California residents will vote in November to potentially increase real property taxes on parent-child real estate transfers. The proposed ballot initiative, Proposition 19, will increase property taxes upon parent-child real estate transfers in California.
As it stands today
If a parent wants to transfer property to their child in an estate plan, the property must be reassessed upon transfer for tax purposes. Generally, these reassessments increase an estate’s property tax rate. As of August 2020, there are two ways to avoid property tax reassessment: the principal residence exclusion or the $1M lifetime non-principal residence exclusion.
If passed, Proposition 19 will:
- add additional requirements for children to qualify for the principal residence exclusion and cap the property value that can avoid reassessment
- favorably adjust the property tax value for persons over 55 moving to a new home
- take effect February 16, 2021 (for the parent-child exclusions) and April 1, 2021 (for property tax adjustment for persons over 55)
The increased tax revenue from the parent-child exclusion provision will fund firefighting efforts (in lieu of California’s recent uptick in wildfires) and offset lost tax revenue from the property tax change for people over the age of 55.