Prop 19 Planning for Ventura County Homeowners

If you own a home in Ventura County and you plan to leave it to your kids, Proposition 19 changed the math in a way most people still haven’t heard about. It took effect February 16, 2021, and it quietly removed one of the biggest tax breaks California families relied on for decades.

Here’s the short version: in a lot of cases, when your children inherit your property, the county can now reassess it to current market value. That can multiply the property tax bill several times over. I help Ventura County families plan around that before it’s too late to do anything about it.

What Prop 19 actually changed

Before Prop 19, parents could pass real estate to their children and the kids kept the parents’ old (low) assessed value. A house bought in 1995 and worth $900,000 today might be taxed as if it were worth $180,000. That break applied to a primary home of any value, plus up to $1 million of assessed value on other property like rentals or a vacation home.

Prop 19 narrowed it to almost nothing:

• The parent-child exclusion now applies only to a primary residence — and only if your child moves in and makes it their own primary residence within one year.
• Even then, the protected amount is capped. If the home’s market value is more than the old assessed value plus $1 million, the difference gets reassessed.
• The exclusion for rental properties, vacation homes, and commercial property is gone entirely. Those get reassessed to full market value when your kids inherit them.

For a family with a paid-off rental in Camarillo or a beach place in Port Hueneme, that can mean a property tax bill that jumps from a few thousand dollars a year to well over ten thousand — every year your children own it.

What you can do about it

There’s no single trick that works for everyone, and anyone selling you a one-size-fits-all “Prop 19 loophole” should make you nervous. The right move depends on what you own, who you’re leaving it to, and what your family actually wants to do with the property.

Depending on your situation, the tools worth looking at include irrevocable trusts, properly structured LLCs or family partnerships, lifetime transfers, and decisions about which property your children keep versus sell. Each has real trade-offs — gift tax, loss of control, the step-up in basis at death — and getting one wrong can cost more than the tax you were trying to avoid. That’s the whole reason to plan it with someone who does this for a living.

Prop 19 Planning FAQs

Can my kids keep my low property tax rate when they inherit my house?

Only if it’s your primary residence and they make it their primary residence within one year of the transfer, and even then only up to your assessed value plus $1 million. If they plan to rent it out or use it as a second home, it will be reassessed to market value.

Does Prop 19 apply to rental property I leave my children?

Yes, and this is the big one. The old exclusion that protected up to $1 million of assessed value on non-primary property was eliminated. A rental or vacation home your children inherit will generally be reassessed to full current market value, which usually means a much higher annual tax bill.

Should I just transfer my house to my kids now to avoid Prop 19?

Sometimes, but be careful. Gifting property during your lifetime can trigger gift tax reporting and, more importantly, your children lose the step-up in basis they’d get if they inherited it at death, which can create a large capital gains tax when they sell. The tax you save on reassessment can be smaller than the tax you create. This is exactly the kind of decision to run the numbers on before acting.

Is it too late to plan if I already have a living trust?

No. A standard living trust does not by itself solve the Prop 19 problem, so most existing trusts in Ventura County could use a second look. We can review what you have and add the structures that fit your property and your goals.

Related

See also Estate Planning, Living Trusts, Property Deed Transfers, and Estate Tax Planning. Serving Camarillo, Thousand Oaks, and all of Ventura County.

Written by Eric D. Ridley — Estate Planning Attorney, Ridley Law. Serving Ventura County since 2010. Learn more about Eric →