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Transfers from Parents & Grandparents to Children: Avoid an Increase in Property Tax

Do you know how to shield your intra-family property transfers from being reassessed for property tax purposes? Understanding the law about exclusions from reappraisal is the first step towards avoiding an increase in property tax.

In California, real property is reassessed at the market value if it is sold or transferred, and property taxes can sometimes increase dramatically as a result. However, if the sale or transfer is between parents and their children, or from grandparents to their grandchildren, the property will not be reassessed if certain conditions are met and the proper application is timely filed.

Transfers of real property are excluded from reassessment if either (1) the transfer is a primary residence (no value limit); or (2) the transfer is of the first $1 million of real property other than the primary residence. The $1 million exclusion applies separately to each eligible transferor. For example,a grandchild may exclude $1 million of property transferred from her father and his parents (paternal grandparents); and $1 million of property transferred from her mother and her parents (maternal grandparents) for a total of $2 million.

It is important to note that claiming this exclusion is not always beneficial. Contact a competent attorney to discuss your situation, and get legal advice tailored to your specific situation. If you are in the Bay Area, the estate planning attorneys at Lonich & Patton have decades of experience handling complex property matters. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

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