Some big changes are coming for people who inherit property from their parents and grandparents. It’s all thanks to Proposition 19, approved by California voters last November.
If you’re planning to leave your home or business to your children or grandchildren, Feb. 16 is an important date to keep in mind. That’s when certain provisions of Prop. 19 take effect.
“We’re gonna see the slimdown of the parent-to-child transfer benefit," said Jordan Marks, taxpayer advocate for the San Diego County Assessor's Office. "So, subsequent to that, you can’t give your kids a second property or commercial property, part of that family wealth building, but you will be able to pass them your primary residence with a limit of a million of market value above what you’re currently paying.”
Children or grandchildren who inherit a home and use it for their primary residence can keep the current tax rate, established by 1978’s Prop. 13. The lingering effect of Prop. 13 is a much lower property tax rate for people who’ve owned their homes for a long time, compared to those who’ve bought their homes in recent years.
If those children or grandchildren don’t live in the inherited house, they’ll begin to pay the current assessed value, which could be thousands of dollars more.
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A second provision of the bill takes effect on April 1.
“On April 1st, the seniors are gonna get the benefit to transfer their replacement property," Marks said. "So they sell their primary home and they can get a second one, and they can do it three times now versus the one time allowed under the law.”
Another provision was pushed heavily in pro-Prop. 19 ads: that victims of wildfires or natural disasters can transfer their current rate one time.
Those ads also touted the financial benefit to schools and local governments and established a wildfire prevention fund that could receive up to $99 million in the first year and up to $6 billion over the next 12 years.
There are other provisions to the law, and it can all get rather confusing. Just ask members of the state Board of Equalization.
“We had a lot of constituents calling in expressing their displeasure with the new law,” said Gary Gartner, who works with the California Board of Equalization.
Gartner said the board is trying to work out ambiguities in the law with assessors around the state and legislators in Sacramento. To that end, the board is holding a virtual town hall tomorrow at noon.
“To just give people the opportunity to better understand the complexity of this law, which is really challenging,” Gartner said.
You must pre-register to attend using this link.
In addition, more information can be found on the Board of Equalization's website.
Both Gartner and Marks also recommend you speak to your tax professional before Feb. 16.
