 2021 do not have to be recorded by that date, in accordance with a CA State Board of Equalization stipulation on Feb 16, 2021.  The $1,000,000 assessed value exclusion applies to inherited assets and gifts.