Transferring Low Property Taxes to Heirs & Replacement Homes

California Property Taxes

California Property Taxes

For Californians that are still confused by  complex tax breaks, or changes to property tax relief measures such as the right to buyout siblings’ share of inherited property – a high-level summary, boiled down to its’ essential key elements, might help…

Expansion of Property Tax Base Transfers

There have been unexpected limitations to former Proposition 58 tax breaks (now under Proposition 19) such as the parent-child transfer, or parent-to-child exclusion from paying current property tax rates, for beneficiaries inheriting their parents’ home, property tax transfer, the right to transfer parents property taxes and keep parents property taxes, when inheriting property, hence inheriting property taxes, to keep parents property taxes, or the right to buyout  siblings’ share of inherited property with a loan to an irrevocable trust in conjunction with Prop 19.

Some limitations now exist where there were none previously, however these benefits are all still intact as genuine property tax relief for beneficiaries inheriting a home from parents, or homeowners transferring a low property tax base from an old home to a new replacement home.  

Surprisingly progressive property tax relief measures  provided by Proposition 19 allow homeowners who are over 55 years of age, or disabled, or victims of a wildfire or natural disasters such as an earthquake or flood… to transfer the lower assessed property value of their original primary home – to a recently purchased or recently built primary replacement residence. Up to three times (or once per disaster).

And, increased from the previous property tax measure which limited portability only to certain approved counties, ones’ tax base may be transferred to a property located anywhere in the state.  Besides being able to transfer the taxable value of their existing primary residence to a new replacement primary residence of any value, anywhere across all 58 counties in the state of California. The exclusion can be filed up to three times by property owners over age 55, or severely disabled.

However. The opportunity to use a natural disaster such as an earthquake or flood, or wildfire, for the same tax break turns out to be a rather dubious benefit for eligible homeowners.  Because  it’s highly unlikely that one family or single homeowner will be hit by a natural disaster or wildfire more than once, even though severe damage from a forest fire or wildfire could very easily occur, residing in Southern California.

Although, when getting on in years, or being disabled, knowing you can transfer your low property tax base three times is a nice benefit to have in your back pocket, knowing you can use it if you need to. It’s just not a terribly realistic tax break, that’s all.

Prop 19 dramatically changed two property tax measures, administered by County Tax Assessors for years:

a) Parent-Child Transfers & Grandparent-Grandchild Property Transfers, effective February 16, 2021;

b) Senior Citizen and Disaster Relief Tax Base Property Transfers, effective April 1, 2021.

Parent/Child Transfers & Grandparent/Grandchild Transfers

Under Proposition 19,  to inherit a lower property assessment from parent(s) or grandparent(s), these requirements have to be completed:  

a) An inherited Property must be the primary residence of parents or grandparents

b) Inherited property must become the primary residence of the child or grandchild heir inside 12-months

c) Only the principal residence of a parent(s) or grandparent(s) qualifies for a base year value transfer. Other property, residential or commercial no longer qualify for this benefit. This provision applies to transfers starting Feb. 16, 2021

Parent-child transfer & grandparent-grandchild transfer forms

Property Transfer Tax Assessments

Proposition 19 expanded and revised rules for tax assessment transfers in California.  Eligible homeowners used to be able to transfer their tax assessments to a different home of the same or lesser market value, which allowed them to move without paying higher taxes.

Homeowners who were eligible for tax assessment transfers are persons over 55 years old, persons with severe disabilities, and victims of natural disasters and hazardous waste contamination.  Any homeowner of any age can buyout siblings’ share of inherited property through a trust loan, in conjunction with Proposition19, in California.

New property tax measures allow eligible homeowners to transfer their tax assessments to a home anywhere  in the state and allow tax assessments to be transferred to a more expensive home  bearing in mind an upward adjustment. The number of times that a tax assessment can be transferred increased from one to three times for homeowners age 55 and over, or with severe disabilities.  

These new tax breaks will impact farms as of Feb 16, 2023, the $1,000,000 amount will be adjusted each year at a rate equal to the change in the California House Price Index.

