Property Tax Changes - Understanding Proposition 19

Proposition 19 - the Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disaster Act (“Act”) was narrowly passed by the voters.  While the Act helps homeowners over 55 years of age, disabled or victims of natural disasters, homeowners looking to transfer assessed values in properties to their children need to carefully consider their options before the effective date of the Act.      

Here are the highlights of the Act:

1.       Transfer of Assessed value.  Effective April 1, 2021, homeowners over 55 year of age, disabled, or victims of a natural disaster may transfer their existing assessed value to a replacement primary residence (“Residence”) a maximum of 3 times, including the purchase of a more expensive Residence anywhere in California.  Remember, your assessed value is the value when the property was purchased.   The assessed value can go up, but not by more than 2% a year.  If the homeowner does buy a more expensive Residence, there will be pro rata increase based on the difference in fair market value between the old and new Residence.   To qualify as your Residence, the Residence must be eligible for either the homeowner or the disabled veteran exemption.

2.      Parent-Child Transfer on Residence.  The Parent-Child (but also available for Child-Parent) transfer on a Residence remains; however now the child or children using the transfer MUST use the Residence as their Residence. In addition, there is now a cap of $1 Million of assessed value on the exclusion. If you have more than 1 child, you need to have a Right of First Refusal in your Trust so the child of your choice can take 100% of the Residence’s assessed value.  Also, if the parent dies before February 16, 2021, you want to get the Parent Child exemption on file immediately because we do not know if the Board of Equalization is going to accept Parent Child exemptions under the old rules for parents who died before February 16, 2021.

3.      Parent Child Transfer on Non Residence property.  Effective February 16, 2021, the Parent Child transfer will no longer be available on non- residence property.  If you are considering transferring property prior to February 16, 2021, I you should seek legal advice.   There are good reasons to do these transfers such as there is currently no limit to the assessed value of the residence transferred and you can transfer up to $1 Million dollars of assessed value in other properties.  A transfer of a vacation rental or commercial property may make sense.  However, there may be good reasons not to do the transfer such as the tax consequences of your child taking your carry over basis, asset protection issues and you losing right to income from your properties or title to your own property. 

The ramifications of the Act are tremendous and there is very little time before February 16, 2021 to determine what should be done.   Because of the complexities of Proposition 19, we are doing consultations on Proposition 19 for a flat fee of $1,500.00.    The consultation includes a review of your existing estate plan, analysis of the ramifications of Proposition 19 issues and options available to you to mitigate effects of Proposition 19.  If you determine that further action is needed, there will be an additional charge.  This article provides only general legal information and not specific legal advice.  Information contained is not a substitute for a personal consultation with an attorney.  LAW OFFICE OF JOAN GRIMES, PHONE (925) 939-1680, 1600 S. Main Street, Suite 100, Walnut Creek, CA  94596     © 2020 Joan Grimes

Protecting your Minor Children in the Event of Incapacity or Death

None of us want to think about something terrible happening to ourselves, especially when our children are young. However, we all know someone who either died unexpectedly or was in a terrible accident causing them to be unable to care for their children.

Protecting your children in the event of your death or incapacity should not be something put off for another day. The way to protect your children is to nominate a guardian for your children for physical custody, temporary custody and financial matters. Also, you need to have an Authorization to Consent to Medical Treatment for the children as well as Letters to the Guardians. 

Selecting a Guardian

The decision about who will be guardian of your children is possibly the most important decisions you will make. If you already know who you want to be the guardian…great! Time to write it down and make it official and avoid a lengthy court process following your incapacity or death. But for the rest of you, here are some things that you may want to think about:

a) Where does this potential guardian live? Will your children have to change schools, neighborhoods or states to live with their guardian? 

b) Does this potential guardian have the same religious, moral and general parenting beliefs as you?

c) Is this potential guardian interested in raising your children as his or her own if something happens to you?

Children’s Access to the Estate

If something happens to you and your significant other when your children are young, at what age do you want them to have access to your estate (i.e. savings accounts, retirement accounts, life insurance proceeds)? Some parents appoint a trustee to manage the estate until the children are well into adulthood. Other people distribute assets once the children have completed college or a trade school. There is no right answer, but this estate plan will help your family carry out your wishes when you are gone.  

Creating an estate plan to protect your children and assets does not need to be difficult and it does not have to be set in stone. Circumstances change and your estate plan can change with it. While it can be tough to think about a possible incapacity or death, it is much better for you to make decisions about your children and your assets now rather than having the decisions be made by someone else. 

An estate plan will give you peace of mind knowing that your family’s affairs are in order. If you would like to discuss establishing an estate plan for your family, I see people Monday-Friday for a FREE 30 minute consultation in Walnut Creek and Brentwood.

This article provides only general legal information, and not specific legal advice.  Information contained is not a substitute for a personal consultation with an attorney.  LAW OFFICE OF JOAN M. GRIMES, PHONE (925) 939-1680   1600 S. Main Street, Suite 100, Walnut Creek, CA  94596     © 2018 Joan Grimes