Proposition 19 goes into effect on February 16, 2021 and the favorable property tax reassessment terms for gifts from parents to children are going to change.
If you are planning to gift a property to your child or children at your passing, you may want to consider accelerating the gift of that property if you fall within certain situations
- Do you have a property with a low assessed value and high fair market value?
- Are you and your family planning to hold onto the property for multiple generations?
- Can you afford to give away the property and all future income?
Under current law, a transfer of ownership generally results in a reassessment for property tax purposes, with two major exceptions:
- Principal Residence exclusion-This exclusion allows the transfer of a principal residence/ family farm* of unlimited value between parents and children
- $1 million lifetime non – principal residence exclusion– This exclusion allows the transfer between parents and children of up to $1 million of assessed value of all other types of property, for example second homes or rental properties.
Under Proposition 19, for transfers on or after February 16, 2021:
- Principal residence/family farm exclusion-this exclusion has been modified in two ways
- The child must use the residence as their principal residence
- Only the first $1 million of assessed value is excluded
- The $1 million lifetime non principal residence exclusion has been eliminated
If you are considering making a change before February 16, 2021, we are here to help. Everyone’s situation is unique, so if you are considering making such a gift, please contact our Estates & Trust team or contact your HW partner or team member you work with for assistance or with any questions you may have.
*Family farm- A family home includes a family farm that contains a principal residence. A family farm is real property that is under cultivation or which is being used for pasture or grazing, or that is used to produce any agricultural commodity.
**Because of holidays, its recommended that you complete the transfer by February 11, 2021 for a completed transfer by February 16, 2021.