CA Property Tax Revenue

Proposition 19 introduced the California Fire Response Fund and County Revenue Protection Fund. The CA Director of Finance has to add up extra revenue and savings from the new property tax law. The State Controller has to fund the Fire Response Fund with 75% of the determined revenue, with 15% going to the County Revenue Protection Fund.

The County Revenue Protection Fund is supposedly going to be used to reimburse counties for losses in revenue associated with  changes to property taxes. The Fire Response Fund is to be used for full-time fire station staff.

Property Tax Base Transfers for Homeowners Over 55

One other component under Proposition 19 allows homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster, to transfer the lower assessed property value of their primary home to a newly purchased or newly constructed replacement principal residence up to three times (or once per disaster). The tax base may be transferred to a property located anywhere in the state.

New CA Property Tax Relief Transferring Low Property Tax Values

Transferring A Parents Property Tax Value In California

Transferring A Parents Property Tax Value In California

2022 Tax Relief: Inherited Properties & Replacement Homes

The 2021 CA constitutional amendment, Proposition 19, otherwise known as the “Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act”, expands a surprising number of tax breaks (with respect to “replacement residence” tax relief benefits) mainly for homeowners over age 55 or suffering from a severe disability… making it possible to transfer a low property tax base from an original home to a new residence, or “replacement home”.

Californians also able to take advantage of expanded property tax breaks are homeowners with a damaged or completely destroyed home, caused by a natural disaster such as a flood, earthquake, or wildfire, can now move to a replacement residence, up to three time – in any of California’s 58 counties, expanded from previous limits of only ten counties allowing the transfer of a low property tax base to a new residence. This is actually quite ironic, as senior and elderly Americans, and folks with disabilities, generally find themselves either ignored or on the short end of the stick, so to speak. So this represents a societal shift, for the better.

However, it is important to point out that Proposition 19 also imposes new limits on property tax benefits for inherited family property, limiting uses of the popular 1986 Proposition 58 “parent-to-child exclusion” from reassessed (i.e., increased) property taxes; limiting parent-to-child transfers of property by narrowing usage in various ways.

This necessitates primary or principal residence (as opposed to owning and renting out investment properties) for both parents and beneficiaries, along with some other, minor, limitations.  On the other hand, beneficiaries do have a full year to move into an inherited primary home, only requiring a minimum of one heir to move in.

Buying Out Siblings & Keeping a Low Property Tax Base

Moreover, beneficiaries still have the ability to keep their parents’ family home, with their parents’ low property tax base, while taking advantage of Prop 19’s parent-to-child exclusion;  always staying focused on inheriting property taxes from parents during a typical  property tax transfer. Avoiding property tax reassessment being a top priority at all times.  For many beneficiaries getting a loan to a trust is critical, generally to buyout problematic co-beneficiaries insisting on selling their inherited property shares.

This typically involves a 6-figure or 7-figure loan to an irrevocable trust from a trust & estate lender, for example like industry leader Commercial Loan Corp, working in conjunction with Proposition 19 – supplying beneficiaries who are selling their inherited property shares with more money than a conventional buyer is likely to offer.

Avoiding a realtor, bypassing their standard 6% commission, and side-stepping the usual legal fees and transaction charges, leaves a good deal more cash, from a trust loan, to equalize beneficiaries selling their share of inherited property.  Basically, a win-win transaction all the way around.

Property Tax Relief Forms

  1. BOE-19-B, Claim for Transfer of Base Year Value to Replacement Primary Residence for Persons at Least Age 55 Years[External PDF]
  2. BOE-19-C, Certification of Value by Assessor for Base Year Value Transfer[External PDF]
  3. BOE-19-D, Claim for Transfer of Base Year Value to Replacement Primary Residence for Severely Disabled Persons[External PDF]
  4. BOE-19-DC, Certificate of Disability[External PDF]
  5. BOE-19-V, Claim for Transfer of Base Year Value to Replacement Primary Residence for Victims of Wildfire or Other Natural Disaster[External PDF]
  6. BOE-60-NR, Notice of Rescission of Claim to Transfer Base Year Value to Replacement Dwelling Under Revenue and Taxation Code Section 69.5 (Propositions 60/90/110)[External PDF]
  7. BOE-502-A Preliminary Change in Ownership Report[External PDF]
  8. BOE-502-AH Change in Ownership Statement[External PDF]
  9. BOE-502-D Change in Ownership Statement Death of Real Property Owner[External PDF]

