Transferring California Property Ownership Sooner Rather than Later Might Protect Your Children
Do you own a winery, farm, or other lucrative property in California? Were you planning to transfer the property to your children, knowing there would not need to be a tax reassessment? If you counted on the parent-child tax exemption for property transfers in California, you might want to speed up your plans. This is because voters passed Proposition 19, and the changes in the law will go into effect on February 15, 2021.
Currently, parents can transfer ownership of a principal residence to their children without the need for a reassessment of property taxes to the property’s fair current market value. If the middle generation is deceased, grandparents can transfer property directly to their grandchildren.
This exemption was important for people wanting to transfer valuable legacy properties, which might include residences located on valuable wineries and vineyards, farms, and more. The exemption applied no matter what the value of the property might be. This helped owners of real estate that included both residences and businesses to easily pass on the property to the next generation in a manner that best set them up for success.
Now, however, Proposition 19 will take away the tax exemption, and the younger generation receiving ownership of the property will have to pay taxes based on a current fair market value reassessment. These tightened rules can be costly for those taking over ownership to continue the family legacy.
Exceptions to the Rule
While there are exceptions to nearly every rule of law, the exception to Proposition 19 is a narrow one. Parents can continue to transfer their residence and related property to children without reassessment only if the child also uses the property, winery, or farm as their own primary residence. Before, children could use the property how they wished, including as a vacation home or merely for business or investment purposes.
However, there is an exception to this exception. If there is more than a $1 million difference between the assessed value of the property and the current fair market value, the property can still be subject to partial reassessment, even if the child is using it as their primary residence or farm.
What Does this Mean for Property Owners?
In light of the upcoming changes, many people who own valuable property are considering a transfer to their children as soon as possible. If you are seeking to transfer ownership through a gift to your child, you should discuss the matter with an experienced estate planning attorney. If your property involves transferring a winery, farm, or another operation on your land, you should ensure that your attorney has experience in business succession planning and related matters.
Speak with a Santa Ana Estate Planning Lawyer Right Away
If you have concerns about Proposition 19 or related matters, consult with the Law Offices of Roshni T. Desai. Contact us online or call 714.694.1200 to speak with an estate planning and business attorney in Santa Ana.