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Proposition 19- California Real Property Succession Planning In Jeopardy

***If you own real property in California, you should be aware of how this law may adversely affect your estate planning.***


California voters are set to narrowly pass Proposition 19, a measure that overturns Proposition 13 and expands property tax breaks for older homeowners, disabled homeowners, or those who have lost a home in a natural disaster (who can now transfer their low property tax assessed value to a new home up to three times in their lifetime).


However, Proposition 19 also dramatically limits the amount of property that can be inherited by children without that property being reassessed for property tax purposes. This means that inherited property will potentially become a lot more expensive for heirs and beneficiaries to hang onto and also pass along to the next generation.


Property 13 once allowed parents to pass on a primary residence, as well as any other real property up to $1M in value (this was calculated based on the very low property tax basis of the property, not the fair market value of the property), without reassessment. Proposition 19 now only shields the transfer of: 1) a primary residence, 2) up to the base year value plus $1M in appreciation, and 3) only if a child resides in the property. A residence that has appreciated more than $1M will likely be reassessed in part. And, any property other than a parent’s primary residence will likely be reassessed 100%.


Proposition 19 becomes effective on February 15, 2021. The CA State Board of Equalization has not yet promulgated rules for this new law. As such, our analysis will be developing as we learn more. However, there’s no better time than now to explore the issues at stake.


If you own real property in California and are hoping to transfer it to your children with your low property tax basis, it is imperative that you understand the differences in the tax laws pre-February 15th and post February 15th. My firm will be hosting a free, live 1-hour webinar about Proposition 19. You can sign up by visiting my events page (https://www.nw-trust.com/events) and clicking on your date of choice):


• Wednesday, December 2 @ noon

• Saturday, December 5 @ 10am

• Wednesday, December 9 @ 5pm

• Saturday, December 12 @ 10am


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