Base Year Value Transfers for Homeowners 55+ or Disabled

Proposition 60/90 and 110 allowed persons over 55 or severely and permanently disabled persons to transfer the taxable value of their existing home to their new replacement home, so long as the market value of the new home is equal to or less than the existing home’s value and located in one of ten tax relief portability approved counties in California.

That left 48 counties not participating with tax breaks allowing the transfer of a low property tax base from an original home to a new replacement residence. When dealing with damage from a natural disaster like the wildfires California has been contending with lately… Or simply because you’re over the age of 55,  or suffering from a serious physical disability.

Of course the good news is that Proposition 19 now allows eligible homeowners to transfer the taxable value of their existing home to their new replace, and wish to move to a replacement home, or to new residence – of any value, anywhere within the state, up to three times (rather than once, with limited county choices and limited assessed dollar values – as it used to be until 2021).

Age 55+ and Disability Tax Relief Forms

  1. Claim for Transfer of Base Year Value to Replacement Primary Residence for Persons at Least Age 55 Years: BOE 19-D[External PDF]
  2. Claim for Transfer of Base Year Value to Replacement Primary Residence for Severely Disabled Persons: BOE 19V[External PDF]
  3. Certificate of Disability: BOE 19DC[External PDF]

Disaster Relief

Proposition 50 stipulated that a base year value of a home or property that is legitimately destroyed, or damaged beyond the point of residing there, by a disaster or wildfire verified as legitimate by the Governor may be transferred to comparable property within the same county.

Proposition 171 stated that the transfer of the base year value of a principal residence to one of 10 counties that has adopted these tax breaks. However, Proposition 19 now permits homeowners to move to a “replacement home” of higher assessed value than a previous primary residence – and transfer the lower tax base with an adjustment for the value difference when a home is damaged or destroyed by a wildfire or some other natural disaster.

Proposition 19 is covered at California State Board of Equalization  
Natural Disaster and Replacement Residence Form



Property Tax Relief 2021 Forward

California Property Taxes

California Property Taxes

It would be worthwhile, for once, to provide interested property owners with a breakdown of little-known details on the property  tax relief system in California. The California Legislature has implemented numerous property tax relief measures that many residents know very little or nothing at all about, such as a CA parent-child transfer for example. Furthermore, some of these programs are complicated, with voluminous forms to fill out — which is why consulting with a tax attorney, a property tax specialist or trust lender is crucial, when inheriting a home in CA or moving from one home to another. 

However – despite mixed feelings from property owners, that is what the County Assessor’s office is for,  besides happily taking your cash – to assist with difficult, complex issues. Unless you have deep pockets and can get all of your tax questions answered by a pricey tax attorney… which most middle class residents are not in a position to do. 

For example, claims have to be filed with the County Assessor for any new construction, to ensure this will be excluded from property tax reassessment – if it concerns modification of any existing structures, for instance to make sure a certain structure is more easily accessed by anyone who is physically disabled or impaired in any way.

Disaster Relief Protections & Exclusions

Properties that have been substantially damaged or destroyed by a so-called “natural disaster” such as wildfire, a massive flood or an earthquake can be reassessed to determine if the damage has reduced the value of the property. If the county where such a property is located has a “disaster relief ordinance”. Written claims for this type of relief has to be filed with a County Assessor inside the time-frame allotted in the ordinance paperwork – or within 12-months from the date the property was damaged or destroyed (whichever is later).

