Qualifying for CA Property Tax Measure Proposition 19

California Prop 19 Rules for Transferring Property Taxes

California Prop 19 Rules for Transferring Property Taxes

Background and Updated Details on Proposition 19

Proposition 58 – a wildly popular, successful property tax relief measure since 1986, was a life-saver for middle class homeowners and beneficiaries inheriting property taxes from Mom & Dad; from San Jose all the way to San Francisco and beyond – and was abruptly replaced after a rushed, slightly confusing  PR campaign; with a tax measure called “Proposition 19” – revising Prop 58’s flagship tax break, the “parent-child exclusion”.

Yet Prop 19, true to it’s advertising, added invaluable property tax exemptions for homeowners age 55 and over, for folks with severe disabilities, and victims of natural disasters and forest fires. Giving qualified homeowners the ability to transfer the assessed value of their primary home to a newly purchased or newly constructed replacement “primary residence” up to three times in a lifetime.

For heirs inheriting a home from parents, the bottom line objective for families is property tax transfer – a low property tax base of course; avoiding property tax reassessment; and naturally  the right to transfer parents property taxes and keep parents property taxes, when inheriting a home and inheriting property taxes from Mom & Dad… Having access to a comfortable stress-free parent-child transfer, and a parent-to-child exclusion from having to pay extremely high current property tax rates.  Although nothing is perfect,  California’s property tax relief, as it is now,  gives a foothold to consumer and homeowner  advocates who firmly believe the folks in power should go all the way, to pause CA property taxes to combat Pandemic impact  on the local economy.

Promotion of Proposition 19, albeit slightly misleading, said it all in the title – the “Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act” – more or less replacing the constitutional amendment Proposition 58… However – still maintaining the right to take advantage of a parent-child transfer, inheriting property taxes from Mom & Dad to keep a low property tax base with a parent-to-child exclusion – homeowners are still able to use Proposition 19 in conjunction with a loan to an irrevocable trust, to buyout inherited property shares from beneficiaries, giving inheritors plenty of time, up to 12-months, to move into an inherited primary residence.

Changes to Property Tax Relief Effective 2/16/2021 and 4/1/2021 

  Replacing Proposition 58 (est. 1986) and Proposition 193 (est. 1996) – limiting parent-to-child transfers and grandparent-to-grandchild transfer exemptions (Proposition 193).

  Replacing Proposition 60 (est. 1986) and Proposition 90 (est. 1988) that allowed home transfer exemptions for seniors; and Proposition 110 (est. 1990) allowing exemptions for disabled homeowners.

To qualify for property tax relief, residents have to file a claim with their County Tax Assessor by the time stated in the local county ordinance, or inside 12-months from the date of property damage caused by a natural disaster, a flood, earthquake, whatever – whichever is later. The loss estimate has to be at least $10,000 of current or “fair market” value to qualify for this type of property tax relief. Property taxes are reassessed and adjusted according to the level of damage.

Requirements to Qualify for Proposition 19 Approval

1. Proposition 19 permits property tax decreases by allowing families inheriting real estate to avoid property tax reassessment on a family home used as a principle or primary residence.

2. Only one child (heir) after property is transferred, and both parents before property is transferred over, have to be primary residents of inherited property, with plenty of time (12-months) to move in after the transfer.

3. Proposition 19 allows the transfer of a family home or farm between parents and their offspring, or grandparents and grandkids (as long as both parents are deceased) without triggering “change in ownership” based property reassessment – which is a property tax increase everyone wants to avoid.

At least one beneficiary has to reside in a primary residence, upon the purchase or transfer of a family home between parents and their children, in order to qualify for a property tax exclusion.

It’s worth reiterating that in order to qualify, a beneficiary inheriting real estate must be eligible for the “homeowners’ exemption” or “disabled veterans’ exemption“, applied within 12-months of the transfer or purchase. A parent also has to be eligible for homeowners’ exemption or disabled veterans’ exemption within 12-months of transfer or purchase. Using a home as a primary residence. And can still apply even without one of these exemptions by simply proving the home is a primary residence.  It is important to point out that there is no requirement for a family farm to contain a home that a beneficiary has to reside in.

The Tax Assessor’s Office has a calculator to help homeowners estimate their potential property tax savings from a tax exclusion.  

To Qualify for an Exclusion the sccassessor.org Website States:

The value limit is equal to the home’s taxable value at time of transfer plus $1 million. Any amount of market value exceeding the limit is added to the taxable value for the transferee. Partial relief is granted under the parent child exclusion up to the value limit; with the remainder assessed at market value.

A $1 million allowance will be adjusted annually beginning in 2023.The principal claimant or the claimant’s spouse who resides with the claimant must be at least 55 years of age at the time the original residence is sold. The claimant must be an owner on record of both the original and replacement residences.

Claims must be filed within three years from the date the replacement residence is purchased or newly constructed to receive full relief. Claims filed after the three-year time period will receive Prospective Relief only. Heirs must complete the claim form and meet the exemptions requirement within the first year following the date of transfer.

The exclusion for transfers between grandparents and grandchildren are the same rules as described above except in order to qualify the parents of the grandchild must be deceased. Special rules apply to multi-unit dwellings and mobile homes.

