On February 16, 2021, California\'s Proposition 19 took effect and fundamentally changed how property taxes work when parents transfer property to children.

If you own California real estate and plan to leave it to your children, Prop 19 affects you. Here\'s what you need to know.

What Changed With Prop 19

Before Prop 19, parents could transfer their primary residence plus up to $1 million of other real property to children without triggering a property tax reassessment.

This meant children could inherit the family home (or a rental property, or a vacation cabin) and keep Mom and Dad\'s low property tax base—potentially saving tens of thousands of dollars per year.

Prop 19 eliminated most of that protection.

The New Rules Under Prop 19

Now, when parents transfer property to children:

For a Primary Residence:

Children can keep the parents' property tax base ONLY if:

• The child uses the property as their own primary residence within one year of the transfer
• The home\'s current market value is not more than $1 million over the original taxable value

If the property value exceeds the parent\'s base by more than $1 million, the excess is reassessed at current market value.

For Other Property (Rentals, Vacation Homes, etc.):

These are ALWAYS reassessed at current market value when transferred to children. The parent-child exclusion no longer applies.

What This Means in Real Numbers

Let\'s say your parents bought a Sacramento home in 1985 for $150,000. Their current property tax base is around $200,000 (with annual increases capped at 2% under Prop 13).

The home is now worth $800,000.

Before Prop 19: You inherit the home and keep the $200,000 tax base. Your property taxes are about $2,000/year.

After Prop 19 (if you DON'T move in): The property is reassessed to $800,000. Your property taxes jump to $8,000/year.

That\'s a $6,000/year increase—$500/month—just in property taxes.

How This Affects Estate Planning

Prop 19 changes the calculus for many California families:

If You Own Rental Property or Vacation Homes:

Many families are now considering selling these properties before death rather than leaving them to children, because the property tax increase may make it financially impossible for children to keep them.

If You Own a Family Home:

To preserve the tax base, your children must:

• Move into the home as their primary residence
• Do so within one year of inheriting it
• Stay below the $1 million exclusion limit

Planning Strategies:

Some options to consider:

• Gift the property while parents are still alive (if appropriate)
• Use life estates or retained income trusts
• Consider selling and using proceeds for other estate planning goals
• Factor property tax increases into inheritance decisions
• Update your estate plan to reflect new tax realities

The Bottom Line

Prop 19 eliminated a valuable tax benefit California families relied on for decades.

If your estate plan was created before 2021, it may not account for these new rules. And that could cost your children tens of thousands of dollars in unexpected property tax increases.

Now is the time to review your plan and make adjustments if needed.