Estate planning in California changed when Proposition 19 passed. This law impacts how property is transferred between parents and children, and it can affect the taxes owed. If you own a home or other real estate, you need to understand how this law shapes what happens when you pass property to your heirs.
What Proposition 19 changed
Before Proposition 19, parents could transfer a primary residence to their children without reassessment of property taxes, no matter the value. Children could also keep the low tax base on up to $1 million of other property. Proposition 19 narrowed these rules. Now, a child can only keep the parents’ property tax base if the home becomes their primary residence, and the exclusion has limits. Other property, such as vacation homes or rental units, will be reassessed at market value.
How this impacts estate planning
These changes mean that passing real estate to children may create higher property taxes for them. If heirs cannot afford the increased taxes, they may need to sell the property. Families who want to keep a home or business property in the family must plan ahead to reduce the financial burden. This makes it more important to review estate plans and consider tools like trusts or other strategies.
Options for families
One option is transferring property before death, but this has its own tax consequences. Another is using trusts to manage when and how property passes to heirs. Families may also explore whether heirs want to live in the property, since the parent-to-child exclusion only applies if it remains a primary residence. Careful planning can help prevent surprises and make sure property stays within the family.
Proposition 19 changed how California families pass property to future generations. By knowing the limits on tax benefits, you can make informed decisions about your estate. Reviewing your plan ensures your wishes are honored while reducing tax burdens on your heirs.