Call today for a consultation

Call today for a consultation

Protecting your legacy: Updating your trust post-Proposition 19

On Behalf of | Jan 20, 2025 | Trust Administration |

California’s Proposition 19, effective February 16, 2021, changed property tax laws. These changes affect how you transfer real estate to your children or grandchildren. If you have a trust, you must review and update it to ensure your estate plan aligns with your intentions under the new law.

How has Proposition 19 changed property tax rules?

Proposition 19 changed how property tax reassessments work when transferring real estate to your children or grandchildren. Key changes include:

  • You can only get a property tax break when transferring a primary home.
  • Your child or grandchild must live in the inherited home as their main home.
  • The transferable tax base has a cap of $1 million plus the current assessed value.

These changes might affect your estate planning strategy. If you created your current trust without considering these new limits, your beneficiaries could experience unexpected tax issues.

What specific trust language might need revision?

To ensure your trust aligns with Proposition 19, review and update the following:

  • Property distribution clauses: These parts of a will or trust show you how to divide the decedent’s property among beneficiaries
  • Tax planning provisions: You might use trusts, gifts, or other methods to reduce estate, income, or gift taxes to minimize the tax burden on the estate or beneficiaries
  • Specific bequests of real estate: These are clear instructions in a will or trust that direct you to give specific properties to beneficiaries
  • Language related to property tax basis step-up: The wording in estate planning documents that tells you how to adjust the tax of inherited property aligning to its fair market value at the time of the decedent’s death

When inheriting real estate, pay attention to any rules that assume you get unlimited property tax benefits. Change these to show the new $1 million limit and the need for the property to be your main home.

Adapting your trust to new realities

The impact of Proposition 19 on your estate plan is highly complicated. Each family’s situation is unique, and the best approach depends on your specific goals and assets. Reviewing your trust with a knowledgeable attorney can help ensure your legacy remains protected under the new law. They can offer advice on structuring your trust to maximize benefits for your beneficiaries while complying with current California property tax rules.

Suzanne P. Nicholl
Rated by Super Lawyers


loading ...