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8+ Prop 19 & Inherited Property in Trusts: A Guide

Proposition 19, enacted in California in 2020, significantly altered the rules governing property tax assessments on inherited properties. Prior law allowed transfers of property between parents and children (and grandparents to grandchildren, if the parents were deceased) to retain the original property tax base. Now, with limited exceptions, the property’s assessed value is reassessed at market value when transferred, even within families. This change has substantial implications for inherited properties held within trusts. If a property in a trust is transferred from parent to child (or grandparent to grandchild with deceased parents) and the child does not move into the property as their primary residence within one year, the property will be reassessed at market value, leading to potentially higher property taxes.

Understanding these changes is vital for estate planning and wealth preservation. The ability to transfer property within families without triggering a reassessment was a key tool for generational wealth transfer. Proposition 19 significantly curtails this ability, making it essential for families to carefully consider the tax implications of holding and transferring property, especially through trusts. This alteration has reshaped the landscape of inheritance in California and requires individuals and families to re-evaluate their estate plans to minimize potential tax burdens.

Prop 218 Vacant Property & Special Benefit Fees

California’s Proposition 218, enacted in 1996, significantly altered how local governments could levy assessments for public improvements. A key aspect of this proposition revolves around the concept of “special benefit.” For an assessment to be valid, it must directly benefit the assessed property. This becomes particularly complex when dealing with undeveloped land. For example, an assessment for a new sidewalk directly fronting a commercial building demonstrably benefits that property by improving access. However, the benefits of that same sidewalk to a vacant lot might be less clear and therefore subject to greater scrutiny under Proposition 218.

This legal framework safeguards property owners from unfair taxation by requiring a clear nexus between an assessment and the advantage it confers upon a specific parcel. It offers increased transparency and accountability in local government financing of public works projects. By necessitating a demonstrable “special benefit,” Proposition 218 prevents municipalities from levying assessments on properties that do not receive a proportional advantage from the improvements. This protection is particularly crucial for owners of undeveloped land, who might otherwise be assessed for improvements from which their properties derive minimal or no present benefit.