Prop 19 – Avoid Increasing Property Taxes On Commercial Property

Your Orange County attorneys want you to know the options you still have to protect your property taxes from reassessment after you pass away! Many people have heard about Proposition 19, but there is a general lack of understanding of what it actually means, and how it impacts you. We are here to clear things up!

The Bad News:

      Proposition 19, effective February 16, 2021, narrows and eliminates two powerful provisions of Prop 13 respecting real property given or sold by parents to a child:

• Under Prop 13, parents’ principal residence given to a child was excluded from property tax reassessment. Prop 19 narrowed this exception by requiring the recipient child to actually move into the residence and file the homeowners’’ exemption claim within 1 year of transfer. Even if these requirements are satisfied, the exclusion from reassessment will apply only to the first $1,000,000 of property tax assessed value and will last only so long as the child in fact occupies the property as his or her principal residence. 

• Prop 19 completely eliminated the exclusion from property tax reassessment for real property other than the parents’ principal residence. Examples are any commercial, industrial, or residential rental property (“commercial property”). While percentages of commercial properties held in companies may be transferred, any transfer over 50% will trigger property tax reassessment.  And when you have cumulatively transferred over 50% of the property, the entire property will be reassessed.

The Good News:

There is a way to avoid the draconian changes of Prop 19 regarding commercial property!  I’ll provide some tips on this technique in a future post.

The key:  Plan ahead!! 

Before acquiring a new commercial property, consult with Sunny Boren at Copenbarger & Copenbarger, LLP. 

LLCs are often the best entity to hold the new property as they offer good creditor/judgment protection without the required “formalities” of a corporation. Corporations can present significant tax disadvantages when they  own real property. 

If the LLC formation, funding, and timing is done correctly, you will be able to gift or sell the LLC, and the commercial property it holds, to your children without  reassessment!

Call us today to learn more about your options regarding Proposition 19 and protecting your property taxes from increase.  To schedule an appointment at our Orange County estate planning law firm or one of our other law firms located throughout the state, call (800) 244-8814. 

If you have any further questions about estate planning and strategies to shield your wealth, or if you’d like to have your current asset protection plan reviewed to make sure it still meets your needs, please contact us at one of our offices located throughout the state of California 800-244-8814 to set up a consultation.