California's New Property Tax Rules in 2025: What Every Homeowner Must Know About Proposition 19 and Estate Planning

If you own a home in California and plan to leave it to your children, there's a critical change in property tax law that could cost your family thousands—or even tens of thousands—of dollars every year. Since February 2021, Proposition 19 has fundamentally transformed how inherited property is taxed, and the 2025 updates have raised the stakes even higher.

As a Glendale estate planning attorney who has helped hundreds of California families navigate these changes, I've seen firsthand how unprepared families get blindsided by property tax reassessments they never expected. The difference between proper planning and no planning can mean the difference between your children keeping the family home or being forced to sell it.

In this comprehensive guide, I'll explain exactly what changed, how the 2025 updates affect your family, and—most importantly—what strategies you can use to protect your property's low tax base for your children.

The Property Tax Problem Every California Homeowner Faces

Here's a scenario I see constantly in my practice: Parents bought their home in the 1980s or 1990s for $150,000. Thanks to Proposition 13, their property taxes have increased only about 2% per year, so they're now paying perhaps $2,500 annually. But that same home is now worth $1.5 million or more.

Under the old rules (Proposition 58), when these parents passed away, their children could inherit the home and keep that same low $2,500 tax bill. The children could live in it, rent it out, or hold it as an investment—all while paying the same property taxes their parents paid.

Proposition 19 changed everything. Now, when children inherit their parents' home, that property gets reassessed to its current market value—potentially increasing annual property taxes from $2,500 to $18,000 or more. That's a $15,500 annual increase that often forces children to sell the family home they've had for generations.

What Is Proposition 19 and Why Does It Matter?

Proposition 19, passed by California voters in November 2020 and effective February 16, 2021, made two major changes to California property tax law:

Change #1: Expanded Portability for Seniors and Disabled Homeowners

Homeowners age 55 or older, severely disabled homeowners, and wildfire or natural disaster victims can now transfer their property tax base to a replacement home anywhere in California, up to three times in their lifetime. This is actually a benefit—previously, this transfer was limited to within-county moves in most cases.

Change #2: Severely Limited Parent-to-Child Transfers

This is the devastating change. Before Proposition 19, parents could transfer their primary residence AND up to $1 million of other real property to their children without triggering property tax reassessment. Children could use the property however they wanted—live in it, rent it out, use it as a vacation home.

Now, the parent-to-child exclusion from reassessment applies ONLY if the child makes the inherited property their primary residence within one year of the transfer—AND even then, only if the home's market value doesn't exceed the assessed value by more than approximately $1 million (adjusted for inflation).

The 2025 Proposition 19 Updates: What's New

The California State Board of Equalization announced important updates for 2025 that every California property owner should know:

New Exclusion Amount: $1,044,586

As of February 16, 2025, the reassessment exclusion amount has been adjusted from $1,022,600 to $1,044,586—a 2.15% increase reflecting California home value appreciation. This amount applies to transfers occurring between February 16, 2025, and February 15, 2027.

What does this mean in practice? If your parents' home has an assessed value of $200,000 and a market value of $1,200,000, your child can inherit it and keep the lower tax base—but only if they move in within one year and make it their primary residence. The market value ($1,200,000) doesn't exceed the assessed value ($200,000) plus the exclusion amount ($1,044,586) = $1,244,586.

New Small Estate Transfer Procedures (Effective April 1, 2025)

California has also expanded small estate transfer procedures. As of April 1, 2025, the transfer of a decedent's primary residence valued up to $750,000 can occur without probate or a formal estate plan. This applies only to decedents who pass away after April 1, 2025.

Additionally, the small estate affidavit threshold for personal property increased from $184,500 to $208,850.

Trust Termination Threshold Doubled

As of January 1, 2025, California Probate Code §15408 allows a trustee to terminate a trust without court approval if the estate is worth less than $100,000 (previously $50,000). This simplifies administration for smaller estates.

