As one of the most complicated measures on the November 2020 state ballot, Proposition 19 would make significant changes to California’s residential property tax system. 19, ... “Voters passed Proposition 19 because it is a win-win for ... Oprah’s interview with Harry and Meghan was damn good TV. Prop 19 was introduced by the CA Association of Realtors and backed up by over $50 million in funds aimed to have it pass. I’m telling all my clients to just sell their homes on Redfin or Zillow because the realtor fees are as much as one year of the increased taxes they created. Also, it’s not just a deed. We made the hard decision to sell our home and move out of state. taxpayers can vote with their wallets and deny realtors any commissions from this con job. The Personal Residence is 100% excluded from reassessment, regardless of its value, and there are no restrictions on its use by the new owner; and. How is the Assessor going to treat mixed-use buildings, whereby the ground floor is zoned for commercial use, and the upper floors are for residential use – also mindful that different “depreciation” rules apply to commercial versus residential use properties. Good one – check with your lawyer. There is no e-filing for recording deeds because you are required to have a ‘wet’ signature – original docs. Soledad (La Jolla) with 180 degree ocean views for the same payment as a mortgage on a dump in Chula Vista. I don’t think it is coincidental that the public comment meeting occurred on the exact date the law goes into effect. Owner was changing title from Nor Cal Company, Mr. Smith, sole owner, to Mr. Smith’s Living Trust. If Proposition 19 passes, the changes pertaining to the parent-child exclusions will be effective on February 16, 2021. 2% each subsequent year. Consider Gifting Real Property Now It used to be that you could inherit your parents’ primary residence and vacation home (or grandparents if parents died first) and maintain their property-tax basis. CoreLogic: 1.5 Million Homes with Negative Equity in Q4 2020 https://www.calculatedriskblog.com/2021/03/corelogic-15-million-homes-with.html This graph from CoreLogic compares Q4 to Q3 2020 equity distribution by LTV. In addition – the ONLY public meeting on Prop 19 through the Bureau of Equalization and Taxation, was – get this – **held at 10 a.m. on Feb 11th, the last legal day for anyone to file a deed transfer under Prop 19** Feb 16th is the actual deadline, but because of the four day weekend, the last day to file was Feb 11th. Vote it down." 19 is a cash grab, not tax reform; it’s not fair to property heirs, and it buys off a union so it has a better chance of passing. Recently passed Proposition 19 (“Prop 19”) includes two (2) relevant changes in California property tax assessments that may impact your estate planning. 19, the termination of the parent-child or grandparent-grandchild exclusion from reassessment upon transfer of property, takes effect on February 16, 2021. However, under Prop 19 the transfer from parent to child of a vacation home triggers a property tax reassessment. In the most underreported story of the election, Prop 19 brought catastrophic change for taxpayers who own California real estate and have kids: before Prop 19, under Prop 58 parents could pass Prop 13 tax caps on their children for nearly any kind of property. (prop. There is a lot to digest – I think it was poorly written. It abolishes the exemption on “other property.”, It preserves the exemption on primary residences, but only if the child also uses the home as a primary residence and to the extent the difference between the home’s assessed value and market value does not exceed $1 million (indexed for inflation). Law offices of Kathleen Siemont Prop 19 Zoom Seminar 12/22/2020 . If you have a legacy property that you intend to pass to the next generation (regardless of whether it is your home, or it is a rental, commercial … I know that you are a realtor, and I commend you for at least recognizing the harm this will cause homeowners. Two changes become effective in February 2021 for parents passing down real property to their children; Under proposition 19, if your child does not use the inherited primary residence as their primary residence, they can no longer take advantage of the lower tax. Prop 19 effective date and how it will eliminate exemptions for transfer of non-primary residences (04:50) Two prongs of Prop 19 and requirements (06:50) Example of transfer of home and partial reassessment upon transfer (08:38) Other tax considerations before jumping to transfer before deadline (10:35) Other possible solutions (13:12) Add in the fact that it was a huge presidential election, smaller issues were swept under the carpet. That is why so many of the on line filing services do not record deeds in California, but will efile any other cases, like criminal, civil, family law. Only preserves their property-tax basis if one of the inheritees moves into the home as their primary residence. Proposition 19 will have some effect on how a homeowner can transfer a tax assessment to another property after selling a previous property. In other words, the donee takes the donor’s cost basis in the property. Homeowners who may have sold prior to the effective dates and those that might have used Prop 60 or 90 previously are left with some ambiguity about what sales may or may not qualify to transfer a prior taxable value. This strategy, of course, will have to be completed prior to the February 15, 2021 effective date of Prop 19. The BOE has no authority to extend the effective date of Prop. In November, Proposition 19 was voted into law. If it does exceed $1 million, it will be partially reassessed, but not to full market value. "Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. 