It’s well worth noting that all 58 California counties now have adopted, in accordance with Proposition 19 stipulations, an ordinance for disaster relief, available to owners of real property, business equipment and fixtures, orchards or other agricultural groves, and to owners of aircraft, boats, and certain manufactured homes.  It is not available to property that is not assessable, such as state licensed manufactured homes or household furnishings.

FAQ: Property Tax Transfers & Taxes on Inherited Homes

Trust Loan Question and Answers

Trust Loan Question and Answers

California Proposition 19 Trust Loan Questions and Answers

If you are staying abreast of updates and news, concerning property tax relief in California, you are most likely aware that there is still some confusion among homeowners as far as where Proposition 58 leaves off and Proposition 19 picks up… with respect to tax breaks like the parent-child exclusion, low tax base issues, and all property tax benefits associated with property inherited from a parent.

We will attempt to dispel some of that homeowner confusion here today through  some well worn questions and answers among beneficiaries, estate & tax attorneys, property tax consultants and trust lenders in California.

Q: If we forgot to apply for the parent-to-child exclusion before Feb 16, 2021, can we still qualify for this exclusion anytime thereafter in 2021 to avoid property tax reassessment through Proposition 58 and Prop 193 for the grandparent-grandchild exclusion?

A: As long as the change in ownership of your property from your parent took place on or before Feb 15, 2021, the transfer will qualify for the exclusion under Proposition 58/193. The date of death is the same as the date of the change in ownership. However, bear in mind that your claim has to be filed with your County Assessor within 3 years of the date of transfer (or prior to transfer to a third party) or within six months of the date of notice of “supplemental” or “escape assessment”. So no, your actual claim did not have to be filed by Feb 16, 2021.

Q: Regarding Proposition 19, if I inherit my parent’s family home and move into it as a primary residence, do I have to reside in that house to take advantage of the parent-to-child exclusion? Can I move somewhere else?

A: Apparently at least one beneficiary has to reside full time in that family home in order to avoid property tax reassessment with the parent-child exclusion. Once that property is no longer your full time home it will be reassessed at current market rates.

Q: Property transfers were executed under Prop 58 prior to Prop 19 becoming law on Feb 16, 2021. Is it true that Proposition 58 can also apply to property transfers after Feb 15, 2021?

A: No, it is Proposition 19 that will apply to property transfers after Feb 16, 2021.

Q: How does Proposition 19 affect my inherited property that’s being held in an irrevocable trust?

A: First of all, the trust governs the property. For a home held in trust, tax law states that a change in ownership occurs when real property goes to anyone other than the trustor or the trustor’s spouse or “domestic partner” when a revocable trust becomes irrevocable, and cannot be revised. The date of the decedent’s passing is viewed as the date of change in ownership. Proposition 19 states that Prop 58 applies to transfers that were executed before Feb 15, 2021. Proposition 19 applies to transfers that occur after Feb 16, 2021.

Q: If a family home is given to three sibling beneficiaries as a gift, must all three siblings reside in this home as a primary residence in order to take advantage of the Prop 19 parent-to-child exclusion?

A: As long as at least one sibling inheriting this property continues to live in the home as a primary residence, or principal residence, the exclusion will remain active for that property, and that beneficiary.

Q: Does Proposition 19 apply to a property transfer of a rental home, as Proposition 58 did?

A: No, under Proposition 19 the parent-child exclusion from reassessment applies only to the transfer of a family home that remains the principal residence of the beneficiary that moved in and continues to live there.

Q: If the value of my inherited home is more than $1,000,000 exactly what are Proposition 19 rules and regulations concerning the parent-to-child exclusion?

A: Under Prop 19 it is the sum of the factored base year value plus $1,000,000. Should the assessed value exceed this limit, you can benefit from partial property tax reassessment, or partial property tax relief. The amount greater than the excluded amount would be added to the factored base year value.

Q: If my county Tax Assessor doesn’t know about the passing of my Dad before Feb 16, 2021, and becomes aware of his death 15 months later and so reassesses the property I inherited from my Dad on the date of my Dad’s passing… Is a parent-to-child transfer or  parent-to-child exclusion applied through Proposition 58 or Prop 19?

A: The law in effect today tells us that the date of death will apply. It has been made clear that Prop 58 applies to an inherited property transfer from a parent on or before Feb 15, 2021.  It’s important to remember that California Proposition 19 applies only to property transfers that go through after Feb 16, 2021.

Q: Now that Prop 58 parent-child exclusion has morphed into Prop 19 property tax breaks, how do I apply for the homeowners’ exemption or disabled veterans’ exemption within 12 months of the transfer to qualify for a parent-to-child exclusion and grandparent-to-grandchild property transfer exemption from fair market property tax rates, as dictated by Prop 19? Who can help me apply for homeowners’ exemption or or disabled veterans’ exemption in my county?

A: To keep it simple, a claim will have to be filed with your County Tax Assessor, who will be on the BOE list of all California Tax Assessors;  and who will inform you as to what forms to complete, to apply for the homeowners exemption or disabled veterans exemption.