California proposition 19 threatens to take away the parent to child transfer ability for non primary resident homes.
The November 2020 election quickly approaching, Californians are preparing to vote on several new ballot measures. If passed, California Proposition 19 eliminates the Proposition 58 parent to child exclusion for property tax reassessment if the recipient doesn’t use the home as their primary residence. In that situation the property tax value of the home would be fully reassessed at current market value, potentially increasing the tax assessment dramatically and creating a financial burden for the owner.
The Howard Jarvis Taxpayers Association says “Proposition 19 takes away important taxpayer protections that have been enshrined in the State Constitution since 1986. That’s when 76% of voters approved Proposition 58 to allow parents to transfer a home and limited other property to their children without an increase in property taxes. Proposition 19 eliminates Proposition 58 and a similar measure, Proposition 193, which gives the same protection to transfers between grandparents and grandchildren if the children’s parents are deceased. Proposition 19 would require property transferred within families to be reassessed to market value as of the date of transfer, resulting in a huge property tax increase for long-held family homes. The only exception is if the children move into the home within a year and make it their principal residence. This is a billion-dollar tax increase on California families. Proposition 19 contains other provisions, which HJTA has supported in the past, to expand the opportunities for older homeowners to transfer the base-year value of their home (under Prop. 13) to a replacement home. This was on the ballot in November 2018 as Proposition 5, but voters rejected it. Now, with a massive tax increase added, the price is too high. HJTA opposes this measure. VOTE NO ON PROPOSITION 19.”
View more information from The Howard Jarvis Taxpayers Association Here
Each day, California Proposition 58 protects families that have suffered the loss of a parent from owing thousands of dollars in property taxes while they settle their affairs. It is important to understand how Proposition 58 helps the average Californian. The majority of transfers from parent to child happen after both parents have passed. The date of passing of the last (surviving) parent will be used as the date of transfer to the beneficiaries (Children). Our data shows that on average it takes 17 months to settle the estate after the death of the surviving parent. During this time, the children are responsible for continuing to pay the property taxes on their parent’s home and on any other properties they own.
Under Proposition 58 (passed overwhelmingly by voters in 1986), a home and up to $1 million of assessed value of other real estate are excluded from reassessment when transferred between parents and children. This keeps the property tax assessment the same as if still owned by the parent.
Unfortunately, if Proposition 19 passes, a property transferred between parents and children would be reassessed to market value as of the date of transfer, which in the case of inheritance is the date of death. A child would have to move in and make the parent’s home his or her primary residence within one year in order to qualify for an exclusion from reassessment.
If children who inherit their parents’ home want to sell it, they would have to pay much higher property taxes over that average 17-month period from the date of death to the close of escrow. Our data shows this would mean an average of $8,500 in additional property taxes. Proposition 19 will create a new tax for average Californians that just lost a parent and dismantle some of the current California Prop 58 property tax benefits that are now in place.
The higher taxes under Proposition 19 would create a hardship for many children who inherit a home from a parent and force them to sell it even if they preferred to keep it. This might be great for realtors who expect to collect more commissions, but not great for a family grieving the loss of a parent.
We encourage you to Vote No on California Proposition 19 in the 2020 California Election.
If you or a family member are currently in a position to take advantage of the Proposition 58 Parent to Child Exclusion from Property Tax Reassessment we suggest you act now before your ability to do so is potentially removed.