Property Tax: What Happens After Death?

Proper estate planning takes into consideration not only one’s assets but also the taxes that come with transferring those assets from one person to the next. Property tax refers to the amount in tax you have to pay for any real estate you own. Every year, you are required to pay taxes on this property, and that does not end once you pass away and leave those assets to someone else. No matter what option you take for estate planning (will, trust, power of attorney, etc.), the property will likely be reassessed for tax purposes unless you fall into an exception. 

How is Property Reassessed? 

Property has to be reassessed upon your death unless an exception applies. If you took zero steps in getting your affairs in order, your assets go through probate and the assessor’s office will get notice of the death and reassess your property. This process would also include checking with any creditors or companies for past due bills to pay off with the property’s worth. For items like real estate, the property’s worth in taxes could be based on the year in which it was originally acquired. That value could be incredibly low if you bought your property 20+ years ago. 

What are Some Exceptions to Property Tax Reassessment? 

There are some ways you can avoid property tax reassessment: 

  1. Parent-Child Exclusion: In this scenario, a parent is giving the house he or she resides in directly to the child. In this case, nothing changes the amount of property tax. 
  2. Specific $1,000,000 Reassessment Exclusion of “Other Property”: This scenario is for any other real property aside from the house you live in. Let’s say you own three houses. You live in one primarily, but you happen to own two others. You have an exclusion amount, which means you can technically give up to a million dollars worth assessed value of property to somebody else without a reassessment of taxes. This is in reference to the assessed value of that property, not the market value. If you are married, you each have the option to give away a million dollars worth of property, totalling to two million dollars worth of property together. If one spouse dies and leaves everything to the other spouse, then you lose one of the spouses exclusion. This is the essence of bad planning. 
  3. Grandchild-Grandparent Exclusion: In this scenario, a grandparent can leave a grandchild an amount of property and the property tax will not be reassessed as long as the grandchild has a deceased parent. 

When it comes to avoiding property tax reassessments, it’s important to work in a timely manner. Those who file claims soon after acquiring property are going to have a better chance of getting what they want in comparison to those who wait five years to speak up. Speak with a trusted attorney at Aliav Law today to see what your options are for avoiding property tax reassessment. 

Your next step is to join our facebook group called “Parents Protecting Assets in California”. We provide valuable information on protecting assets from future in-laws and creditors!