What Proposition 19 means

Before Proposition 19, California's parent-child exclusion (Proposition 58) allowed children to inherit their parents' principal residence at any value, plus the first $1 million of assessed value of other real property per parent, and preserve the parents' low assessed value for property tax purposes, with no requirement that the child move in. Prop 58 still applies when the parent died on or before February 15, 2021. This allowed families to pass investment properties and vacation homes with dramatically lower property taxes intact to the next generation. Proposition 19, which California voters approved in November 2020 and which became effective February 16, 2021, substantially changed these rules.

Under Proposition 19, a child who inherits a parent's primary residence can still qualify for a parent-child exclusion, but only if the child uses that property as their own primary residence within one year of the transfer. Additionally, if the property's current market value is more than the parent's assessed value plus an inflation-adjusted amount (originally $1 million, now $1,044,586 for transfers from February 16, 2025 to February 15, 2027), the child's new assessed value is the parent's assessed value plus that excess. Inherited investment properties, rental properties, and vacation homes no longer qualify for the exclusion at all and are automatically reassessed at market value upon transfer.

The practical effect has been significant for many California families. A parent might have owned a home purchased decades ago for $150,000 that is now worth $1.2 million. Under pre-Prop 19 rules, a child could inherit it and continue paying taxes on the $150,000 assessed value. Under Prop 19, the child must move in within a year to preserve any exclusion, and even then, for a death between February 16, 2025 and February 15, 2027, the assessed value will be set at about $155,414 ($150,000 assessed plus the $5,414 by which the $1,050,000 gap exceeds the $1,044,586 limit). For a death between February 16, 2021 and February 15, 2023, when the figure was $1 million, it would be $200,000.

Why it matters for trust and probate loans

Prop 19 equalization loans can help one heir keep a parent's home at the parent's tax base. The trust or estate borrows against the home and pays the other heirs their shares in cash. A trustee then distributes the home to the child who will live there. In probate, the executor pays the other heirs, and the court's order of distribution gives the home to the child who stays. If the child instead buys the siblings' shares after they inherit, those shares are reassessed. The child must move in and file for the homeowners' exemption within one year of the date of death, and the BOE-19-P form is due with the county assessor within three years. Without a loan, many families cannot pay the other heirs in time.

North Coast Financial funds Prop 19 equalization loans in about 7 days once the file is complete, which is fast enough to meet the deadline in almost any case where planning begins at least a few weeks in advance. Interest rates run from 9.95% to 10.5% with origination of 1.25 to 1.95 points, no prepayment penalty, and no appraisal fee. See our full article on Proposition 19 and inherited property in California.

Related terms

See also: Parent-child exclusion, Step-up in basis, and our main article on Proposition 19 and California inherited property.

Frequently Asked Questions

Does Proposition 19 apply to property inherited through a trust?
Yes. Proposition 19 applies to transfers of real property from parents to children regardless of whether the transfer occurs through a revocable trust, an irrevocable trust, a will, joint tenancy, or intestate succession. What matters for the exclusion is the relationship between the transferor and transferee, whether the inherited property will be the child's primary residence, and compliance with the filing deadline. The legal mechanism of transfer does not change whether Prop 19 applies.
What is the one-year deadline under Proposition 19?
To qualify for the parent-child exclusion under Prop 19, two deadlines apply. The child must establish the inherited property as their primary residence and file for the homeowners' exemption within one year of the date of transfer (for an inheritance, the date of the parent's death). The BOE-19-P claim is due with the county assessor within three years of the date of death, or before any transfer to a third party, whichever is earlier. A late claim still gets the exclusion from the lien date of the year it is filed, but not for earlier years. An equalization loan can help a family meet this deadline when the buyout requires financing.
What happens to the property tax basis if one co-heir moves in and the others are bought out?
If the trust or estate distributes the home to one child and pays the other heirs from other assets or from a loan the trust takes out, that child can claim the parent-child exclusion on the whole home by establishing it as their primary residence and filing for the homeowners' exemption within one year. If the child instead buys the other heirs' shares after they inherit, those shares are reassessed. The new assessed value will be the parent's assessed value, plus any amount by which the property's fair market value exceeds the parent's assessed value by more than the inflation-adjusted limit ($1,044,586 for transfers from February 16, 2025 to February 15, 2027). If the market value is within that limit of the assessed value, the full exclusion applies and the assessed value carries over unchanged.