San Mateo Proposition 19 Planning Attorney
You worked hard to pay off your San Mateo home, and that home is part of the legacy you want to leave to your children. But California Proposition 19 has changed the rules around how property taxes are assessed when certain real estate is transferred between parents, children, and other family members.
Without proper estate planning strategies that take Prop 19 into account, your children who inherit your home could face a substantial tax burden that they were not prepared to meet.
Understanding Proposition 19 and how its requirements affect your estate plan is essential to making an informed decision about transferring property to your family after you’re gone.
At the Law Office of Vidhya Babu, we offer Prop 19 estate planning strategies to families in San Mateo and the Bay Area. Whether you’re creating your first estate plan, reviewing a trust, or preparing to transfer your home to your children, a Prop 19 planning attorney can help you evaluate your property and estate plan before a transfer creates an unexpected tax burden for your children.
Contact the Law Office of Vidhya Babu today to discuss your situation.
How Does Proposition 19 Affect Estate Planning in San Mateo?
In 2020, California voters approved Proposition 19. The new addition to the California property-tax rules made substantial changes to the way intergenerational transfers of property are handled.
At its core, Prop 19 significantly changed and narrowed the rules for preserving a parent’s property-tax basis when a family home is transferred to a child.
In a place like San Mateo County, where the value of homes has increased significantly in recent years, Prop 19 can have a significant impact.
To understand just how big of an impact this can have, consider a hypothetical home that was purchased in San Mateo in 1990 for $150,000. Today, the value of that home could be well over $2,000,000.
Under the previous laws, California’s property tax system allowed that property’s taxable value to be based on its initial purchase value, and remain relatively low.
Today, under Prop 19, the rules are significantly more restrictive than the former Prop 58/193 rules. When a parent passes away and leaves that home to a child, it can trigger a reassessment to current fair market value, which can dramatically alter the property-tax bill for the beneficiary who inherits the home.
Simply leaving a home to a child does not, by itself, guarantee that the property’s existing property-tax basis will remain unchanged. The transfer must satisfy Prop 19’s requirements, including requirements around the property, the transferee’s usage of the home, and the property’s value.
That is a major change that can potentially cost the new owners thousands of dollars per year in property taxes.
However, Proposition 19 does provide an intergenerational transfer exclusion, but only if the statutory requirements are met.
That’s when it can make sense to work with a San Mateo estate planning attorney to take advantage of Prop 19 planning strategies that can minimize the change in taxes.
Understanding the Proposition 19 Parent-Child Exclusion
Proposition 19 allows certain transfers between parent and child, and under more limited circumstances, between grandparent and grandchild, to receive an exclusion from reassessment.
However, there are certain important conditions that must be met for a qualifying home. To qualify for exclusion, the property must:
- Be the transferor’s principle residence
- Be transferred to an eligible child
- Become the transferee’s primary residence
- Remain their primary residence
- Satisfy the applicable value limitation
- Have the required forms filed with the county assessor.
You’ll notice that to receive the exclusion, the child inheriting the home must move into that home as their primary residence within one year, and continue to occupy it as their family home. That means that the home cannot be used as a rental property and still qualify for the exclusion. The property also has to have been the parent’s primary home, as investment properties aren’t eligible for the exclusion.
When a parent wishes to leave their family home to a child, reviewing the family’s estate plan in advance can help ensure that the intended transfer complies with Proposition 19’s exclusion requirements.
The county tax assessor will evaluate the change in ownership to ensure that the Prop 19 exclusion applies. As long as the child satisfies the Proposition 19 requirements, including principal residence and value requirements, the property’s original property-tax value may be preserved.
There is one other consideration: satisfying the Proposition 19 value limitation.
Even when a family home qualifies for the Proposition 19 parent-child exclusion, the property’s value can affect how much of the parent’s existing property-tax assessment can be retained.
The rules generally compare the home’s current market value at the time of transfer with the parent’s existing taxable value, plus an inflation-adjusted amount set by California law. If the home’s value falls within the applicable limit, the child’s property tax assessment may remain the same as the parent’s factored base-year value.
