Prop 19 – For the past few months, our Law Firm has been extremely busy strategizing with clients, creating trusts and transferring properties before Proposition 19 took effect.  As a refresher, Proposition 19, passed by California Voters last fall, eliminates the ability for families to retain the low property tax base enjoyed by parents on transfers of their California property to their children and, in special circumstances, to their grandchildren.  Prop 19 effects ALL California real property transferred after February 16, 2021, except qualifying family homes and family farms.  Many California families faced with potentially huge increases in property taxes will find it financially difficult or impossible to keep property in the family.

Legal Work:  The passage of Prop 19 caught California families by surprise and with very little time to act to take advantage of the old law.  The varied family compositions, goals and types of properties required equally varied new legal strategies and customized documents to mitigate the potential financial impact of the new law. Some families opted to transfer title of properties into co-tenancy with the children. Other families opted to put their property into an irrevocable trust for the children.  Still others chose a hybrid approach. And many opted to do nothing because of the potential limits it put on their use of the property during the parents’ lifetime. Because, we had only three short months (remember this was over all of the winter holidays) to figure out what the new laws meant, what could be done to protect family properties from reassessment later, and get all of the work done, we and our colleagues who took on this challenge, worked hard to help as many clients as we could before the February 16^th, 2021 deadline.

Timeline: The short time between when Prop 19 passed and when it became effective was not enough for the California Board of Equalization and the state legislature to fully promulgate and adopt all of the rules, regulations and additional laws needed to interpret and flesh out the proposition so it could be implemented by the county assessors’ offices.  As we all know, not only did this occur during the winter-time holidays, but also while we were under the threat from the Covid-19 pandemic, with businesses, schools, and government offices partially closed and/or with staff working remotely even when open on non-holidays. As a result, uncertainty continued about how the new law will affect the strategies used by attorneys across the state to try to protect their clients’ Prop 13 property taxes when the family properties pass to the clients’ children.   Unfortunately, due to all of the uncertainty about the law and the short time available to figure out what to do and act, most trust and estate attorneys were unable to help more than a handful of clients, and many decided against taking up the challenge at all.  As a result, most families were unable get help before the deadline and their families now face future difficult decisions about if and how to afford to keep the family properties.

Call to Action:  There may be some potentially good news afoot. California State Senator Patricia Bates from Laguna Hills has introduced SB 668 to extend the implementation date for the transfer of property to children part of Proposition 19 by two years, to February 16, 2023.  This extension would allow California state law makers and county assessors time to properly implement the law, California attorneys time to understand and incorporate the law into estate plans, and California families time to meet with their attorney to determine what they are willing to do to protect the property taxes on their family properties.   It would also give time for tax-payor advocates to try to get a proposition on the 2022 ballot to reverse Prop 19 and restore the parent-child exemptions.

• Access a copy of SB 668 online at: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220SB668
• If you are in support of SB 668 giving a two-year extension for the implementation of this part of Prop 19, contact your local California State Senator to urge them to vote YES.

Find your State Senator here: https://www.senate.ca.gov/senators

All for now,

From the Law Office of Janis A. Carney