How the Math Works: Real-World Examples

Let me walk you through exactly how Proposition 19 affects inherited property with some realistic scenarios:

Example 1: Child Moves Into the Home (Best Case)

Facts: Parents purchased a Glendale home in 1985. Current assessed value (factored base year value): $300,000. Current market value: $900,000. Child inherits after parents pass away in 2025.

Analysis: The market value ($900,000) is less than the assessed value ($300,000) + exclusion amount ($1,044,586) = $1,344,586. Since $900,000 < $1,344,586, the child qualifies for the full exclusion—IF they move in within one year and claim the homeowners' exemption.

Result: Child keeps the $300,000 assessed value. Annual property tax: approximately $3,600. Without the exclusion, property tax would be approximately $10,800—a savings of $7,200 per year.

Example 2: High-Value Home (Partial Exclusion)

Facts: Parents purchased a Pasadena home in 1980. Current assessed value: $200,000. Current market value: $2,000,000. Child inherits in 2025.

Analysis: The market value ($2,000,000) exceeds the assessed value ($200,000) + exclusion amount ($1,044,586) = $1,244,586. The excess amount is $2,000,000 - $1,244,586 = $755,414.

Result (if child moves in): The new assessed value becomes $200,000 + $755,414 = $955,414. Annual property tax: approximately $11,465. Without the exclusion, property tax would be approximately $24,000—still a significant savings.

Example 3: Child Does NOT Move In (Worst Case)

Facts: Same Pasadena home as above. Child already owns their own home and doesn't want to move.

Result: The property is fully reassessed to $2,000,000 market value. Annual property tax: approximately $24,000. That's an increase from approximately $2,400 to $24,000—a $21,600 annual increase that often makes keeping the property financially impossible.

Critical Deadlines and Requirements

To qualify for the parent-child exclusion under Proposition 19, you must meet ALL of the following requirements:

1. Primary Residence Requirement

The property must have been the parent's primary residence at the time of transfer (typically at death). Second homes, vacation properties, and rental properties do NOT qualify for any exclusion.

2. One-Year Move-In Deadline

The child must move into the inherited home and make it their primary residence within ONE YEAR of the transfer. This deadline is strict—missing it by even a day means full reassessment.

3. Homeowners' Exemption Filing

The child must file for the homeowners' exemption (or disabled veterans' exemption) within one year of the transfer. This filing proves the property is their primary residence.

4. Claim Form Submission

Submit BOE-19-P (Claim for Reassessment Exclusion for Transfer Between Parent and Child) to the County Assessor's Office. Claims must be filed within three years to receive full retroactive benefit. Late claims receive only prospective relief from the date filed.

5. Continued Occupancy

The child must CONTINUE to occupy the property as their primary residence to maintain the exclusion. If the child moves out, the property will be reassessed to market value as of the date they inherited it, plus inflation adjustments.

What About Property Held in a Living Trust?

Many clients ask whether having a living trust changes the Proposition 19 analysis. The short answer is: the trust itself doesn't provide any special protection from Proposition 19.

For properties held in a revocable living trust, the "transfer" for property tax purposes occurs when the trust becomes irrevocable—typically when the parent (trustor) passes away. The date of death is considered the date of the change in ownership.

This means the same rules apply: the child beneficiary must make the inherited property their primary residence within one year and file the appropriate claims to avoid reassessment.

However, having a living trust is still essential for other reasons: avoiding probate (which costs $30,000-$50,000+ for California homes), maintaining privacy, providing for incapacity, and ensuring smooth transfer of all your assets—not just real property.

Estate Planning Strategies to Consider

While Proposition 19 significantly limited parent-to-child transfer benefits, there are still strategies families can consider:

1. Family Communication and Planning

The most important strategy is having honest conversations with your children. Do they actually want to inherit the family home? Would they be willing to move into it? If no child wants or can use the property as their primary residence, the family may be better served by different planning—such as selling the property while the parents are alive to avoid both property tax reassessment issues AND capital gains tax through the step-up in basis.

