Reappraisal Exclusion from Grandparent to Grandchild
Proposition 193 allows the new property owners to avoid property tax increases when acquiring property from their grandparents.
In the State of California, real property is reassessed at market value if it is sold or transferred and property taxes can sometimes increase dramatically as a result. However, if the sale or transfer is between parents and their children, under limited circumstances, the property will not be reassessed if certain conditions are met and the proper application is timely filed.
Proposition 193, effective March 27, 1996, is a constitutional amendment approved by the voters of California which excludes from reassessment transfers of real property from grandparents to grandchildren, providing that all the parents of the grandchildren who qualify as children of the grandparents are deceased as of the date of transfer. This is a one way transfer from grandparent to grandchild. Proposition 193 is also codified by section 63.1 of the California Revenue and Taxation Code.
Transfers of real property excluded from reassessment by Proposition 193 are:
- Transfer of principal residence (no value limit).
- Transfer of the first $1 million of real property other than the primary residences. The $1 million exclusion applies separately to each eligible transferor. The $1 million is the factored base year value, not the fair market value.
Definition and Terminology specific to Proposition 193:
Child (Middle Generation): Children include the following: sons and daughters, sons-in-law and daughters-in-law, stepchildren, and children adopted under 18. Beginning January 1, 2006, a stepparent who is an in-law child of the grandparent does not need to be deceased in order for the grandchild to qualify.
Grandchild: The children of the deceased child (Middle Generation).
Gift/Purchase: Transfers such as a gift or purchase between grandparents to grandchildren are excluded with a completed Prop. 193 form.
Principal Residence: Proposition 193 does not require that the grandparent use the transferred property as his or her principal residence. This only applies the grandchild who has not received a principal residence exclusion from his parent. If the grandchild has already received a principal residence exclusion from his parents, then even though the property is the grandparent’s principal residence, this is a non-principal residence transfer subject to the $1 million exclusion.
$1 Million Exclusion: The $1 million exclusion for other property applies for each transferor. Therefore, one parent can transfer $1 million of other property and the other parent can also transfer $1 million of other property for a total combined exclusion of $2 million. These transfers are coordinated State-wide under the million dollar limit. For this definition and terminology, the parent is the Middle Generation.
Legal Entities: Transfers directly between legal entities owned by grandparents and grandchildren are not entitled to the benefits of this measure.
Trusts: A transfer to or from a trust is treated just as a transfer to or from the trustor personally, provided the trust is revocable.
Date of Death of Decedent: The date of any transfer between grandparents and their grandchildren under a will or intestate succession is the date of a decedent's death, which must be after November 6, 1986 (the effective date of proposition 193).
Third Party: A third party is any person or entity that is not a transferee or transferor in the transfer between the parents and children.
Transfer of Real Property to a “Third Party”: For filing proposes, a transfer of the real property to a third party occurs when all the real property received is transferred to someone other than an original transferee or transferor. Therefore, a transfer may qualify for exclusion when a partial interest in the property received is transferred to a third party prior to an application being filed.
- A claim form must be completed and signed by the transferors and transferee and filed with the Assessor. A claim form is timely filed if it is filed within three years after the date of purchase or transfer, or prior to the transfer of the real property to a third party, whichever is earlier.
- If a claim form has not been filed by the date specified in the preceding sentence, it will be timely if filed within six months after the date of mailing of the notice of supplemental or escape assessment for this property.
- If a claim is not timely filed the exclusion will be granted beginning with the calendar year in which you file your claim.
- Complete all of Sections A, B, and C and answer each question or your claim may be denied. Proof of eligibility, death certificate, including a copy of the transfer document and/or trust may be required.
An eligible “grandchild” for purposes of Proposition 193 is any child of parent(s) who qualify as child(ren) of the grandparents as of the date of transfer. The parents of the grandchild who would qualify for a Proposition 58 exclusion from the grandparents must be deceased.
No. Your son-in-law is still deemed to be a “child” of yours, until he remarries, thus disqualifying your grandchildren as eligible transferees, unless he is a step-parent, in which case they would qualify.
My grandmother’s property was in a trust. The assessor asked for a copy of the trust. Can I provide a certification of trust in lieu of the trust documents?