What is California Prop 19 and How Does it Affect Me?

Proposition 19, a constitutional amendment California voters adopted in 2020, may raise the property tax on real estate inherited from parents or grandparents. Your personal properties and taxes may be impacted by Prop 19, according to a Pasadena property tax attorney at Barilari & Williams.

With slightly over 51% of the vote, Proposition 19 was narrowly successful. It considerably reduces the advantages of property taxes for specific familial transfers of real estate, such as when a parent passes property to a child after the parent’s passing.

Before Proposition 19, parents may give real estate to a kid (or a grandchild if the grandparent is deceased) without having to appraise the property for tax reasons. A principal house may be transferred regardless of its value, and another real estate could be transmitted up to $1 million without requiring a property reassessment.

Limiting parent-to-child and grandparent-to-grandchild transfer exemptions, which amounted to thousands of dollars in tax savings on real estate that the owners had inherited from their parents or grandparents, amended Propositions 58 (1986) and 193 (1996).

How Do Exclusions for Property Transfers Apply Today?

From February 2021, parent-child property transfer exemptions under Proposition 19 have only applied to the parent’s or grandparent’s principal residence and only when the transferred property will serve as the new owner’s permanent residence. An inheritance of a family farm is still excluded.

But, any sum beyond that million-dollar mark will be evaluated if the transferred principal house has increased in value by more than that amount in the years after the parent or grandparent purchased it. The transfer exclusion for any properties other than principal residences is also eliminated by Prop 19 in this way.

How Would It Work If You Gave a Property to a Business?

The procedures differ slightly when transferring a property to a corporation or limited liability company, two types of commercial entities. If the ownership of the property does not change, transferring it to a business entity is permitted without a reassessment.

For instance, if a father and two children each own one-third of a property and they also each own one-third of a business company, the property may be transferred to the business entity without a reassessment as long as there is no change in the ownership of the property’s majority.

Let Barilari & Williams Help You with Property Tax Advice

Fundamentally, Proposition 19 restricts your possibilities for transferring real estate to your children or grandkids without a reassessment if you own property in California.

The California estate planning lawyers of Barilari & Williams, who have offices in Pasadena and Long Beach, have more than ten years of combined expertise assisting clients in understanding and, where feasible, minimizing their property tax burden.

The most significant estate planning takes into account a variety of factors, including property tax planning. Your homes and assets can be shielded against needless taxes and other dangers like divorce, creditors, and litigation with a Pasadena property tax attorney from Barilari & Williams.

Barilari & Williams offers a free first consultation with one of their attorneys. Call us at 888-EST-PLAN to set up that appointment if you want to learn more about Proposition 19’s consequences and effective estate planning.