The reduced value of a damaged property like that remains reduced until the property is completely restored. At that point, the factored base year value can be restored – as long as it’s similar to the way the property looked before it was damaged. If a county has no disaster relief ordinance, a taxpaying resident can ask the County Assessor for a “Proposition 8 reduction in value”. But only if the natural disaster occurred in an area validated by the Governor as an area in a state of emergency and the resident decides not to restore the damaged property. 

The taxable value of damaged or destroyed property can be transferred to a reasonably comparable replacement property that is in the same county and was purchased constructed within 5-years after the natural disaster. The County Assessor will accept claims for this exclusion. 

Replacement Residence Transfers

The taxable value of a principal residence that is genuinely damaged or destroyed can be transferred to a “replacement residence” in another county, as long as the alternative residence is in a county that has an ordinance permitting taxable value transfers like this.

Los Angeles County, Orange County, San Diego, San Francisco, Santa Clara, Contra Costa, Modoc, Solano, Sonoma, Sutter, and Ventura Counties have all signed onto ordinances that accept transfers of base year value. And naturally, all County Assessors accept claims for this type of exclusion.

Parent-Child and Grandparent-Grandchild Exclusion

The purchase or transfer of a principal residence and the first $1 million of other real property between parents and children is not subject to reassessment.  Under the CA parent-to-child exclusion, to avoid property tax reassessment, CA parent-child transfer allows for a full year to move into a home inherited from a parent, as long as it is a primary residence, and the parent had used it as a principle residence as well – enabling  a beneficiary to transfer parents property taxes on a standard property tax transfer when inheriting property taxes.

At least one beneficiary can keep parents property taxes, as well as being able to buyout a sibling’s share of inherited property on a transfer of property between siblings, in concert with a Proposition 19 enabled CA parent-child transfer and an irrevocable trust loan for homeowners and beneficiaries inheriting property in California

The CA parent-child transfer and exclusion also applies to property  transfers from grandparents to grandchildren when both qualifying parents are deceased, subject to certain limitations. As usual, claims for this exclusion have to  be filed within a certain time-frame.

Eminent Domain Exclusion
 
Eminent Domain is the right of a government to expropriate private property for public use, with compensation. The taxable value of property may be transferred to a comparable replacement property if the person acquiring the real property has been displaced from property by eminent domain proceedings.

This is basically an acquisition by a public entity, or by some sort of pointed government action that resulted in an adverse legal judgment of some kind. The replacement property does not have to be located in the same county as the property that was taken; or as it’s referred to in polite company, as “removed”.  Claims for this exclusion has to be filed with the County Assessor within four years of the displacement.

Property Tax Exclusion for Residents Age 55+ or Disabled 

People over the age of 55 or who are severely and permanently disabled can transfer the taxable value of their principal residence to a replacement property if it is of equal or lesser value, located within the same county, and purchased or newly constructed within two years of the sale of the original residence. This type of unique  property tax relief can be utilized only once in a lifetime.

There is one exception to this one-time-only limit. If a candidate for this exception proves to be permanently disabled, after transferring the taxable value, and is under age 55, he or she can transfer the taxable value a second time under the disability requirement if the move is directly related to the disability.

Lastly, the taxable value can be transferred to a replacement property located in the same county, or to a replacement property in another county – as long as that property is in a county that has an ordinance that allows transfers like this. Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, and Ventura Counties all have ordinances that allow transfers under this program. 

However, claims have to be  filed with the County Assessor inside of three years after the purchase of the replacement property, or after the completion of construction of the replacement property.  It’s critical to pay attention to this deadline.

Solar Exclusions

The construction or addition of a solar energy system (with the exception of a solar swimming pool heater or hot tub heater) is excluded from being viewed as “new construction”, and cannot be charged property tax until the property changes ownership.

Avoiding Property Tax Reassessment When Transferring an Inherited Home

Avoiding Costly Property Tax Reassessment On An Inherited Home

How To Avoid Property Tax Reassessment On An Inherited Home

Should I Give My Home to My Children as “a Gift”?

Many people wonder if it is a sensible idea, given their personal tax situation, to give their home to their children as a gift.  For middle class or upper middle class families this really is a moot question, as the threat of steep taxation clearly applies only to folks with high net worth.  Bottom line, you can gift $11.58 million over an entire lifetime without bring hit with a gift tax. 

