Proposition 19, enacted in California in 2020, significantly altered the rules governing property tax assessments on inherited properties. Prior law allowed transfers of property between parents and children (and grandparents to grandchildren, if the parents were deceased) to retain the original property tax base. Now, with limited exceptions, the property’s assessed value is reassessed at market value when transferred, even within families. This change has substantial implications for inherited properties held within trusts. If a property in a trust is transferred from parent to child (or grandparent to grandchild with deceased parents) and the child does not move into the property as their primary residence within one year, the property will be reassessed at market value, leading to potentially higher property taxes.
Understanding these changes is vital for estate planning and wealth preservation. The ability to transfer property within families without triggering a reassessment was a key tool for generational wealth transfer. Proposition 19 significantly curtails this ability, making it essential for families to carefully consider the tax implications of holding and transferring property, especially through trusts. This alteration has reshaped the landscape of inheritance in California and requires individuals and families to re-evaluate their estate plans to minimize potential tax burdens.
