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California’s new Prop. 19 property-transfer law spurs flood of family filings

Key components of Proposition 19

• Parent to child property tax transfers require the heir live at the premises.

• If the parents are dead, the grandparents may transfer their property.

• Family farms are included in the transfers.

• The $1 million exemption on taxing rentals and investment properties has gone away.

• Seniors over the age of 55 who move within the state may transfer property taxes from one house to another.

• Homeowners who are wildfire victims may keep their base year value on their properties.

• The senior’s property must be used as a principle residence.

California’s Proposition 19 has prompted a sevenfold increase in requests to county assessors to transfer property throughout the North Bay.

Proposition 19 allows homeowners over age 55 to keep a better tax rate when they sell one house and buy another. It took effect on April 1 and applies to anywhere in the state. It’s about as far reaching as the housing tax revolt of Proposition 13 that passed 1978.

But there’s another side to Proposition 19.

It restricts the ability for parents to transfer property to their children by adding a requirement that they live in the home. That’s triggered a rush of people to get transfers in before the new rules apply.

The deadline for filing the parent-to-child property transfers was Feb. 15, prompting a fever pitch of reaction within North Bay counties.

Some North Bay banking, accounting and law firms have fielded an uptick of calls over the last few months from their clients trying to be careful with tax issues. A few noted the measure was written in a convoluted way.

“Most people work with attorneys to put their properties into revocable trusts to preserve the property tax benefits for beneficiaries,” Santa Rosa certified public accountant Jon Dal Poggetto told the Business Journal.

Dal Poggetto insisted the proposition may very well benefit seniors who are moving within the state from one house to another, by allowing them to keep the lower tax rate they had.

“On that side of it, (the proposition) was good,” he said.

But Dal Poggetto added, when it comes to planning their estates, especially passing down their property to heirs, the proposition was somewhat confusing.

For example, the initiative increases restrictions for homeowners seeking to transfer their estates to their children by requiring the heirs live at the premises unlike old property tax rules.

“It takes away the inheritance if the kids don’t live there,” he said.

Josh West, a Smith Dollar attorney who handles estate planning, said the matter becomes trickier for parents with more than one child who are trying to pass down their primary residence.

How do you decide as a parent which child will live there?

Proposition 19 has forced parents to make decisions on their estates now, opposed to later on in life.

“In general, families have been trying to struggle with this,” said John Mackey, Exchange Bank senior vice president and managing director of the Investment and Fiduciary Services division. “It’s for parents who intended to transfer their property into their children’s names with the idea the property stays within the family.”

Homeowners who worked that out greeted assessors in Sonoma, Napa and Marin counties with a load of filings before the mid-February deadline written into the measure.

Sonoma County has taken in 917 filings through Feb. 5. The usual rate is 193 for the three-month period when compared to the previous year.

“It’s crazy. We’re just catching up,” said Barbara Green, the change-of-ownership supervisor in the Sonoma County assessor’s office.

Although a smaller jurisdiction, Napa County’s government offices are in the same boat. Residents put in 175 of the forms to pass down their properties within the family.

“They’re going to have to maybe file a statement saying they still live there,” Napa County Assessor John Tuteur said when asked how the counties would monitor whether the child beneficiaries were continuing to live there.

That may be an issue for Marin County, which has collected 600 more than its usual 54 parent-to-child property transfers.

“There’s no provision in the law that it sunsets, but I don’t want to police this,” Marin’s Assessor Recorder-Clerk Shelly Scott said, adding she understands homeowners with heirs wanting to take advantage of a good tax shelter.

Still, the process has taxed her workers.

“It’s been amazing. It created a backlog in our department,” Scott said.

Key components of Proposition 19

• Parent to child property tax transfers require the heir live at the premises.

• If the parents are dead, the grandparents may transfer their property.

• Family farms are included in the transfers.

• The $1 million exemption on taxing rentals and investment properties has gone away.

• Seniors over the age of 55 who move within the state may transfer property taxes from one house to another.

• Homeowners who are wildfire victims may keep their base year value on their properties.

• The senior’s property must be used as a principle residence.

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