Currently under Proposition 58, parents can leave their primary residence of any value to a child (and in some cases, grandchildren) without reassessment of the Proposition 13 assessed value. Additionally, each parent can leave one million dollars of additional property (two million for two parents) at the current assessed value to children. Proposition 19 drastically changes these allocations. Under Proposition 19 the parent to child exemption is eliminated except under the condition that the child declares the parent’s primary residence as their own residence after their parent’s passing.
If you wish to utilize the parent to child/grandchildren exemption before it expires on the effective date of Proposition 19 set forth below, then you need to consider gifting real estate to adult children to avoid property tax reassessment at your death, particularly if your children are planning on keeping the property for the foreseeable future. Time needs to be spent analyzing your specific situation. It is important to also consider if you are reliant on those properties for continued income or if you would be troubled by handing over control of property to children.
If you are a surviving spouse with real property in a B trust, (also known as Bypass, Exemption, Disclaimer trust, etc.) Proposition 19 will increase the assessed value of the property for your children when you pass away.
What about a family vacation home that you want to keep in the family for generations?
There may be options to mitigate these and other concerns.
We urge you to schedule a phone call or Zoom meeting if you have any questions about how Proposition 19 will affect your estate planning goals. Proposition 19 goes into effect February 16, 2021, (with some holidays, the deadline to act is February 11, 2021) so proactivity is critical. Deeds to the subject property need to be recorded on or before the effective date. The initial phone call or Zoom meeting (and time to review documents in preparation for the call) is $800. Fees for further work are discussed with the attorney.
Please call 916-282-5033 or email: [email protected] on or before December 31, 2020 to schedule an appointment. We have limited appointments available and when those are gone, we will be unable to assist additional clients. Please be aware that depending on the number of these cases which our office may end up handling, the complexity of the client’s circumstances and given the short timeline, we may end up referring you to another law firm at our initial meeting and evaluation. There is also risk whether or not other law firms will have the scheduling capacity.
NOTE: Our engagement does not start until you meet with an attorney and sign our legal services agreement. The comments in this email are not case specific and do not constitute legal advice. Gifting and other planning options may result in loss of an upward property basis adjustment (“step up in basis”) for property on the original owner’s death and related adverse tax consequences. This e-mail does not attempt to outline all of the various tax planning options and related benefits and risks.