It’s pretty obvious that any parent who owns a home has the intention of leaving that home to their children upon passing or maybe transferring as a form of a gift at some time.
That is a great thing. That’s what we work so hard for, to leave some sort of legacy for our children. The hidden downside to this is that generally speaking, when you transfer a property, it is reassessed by the tax assessor for the new value and taxed based on that value.
That’s all find and dandy when you sell the home because it doesn’t affect the seller or their family in anyway. But…what if you want to transfer the property outright via a trust, probate or just to be nice to a child or grandchild?
I’ve seen many times where the tax rate on the new value alone makes the home unaffordable for the child or grandchild and therefore are no longer able to enjoy the wonderful gift you have left.
Let me give you a real life example. These is an actual scenario I’m involved in now.
Home was purchased in 1964 for about $35,000
It has never been refinanced and has long since been paid off in full.Current annual property tax is approximately $1,200 / year
Current estimated value of the property is around $900,000.
If the property was transferred and the child never filed for Prop 58 or Prop 193 for grandchildren then the value would be assessed at the full $900,000
Example:
$900,000 x 1.2% = $10.800 (new annual property tax)$10,800 – $1,200 = $9,600 new difference.
Assuming the property tax never increased, that would be an additional $96,000 in taxes alone that the child/grandchild would have to pay over the next 10 years.
It’s not necessary. In California just learn more about Proposition 58 and 193.
In Orange County you can find more at the Orange County Assessors office: http://ocgov.com/gov/assessor/programs/transfer
The example above is for demonstration purposes only and is not intended to accurately reflect the tax rates of any property anywhere. To find your tax rate on your property, contact the Orange County Tax Assessor.
If you have a property in probate that you need to sell, visit Amazing Open House site to get top dollar.
In the end of the day it is best to create a proper trust for the family to avoid having to see The Probate Agent and giving up a bunch of money to the legal system.
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