California’s Proposition 19 was passed as a constitutional amendment about two years ago amid quite a bit of confusion. A large part of this stemmed from the misleading rationale that positioned it mainly as a means to extend a financial lifeline to Californians whose homes were destroyed by wildfire or other natural disasters. This paved the way for them to transfer their property tax base to a new home in any of California’s 58 counties and thus rebuild their lives after such a tragedy.
Obscuring further were also some takebacks from the homeowner benefits offered, which largely replaced — Proposition 58. These takebacks from Proposition 58 centered mainly on the property tax benefits available when a primary residence was passed from parent to child. Now, it only covers the primary residency or family home. If it is transferred to a child, that child must make it their primary residency within one year after the transfer, and the property must remain their primary residence. Any other type of move will essentially trigger a reassessment. And many clients are still surprised about this.
Luckily the Board of Equalization has come out with clarifications and guidance on how Prop. 19 is supposed to work. So, if you’re wondering if the proposition has been a net gain or a bust, we are taking a closer look at both the good and the bad and reviewing the new instruction in this episode of Absolute Trust Talk. Kirsten and Madison will weigh in on the proposition’s changes and what those changes mean for the citizens of California and share some insights from the impacts we’ve been seeing with our clients here at Absolute Trust Counsel.
0:00 introduction
1:54 Here’s a little background on Proposition 19 and how it came to be law.
2:54 The good part of Prop 19 is that if you’re over 55 or a natural disaster victim, you can transfer your property tax base from your existing home to a new home, and it doesn’t matter what county you’re moving from or to.
3:57 Like most propositions, Proposition 19 contains multiple elements. However, here’s the part that most Californians are unhappy with.
4:50 The parent-child exclusion only covers the primary residence or family home if that’s transferred to a child and the child makes it their primary residence, but that’s not all.
5:42 This misleading omission in the Proposition 19 marketing campaign is why it’s still so misunderstood.
6:12 Next, Kirsten and Madison talk about some of the changes that weren’t clear when the Proposition first passed, starting with new forms – ensuring the transfer date matches the form.
6:48 The Board of Equalization has struggled to keep up with the changes the Proposition brought. It took them quite some time to update the forms but now that they have, make sure you are using the right one!
7:01 When multiple children inherit a home from their parent, and one wants to buy the others out, utilizing a bridge loan has been the most common short-term financial practice. Luckily, Proposition 19 has left it intact.
7:10 A common misunderstanding that centers on property transfers and has led to plenty of unpleasant tax surprises is that the date of transfer is also the date of death. And, if taxes are going to go up, they go up on that date.
9:22 The Board of Equalization (BOE) has added some steps to transfer a primary residence from a deceased parent to a child. Here’s a brief summary.
11:30 Because parents frequently organize their estates in this manner, the BOE’s new guidance presents a welcome change for inheriting children, but there is a catch that must be considered – There can be co-owners, but one child must still move into the house, and make it their primary residence.
12:57 Supposing one child moves out of the inherited family residence, but another move in? Here’s what happens.
14:15 Next, Kirsten, and Madison discuss what happens if a property is left in trust to benefit someone who is not a child.
16:18 When property tax reductions are involved, reassessments seem to take considerable time. Here’s what you should do.
17:50 BOE guidance on apartment units and duplexes is specific. This is how ADUs are treated differently.
20:54 If your home’s value has skyrocketed since its assessment, the million-dollar cap under Proposition 19 may impact you.
24:37 If two or more siblings inherit the family home and one makes it their primary residence, can they pay rent to those who don’t live there?
Do you need help with your estate planning or trust administration now? We can help. Together our Absolute Trust Counsel team will take a look at your situation and your specific needs and develop a strategic plan that will protect you and your loved ones, regardless of what may come. Here’s a link to schedule your free discovery today https://absolutetrustcounsel.com/sche….
Kirsten Howe and Madison Gunn Can Be Reached at 925-943-2740 or Info@AbsoluteTrustCounsel.com.