How many people do any of us know who will  be giving away over eleven million dollars in real estate over the next 50 years?  Think for a moment how wealthy you would have to be in order to give away over eleven million dollars in property to your children.  Regardless,   giving away a house to offspring can have a variety of peculiar financial or tax consequences, among other outcomes. 

In 2021, and the years following, the annual “gift tax exemption” will stay at $15,000 per recipient. This means you can give up to $15,000 to as many people as you want during the coming year without any of it being subject to a gift tax.

A gift tax is imposed if you transfer money or property to another person without receiving at least equal value in return. This could apply to parents giving money to their children, the gifting of property such as a house or a car, or any other transfer. There is also a lifetime exclusion of $11,700,000. The very idea that any entity outside a family group can make decisions on taxing what a family does or does not do with their real estate is a most unpopular idea among most citizens.

Being Aware of all Consequences, Giving Your Home to Heirs

ElderLawAnswers.com weighs in on this issue, which is highly appropriate, as these writers and editors frequently deal with tax problems facing older Americans. June 23, 2020 they published an article entitled “Giving Your Home to Your Children Can Have Tax Consequences”

When you give anyone property valued at more than $15,000 in any one year, you have to file a gift tax form. Also, under current law (2020) you can gift a total of $11.58 million over your lifetime without incurring a gift tax. If your residence is worth less than $11.58 million, you likely won’t have to pay any gift taxes, but you will still have to file a gift tax form.

While you may not have to pay gift taxes on the gift, if your children sell the house right away, they may be facing steep taxes. The reason is that when you give away your property, the tax basis (or the original cost) of the property for the giver becomes the tax basis for the recipient. For example, suppose you bought the house years ago for $150,000 and it is now worth $350,000. If you give your house to your children, the tax basis will be $150,000.

If the children sell the house, they will have to pay capital gains taxes on the difference between $150,000 and the selling price. The only way for your children to avoid the taxes is for them to live in the house for at least two years before selling it. In that case, they can exclude up to $250,000 ($500,000 for a couple) of their capital gains from taxes.

Inherited property does not face the same taxes as gifted property. If the children were to inherit the property, the property’s tax basis would be “stepped up,” which means the basis would be the current value of the property. However, the home will remain in your estate, which may have estate tax consequences.

Beyond the tax consequences, gifting a house to children can affect your eligibility for Medicaid coverage of long-term care. There are other options for giving your house to your children, including putting it in a trust, or selling it to them. Before you give away your home, consult your elder law attorney, who can advise you on the best method for passing on your home

Potential Property Tax Surprises for the Middle Class

As we can plainly see, if you’re not extremely wealthy you don’t face the same severe real estate tax burden that high net worth families face when gifting property to offspring. However, the tax man just doesn’t quit there. If you leave your home as part of your entire estate to your children, the property’s “tax basis” would be stepped up, in other words the “basis” would be the actual current value of your inherited property. 

Moreover – if the house remains in the estate, it will most likely will impose a significant estate tax burden on you, unless you take advantage of some other options, such as using an irrevocable trust loan in tandem with Proposition 19, to lock down a low Proposition 13 protected property tax base.

On top of these sort of tax consequences, middle class and even upper middle class homeowners are generally stunned when they discover that  gifting a home to heirs can also affect their eligibility, when becoming elderly, for Medicaid “long-term care” coverage. What many senior Californians call “a sneak  attack”.

Options to Help Your Children Avoid Property Tax Reassessment

Fortunately, there are some attractive options that you, as a home-owning parent, can turn to – prior to giving your children a house… such as (a) placing the house into a trust; (b) speaking with your children about how loans to irrevocable trusts work in their favor  when used in conjunction with Proposition 19 to buyout property shares from siblings – in other words keeping the home at a low property tax base with an irrevocable trust loan from a trust lender     whose expertise includes taking complete  advantage of California Proposition 19 parent-to-child property tax transfer on an inherited home as another option to turn to when you’re gone; or (c) simply selling your home  to your kids at an incredibly low price.

