California residents voted Proposition 19 (Assembly Constitutional Amendment No. 11), into law on Nov 3, 2020 – and became active on Feb 16, 2021; changing the parent-to-child exclusion and adding other tax relief exemptions involved with inheriting property taxes in California.
Reassessment Exclusions and Property Tax Exemptions
Regardless of revisions of any kind, an exclusion from property reassessment at current property tax rates still allows parents to transfer their primary residence or in certain cases a “family farm” – to their children, as heirs avoiding full reassessment; as long as they move into their home as a primary residence once the property transfer is complete, or if it’s a farm, as long as they continue to use that property legitimately as a functional farm.
If a home is being transferred, heirs have to claim a “homeowner’s exemption” to prove that that the home is being used as a primary or principal residence. As most people know by now, this exclusion is now under limitations as to the assessed value of the home, plus $1,000,000. Even if all the “i’s” are dotted and the “t’s” are crossed the home will be reassessed at current market value if it exceeds the existing assessed value plus $1,000,000. Moreover, the “Claim for Reassessment Exclusion” and “Claim for Homeowners’ Property Tax Exemption” must be completed and filed.
Pro Rata & Non Pro Rata Distribution
Even though the parent-to-child exclusion (i.e., parent-child exemption) applies to non pro rata trust distributions from a parent to their children (heirs) – this never applies to transfers between siblings… So many think it’s better to give the trustee managing the trust the power to distribute equal cash assets to the heirs as pro rata distribution, rather than allow a trustee to give the children different values…
Of course, when a trust loan is applied to the process in conjunction with Proposition 19 (formerly Prop 58, passed in 1986), it is as pro rata distribution, so all beneficiaries selling off their inherited property shares will receive equal revenues from the sale, typically from one heir, or multiple beneficiaries, looking to keep their inherited parental property, while keeping their parent’s low property tax base, as stipulated and protected by CA Proposition 13.
Avoiding Property Tax Reassessment & Property Tax Hikes
As long as a beneficiary moves into an inherited home as a primary residence within 12-months of the passing of the parent, the beneficiary can transfer parents property taxes and keep parents property taxes when inheriting parental property and subsequently inheriting property taxes in California. A property tax transfer (inheriting property taxes in California) still goes hand in hand in California with a parent-child transfer, namely a parent-to-child exclusion, to avoid property tax reassessment or fair market property tax rates.
Which is why it is so important to keep up with correct information on any current property tax hikes… Plus, staying current with any new releases from the Legislature regarding property tax breaks, or new rules for property tax transfers. Moreover, it really is critical to keep up to date on all pertinent, accurate and timely property tax news and resources for transferring property taxes in California
Working With a CA Trust Lender or Property Tax Consultant
A pro rata distribution of the assets of an estate means that each heir receives an equal portion of each asset in the estate. A non pro rata distribution means that each heir receives an equal proportion of the entire estate but not necessarily of each asset.
Should the children of the grantor parents decide to trade properties after the distribution of the trust – any real estate will certainly be reassessed. That’s why it’s so important to have a trust lender or a property tax consultant at your side before you plunge into all of this, if you are a middle class homeowner and can’t afford an expensive real estate attorney. That’s perfectly understandable. Join the crowd…