February 2021 News from LA County Assessor Jeff Prang:
Proposition 19 was adopted by the voters of California in the November 2020 election. There are many elements of the measure that will need to be clarified in order for my 57 fellow county Assessors and I to administer it properly. We are already receiving numerous questions about the changes. Unfortunately, until clarifying legislation is passed, there will remain as many unanswered questions as there are answers.
In the absence of implementing statutes and rules, Assessors are likely to interpret some portions of Proposition 19 differently from county to county. Moreover, it is possible that some aspects of how Los Angeles County or other Assessors interpret and administer Proposition 19 may be subject to change if and when action is taken by the legislature, the BOE or the Courts. Rest assured, Assessors are working closely together to minimize the disparities in administering Proposition 19.
Working closely with the State Board of Equalization (BOE), the California Assessors’ Association (CAA) drafted a detailed legislative package, which was presented to the appropriate leaders in the State Legislature the first week of January, with the hope it would get passed on an urgency basis by February 16, when the first component of Proposition 19 goes into effect. That legislative package contained changes that addressed major issues, such as what properties are eligible to transfer and when, who is eligible, and the application process.
No formal action has been taken on these proposed changes. Subsequent efforts to pass a temporary, stop-gap measure to clarify a few critical provisions and provide the Board with emergency rule making authority remains unclear.
To help the public understand the new law, and to learn what we know, we have published a Proposition 19 webpage on our website. Here you will find facts, FAQ’s, a webinar, and factsheets. Continue to frequently visit the page, as we will be adding other valuable resources to help serve you.
SUMMARY
Proposition 19 has two basic components:
Limits on Inheritance
Prop. 19 places new limits on the inheritance of the “assessed value” of family property by children and in some cases grandchildren. (Generally speaking, the “assessed value” is the price you paid for your home, plus the annual maximum of a 2% cost of living adjustment).
Prop. 19 makes significant changes to previous law (Parent-Child Transfers and Grandparent-Grandchild Transfers, Prop. 58/193) and reduces the transferable property assessment and tax-savings benefits. The previous law, allowed a parent (in some cases a grandparent) to transfer a primary home, of any value, and its property tax base (assessed value) without resulting in a reassessment of the property for the children. Previous law also allowed $1 million in additional property to be transferred without reassessment, such as rental homes or commercial property.
The main differences of Proposition 19 compared to Prop 58/193 are:
The property must be the primary residence of the parent or grandparent – no other property can be considered.
The child (or grandchild) must make the home their primary residence within one year of the transfer.
The implementation date of this provision is February 16, 2021
Property Tax Base Portability
The other provision of Prop 19 expands the benefits for homeowners who are over 55, disabled, or victims of natural disasters. The original Prop 60/90 allows the homeowners to transfer their current property tax base of the home they sold to a newly purchased home one time. Prop 19 increases the number of times that value can be transferred from one to three times. Additionally, Prop 19 allows eligible homeowners to transfer their assessed value anywhere within the state, and eliminates the “equal or lesser value test” which allows the transfer of the assessed value of the original home to a more expensive home, with any amount over 100% of the original home added to the new assessed value. The effective date is April 1, 2021
Webinar
On January 22, 2021, I had a webinar to help the public understand the new law and to share the uncertainty in the new law. The webinar was moderated by Meny Atias, a Real Estate Broker based out of Los Angeles, and featured two panelists, Tony Yu, Esq. President of DSG Insurance Services, Inc and Professor Joseph Sliskovich, Esq from Loyola Law School, who spoke about potential impacts to inheritance taxes and estate planning flaws.
If you missed the webinar, you can find a recording of it on my website: www.assessor.lacounty.gov/prop19