If the home’s value exceeds that limit, the property’s assessed value may be adjusted upward based on the amount which exceeds the limit.
The applicable amount can be adjusted periodically, which makes consulting with a Proposition 19 planning attorney helpful in determining how the current rules apply to your family’s property.
Prop 19 Estate Planning Strategies for San Mateo Families
With the potential change on the taxable base for the new owners, one of the biggest mistakes a family can make is waiting to plan for Prop 19’s impact. Prop 19 planning strategies are much easier to evaluate while the parents are still alive.
It’s also a mistake to assume that placing the home in a trust automatically solves the problem. The property still needs to satisfy the Prop 19 requirements for exclusion.
To make sure your family is prepared, consider consulting with the Law Office of Vidhya Babu as your San Mateo estate planning attorney. Together, we can find Prop 19 planning strategies that fit your family’s needs.
We start by reviewing your current estate plan, including how the property is currently titled and identifying who the intended beneficiary is. We’ll also help you determine whether the property qualifies as a family home, and consider the beneficiary’s plans to occupy the home.
Depending on your family’s plans, we can evaluate the potential property-tax consequences of different transfer structures, and coordinate your will or trust.
Why Work With The Law Office of Vidhya Babu as Your Proposition 19 Planning Attorney?
In San Mateo, your family’s home may be one of its most valuable assets. Proposition 19’s impact is significant enough that without proper planning, your beneficiary could face potential property tax increases that complicate ownership.
Unfortunately, Prop 19 exclusion isn’t simply a matter of completing a tax form.
It can interact with your existing trust, property ownership, beneficiary designations, and family relationships. It deserves the attention of an experienced legal professional who can help you find the best solution for your family.
Without the right legal help, reassessment can result in significantly higher property taxes, administrative complications, and unintended family disputes. Determining the right strategy depends on the specific property, its value, and the beneficiary’s intended use of the property.
At the Law Office of Vidhya Babu, our team is committed to helping families in San Mateo incorporate Prop 19 planning strategies into their estate plans. We offer California and Bay Area- specific knowledge of estate planning and property tax rules, including Proposition 19. We take the time to intimately understand the estate planning goals of our clients, ensuring that your plans are tailored for your specific needs.
Our goal is to create a long term relationship with our clients, where we can proactively plan for their family’s future, including trust formation, powers of attorney, and advance health directives.
The Law Office of Vidhya Babu: San Mateo Prop 19 and Estate Planning Attorney
The changes Proposition 19 brings to California’s property-tax rules can significantly complicate the transfer of a family home to a child. If you own a San Mateo-area home, and want to understand how Proposition 19 affects your estate plan, the Law Office of Vidhya Babu can evaluate your options and help you plan ahead.
Contact our team for an initial Proposition 19 planning consultation, and let us help you plan for your family’s future.
San Mateo Prop 19 Planning FAQs
Prop 19 makes significant changes to how California handles property taxes for inherited homes. Without proper planning, these changes can create a significant property-tax burden for children who inherit their parent’s home. Prop 19 estate planning helps families anticipate this and take advantage of exclusions when appropriate.
Potentially. A qualifying transfer of a family home can be excluded from reassessment if specific requirements are met. Those requirements involve the property, transferor and transferee’s occupancy, the property’s value, and required filings. An attorney can help you understand whether or not the exclusion may apply to your family’s circumstances.
Generally, no. The Prop 19 intergenerational exclusion applies to qualifying family homes and family farms, subject to specific statutory requirements. Ordinary rental and investment properties generally do not qualify for the parent-child exclusion under Prop 19.
Grandparent-to-grandchild transfers may be subject to additional requirements, including middle-generation limitations. Families should have a qualified attorney evaluate their specific situation.
Ideally, Prop 19 planning should begin while the initial property owner is still alive and capable of reviewing and updating their estate plan. Prop 19 planning becomes more difficult once the transferor has already passed away.
The contents and materials of this website should be used as a general guideline and not as the ultimate source of current information. The user should consult their own legal, accounting, or other advisors.