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  • Writer's pictureGenoveva Meza Talbott

Prop 19 Makes Estate Planning Even More Crucial

Planning for the Future Without a Crystal Ball

Proposition 19 is a ballot measure that was approved by California voters in November 2020. This measure creates county revenue by limiting and changing the rules surrounding parent-to-child transfers and dedicates that revenue to wildfire relief. But Proposition 19 can also impact your estate planning and make it even more crucial.

As a refresher on how and why you pay property taxes, the taxable value of a home is determined by tax assessment. This tax assessment then dictates how much homeowners must pay each year in real estate taxes. It tends to go up over time as the values of properties increase, meaning that homeowners pay more taxes if and when their home value is reassessed. So, it’s beneficial to minimize tax reassessment when possible. Some transfers (e.g., changes of ownership) can’t avoid a tax reassessment, but there are some exceptions such as transfers between spouses.

So how can Prop 19 affect your estate planning? Before Prop 19 was passed, children and grandchildren were able to inherit real estate and benefit from an unlimited tax reassessment exception. This meant that they could benefit from the lower property taxes that their parent or grandparent had. Now, children or grandchildren who inherit property from their family will now have the property’s tax value reassessed if they don’t occupy the inherited home within one year of the deceased person passing away and the property value is worth $1 million over the original tax basis. This means that if you inherit a house and live there, your home’s property taxes will stay the same as it was for your family (assuming the value requirement is met). Unfortunately, not everyone is able or ready to live in their inherited home right away, or some may have desired to use that inherited home as a rental for a source of income. Plus, the way California property values are increasing year to year, many inherited properties will not meet the value requirement. In those cases, there will be a tax reassessment to the current fair market value of the property.

Thankfully, estate planning can help you help your loved one avoid a difficult situation down the road.

What should you do next if you own real estate in California:

● Create a Trust: A trust is funded while you are still alive. Trusts can be revocable, or irrevocable. During the creation of your plan, you’ll discuss creative strategies and alternatives to ensure that your estate avoids probate and that your heirs inherit as much as possible while disinheriting Uncle Sam.

● Work with an Attorney: An attorney can help you create a trust and estate plan specific to your situation. Don’t rely on a cheap, quicky, or DIY estate plan when so much is at stake. When it comes to surgeries, dental work, or legal documents, DIY just won’t cut it!

With Prop 19, it is more important than ever to consider careful estate planning. If you need assistance with creating a trust or estate planning, give us a call. We are here to help!

Meza Talbott Law

A Modern Family + Estates Firm

(909) 377-8141

Claremont, California

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