November is election season, and with all the rancor and intensity of the presidential contest, Californians may be at risk of overlooking a significant ballot proposal that could cost grieving families thousands of dollars in new property taxes. Have you heard about Proposition 19? It could have a serious impact, particularly on grieving families.
If successful, Proposition 19 would eliminate the “parent-to-child exclusion” for non-owner occupied properties. This is a longstanding provision that allows adult children of deceased parents to pay the same property taxes for their last surviving parent’s home if they inherit it. Up to $1 million of assessed value for other inherited real estate assets also applies, although a coming statewide majority vote would put those protections on the chopping block.
Voters originally approved the parent-to-child exclusion, also grandparent-to-grandchild exclusion, by an overwhelming majority in 1986 under the moniker Prop 58. The tax assessment continuity for inherited property has shielded families from large tax bills, even when they wish to sell their deceased parent’s home as quickly as possible.
Research shows that the average process for executing an estate in California is 17 months from the date of the last surviving parent’s death, which is also the date of transfer, according to Prop 19. In other words, the proposed ballot amendment would institute a property tax reassessment at a higher market value on the very day your parent passes away. The average increase for an inherited home in California would cost roughly $8,500, and that is in addition to an older parent’s current property tax liability.
To-date, more than $19 million has been raised in support of Prop 19, including more than $15.7 million from the California Association of Realtors Issues Mobilization PAC. Numerous newspaper editorial boards have blasted the proposal. The Los Angeles Times, for example, has called it “cynical and unwelcome.”
Prop 19 includes an exemption for beneficiaries if they move into their deceased parent’s home and declare it their primary residence within one year of the date of transfer. This, however, is not feasible for many Californians and financial hardship will likely ensue, potentially forcing homeowners to sell. Realtors and other special interests may benefit from increased commissions and costs, but Prop 19 effectively punishes families during times of emotional distress.
For help preparing for these potential changes, get in touch with our office to schedule a meeting.