So before you decide to gift, or give away, your home – definitely consult with an estate lawyer, or an elder law attorney… who can advise you correctly on the best next-steps for transferring property over to an heir or several beneficiaries. Your children may very well turn to an irrevocable trust loan down the road, and this could save them from a severe tax burden that they may not even be aware of at this stage.

Naturally, if you have several children and some wish to buyout other siblings who decide to sell their shares, then your children who want to retain your property may wish to enlist the help of a trust lender as well as an attorney, to get an irrevocable trust loan to buy those siblings out while keeping the home at a low property tax base, given that your home is your primary residence, which is most likely is. 

Prop 19 Expanded Benefits for Seniors, Disabled Residents & Victims of Natural Disasters

Proposition 19 Property Taxes

Proposition 19 Property Taxes

There seems to still be a great deal of confusion in California regarding Proposition 19 benefits and homeowners over age 55, property owners who are severely disabled, and residential or commercial property owners who have been impacted physically and/or financially by a California wildfire or natural disaster such as a flood or earthquake.

Thanks to Proposition 19, also entitled “The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act”, approved by California voters Nov 3, 2020, these residents can now transfer the taxable value of their initial primary residence to a replacement principle residence as many as two or three times prior to their death; in any of the 58 counties in California. Therefore, to clear up some of this confusion and misinformation, we’ll delve into some these benefits here.

Commenting on these new California Proposition 19 benefits,  specifically for seniors and other property owners impacted by disabilities and natural disasters, California State Board of Equalization (BOE) Chairman Antonio Vazquez commented in his usual articulate fashion: “Seniors, the severely disabled, and victims of wildfires or natural disasters can now move to a replacement home anywhere in California and avoid significant property tax increases if eligible… Property tax relief can be beneficial for those especially on limited incomes or who have been affected by wildfires or natural disasters.”

Seniors, age 55, and others who qualify have to verify that both the original property and the “replacement residence” they are moving into are both eligible for the Disabled Veterans’ Exemption and the Homeowners’ Exemption. The BOE tells us quite specifically, concerning both the homeowners’ exemption and the disabled veterans’ exemption:

The Disabled Veterans’ Exemption reduces the property tax liability on the principal place of residence of qualified veterans who, due to a service-connected injury or disease, have been rated 100% disabled or are being compensated at the 100% rate due to ‘unemployability’. An unmarried surviving spouse of a qualified veteran may also claim the exemption.

As for the Homeowners Exemption: The California Constitution provides a $7,000 reduction in the taxable value for a qualifying owner-occupied home. The home must have been the principal place of residence of the owner on the lien date, January 1st. To claim the exemption, the homeowner must make a one-time filing with the county assessor where the property is located. The claim form, BOE-266, Claim for Homeowners’ Property Tax Exemption, is available from the county assessor.

A person filing for the first time on a property may file anytime after the property or claimant becomes eligible, but no later than February 15 to receive the full exemption for that year. Homeowners’ Exemption claimants are responsible for notifying the assessor when they are no longer eligible for the exemption. December 10th is the last day to terminate the Homeowners’ Exemption without penalty; the assessor should receive notice of ineligibility by that date.

An application has to be filed with a County Assessor in order to transfer any taxable value. Moreover, the so-called ‘replacement residence’ has to be purchased or constructed as a new property inside of 24-months from the sale of the original primary residence. However, should the fair market value of the replacement residence be larger than the sales value of the original residence, the difference in dollars must be added to the “taxable value” when the property tax transfer occurs. We realize this is still a bit confusing, however your trust lender or attorney will fill in any gaps to clarify how this works.

As for victims of a California wildfire, of which there have been many… or a so-called “natural disaster” such as an earthquake or flood, for example, the same requirements apply as the taxable value for the transfer for seniors, just without the age requirements. The primary residence damaged by a wildfire or state government-verified “natural disaster” in will need to be fairly damaged, obviously, in order to qualify for these new Prop 19 exemptions.

