Navigating California's Proposition 19: How an Estate Plan Can Help
Proposition 19, also known as the Property Tax Transfers, Exclusions and Revenue for Wildfire Agencies and Counties Amendment, is a California ballot initiative that was approved by voters in November 2020. This initiative makes significant changes to California's property tax laws and affects homeowners 55 and over and disabled homeowners who are looking to transfer their primary residence's base year value to a replacement residence anywhere in California.
Key Takeaways
Proposition 19 makes significant changes to California's property tax laws and affects homeowners
Navigating these restrictions and rules can be complex, and it's important to have an experienced estate planning attorney
PROPOSITION 19 CHANGES FOR HOMEOWNERS
Proposition 19 allows homeowners to transfer their primary residence's base year value to a replacement residence anywhere in California, as long as the replacement residence is of equal or lesser value. This can be a significant savings for homeowners, as it can significantly lower their property taxes. However, there are some important restrictions to be aware of.
The first restriction is that the replacement residence must be located in California. If a homeowner is looking to move out of state, they will not be able to take advantage of Proposition 19. Additionally, the replacement residence must be of equal or lesser value than the primary residence. If the replacement residence is more expensive, the homeowner will not be able to transfer the base year value and will be subject to higher property taxes.
Another important restriction is that only one transfer is allowed per homeowner or per married couple. This means that if a homeowner has already transferred their base year value to a replacement residence, they will not be able to do so again. Additionally, there are certain types of property, such as vacation homes or rental properties, that are not eligible for the transfer.
Ensuring Compliance with Proposition 19
An experienced estate planning attorney can help ensure that your assets are structured in a way that complies with Proposition 19 and maximizes the benefits for your beneficiaries. One of the ways an attorney can help is by creating a trust that can be used to bequeath real property to those excluded from property tax reassessment under Proposition 19.
For example, if a homeowner has a child who is disabled and unable to work, they may want to ensure that the child is able to continue living in the family home after the homeowner's passing. An attorney can help create a special needs trust that allows the disabled child to inherit the family home and continue living there without disqualifying them from government benefits. Additionally, the trust can also be structured to take advantage of Proposition 19 and ensure that the child is able to continue living in the home without incurring significant property tax increases.
Additionally, an attorney can also help with trusts and other estate planning tools that can help your beneficiaries take advantage of the new rules while avoiding any potential pitfalls. For instance, if a homeowner has multiple children and wants to ensure that the primary residence is passed on to one child while ensuring that the other children also receive a fair share of the estate, an attorney can help create a trust that accomplishes this. This type of trust can also be structured to take advantage of Proposition 19 and ensure that the child who inherits the primary residence is able to continue living there without incurring significant property tax increases.
An attorney can also help with the transfer of the primary residence's base year value to a replacement residence. This process can be complex, and it's important to have an attorney help ensure that the transfer is done correctly and in compliance with Proposition 19's rules. This can include reviewing the property's title, obtaining any necessary permits, and filing the appropriate paperwork with the county.
Furthermore, an attorney can also help with the planning of the estate to make sure it is in compliance with the $1 million cap on the value of the property that can be passed on tax-free, and limits the number of times it can be used. In some cases, it might be beneficial to transfer certain assets before death to stay under the cap, or divide assets among multiple beneficiaries to take full advantage of the exclusion.
EXPERIENCED PROPOSITION 19 ESTATE PLANNING ATTORNEY
Navigating these restrictions and rules can be complex, and it's important to have an experienced estate planning attorney help you understand how Proposition 19 may affect your estate plan. An attorney can help you structure your assets in a way that takes advantage of Proposition 19 while also ensuring that your beneficiaries receive the maximum benefit. An attorney can also help with trusts and other estate planning tools that can help your beneficiaries take advantage of the new rules while avoiding any potential pitfalls.
In summary, Proposition 19 makes significant changes to California's property tax laws and affects homeowners 55 and over and disabled homeowners who are looking to transfer their primary residence's base year value to a replacement residence anywhere in California. However, there are several restrictions and rules to be aware of. It is important to have an experienced estate planning attorney help you understand how Proposition 19 may affect your estate plan, to structure your assets in a way that takes advantage of Proposition 19, and ensure that your beneficiaries receive the maximum benefit.
For more information on trusts, you can explore our estate planning practice and Resources.
CONCLUSION
Proposition 19 makes significant changes to California's property tax laws and affects homeowners 55 and over and disabled homeowners who are looking to transfer their primary residence's base year value to a replacement residence anywhere in California. However, there are several restrictions and rules to be aware of. It is important to have an experienced estate planning attorney help you understand how Proposition 19 may affect your estate plan, to structure your assets in a way that takes advantage of Proposition 19, and ensure that your beneficiaries receive the maximum benefit. Check our Resources for further discussion in this regard or schedule a strategy session today. Keep planning smarter.
Matthew Schlau is a co-founding principal of Schlau|Rogers and an estate and business planning lawyer practicing in Orange, San Diego, Los Angeles and Riverside counties. He is a husband, father, blogger, crossfitter, and really good at helping people achieve their goals.
At Schlau|Rogers, we do more than just estate and business planning, probate and trust administration. Our objective is to provide individually-tailored plans that allow you the opportunity to reach your goals, all while minimizing headaches and risk, and maximizing peace of mind.
On our blog, you'll find useful information about estate and business planning, probate and trust administration, as well as some tidbits on personal finance, taxes, and anything else we think will help minimize headaches, worry and risk, all while maximizing peace of mind.
–
You can find Matthew here:
Website: schlaurogers.com
Facebook: facebook.com/schlau.rogers
Twitter: twitter.com/SchlauRogers
LinkedIn: linkedin.com/in/schlau-rogers
Instagram: instagram.com/schlaurogersfirm/
Disclaimer: This blog is a resource for educational and informational purposes only and should not take the place of hiring an attorney. Using this blog does not create an Attorney-Client relationship between you and Schlau|Rogers. Individually-tailored legal advice is not provided within this blog. Instead, this blog is a resource designed to make you aware of various legal issues. Your use of this resource is subject to our Terms and Conditions, which you can read here. If you would like to hire an attorney, you can get in touch with us at (949) 873-0662 or request a strategy session.