Recently, I was having coffee with an old friend, and he let out a deep sigh. He mentioned that after his mother passed away, he heard that the property taxes were skyrocketing while sorting out the house.

Honestly, hearing that made it feel very real to me. I thought that when inheriting a parent's home, the taxes would just carry over as they were.

In fact, a few years ago, I wrote on this blog that "there's no need to worry about property taxes between parents and children." Looking back now, that statement is only half true.

The game changer is Prop 19. It passed in a voter referendum on November 3, 2020, and the rules for transfers between parents and children have been in effect since February 16, 2021.

During the Prop 58 era, if a parent lived in a home, the assessed value was transferred regardless of the home's market value. Other properties could also be transferred without reassessment up to an assessed value of $1 million.

Now, the conditions have become much stricter. The parent's primary residence, referred to as the family home, must be inherited, and the child must also use that home as their primary residence.

Rental properties or investment condos no longer qualify for this benefit. The moment they are transferred, they are reassessed at market value.

There is also a cap on the home value. It only protects the amount up to the parent's existing assessed value plus $1,044,586.

This amount applies to transfers occurring between February 16, 2025, and February 15, 2027. The State Board of Equalization (BOE) adjusts this figure every two years, so starting February 16 of next year, this number will be adjusted again.

For example, if the assessed value of the parent's home is $300,000 but the market value is $1.5 million, the protection limit is $1,344,586.

Only the amount exceeding that, $155,414, will be added to the assessed value, resulting in a new assessed value of $455,414. Based on a basic tax rate of 1%, the property tax would increase from $3,000 to $4,554.

However, if the conditions are not met, the situation changes completely. The entire $1.5 million would be reassessed, leading to an annual property tax of $15,000 based on the basic rate, plus additional local bonds and special assessments on the actual bill.

In my view, the bombshell often detonates more frequently due to paperwork deadlines than home value limits. Let's break down what that means.

The first deadline is one year. The inheriting child must move in within one year of the transfer date and must also apply for the Homeowners' Exemption (BOE-266) within that same year.

In the case of inheritance, the transfer date is usually considered the date of death. Even if probate takes over a year, this clock does not stop.

The second is the exclusion application BOE-19-P. It must be submitted within three years of the transfer date or by the earliest date before selling to a third party.

If you miss the three-year window, you can still submit it within six months after the county assessor sends a reassessment notice. If you miss that too, it will only apply from the year you applied, and you won't get a refund for past taxes.

There are some cases where the deadline has been extended due to SB 293, which took effect on January 1 of this year. However, this mainly applies to certain disaster-affected areas like Palisades and Eaton Canyon in 2025, and the one-year residency requirement remains unchanged.

Many people also ask what happens if there are multiple siblings. According to BOE guidelines, if one child moves in and applies for the exemption within a year, the conditions are met.

The real trap is the buyout. If the sibling who moves in buys out the shares of the other siblings with their own money, that portion may be considered a transaction between siblings and could be reassessed.

That's why many people include a non-pro-rata distribution clause in their living trust. The home goes to the child who will live there, while cash of similar value is given to the other children, but this requires specific trust language.

It gets even trickier when grandchildren are involved. It only applies if the grandchild's parent, meaning the grandparent's child, has already passed away as of the transfer date.

There have also been ongoing movements to repeal Prop 19. In 2022 and 2024, efforts fell short due to a lack of signatures, and there is no repeal proposal on the ballot for the upcoming election on November 3 this year.

Honestly, I think it's a rather harsh law. If a child can't move in due to work, they lose the benefits on a home that their parents have paid off their whole lives.

However, I also think it's fair to reduce tax benefits for investment properties that were previously passed down. Either way, it's not a situation where you can just sit back and wait for the law to change.

There are things to do while your parents are still alive. Check the trust language, verify the current assessed value on the assessor's website, and discuss with family who will be moving in.

Once something happens, timing is crucial. Gather the death certificate, set a move-in date, submit BOE-266 first, and then follow up with BOE-19-P right after.

If the home is in LA County, submit it to the LA County Assessor, and if it's in another county, go to the assessor for that county. After handling the funeral, a year goes by quickly.

Since calculations vary based on home values and family situations, I recommend checking with a tax advisor or an estate attorney before making a final decision.

It's okay to take your time to grieve, but mark those paperwork deadlines on your calendar. My friend almost missed that one-year window.