Q: Estate Planning / Real Estate Law...Prop 13 & Prop 19

A: Sorry to say, the only way to avoid a reassessment for property tax purposes is when property is transferred between spouses, parents and children, and/or grandparents and grandchildren IF the parents are deceased. There is no exemption in any law that says you can transfer property to a sibling, cousin, best friend, or anyone else and keep your same property tax. So, if one-half of the property is transferred to a sibling, then one-half of the value of the home will be reassessed to current value effective as of the date of the property transfer. If the homeowner already paid property tax for that period, the homeowner will definitely get a supplemental tax bill. It may not come for 5-6 months. But trust me; it will come!

A: Under California law, transferring ownership of a property can have significant tax implications. In this case, there are a few key points to consider:

1. Prop 13: This proposition limits property tax increases on a property until there is a change in ownership. Adding a sister to the deed would likely be considered a change in ownership, which could trigger a reassessment of the property value and an increase in property taxes.

2. Prop 19 (effective February 16, 2021): This proposition allows homeowners who are over 55, severely disabled, or victims of wildfires or natural disasters to transfer their property tax base to a replacement primary residence. It also allows the transfer of a primary residence to children or grandchildren without triggering a reassessment, but only if the property continues to be used as a primary residence by the child or grandchild.

3. Inheritance taxes: California does not have a state inheritance tax. However, if the estate's value exceeds the federal estate tax exemption ($13.61 million for 2024), federal estate taxes may apply.

Considering these factors, some options for the homeowner to consider are:

1. Leave the property to the sister in the Will/Trust: This would allow the sister to inherit the property upon the homeowner's death without triggering a reassessment of property taxes under Prop 19, as long as the sister uses the property as her primary residence.

2. Create a Life Estate Deed: The homeowner could create a Life Estate Deed, which allows them to retain ownership and control of the property during their lifetime, with the property automatically transferring to the sister upon the homeowner's death. This option might help avoid probate and reassessment of property taxes.

It is highly recommended to consult with a qualified estate planning attorney and a tax professional to determine the best course of action based on the specific circumstances and goals of the homeowner and their family. They can provide personalized advice to minimize potential tax liabilities and ensure a smooth transfer of the property.

A: Thank you for your question!

If you want to avoid taxation thoroughly, probably there is no way for that. But, creating a trust may help you/your sister save more compared to other ways.

I strongly recommend you consult with a tax attorney. So many lawyers offer free consultations.

This is merely a discussion of general laws and not legal advice. For legal advice, more specific facts and investigations are needed. I recommend you consult with an attorney for more details.