Proposition 19 can significantly increase property taxes on a highly appreciated South Bay home when it passes from a parent to a child, because the home’s old, lower property tax base is no longer guaranteed to carry over automatically. Because many homes in Manhattan Beach, the Palos Verdes Peninsula, and other South Bay cities have appreciated substantially over the years, Proposition 19 can have a significant impact when property passes to the next generation.
Table of Contents
- How Proposition 19 Changed Parent-to-Child Property Transfers
- When Can a Parent-to-Child Transfer Avoid Reassessment?
- Why This Matters More in Manhattan Beach and on the Palos Verdes Peninsula
- Review Proposition 19 as Part of Your Overall Estate Plan
- Frequently Asked Questions About Proposition 19
- Get Help Reviewing Your Proposition 19 Exposure
How Proposition 19 Changed Parent-to-Child Property Transfers
Under Proposition 19, the old, lower property tax base generally does not automatically carry over to a child unless certain requirements are met. Instead, the property may be reassessed to its current market value. For a South Bay home that was purchased many years ago and is now worth several million dollars, that reassessment can mean a substantial increase in annual property taxes — an added expense that can make it difficult for a child to keep the home.
When Can a Parent-to-Child Transfer Avoid Reassessment?
There are circumstances where a parent-to-child transfer may still qualify for an exclusion from reassessment, particularly when the child will use the property as his or her principal residence. Even then, important requirements and limitations apply, including:
- The child generally must move into the home and claim it as a principal residence within a limited time after the transfer
- A second home, vacation property, or rental does not qualify for this exclusion the way a principal residence can
- Even a qualifying transfer can trigger a partial reassessment if the home’s market value exceeds its existing assessed value by more than a set threshold, which is adjusted annually
These rules make the outcome highly fact-specific — two families with similar homes can end up with very different results depending on how the transfer is structured and what the children plan to do with the property.
Why This Matters More in Manhattan Beach and on the Palos Verdes Peninsula
South Bay coastal communities are especially exposed to this issue because home values have risen so dramatically over the decades. Families in Manhattan Beach and on the Palos Verdes Peninsula often hold property with an assessed value far below current market value — exactly the gap Proposition 19 targets. See how this connects to deciding whether an appreciated home should pass outright to your children.
Review Proposition 19 as Part of Your Overall Estate Plan
If you own a highly appreciated home on the Palos Verdes Peninsula, in Manhattan Beach, or elsewhere in the South Bay, and intend to leave it to your children, it’s important to review the potential Proposition 19 consequences as part of your overall estate planning — not as an afterthought. A living trust can also be designed to give your successor trustee flexibility to help take advantage of available exclusions; learn more about how a living trust can help with Proposition 19 planning.
Frequently Asked Questions About Proposition 19
Does Proposition 19 apply to all inherited property?
No. The exclusion from reassessment is generally limited to a principal residence transferred from parent to child (or, in some cases, grandparent to grandchild), plus certain family farms. Second homes, vacation homes, and most rental or investment properties do not qualify in the same way.
Will my child automatically keep my home’s current property tax base?
Not automatically. Under Proposition 19, the exclusion generally requires the child to use the home as a principal residence, and even then, a partial reassessment can apply if the home’s market value exceeds a set threshold above its assessed value.
Can a living trust help with Proposition 19 planning?
In some situations, yes. A properly designed living trust can give your successor trustee the flexibility to structure a transfer in a way that helps take advantage of available exclusions, though a basic living trust alone does not automatically avoid reassessment.
What should I do if I own a highly appreciated South Bay home?
Review your Proposition 19 exposure as part of your overall estate plan, ideally before a transfer occurs, so your plan can be structured around your property, your children’s plans for it, and the exclusions that may be available.
Get Help Reviewing Your Proposition 19 Exposure
Kavesh, Minor & Otis helps South Bay homeowners evaluate how Proposition 19 may affect their highly appreciated homes and build an estate plan designed around the exclusions that may be available. For more information, download our free report, What South Bay Homeowners Should Know About Proposition 19.