2. Lifetime Gifting Considerations

Some families consider gifting property during the parents' lifetime. However, this approach has significant drawbacks: the child receives the parents' original cost basis (carryover basis), meaning they'll face substantial capital gains tax if they ever sell. Additionally, the gift may still trigger property tax reassessment depending on how it's structured.

Compare this to inheritance: when a child inherits property, they receive a "stepped-up" basis equal to the property's fair market value at the date of death—meaning little to no capital gains tax if they sell.

3. Qualified Personal Residence Trust (QPRT)

A QPRT allows parents to transfer a home to an irrevocable trust while retaining the right to live in it for a specified number of years. At the end of that period, ownership transfers to the children. This can provide estate tax benefits for very large estates, but Proposition 19 creates complications—the child would need to make the residence their primary residence to avoid reassessment.

4. LLC and Partnership Strategies

Some attorneys have proposed using LLCs or family partnerships to minimize Proposition 19 impacts. These strategies are complex and aggressive, and the County Assessor's office may challenge them. Consult with a qualified estate planning attorney and tax advisor before pursuing any such strategy.

5. Trust Planning for Multiple Children

If you have multiple children and only one can use the property as their primary residence, your trust should be drafted to address this fairly. Options include having the occupying child buy out siblings' interests, creating an arrangement for the property to be sold after a certain period, or offsetting the property value with other assets.

Special Rules for Grandparent-to-Grandchild Transfers

Proposition 19 also allows transfers from grandparents to grandchildren under limited circumstances. The same requirements apply (primary residence, one-year move-in, value limitations), with one additional requirement: the parents of the grandchild must be deceased at the time of transfer.

To claim this exclusion, submit form BOE-19-G to the County Assessor's Office.

The Senior/Disabled Portability Benefit: A Silver Lining

While Proposition 19 limited parent-to-child transfers, it expanded benefits for seniors (55+), disabled homeowners, and wildfire/disaster victims:

Statewide transfers: You can now transfer your property tax base to a replacement home anywhere in California, not just within the same county.

Three transfers allowed: Previously limited to one transfer, seniors can now use this benefit up to three times.

No price limitation: You can buy a more expensive home. If the replacement home costs more than your original home, the difference is added to your transferred tax base.

This is particularly valuable for Los Angeles County homeowners who want to downsize or move to a less expensive area but have been "trapped" by their low property tax base.

Common Mistakes That Cost Families Thousands

In my practice, I've seen families lose the parent-child exclusion due to avoidable mistakes:

Mistake #1: Missing the One-Year Deadline

Life gets complicated after a parent's death. Between grief, administering the estate, and dealing with siblings, it's easy to let a year slip by. But missing the move-in deadline means full property tax reassessment—period.

Mistake #2: Failing to File the Exclusion Claim

The exclusion isn't automatic. You must affirmatively file BOE-19-P with the County Assessor. Late filing means you'll pay the higher property tax rate for the period between the transfer date and when you finally file.

Mistake #3: Not Filing the Homeowners' Exemption

Filing the homeowners' exemption is required to prove the property is your primary residence. This is a separate form from the exclusion claim, and both must be filed.

Mistake #4: Moving Out After Claiming the Exclusion

If you claim the exclusion but later move out, the property will be reassessed. Some families mistakenly think they can claim the exclusion, live in the property briefly, then move out and rent it. This doesn't work—the Assessor tracks primary residence status.

Mistake #5: Assuming the Trust Provides Protection

Having a living trust doesn't exempt you from Proposition 19 requirements. The trust provides probate avoidance and other benefits, but the property tax rules apply regardless of how title is held.

Action Steps: What You Should Do Now

If you own California real estate:

1. Review your current estate plan. If your trust was created before February 2021, it may contain provisions based on the old Proposition 58 rules. These provisions need to be reviewed and potentially updated.

2. Have honest conversations with your children. Do they want the family home? Would they be willing to move into it? Understanding their intentions is critical to proper planning.

3. Understand your property's value gap. Know the difference between your assessed value and current market value. This determines how much property tax impact your children will face.

4. Consider your options while you're alive. Some strategies work better during lifetime than after death. Consult with an estate planning attorney to understand your options.