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

California Proposition 19

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.

 >> Click Here for Part Two…

Getting the Most Out Of Prop 13 and Prop 19 Property Tax Breaks

Getting the Most Out Of Prop 13 and Prop 19 Property Tax Breaks

Getting the Most Out Of Prop 13 and Prop 19 Property Tax Breaks

Residents in California that Benefit from Proposition 19

Focusing on senior residents and of course wildfire victims in the promotion of Proposition 19 was an extremely clever move by the CA Legislature. The state has been in the midst of another catastrophic series of natural fire storms  at the same time that voters were being introduced to the Proposition 19 tax measure; and voters certainly were personalizing what it might feel like to lose their home, in a matter of minutes, to fire… and of course this connection did not go unnoticed by the folks promoting Prop 19.  

Proposition 19’s backers ran sentimental, heart-tugging ads and even poured cash into the firefighter’s union.  Nonetheless, Proposition 19 only just passed with a little over half of the vote, 51%.
 
Prop 19 is a positive financial opportunity for seniors, victims of natural disasters and fire storms, and for homeowners with disabilities; or residents that happen to be grandparents that are looking to relocate from one area to another in California, to purchase a house nearer their family, specifically their children. And it’s a positive opportunity for older married couples looking to downsize, or to upgrade to a retirement home. 

On the other hand, it is a challenge for many middle class families, that are trying to avoid property tax reassessment; that are keen on establishing a low property tax base; to take advantage of Proposition 13 transfer of property, that wish to transfer parents property taxes when inheriting property taxes. It’s important to most families when inheriting property taxes from a parent, to keep parents property taxes, on any property tax transfer with a parent to child transfer or parent to child exclusion. 

Moreover, beneficiaries looking to buyout co-beneficiaries, siblings, are always looking for help in the transfer of property between siblings, to make sure nothing goes wrong — that you can keep your parent’s low Proposition 13 tax base and properly establish a low property tax base when buying out a siblings’ share of a house.

Easy Mistakes to Make, and to Avoid, with Proposition 13 & Prop 19

A few mistakes single homeowners, beneficiaries and property owning families  can fall into quite easily:

1) Some families forget to execute a property LLC in order to protect their  property from property tax reassessment when they pass away.

2) Some heirs or beneficiaries are not aware that they must file a claim for a “reassessment exclusion” or “exemption” under Proposition 13 inside of three years after the passing of a decedent, and therefore may lose their exclusion from property reassessment.  This can be an extremely expensive mistake.

3) Some homeowners mistakenly believe that they are passing on a “principal residence” or “primary residence”  but in fact have not resided full time in that home for many years.  This will cause expensive reassessment issues for any beneficiaries.

4) Some families believe they can pass on an exclusion from reassessment regarding a multi-unit residential property, even though they only reside in part  of the property.  This will cause serious issues for any beneficiary or heir.  

5) Some heirs or beneficiaries may not understand that they must reside in an inherited property only as a primary residence, under Proposition 19, in order to take advantage of a “parent-to-child” exclusion from reassessment, establishing a low property tax base; once a parent passes away.  Non primary residence could trigger reassessment at current market rates.

6) Some families revise the title of their home without consulting their tax lawyer or property tax specialist, possibly triggering property tax reassessment.

7) Some families will include numerous beneficiaries in a living trust, along with  listing their home.  If some of the beneficiaries are not offspring and some are, your actual children, i.e., heirs, may lose their ability to avoid property tax reassessment.

8) Some families may shift an industrial facility they have inherited into an LLC for business purposes, while renting it out; triggering a property tax reassessment by not  filing the proper forms in a timely fashion.

9) A property transfer may occur without proper registration paperwork filed   with the state.  Twenty years later the new property owner may owe twenty years worth of back property taxes at vastly increased rates. This can be a devastating event, causing the current owner to lose their home.

These laws are complicated and different scenarios can be confusing. Mistakes with paperwork or filing procedure errors can trigger reassessment at current market rates; even resulting in the loss of a home.  Another reason why estate lawyers have become so important as of late!