Many people believe that only wealthy individuals can avoid property taxes. However, with the proper knowledge and guidance, anyone can find a way to avoid property taxes. Prop 19 can significantly impact your property taxes in the future. Therefore, taking the proper steps now can help you avoid taxes in the future. Our team at Gilfix & La Poll Associates LLP explains what you need to know to prepare.
Learn more about how to avoid property taxes below:
Property Tax Implications with Prop 19
Real estate is likely your most valuable asset. One of the factors that can impact your ability to pass property ownership to your family is Prop 19. It is vital that you take the proper steps today to protect your property for future generations.
Before Prop 19 (Prop 58)
Before prop 19 came into play (February 16, 2021), the primary residence would go to the children without a change in property taxes when an individual passed away. Other real property could also be passed on to children without a change in property tax (up to $1 million in assessed value). For example, if Jan paid $6,000 in property taxes – their children Bill and Joe would also pay the same amount in property taxes after their mother Jan passed away.
After Prop 19
After February 16, 2022, dramatic changes occurred with property tax. The primary residence now goes to children with some property tax protection (up to $1 million of value) only if children reside in residence. Therefore, if a child decided they wanted to rent the property, the tax protection would no longer apply.
All other properties, such as rentals, business, or vacation properties, would be fully reassessed upon passing, with no exceptions –whether you have a child with special needs, a low-income child, or a sibling who would want to live in the house.
Tips to Protect Property for Future Generations
One of the best ways to protect property for future generations is by creating a Family Protection Trust, also known as a Dynasty Trust. Instead of leaving assets directly to your children, you would make a Family Protection Trust for each of them. Although you wouldn’t technically leave them any assets, the assets would be in a trust.
Putting your assets into a Family Protection Trust would them from:
Financial impacts after a divorce
Lawsuits
Estate taxes
Not only does this protect your children, but it also protects your grandchildren and great-grandchildren. A Family Protection Trust can also be a form of a prenuptial agreement that protects your family in the event of a divorce.
This is a tool that many wealthy families use to protect their assets, but it doesn’t mean it’s not something anyone can do. If you want to learn more about how to protect your future generation from property and estate taxes, get in touch with us today (650) 683-9200!