Dear Stefanie:
One of my daughters wants to live in my home after I pass away. It is fully paid off and the property taxes are very low. Can she keep my low property taxes when she inherits? She is on a budget.
– Tax Planner on Tayberry Lane
Dear Tax Planner on Tayberry Lane:
There is a critical tax break available to all children who inherit appreciated California real property from a parent. Essentially, under Prop 58, a child can keep the same property taxes as a parent on a primary residence. This can be huge! However, there are a few “traps.”
First, your daughter must timely file forms with the County Assessor’s office after your death. This is critical. Failure to do so can result in an increase in the property taxes. I hate to see this happen!
Second, if you have more than one child and one wants to keep the house (and the low taxes on it), they can “horse trade” among themselves. For example, one child can keep the property and the other can receive something else of equal value (e.g: cash). However, it is critical this is planned by you in advance. Your estate documents must allow for the children to make this trade, otherwise the tax break could be diluted.
Finally, if there are not enough assets in the total estate to equalize the value among your kids, legal counsel must be sought immediately.
In this video I talk about “Keep Property Taxes Low“.
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