In a close knit community like Coronado with priceless residences scattered all over the island, property owners should be in the loop about the future of their homes, specifically when it comes to the future of keeping their homes “in the family.”
Previously, Propositions 58 and 193 provided property tax relief for real property transfers among parents and children and grandparents and grandchildren, together making it easier to pass real estate “hidden gems” down the family tree.
Now with Proposition 19, which was approved on Nov. 3, 2020, the California Constitution has expanded the qualifications for the transfer of a property’s taxable value.
The proposition will affect small details in the way that you pass properties onto your children.
Proposition is twofold
The proposition is twofold, primarily affecting two things— property tax base transferred and inherited properties.
First, beginning April 1, 2021, Prop. 19 gives the owner of a primary residence the freedom to transfer the taxable value of their property to a replacement primary residence IF they are above 55 years, severely disabled or a victim of a wildfire or natural disaster. With these contingencies:
-The residence can be anywhere in California
-It must be purchased or newly constructed within 2 years;
-Of any value with an upward adjustment for a more expensive replacement; and
-The property tax base can be transferred up to three times.
The new contingencies for inherited properties are slightly different.
Starting Feb. 16, 2021, Prop. 19 narrowed the rules for parent-to-child or grandparent-to-grandchild exemption for inherited properties. So the inheritor (child or grandchild) can transfer the taxable value of the inherited property if:
-The property is the principle residence of inheritor (or the property is a family farm);
-The homeowner’s or disabled veterans exemption is claimed within one year of the transfer to the inheritor;
-or, the property is used as the principal residence with a market value above $1 million.
So what exactly does this mean for families and how is this different from Propositions 58 and 193?
Let’s take a look at a breakdown the key differences between the laws:
-With the former law, the principal residence just needed to be the residence of the transferor, or the parent/grandparent.
-With Proposition 19, the principal residence needs to be the residence of both the parent or grandparent and the one receiving the property.
-Previously, the principal residence had no value limit, and now there is a value limit of the current taxable value PLUS $1,000,000 (as biennially adjusted).
-With the former law, a property owner needed to file the claim within three years of transferring the property to a third party.
-Proposition 19 requires the same three year filing period with an additional file for homeowner’s exemption within one year of the transfer.
-Both Propositions 58/193 and Proposition 19 stated that parents of the grandchild receiving the property (who are the children of the grandparent), must be deceased on the date of transfer.
Questions? Reach out by phone or email
As a trusted real estate agent, I am here to keep you informed about the most up-to-date information of all things real estate. And helping you keep property in the family is no exception.
If you have any questions about Proposition 19, or are interested in learning more about how to best navigate the arena of passing properties down in the family, don’t hesitate to reach out at 619-568-0568 or firstname.lastname@example.org.
I am always here to help answer any questions and keep you informed on the ever-evolving landscape of real estate properties!