What Every California Resident Should Know About Proposition 19 and How to Avoid a Huge Tax Hike on Inherited Homes

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Are you planning to pass your primary home down to your child(ren)? How about your vacation home? Or a rental property?

Then you should be aware of how California’s Proposition 19 will impact your family when it takes effect in early 2021.

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    What’s the Current Law?

    Now, many California residents benefit from low property tax rates due to Prop 13’s restrictions on property tax assessments. These safeguards help ensure that parents can pass down their property taxes to their children, and seniors are not “priced out” of their homes because they cannot afford the tax increase at today’s market value rates.

    Seniors over 55 can move to certain counties and take their low property tax value to a lower-cost home.

    An additional perk is that owners of real property other than the primary residence could pass down their low property tax rate to their children when they passed away. This perk applied to the first $1,000,000 of assessed value. This could help save heirs tens of thousands  of dollars in taxes that would otherwise be owed by beneficiaries if the property was reassessed.

    What’s Changed?

    First, beginning in April 2021 seniors can move into any higher cost home in the state and retain their lower tax base.

    Two changes become effective in February 2021 for parents passing down real property to their children;

    1. Under proposition 19, if your child does not use the inherited primary residence as their primary residence, they can no longer take advantage of the lower tax. Instead, the property will immediately be reassessed at current market value. Such a tax hike may make it nearly impossible for your child(ren) to keep the home if won’t live in the home.
    2. Proposition 19 also eliminates the current owners’ ability to transfer without a big tax hike on the first $1,000,000 of other real property, such as a second home, a rental, or a vacation home.

    What Should I Do?

    We should have a conversation ASAP about your planning if:

    • You do not believe that your children will use your home as a primary residence when you pass away;

    • You have more than one child and you are worried that one will try to move into the home in order to avoid the tax penalty, but it will instead cause fighting over an inheritance that appears to be “unequal”;

    • You know that your children will sell the home, but you do not want them to be strapped with a huge tax bill until the property goes to closing. This will give them space to list the property at the right time and hold out for an offer that’s fair for everyone; or

    • You have a rental or vacation home that you want to pass on to your child(ren), but you want to keep the rental income for your lifetime.

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    The good news is that there is a SHORT window to put plans in place prior to February 2021 that can help lower, or even eliminate, the tax burden that you or your children may face on inherited homes when you are gone. We are holding free educational webinars where we are going to discuss Proposition 19 in greater detail and walk you through all of your options. What we are teaching is important information for EVERY California resident! Please share this link with your friends and loved ones:

    Register for a Webinar about Proposition 19 webinar and other topics now!
    https://www.copenbarger.com/events/

    You can also contact us directly if you have specific questions about Proposition 19 and how it may affect your family.

    To schedule an appointment, call us at (800) 244-8814!

    Copenbarger & Copenbarger LLP

    (800) 244-8814

    Located in California, the law firm of Copenbarger & Copenbarger LLP represents clients throughout California, including, but not limited to the cities of Sacramento, San Jose, Santa Cruz, Pasadena, Santa Ana, Temecula, San Diego, Riverside, Bakersfield, and Borrego .

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