As we start the new year with cautious optimism, happily bidding 2020 “Good riddance,” one of the first issues for California property owners to tackle is how they (and their families) will be impacted by Proposition 19’s new tax rules.
- How will it affect you?
- How will it affect your children or grandchildren?
Prop 19 Goes into Effect February 16, 2021
Beginning February 16, 2021, many of the property tax rea-assessment protections of Prop 13 for real estate transfers between parents and children will be significantly reduced.
In a nutshell, Prop 19 dramatically changes property tax rules for Californians around intrafamily transfers of real estate, what can be exempted from reassessment, and imposes limits on other property tax benefits.
What this means for many Californians is that under Prop 19, the act of transferring property from parents and grandparents to their children or qualifying grandchildren will now trigger large increases in property taxes due to reassessment to fair market value. While there are limited exceptions for personal residences that children use as their primary residence, the differences are dramatic. Commercial property transfers, such as rental properties, would be subject to reassessment to fair market values immediately.
The implications are far reaching. Not only will property tax liabilities increase dramatically, but in cases where the property in question is a rental property, tenants can expect to see their rents to go up to help offset the higher property taxes.
Hundreds of thousands of Californians will be affected. Are you one of them?
What Can You Do to Prepare for Prop 19?
While the tax rule changes resulting from the passage of Prop 19 are significant, there may be actions you can take now to help mitigate their impact on your family.
The most obvious immediate action would be to make any planned transfer of properties prior to February 16, 2021. Of course, such a quick turnaround may not be realistic for everyone.
In either case, we recommend you work with qualified, experienced attorneys to explore all of your options and select a solution for your family.
- Is your current estate plan up to the test?
- Under Prop 19’s new tax rules, will your children be able to afford to keep the property in the family?
If you have questions about preparing for Prop 19, we can help. We are experts at estate planning and helping our clients secure their assets and protect their heirs. Contact the attorneys at Shoup Legal, A Professional Law Corporation, at 951-445-4114 or www.ShoupLegal.com to discuss your unique situation today.