The Impact of Prop 19 on Estate Plans

By Tyler P Krueger, Associate Attorney

Changes to Property Tax Rules Can Significantly Impact Your Estate Plan

Prior to the passage of Proposition 19, almost any property could pass from a parent to a child without the property taxes increasing. Proposition 19 makes significant changes to the property tax transfer rules for transfers between parents and children that could significantly impact your estate plan.

The Impact on Primary Residences

The first change concerns property tax base for a primary residence. Now, an individual can only transfer the property tax base of their primary residence to a child if that child claims it as their primary residence upon receiving the property. If that inherited property is not declared as the child’s primary residence, the property tax base will be re-assessed, and the property taxes increased.

The Effect on Non-Primary Residences

The second change is the elimination reassessment exclusion for non-primary residence properties. A non-primary residence property includes family homes, vacation homes, and investment properties. A family vacation, for example, will now be reassessed upon the transfer to the children.

This can have a significant impact upon many people. ​

An Example Scenario

A vacation home that a parent purchased in 1985, which has a tax base of $150,000.00 but a current value of $1,000,000.00, will now be reassessed to that new value upon the transfer to the child. 

Prior to Proposition 19, the child would be able to continue paying property taxes based on the $150,000.00 value. Under the new rules, the transfer will result in the child paying property taxes based on the $1,000,000.00 value. 

This change may be the difference between keeping the family vacation home in the family or having to sell it because the property taxes have become high.

New Rules Take Effect on February 15, 2021

These new transfer rules will take effect February 15, 2021. If you think these new property tax transfer rules impact you or your estate plan, you should make an appointment with the attorneys at Rusconi, Foster & Thomas, APC to discuss your options.