Did you follow the results of the vote on the Propositions that were on the November Ballot?
One passed by a 51.4% approval of Proposition 19. It is labeled “The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act.” By its title it would appear like a benefit to each of those groups, and is there anything more important than protecting “home?” Turns out to be a clever Trojan Horse. Who would propose this? Who would invest in the $millions to get this on the ballot and then campaign for its passage? Are you guessing it was a special interest? If you guessed yes, you are correct. This Proposition is the third, and now successful investment of the California Realtors Association. They along with their national group spent between $60 and $80 million in advertising to convince a majority of voters to approve.
Why? Proposition 19 eliminates two powerful, frequently used by parents to gift or will their children real estate and to avoid increasing the property tax. The Parent to Child exemption has benefitted families for four decades allowing children to keep the property tax on family-owned property they inherit at the same amount as that of the parents. Proposition 19 eliminates this benefit on the transfer of commercial, agricultural, professional, dwelling rentals, vacation homes. The only remnant of the Parent to Child exemption that remains is the transfer from parent to a child of a principal residence of a value less than $1 million-plus the assessed value of the family home. While this $1 million-plus exemption amount would continue to benefit the transfer of many California principal residences there is a catch: to qualify a child must live in the principal residence following the transfer.
Can you sense why it was worth the investment to the Realtors? You got it! Beginning on February 16, 2021, when this new law takes effect, the expectation is that property usually retained by the children will after that date no longer have the attraction of a relatively low annual property tax.
Take a moment to think about your situation considering the real estate you own. Is your plan designed to transfer title to your children at your death? Is there a relatively low assessed value of the property compared to the current fair market value? Is the property in individual names, in a family revocable trust, in a Survivor’s or A-Trust, in a Family, Credit, Bypass or B-Trust, in a Qualified Personal Residence Trust? If your answer is “Yes” to any of these questions, then are you asking: “What can I do?”
The Lowthorp Richards estate and trust lawyers and paralegals team are prepared to help answer your specific questions and provide possible solutions. Your action followed by our providing guidance must result in actions being completed no later than February 15, 2021. After that date, the new law is in play. We have already received several requests for help. We would suggest that if your circumstances fit the danger zone, then call us as soon as possible before we can no longer take on additional matters. To get started please call Mackenzie Neilan at our firm’s number 805 981-8555, ask for her and either of our receptionist Cheryl or Stevie will connect you. You can either request Lowthorp Richard’s summary of the new law and some possible solutions or better yet an appointment with one of us to get started. As an existing client, we will have the benefit of having most of the information concerning your real estate and planning goals so we can get right to learning your current goals and providing guidance to a solution. Our regular hourly rates will apply.