How did we get to Proposition 19? Let’s start with first start there. In 1978 Proposition 13 was passed providing Californians with some certainty about the future of their property tax liability by limiting the “taxable value” of property to an increase capped at 2 percent per year.
The property would be reassessed to market value only when ownership changed hands. Furthermore, to prevent families from incurring large property tax increases, on November 4, 1986, voters in California adopted Proposition 58 to provide that “purchase” and “change of ownership” did not include a purchase or transfer of
(1) the principal residence between parent and children and
(2) the first $1 million of the full cash value of all other real property (other than the principal residence) between parents and children. Section 63.1 was added to the Revenue and Taxation Code to implement the parent-child exclusion provisions of Proposition 58.
Later, on March 26, 1996, the California voters adopted Proposition 193, which further excluded from the definition of change of ownership certain transfers from grandparents to their grandchildren
Proposition 19 significantly altered the parent-child exclusion such that to qualify for the principal residence exclusion, it would require the receiving child to use the residence as the child’s principal residence, and the exclusion amount would not be unlimited. Instead, the exclusion amount would only exclude the first $1 million of assessed value; and the non-principal residence exclusion would be eliminated.
Proposition 19 passed, and the parent-child exclusion changes are effective as of February 16, 2021.
Proposition 19 severely limits the principal residence exclusion and eliminated the non-principal residence exclusion, families may wish to consider having their estate plans reviewed to see what options are still available. All situations are different, and each matter is unique in what options are best.
If you are interested in learning more about these options, speak to our Temecula and Murrieta elder law or estate planning attorneys. To schedule an appointment at our Temecula office or one of our other offices located throughout the state of California, contact us at (800) 244-8814.