Of note, Proposition 13 caps the levying rate for property taxes in California at 1%. Cal Const art XIIIA, §1.
The following are examples of situations in which the transfer will not result in a “change in ownership” and thereby avoid the dreaded re-assessment for property tax purposes.
1. Transfers in which proportional ownership interests remain the same before and after transfer
For example, Husband and Wife own a rental home in joint tenancy (50/50 split) and transfer it to a limited liability company in which they have same membership interest (50/50 split). Rev & T C §62(a).
2. Transfers to revocable trusts
For example, Husband and Wife execute a revocable (living) trust and transfer the home they live in into the trust by transferring title from themselves to the trust by naming the trustee of their revocable trust as owner. Rev & T C §62(d).
3. Interspousal transfers
For example, Husband and Wife own their home in joint tenancy, Husband dies and Wife inherits the other half of the house. Rev & T C §63.
4. Parent-child (or grandparent-grandchild) transfer
For example, in the case of a Parent-Child transfer, Husband and Wife own a home and have one child, Son. Husband and Wife pass away and Son inherits the home. Furthermore, in the case of a Grandparent-Grandchild transfer, Grandparent is only survived by a Grandchild, that is no child of the Grandparent outlives the Grandparent. Rev & T C §62.
5. Persons over age 55 or who are severely and permanently disabled may transfer the base-year value of a residence to a replacement dwelling in the same county, or in another county if the board of supervisors of that county adopts an ordinance granting base-year-value relief to replacement dwellings when the original dwelling was located in another county
As of this writing, seven counties (Alameda, Los Angeles, Orange, San Diego, San Mateo, Santa Clara, and Ventura) have ordinances granting base-year-value relief to replacement dwellings when the original dwelling was located in another county per Rev & T C §§ 68-69.5. For example, Person purchases a home in San Jose (Santa Clara County) and upon reaching the age of 55 sells their home in San Jose in order to purchase a home in Redwood City (San Mateo County) so they can be closer to their family.
If you have any questions please call my office at (408) 866-8382 for a free consultation or email me at s.miri@mirilaw.com.
My father is creating a living trust for him house that is fully paid for. He wants to put as beneficiaries myself, my sister and my son. He wants to have my son inherrit a portion as he has helped my father work on the house for the last 5 years. How would that work with the prop 13 rules. Would the house have to be reassesed because a grandchild is a benificiary as his parents are still living?
ReplyDeleteThe portion that is devised to your father's children is exempt from property tax re-assessment because of the parent-child exclusion.
DeleteThe portion that is devised to the grandchild, your son, would only be exempt if all parents of the grandchildren are deceased as of the date of sale or transfer. In other words, you and your sister would need to predecease your dad and your son would need to outlive your father in order for this exclusion to apply.
Can a widdowed wife gift her home to a only adult daughter?
ReplyDeleteWould the property tax on the home stay at the current amount per year under Caiforina prop 13?
Yes, although if the house has a mortgage this might accelerate the loan.
DeleteYes the property tax would remain the same if the primary residence was gifted. Rev & T C §63.1(a)(1).
What if only 2 of the three children out survive their parent and that parent wishes to gift their home to their grandchild born to their deceased child? Is there also a difference if the house is sold to the grandchild vs gifted or inherited?
ReplyDeleteThe situation you describe qualifies for the grandparent-grandchild exclusion.
DeleteBy sale or gift qualifies for the exclusion. However, there are significant tax differences between a sale and gift transaction.
I should mention that gifting real property to offspring is almost always a very poor decision because of tax, contractual and liability reasons. I have never advised a client to do such.
What are the tax ramifications of a parent gifting a joint tenancy to their child?
ReplyDeleteWhat is the tax liability if a parent gifts a joint tenancy with parent to an adult child?
ReplyDeleteThe parent also has prop 13 on their property.
I assume you asked both of these questions judging by the similarity and timing of the two questions.
DeleteYour question is ill-suited for Internet Q&A. There are gift, income and property tax issues raised by the transfer. There is no way I could answer this question competently given the lack of facts presently.
Regardless, I would NOT do this transfer. I would be shocked if any attorney advised you to do this.