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Is the County Assessor’s Office Trying to Wrongfully Take Away the Parent-Child Reassessment Exclusion?

By Goria Weber & Jarvis on Nov 06, 2017 at 11:45 PM

California’s property tax system has been in place for decades, with various tweaks and revisions to the law over the years. One revision was the adoption of the parent-child exclusion (also called the "parent-child exemption"), whereby a transfer of real property (or portion thereof) to or from a parent to child does not trigger a reassessment of the property tax base. I am skipping some of the detailed terms and conditions of the parent-child exemption (Proposition 58 enacted on November 6, 1986 for reference and codified as Section 63.1 of the California Revenue and Taxation Code) but trust me, it is fantastic law that has mostly remained unchanged for the last 30 years or so.


Many clients have used the parent-child exclusion to lawfully avoid reassessment of highly appreciated residences while transferring the residence to the next generation, whether during their lifetimes or as the result of an inheritance. While the parent-child exemption also applies to transfers from children to parents, the most common type of scenario is:


Example – parents purchase San Diego residence in 1975 for $37,000. Parents transfer residence to a living revocable trust (also an exempt transfer) in 1990. First parent dies in 2008, with ownership vesting in surviving parent (also an exempt transfer). Surviving parent dies in 2017. Residence is worth $600,000 in 2017, with an assessed value of $85,000. Residence is inherited by child who retains the $85,000 assessed valuation of the residence.


In this example, the child saves about $5,150 each year (the difference between 1% of $600,000 and 1% of $85,000) as a result of the parent-child exemption. This child further does not need to use the residence as her principal residence, either. She can use the residence as a rental or secondary residence. Again, this is fantastic law, particularly in southern California where real estate values consistently appreciate.


While California property tax law has not really changed, we have seen a change in the enforcement of assessment exemptions over the last 5 years, with more frequent wrongful interpretations of California law by local Assessor offices. Even the California State Board of Equalization (which creates the rules and regulations the Assessor offices follow) has a library of Property Tax Annotations, nonbinding opinions (presumably created by the BOE’s staff attorneys) that seem to directly contradict California law. Worse, the Assessor offices are using those nonbinding, unregulated, opinions as their basis for incorrectly reassessing property taxes in parent-child transfers.  


The County Assessor’s office is further giving legal opinions contrary to those little placards at their windows which say they are not authorized to give legal advice. Specifically, we have seen numerous cases where the County Assessor misinterprets a living trust or simply ignores the clear provisions of a living trust in order to justify a reassessment of a parent-child transfer. And that is just in southern California, which leads us to believe it is occurring throughout California. Sadly, most taxpayers probably aren’t even contesting the County Assessor decisions, or contacting legal counsel to review these matters, resulting in taxpayers paying thousands of dollars each year in additional property taxes that they should not be paying.


We have also seen this trend of wrongful attempts to reassess real property in other situations, ranging from transfers to or from legal entities, challenging the valuation of real property when there is a change of ownership, and even inter-spousal transfers of real property.  


We recommend you know your rights and remedies, and consult with legal counsel prior to finalizing a real estate transfer. There are pitfalls that the unwary can suffer, particularly in property tax law. But most importantly, understand that the person at the Assessor’s Office making a decision that could cost you thousands of dollars each year may not understand your rights under California Law. They may be reassessing your property based on a handbook they don’t fully understand, and that could contain rules and annotations that are not supported by the California law created by the Legislature.

Dave Jarvis

Dec 14, 2017 Arrow1 Down Reply
Mary Sue

Nice article Dave!

Sep 29, 2020 Arrow1 Down Reply
Anne Lawver (Mrs. R.B.)Hoffman

I need to speak with David Jarvis concerning my Trust. Please call me at (858)573-1643.