If you're inheriting California real estate:

1. Act quickly. You have only one year from the date of transfer (typically date of death) to move into the property and file the necessary claims.

2. File all required forms. Submit BOE-19-P to the County Assessor AND file for the homeowners' exemption within one year.

3. Document your primary residence status. Change your driver's license, voter registration, and mail delivery to the inherited property. Keep records proving occupancy.

4. Consult with professionals. Work with an estate planning attorney and tax advisor to understand all implications before making decisions.

Frequently Asked Questions

Can I rent out the inherited property while still claiming the exclusion?

No. The property must be your PRIMARY residence to claim the exclusion. If you rent it out (other than perhaps a room while you're living there), you lose the exclusion and the property gets reassessed.

What if multiple siblings inherit the property and only one wants to live in it?

The sibling who moves in can claim the exclusion for their share. However, the ownership structure and how the other siblings are bought out (if at all) requires careful planning to avoid unintended reassessment triggers.

Does Proposition 19 apply to commercial property or rental properties?

No exclusion is available for commercial property, rental property, or vacation homes. These properties are fully reassessed at market value upon transfer—no exceptions.

Can I avoid reassessment by having my parents add me to the deed now?

This is rarely a good strategy. Adding a child to a deed may trigger a partial reassessment immediately, create gift tax issues, eliminate the stepped-up basis benefit, and potentially disqualify the property from other exclusions. Consult with an attorney before adding anyone to a deed.

What if I already own a home when I inherit my parents' property?

To claim the exclusion, you must make the inherited property your PRIMARY residence. This typically means selling your current home or converting it to a rental. The decision involves weighing property tax implications against capital gains tax and your personal circumstances.

Is there any way to avoid the property tax increase if I don't want to move into the inherited home?

Unfortunately, under current law, if you don't make the inherited property your primary residence, it will be reassessed to market value. Some aggressive strategies exist using LLCs or other entities, but these are complex, expensive, and may be challenged by the Assessor.

The Bottom Line

Proposition 19 fundamentally changed how California families transfer property between generations. The old strategy of holding onto the family home for children to inherit and do with as they please is no longer tax-efficient unless the child actually moves in.

For many families, this requires completely rethinking their estate plan. Should you sell the home while you're alive and divide the proceeds? Should you plan for one child to buy out the others? Should you structure ownership differently?

These aren't questions with one-size-fits-all answers. Every family's situation is different, and the right strategy depends on your specific property values, your children's circumstances, and your overall estate planning goals.

What I can tell you is this: doing nothing is the most expensive option. Families who fail to plan under Proposition 19 often face devastating property tax increases that force them to sell properties that have been in their families for generations.

Schedule Your Free Consultation

If you own California real estate—especially if your property has significantly appreciated since purchase—now is the time to review your estate plan with an experienced attorney who understands Proposition 19's complexities.

During our free consultation, we'll:

• Review your property's assessed value vs. market value and calculate the potential tax impact
• Discuss your children's intentions regarding the property
• Explain strategies that may help minimize property tax impacts
• Review or create a comprehensive estate plan that addresses your goals

Call (818) 291-6217 or schedule your free consultation online today.

Living Trust Package: From $575 (Single) / $675 (Married Couples)

Don't wait until it's too late. The property tax decisions you make today will impact your family for generations.

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About the Author

Rozsa Gyene (State Bar No. 208356) is a California estate planning and trust litigation attorney serving Glendale, Burbank, Pasadena, and throughout Los Angeles County. With over 25 years of experience in both creating estate plans and litigating trust disputes, Rozsa provides clients with practical guidance on protecting their families' assets and minimizing tax impacts.

Office Location: 450 N Brand Blvd, Suite 600, Glendale, CA 91203

Phone: (818) 291-6217

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Disclaimer: This article provides general information about California property tax law and Proposition 19. It should not be construed as legal advice. Laws change regularly, and this article reflects information current as of December 2025. Consult with a qualified California estate planning attorney about your specific circumstances.