19 has one good feature — portability. Without Proposition 19, property tax is based on the value of the property when it was purchased, limiting property taxes to 1% of the home’s taxable value. Transfers between spouses are always exempt. For residents age 55 and older, severely disabled, or a victim of a wildfire or natural disaster, there is much to like about Prop. 2. It is notable that the current $11.7 mil exclusion is scheduled to “sunset” on Jan. 1, 2026 (unless Congress acts sooner) and roll back to about $6 mil. Its effective date is Feb. 16, 2021, however, given that Feb. 15, 2021 is a Holiday, the effective date for making any Pre-Prop-19 transfers, is Friday, Feb. 11, 2021. As such – Partial reassessment applies, which is calculated as follows: The Difference between FMV ($3mil) minus (AV of $1.5 mil +$1 mil = $2.5 mil), or, $500,000, is now added to the Assessed Value of $1.5 mil ($500,000 + $1.5 mil = $2 mil). (The anticipated answer here is YES, but still waiting for clarification from BOE). (climbing off my soapbox now), kindest regards , Here is a Google opinion on gift vs. inherit: While you may not have to pay gift taxes on the gift, if your children sell the house right away, they may be facing steep taxes. For example, if parents put property into a trust for their own benefit during their lifetimes and thereafter for the children, “in that case the assessor would not consider it a change of ownership until the parents passed away,” Marsh said. They know the market and gave us sound advice backed by details and very considerable experience, reflected both in the initial pricing and subsequent negotiations. There is no legitimate legal basis to implement Prop 19 less than 60 days after it passed. Many of you have reached out with questions about the newly-passed Proposition 19. When transferring to multiple children, do ALL of them have to move into the property and claim it as their personal residence? Proposition 19, which passed last month, has important consequences for all real property owners in California. As such, if you plan to “grow old” in your child’s home, strongly consider your child’s personal circumstances and marital status before you let go of your residence or other property. Changes & Effective Dates of Proposition 19 . Not all irrevocable trusts convey ownership. by Jim the Realtor | Dec 7, 2020 | Jim's Take on the Market, Local Government, Property Tax Re-Assessment | 19 comments. Provided your home has an existing mortgage - your Deed of Trust securing your loan most likely includes an Acceleration Clause that would cause the entire loan to be due and payable upon transfer of title without the consent of the Mortgage Company. Editorial Summary – California Proposition 19 is a massive property tax hike on the next generation of property owners. Note that the above examples only apply if the NEW OWNER MOVES INTO THE PROPERTY AND USES IT AS THEIR OWN PERSONAL RESIDENCE. 90292 But Prop. If it’s a typical revocable trust, also called a living trust, whoever set it up (called the grantor, trustor or settlor) is deemed to be the owner as long as that person is alive. For this reason, when deciding TO GIFT OR NOT TO GIFT, it is important that this is a FAMILY DIALOGUE to discuss the Children’s intentions in the context of the Parents’ plans. But you can’t put $100. Prop 19_Presentation Dec 22, 2020. ASK: Is the FMV of $3 larger than AV ($1.5 mil) + $1mil (=$2.5 mil)? For example, suppose you bought the house years ago for $150,000 and it is now worth $350,000. (Does anyone even use a checkbook anymore?) year of the effective date of transfer. In other words, Jason would not face reassessment of the properties to their fair market value and he would not have to live in the residence as his family home. We expect a high volume of document submissions leading up to the effective date of Prop 19. What happens when the kid who inherits the home dies – does his kids get to keep the previous tax basis? This is best understood with an illustration: Assessed Value ($1 mil) Plus $1 mil = $2 mil. Ridiculous. I suggested a life estate instead — he said I’m ungrateful Published: Nov. 29, 2020 at 7:29 a.m. Take a … As such, if the Child Plans to SELL the parent’s property, they will pay much higher capital gains taxes on a gifted property than on an inherited property. Seniors who are 55+ in age can transfer their primary-residence property-tax basis to a new primary residence purchased in any county in the state (60/90 only had ten states included). I’ve had the following responses from various recording offices to filings I’ve submitted in the past 30 days: – Transfer value of a Gift Deed unstated in document (Um, it’s a gift deed, for no money?) If this transfer takes place before Feb. 16, the current parent-child exclusions apply. Prop 19 intentionally gutted Prop 13 and Prop 58. All other