Update for May 2021 – Prop 19 is currently in effect; however, the California Senate has approved a bill which would extend the implementation two more years to February 16, 2023, to allow more people to plan. Stay tuned if this passes CA congress we will be able to assist more families with Prop 19 planning.
Proposition 19 Practically Eliminates the Parent Child Exclusion From Property Tax Reassessment on Inherited Properties
If you have owned real estate in California for years and you were planning on passing your home and other investment properties to your children on your death while preserving your low property taxes, the clock is ticking.
Prop 19: Huge Property Tax Increase
Proposition 19 will go into effect on February 16, 2021 and will almost eliminate the Parent-Child Exclusion that currently exists on property tax reassessments.
Under the current rules, a parent may transfer his or her personal residence of unlimited value to a child and the property taxes will not go up. Your home in Del Mar, that you bought for $200,000 for which you only pay $5000 in annual property taxes could be transferred to your child or children and the property taxes will not go up to the current fair market value. With the parent child exclusion the taxes will stay at the $5000 rate.
Under Prop 19, you can only transfer your primary residence and the child will only qualify for the exclusion on $1,000,000 above the assessed value, plus the child must make the home his or her primary residence to qualify!
In addition, under current rules, you can transfer $1,000,000 in other real property to your children and they keep your low property taxes (based upon $1m of assessed value – not current fair market value).
Under Prop 19, a transfer from parent to child of non-owner occupied properties will result in a change of ownership and resulting increase in property taxes. The tax savings on transferred properties will soon be gone!
Act Now To Save Property Taxes on Parent to Child Transfers!
If you currently enjoy low property taxes on your home and/or other properties and were planning on passing these to your children, you have from now until February 16, 2021, to take advantage of the current exclusions before they are gone.
With a special Irrevocable Trust you may be able to transfer properties to your children now and qualify for the current parent-child exclusion from reassessment AND potentially also preserve a step-up in cost basis on the property when you die.
There is a very small window to get this planning done before Feb 16. We have already been inundated with requests. We are able to offer a Prop 19 Review Meeting for qualified homeowners for a low fee of $495. If you engage in any trust planning, we will credit your review fee toward any trust planning fees.
Act now, before it’s too late to avoid the Prop 19 Huge Property Tax Increase. *Priority will be given to current KR Hess Law Clients