Proposition 19 and Your Estate

Proposition 19, passed in California in November 2020, brought significant changes to property tax rules, particularly affecting private party real estate transactions and estate appraisals. One of its key provisions allows homeowners over the age of 55, severely disabled individuals, or victims of natural disasters to transfer their property tax assessments to a new home of equal or lesser value up to three times, ensuring that they can retain their lower tax base when downsizing or relocating. This is especially relevant for estate appraisals, as it adds complexity to determining tax implications when properties change hands.

For inherited properties, Proposition 19 introduced stricter guidelines. Prior to its passage, children or grandchildren could inherit a parent's home while maintaining the existing property tax assessment, regardless of whether they lived in the home. However, under the new law, in order to keep the low tax base, the heir must move into the property and establish it as their primary residence within one year of inheritance. Estate appraisals now play a crucial role in determining the property's fair market value for tax reassessment purposes if the heir does not meet these requirements.
For private parties and estate planners, the impact of Proposition 19 cannot be understated. The change in tax reassessment rules means that estate appraisers must take a careful approach to valuing properties, particularly those being passed down through inheritance. It is essential to understand the long-term tax consequences for heirs, ensuring they are prepared for potential increases in property taxes or considering strategies to retain the favorable tax base. This shift underscores the importance of thorough and accurate real estate appraisals in today's evolving tax landscape.