As you may know, it looks like Proposition 19 (“Prop 19”) will pass. Prop 19 severely limits the use of the parent-child exclusion for property tax purposes. If you are considering a transfer of California real estate to your children, whether now or in the future, and you wish to avoid an increase in property taxes, you will need to make the transfer before the effective date of Prop 19 (February 16, 2021).
For example, Prop 19 poses a particular dilemma for clients who created a Qualified Personal Residence Trust (“QPRT”) with a Fixed Term which extends beyond February 16, 2021. In such case, when the QPRT Fixed Term expires after February 16, 2021, the property tax value of your residence will be reassessed to the then current fair market value, which likely means that your property taxes will increase (in some circumstances, substantially).
If the fair market value of your residence owned by your QPRT is higher than the property tax value, and you do not want an increase in your property taxes when the QPRT Fixed Term expires, or if you wish to consider options for transferring your California real estate to your children before Prop 19 becomes effective, please call your estate planning attorney so we can discuss options for mitigating the potential increased property taxes triggered by the passing of Prop 19.
The information contained in this note is for general educational purposes only and is not designed, nor intended, to be used as the singular source of information to analyze a legal issue. Please contact legal counsel to discuss any specific questions you may have.