If you’re planning to leave your home or rental property to your children—or expecting to inherit property yourself—Proposition 19 may dramatically change the outcome.

This voter-approved law repealed major property tax protections that families in California once relied on. Now, inheriting real estate can trigger a massive property tax reassessment, unless you meet very specific criteria.

In this article, we’ll break down:

• What Proposition 19 is

• How it changed property tax rules for inherited homes

• What it means for parents, children, and estate planning

• What you can do to protect your family’s real estate

Let’s dive in.

What Was the Law Before Prop 19?

Before Proposition 19 passed in November 2020 (and took effect in February 2021), California families benefited from Prop 13 and Prop 58:

• Prop 13 limited annual property tax increases and locked in low taxable values for homes purchased long ago.

• Prop 58 allowed parents to transfer a primary residence—and up to $1 million of other real estate—to their children without triggering reassessment.

This allowed children to inherit rental properties, vacation homes, and family homes while keeping the low property tax bill their parents had enjoyed for decades.

For many, it was the most valuable estate planning tool in the state.

What Did Proposition 19 Change?

Prop 19 removed the unlimited tax break for inherited properties. It narrowed who qualifies for reassessment exclusion and placed strict conditions on inherited homes.

Here’s how it works under Prop 19 (after Feb 16, 2021):

1. Only the primary residence of the parent qualifies for tax protection.

2. The child must move into the home and make it their primary residence within 1 year.

3. The exclusion is capped—only the first $1 million of the difference between assessed value and market value is protected.

4. All rental and investment properties are reassessed to full market value upon transfer.

Before Prop 19 vs. After Prop 19 (Example)

Let’s say your parents bought a house in 1985 for $200,000. Thanks to Prop 13, they’re only paying $3,000/year in property taxes.

Before Prop 19

• You inherit the home and rent it out.

• You keep their $3,000/year tax bill.

After Prop 19

• You inherit the home but don’t move in.

• Property is reassessed to market value (say $1.5 million).

• New tax bill is around $15,000–$18,000/year.

That’s a $12,000+/year increase in property taxes—for life.

Who Is Affected Most by Prop 19?

• Families with multiple children (only one can claim the property as a primary residence)

• Children who already own a home and can’t move into the inherited one

• Inheritances involving rental properties, vacation homes, or commercial real estate

• Parents hoping to keep properties in the family long-term

If you’re inheriting property or planning to pass one down, these rules are a game-changer.

Are There Any Exceptions?

Yes, but they are narrow.

✅ No Reassessment (Full Exclusion):

• The property is your parent’s primary residence

• You file a Claim for Exclusion from Reassessment (BOE-19-P) within 1 year

• You move into the home and make it your own primary residence

• The home’s market value does not exceed the assessed value by more than $1 million

❗ Partial Reassessment:

If the home’s market value exceeds the exclusion limit, only the first $1 million of gain is protected—the rest is taxed at full rate.

How to Plan Around Proposition 19

This law wiped out many traditional estate planning strategies—but there are still ways to preserve wealth and control taxes with smart planning.

1. Use a Trust Strategically

• A revocable living trust doesn’t avoid reassessment, but it ensures smoother asset transfer.

• An irrevocable trust or intentionally defective grantor trust (IDGT) can remove the property from your estate and freeze values.

• Trusts with limited liability companies (LLCs) can offer flexibility for fractional ownership and long-term planning.

2. Gift Property During Your Lifetime

• Gifting property while alive may avoid Prop 19’s rules—but it comes with gift tax, capital gains, and control trade-offs.

• Lifetime gifts may make sense if children plan to live in the home and tax savings outweigh stepped-up basis loss.

3. Reposition Real Estate in Business Entities

• Converting properties into LLCs or limited partnerships may allow for creative succession planning.

• This strategy must be coordinated with tax advisors and lawyers to avoid pitfalls.

4. Use Insurance to Cover Reassessment Costs

• For families who can’t avoid reassessment, life insurance can provide tax-free liquidity to cover new property taxes.

5. Plan with Clear Intentions

• Some families decide to sell the inherited home and divide proceeds.

• Others choose to keep it in the family through carefully structured buyouts or delayed sales.

The most important thing is to plan in advance. Waiting until after death means your family may be stuck with court timelines, higher taxes, and fewer choices.

Next Steps: What Should You Do?

If your estate includes any California real estate, you need to update your plan.

Start with these three questions:

1. Who do I want to inherit my home or properties?

2. Will they live in the property or not?

3. Can my current plan withstand Prop 19’s rules?

If you’re not sure, it’s time to have a conversation.

Conclusion: Prop 19 Raised the Stakes—Smart Planning Is Essential

Prop 19 changed the rules. But it didn’t eliminate your options.

With the right legal strategies—trusts, entities, timing, and customized planning—you can still:

✅ Keep property in the family
✅ Reduce or manage reassessment
✅ Minimize taxes

At Wealth Law, we help California families understand and plan around Proposition 19 with clarity and care.