While the main focus of this year’s election was on the presidential race the propositions are important as well. This year Prop 19 was passed in California and if you own a home you should be aware of the changes that this proposition will bring. You may know of Prop 13 that was passed in the 70s; this proposition allowed for a reasonable increase in property taxes for homeowners. Prop 19 has changed some of the rules of Prop 13.
One change that may affect your estate plan is the transfer of parent to child exemption. Previously if you passed away and your child(ren) inherited your home they would receive that real property and they would be able to continue to pay the same amount in property taxes as you were paying. The parent to child or in special circumstances grandparent to grandchild transfer would not trigger a re-assessment from a property tax standpoint. Additionally Prop 13 allowed for each spouse to transfer an additional $1 million dollars in real property at the assessed value to children and allow for them to take advantage of the exemption.
With Prop 19 all of those exemptions will change. This proposition will go into effect on February 16, 2021. You can still transfer real property from parent to child and maintain the property tax rate, however the recipient will need to use the property as their primary residence. The additional real property transfer exemption will be completely eliminated once this proposition goes into effect.
If you are considering changing your estate plan or transferring ownership of your property now you should speak with a professional because there are other factors to take into consideration.