California voters approved Proposition 19 in November 2020, which updates California's long-standing property tax reassessment rules. There are two major provisions of Prop 19:
The first major update limits the scope of Proposition 58, the parent-child exclusion,1 which goes into effect on February 16, 2021. This change, which is discussed in more detail below, (1) eliminates the $1 million assessed value reassessment exclusion as to a parent-child transfer of non-principal residence property and (2) substantially limits the parent-child transfer reassessment exclusion as to a principal residence.
Any gifts under the pre-Prop 19 rules must be made no later than February 15, 2021. Accordingly, some individuals may wish to consider gifting California real property sooner than otherwise planned and transferring to children (or trusts for exclusively children) California real property held in a qualified personal residence trust (QPRT) which terminates later than February 15, 2021.
Transfer of Assessed Value to New Residence
The second major update benefits property owners and goes into effect on April 1, 2021. Generally, this change provides that persons over age 55, individuals with a disability, or victims of a wildfire or natural disaster may transfer the assessed value of their California principal residence to a newly purchased or newly constructed replacement principal residence in any county in California.
These new Prop 19 provisions apply to real property located in California, whether or not you are a California resident. Accordingly, clients with California vacation homes, rental residential homes, or commercial properties (owned outside any corporations, partnerships, limited liability companies, etc.) may wish to look at engaging in this time-sensitive planning.