Today, Distinct Law Group is happy to give information pertaining to estate planning and the term “reassessment”. The estate planning attorneys at Distinct Law Group are constantly thinking of new and innovative ways to keep our clients and the general public informed. There are several things you should consider when transferring California real estate. If you or someone you know is thinking about buying or selling property, one of the main items of thought that should be on the top of your list is property tax and reassessment. Currently under Prop 13, or the People’s Initiative to Limit Property Taxation, homeowners who do not plan on selling their property reap certain benefits such as having the assessed value of a property limited to an annual inflation of no more than 2% each year. So for example, say you bought a home in 1995 for $800,000, the original property tax on that home would be around $8,000. Under Prop 13, that amount can only be increased by up to 2% each year, meaning that the property tax can be no more than $8,160 the following year. Say though, that you would like to sell your home that is now worth $2,000,000. This selling of a home would trigger something called reassessment, which means that the new owners of your home would be paying property tax on the $2,000,000, which would amount to much more than what the previous owners of the same home were paying each year.
With all that said, if you are someone who is selling your home to a perfect stranger, the reassessment trigger may not give you pause, but if you are transferring your home to a child, grandchild, a spouse or even to a trust, there are ways to avoid the reassessment trigger altogether. The main trigger that causes reassessment is the term “change of ownership.” Change of ownership is what will effectively remove the 2% cap, causing your county assessor to reassess the property at its current fair market value. If you are looking to protect the interests of a family member or even your own interest as a trustee transferring your property to a trust, there are ways to avoid this reassessment trigger. These particular exclusions include, but are not limited to, changes in ownership between spouses and registered domestic partners (that includes lifetime and at-death transfers), changes in ownership between children and grandchildren, and ownership changes that involve joint owners, transfers to trusts and transfers to business entities.
Each exclusion though, may come with its own separate rules and requirements that must be followed for that specific exclusion claim to occur. Planning ahead of reassessment is one of the easiest ways to save you and others thousands of dollars on property taxes after a change of ownership occurs. For more information about certain reassessment exclusions or questions about whether you qualify for a particular reassessment exclusion, plan ahead by contacting a qualified estate-planning attorney at Distinct Law Group, APC before any change of ownership occurs. Doing so may just save you and the ones you love tremendous amounts of time and money, and the estate-planning team at Distinct Law Group, APC can help you make this transition as smooth as possible by helping you avoid reassessment and other potential financial pitfalls.