Keep more of your property tax base.

Proposition 19 took effect February 16, 2021. Under the new rules, a child who inherits a parent’s home only keeps the parent’s low property tax basis if the child moves into the home as a primary residence within one year and files a Homeowners’ Exemption. Even then, only the first $1 million of value above the parent’s assessed value is excluded from reassessment. Vacation homes, rental properties, and second homes are reassessed at full market value on transfer.

The parent-child exclusion allows a child who inherits a California home to keep the parent’s assessed property value (and therefore the lower tax bill) under two conditions: the child uses the home as a primary residence within one year of transfer and files a Homeowners’ Exemption, and the home’s value above the parent’s assessed value is no more than $1 million. The exclusion does not apply to non-primary residences.

Only if at least one child moves into the home as a primary residence within one year of inheritance and files a Homeowners’ Exemption. The first $1 million above your assessed value is excluded; any value above that is reassessed. If no child moves in, or if the home is a vacation or rental property, the entire property is reassessed at fair market value. Planning options exist to soften the impact.

Strategies include transferring the home before death to a child who will use it as a primary residence (subject to gift tax considerations), using a qualified personal residence trust for high-value primary residences, structuring rental properties through entities that may qualify for legal-entity reassessment exclusions, and timing transfers to minimize the gap between assessed and market value. Each option has trade-offs and works only when matched to your specific facts.

For a child inheriting a parent’s California home to keep the parent’s assessed value, the child must occupy the home as a principal residence within one year of transfer and file a Homeowners’ Exemption (Form BOE-266). If the child later moves out or rents the home, the home is reassessed at that point. The primary residence rule applies continuously, not only at transfer.

Yes. Property transferred to a child through a trust is subject to the same Prop 19 rules as direct transfers. The trust mechanics do not change the tax outcome. Trust language can help by routing the home to the child most likely to occupy it, by giving the trustee discretion to fund a sub-trust that triggers the exclusion, or by using equalization payments so siblings can be balanced even if only one child takes the home.

The exclusion is the parent’s assessed value plus $1 million in additional market value, both indexed for inflation. The Board of Equalization publishes the inflation-adjusted figure annually. Confirm the current year’s number with the BOE or your assessor before relying on a specific figure for planning.

Sometimes, but not always. A lifetime gift can preserve the parent’s assessed value if the child will occupy the home, but it triggers a gift tax reporting requirement, gives up the step-up in income tax basis at death, and creates exposure to the child’s creditors and divorce. The right answer depends on the home’s value, the child’s situation, and the family’s overall plan. Bob will walk through the trade-offs.

No. Transfers between spouses are excluded from reassessment under separate California rules that Prop 19 did not change. The parent-child exclusion only applies to transfers from parent to child (and limited grandparent-to-grandchild transfers when the parent is deceased).

Prop 19 expanded the rules for homeowners 55 or older (and severely disabled or disaster-displaced). Eligible homeowners can transfer their assessed value to a replacement primary residence anywhere in California up to three times in a lifetime. The replacement home can be of greater value, with adjustments. Bob covers this option in planning meetings when it fits.