Why did C.A.R. allow the removal of benefits and protections of intergenerational transfers under Prop 19?

The media and state legislators had already targeted family transfers for significant reform or complete elimination. Without Prop 19 , the elimination of all intergenerational transfers was at stake. With the urgent need for revenue by state and local budget governments, removal of intergenerational transfer tax rules was imminent – which is why it was so important to preserve and protect this right under the initiative.

Proposition 19 safeguards family transfers as a right in the California State Constitution, protecting tax savings for children and grandchildren on the family home.

Lost a home in a natural disaster? Transfer your tax assessment to a new home beginning April 1, 2021

Proposition 19 expands the class of people who qualify for tax transfer of their taxable assessment value from their current home to a new property. The new law, which takes effect on April 1, 2021, expands the class of homeowners who can transfer their taxable value to include wildfire victims or victims of other natural disasters, regardless of age or disability status, as well as with taxpayers who are age 55 or older The new home’s tax value will be added to the current tax assessment if the new home is more expensive. A transfer like this can be done three times, and homeowners have two years to sell their current home and buy a new one.

What are the new rules on intergenerational family transfers and family farms?

Proposition 19 also changes the rules on exemptions from reassessment for intergenerational transfers by limiting the exemption to the transfer of a primary residence to a child (or grandchild) only when the property continues to be used as a family home by the child (or grandchild), and even then, if the divergence between the taxable value and the actual value is too great, a partial increase in the new taxable value will be imposed. As is the case under current law, under Prop. 19, a grandparent- to-grandchild transfer receives the exemption only if the parents are deceased. Proposition 19 also includes provisions that would allow the transfer of a family farm to retain its taxable value.

If I pass my principal residence on to my children or grandchildren, will the property be reassessed?

So long as the property continues to be used as a Family Home (primary residence), and the transferee claims the homeowner exemption, the property tax basis will remain the same, subject to some upward adjustments if the property value, at the time of transfer, is more than $1M over the original tax basis.

If the property is transferred to a child or grandchild and used as a Family Home, what will the new tax basis be if at the time of transfer the property value is less than $1M over the original tax basis?

The new tax basis will remain the same as the original tax basis.

For example, if the original tax basis was, let's say, $500,000, and at the time of transfer the property is valued at $1.2 M, then the tax basis will remain at $500,000. This is because $1.2M is not more than $1M over the original taxable basis.

If the property is transferred to a child or grandchild and used as a Family Home, what will the new tax basis be if the at the time of transfer the property value is more than $1M over the original tax basis?

If the property at the time of transfer is more than $1M over the original tax basis then the new tax basis will be the value of the property at the time of transfer minus $1M. For example, if the original tax basis was, let's say, $500,000, and at the time of transfer the property is valued at $2M then the new taxable value will be $1,000,000 ($2M minus $1M). You use this formula because the value of the property at time of transfer was more than $1M over the taxable basis.

Are Family Farms included in Proposition 19?

Yes, Family Farms have the same exemptions as Family Homes (principal residences). "Family Farm" means any real property under cultivation or which is being used for pasture, or grazing, or that is used to produce any agricultural commodity. It does not require the transferee to live in the property as a principal residence.

When do these family transfer rules take effect?

The family transfer rules took effect on February 16, 2021. The transferee would have to claim the homeowner’s or disabled veteran’s exemption within one year of the transfer to obtain the benefit of the family transfer tax exemption.

Intergenerational transfers previously exempted not only the transfer of the tax basis of a primary residence but also up to $1 million dollars of all other real property. Is that exemption still available under Prop 19?

No. Prop 19 allows only the intergenerational transfer exemption only for the primary residence and only if it continues to be used as a primary residence.

Will this initiative raise my taxes?

No. The initiative will limit property tax increases for seniors, people with severe disabilities, wildfire or natural disaster victims. It will also limit property tax increases on the family home used as a primary residence, keeping family homes affordable.