real property – reassessment exclusion is capped at $1 million of its “assessed value” (not its fair market value). For simplicity, we’ll assume here the transfer is from parents to children, but it also works in reverse. Prop 19 stems from the property tax protections put in place by the 1978 passing of Prop 13, ... transfer to an irrevocable trust. I hadn’t heard about the date being a requirement for moving in – only for the transfer of ownership. The effective date of proposition 19 is February,16, is this the recording date, or signing the document date? The 1994 taxpayers protection act was specifically intended to address “surprise” tax increases. Prop. Prop. Thereafter, under Prop 13, such assessed value (also called “base value”) is increased by approx. The child will pay property taxes based on the vacation home's value at the transfer date ($750,000) rather than the parents’ taxable value ($200,000). Clerk told me she would not accept the deed without a copy of the Articles of Incorporation for his single member LLC to prove that he was the only one with ownership in NorCal Company, Mr. Smith, sole owner. Parents wanting to do this should not retain any rights to the property, except possibly the power to shift assets among the children who qualify for the parent-child exclusion, Hartnett said. “Because the estate and gift tax exemption is so high, they want to make that transfer now, if the parents don’t need the income,” said Yin Ho, a real estate attorney with Withersworldwide. If the revocable trust grantor dies prior to February 15 and gives the successor trustee the authority and power to divide the assets of the trust to the 5 beneficiaries in their discretion as allowed by the trust, and decide to give the entire house to one of the 5 beneficiaries which is the only real property asset of the trust and has a fair market value equal to that one fifth of the fair market value of the entire trust. Before that date, it’s safe to assume that you’ll be working with the older Prop 60/90 regulations. 2.1(c)(1) of Prop 19 specifically requires that “the property continues as the family home of the transferee.” One thing is certain, if you are considering an inter-family transfer in the foreseeable future, there may be some tax benefits to completing that transfer before the effective date of Prop 19. Under current law, parents can transfer — by sale, gift or inheritance — their primary residence to their children and it won’t be reassessed, no matter how much it’s worth or how the kids use it. 2020 Proposition 19: Shuffling Property Tax Breaks & Making Realtors Happy. "Jim and Donna Klinge made the sale of our condo extraordinarily easy. Yes, you read that right. So she told me to print out the Zillow estimate of the houses’ value – as if that’s a legal document. And, it passed by a very slight margin of a little over 400,000 votes…. The change for inherited properties is effective starting Feb 16, 2021. Prop 19 effective date and how it will eliminate exemptions for transfer of non-primary residences (04:50) Two prongs of Prop 19 and requirements (06:50) Example of transfer of home and partial reassessment upon transfer (08:38) Other tax considerations before jumping to transfer before deadline (10:35) Other possible solutions (13:12) https://www.elderlawanswers.com/giving-your-home-to-your-children-can-have-tax-consequences-9667. If Prop 19 is passed, the new parent-child transfer exclusions will be effective as of February 16, 2021, while the base-year-value transfer by persons over 55 will be effective as of April 21, 2021. Proposition 19 passed with just over 51% of the vote. To understand the impact of Prop 19, below is a brief summary of how are property taxes calculated, and what are the current Parent-Child reassessment exclusion rules upon transfer of property to/from parents/children (and by extension – grandparents/grandchildren). Seniors are the most at-risk population in our society for death due to Covid. Staff has not been trained on Prop 19, so they refuse to answer any questions, due to its vagueness and lack of clarity. … Many realtors I have talked to claim they knew nothing about the provisions when the California Association of Realtors actually *wrote the Prop 19 law* and spent over $38 million dollars to get it on the ballot. Mindful that this can only occur in the context of the new owner MOVING INTO the property and filing a HOMEOWNER’s EXEMPTION with the Assessor within ONE YEAR of the transfer. TIA. email: Katie@SiemontLaw.com. Is there a mechanism to reassess if they do? Under the current law, a property owner can leave their primary residence and up to $1,000,000 of assessed value of other real estate to their children, and the assessed value would transfer with the property to the child. Yes plus she won’t get the step-up in basis when she finally inherits. “The spousal exclusion will apply,” said Steve Hartnett, director of education with the American Academy of Estate Planning Attorneys. The answer is no. … Additional Ramifications of Prop 19. Prop 19 Changes: 1. I am an attorney with over 20 years of experience and I can’t figure out how anyone without a legal background would be able to navigate this process. As such, it is prudent to consult with your mortgage company and a lender before changing title to your home.