Property Tax – What Happens After Death

Let’s talk about property tax. What happens specifically to your assets after you pass away in terms of property taxes, not about anything else, we don’t care about capital gains tax right now, we’re not talking about probates but we’re talking about just your property tax. 

Well, the general rule you should know is that property gets reassessed when there is a death. So if someone passes away and moves to another person’s hands, you are now stuck with a reassessment. And that reassessment could be huge, especially if you bought it in the 70s or 80s or 90s because now your property tax bill is going to double, triple, quadruple, maybe even times ten. It doesn’t make a difference. But that is the general rule.

Now you have some exceptions and this is where it comes into play where everything is made right. So first off is the biggest one is called the parent child exclusion. This allows a parent to give a child any house they reside in without a change in property tax. 

So you own a house, you live in it, you want this house to go to your children, has to go to your children, then there won’t be a property tax reassessment for that property. What about other property? Well, I have a house and two other properties. Does this work for me? The answer is maybe. You have something called an exclusion amount on top of yours.

So you have one, your house, two, exclusion amount on top of your house, which is $1 million per person, so you can give a million dollars’ worth of property to somebody else without a reassessment in taxes.

Now, how does the $1 million figure. How do you get the value of something when there’s a transfer? Well, you don’t have to worry about the fair market value. That’s not what we’re talking about. 

We’re talking about the assessed value, which could be a lot less than what you think it is. The assessed value is what’s on your property tax. That’s the amount you could transfer without a reassessment per person. 

So 1 million for father, 1 million for mother, so 2 million total can be transferred, and if the mom passes away and gives everything to dad, you lose that 1 million. So you have to make sure that your estate is planned properly if you have more than one when you have a reassessment issue with lot of properties. Do an assessment on which property is the best because at the end of the day, you’re trying to save as much money as possible. That is the second exclusion. So the first one is the parent child. Then you have the $2 million of other property if you’re married, one, if you’re single.

And the third is a grandchild grandparent exception. And then this is if the grandfather gives or grandmother gives to a grandchild a certain amount of property, it can be excluded. If it’s their house, it doesn’t only have to be a child, it can be a grandchild, but it has to be a grandchild that has a deceased parent. So if that grandchild doesn’t have a parent that is related to you by blood, then you could skip that generation and give it to your grandchild without a reassessment.

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