What drives Bay Space property transfers

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What drives Bay Area property transfers

Thousands of Bay Area landowners hoping for tax savings flooded appraisers’ offices and transferred ownership of homes and other real estate to their children this year before new rules came into effect that limited the ability of the next generation to inherit their parents’ favorable real estate valuations.

“Everyone says,” Oh, the window closes if I want to transfer my property to my children, “said Gus Kramer, assessor for the Contra Costa County.” We had a landrush, if you will. “

The onslaught was fueled by the implementation of Proposition 19, a statewide measure approved by voters last November that expanded tax breaks for older homeowners, created a new fire-fighting fund, and changed the rules on inherited properties.

For years, parents and grandparents have been able to transfer property to their offspring at the current appraised value, which is based on the original purchase price plus a small annual increase. Thanks to Proposition 13, this value is often well below the current market value of a property. And in California’s stratospheric real estate market, lower appraisals mean lower taxes.

According to Prop. 19, however, children can only inherit these lower assessments if they move into the apartment within one year. If this is not the case, the property is revalued at its current market value.

Auditors’ offices across the region were inundated with requests before the new rules went into effect in mid-February. Alameda County received 2,900 parent-to-child property transfers – three times as many as in the same three-and-a-half month period last year. There were 1,086 transfers in Contra Costa County, compared to 643 in the previous year. In just three and a half months, San Mateo County had 1,338 transfers – almost as many as in all of 2019.

Marin County had 660, 12 times the same time last year, according to the Marin Independent Journal. And Santa Clara County had 1,178 transfers in that period, almost double the previous year’s figure. A Santa Clara County Assessor official said that much of the properties transferred prior to the deadline were likely vacation homes or other secondary properties, not family homes whose heirs could move in and claim a lower Prop 19 estimated value.

San Francisco hasn’t counted parent-child transfers yet, but a spokesman for the assessor-recorder bureau said they received nearly a year worth of real estate transactions in the nine months leading up to February 16.

Real estate attorney Jim Cunningham, whose CunninghamLegal law firm has offices across California, said he had received about 300 calls from people who panicked that they did not have enough time to transfer properties to their children and receive their lower taxes .

“I had people crying,” he said. “It has had a negative impact on people whose wealth is in real estate.”

The change in inheritance rules was part of Prop 19’s proposal to voters to close the so-called “unfair tax loopholes”. Critics say the old rules enabled families to build generational wealth.

In 2018, the Los Angeles Times found that many of these children rented the properties they had inherited, benefited from rising market rents, and at the same time paid significantly lower property taxes. Nearly two-thirds of inherited properties in Los Angeles County were used as rental or second homes, according to the newspaper. And the lower taxes on these properties cost schools and local governments $ 280 million. Actor Jeff Bridges and his brother, according to the newspaper, saved around $ 300,000 in taxes between 2009 and 2017 on a Malibu beach home they inherited and rented for nearly $ 16,000 a month.

The Yes-to-19 campaign said it aims to fill those “loopholes that have been exploited by East Coast investors, celebrities and wealthy heirs to trust funds to avoid paying their fair share of vacation homes, beach rentals and luxury homes.” The proposal, which was passed with 51 percent of the vote, allows homeowners 55 and older to transfer the lower appraised value of their home to a new primary home purchased somewhere in the state.

“This proposal affects many people who are not as rich as Jeff Bridges,” said Ronald Ongtoaboc, communications director for Senator Patricia Bates, R-Laguna Niguel.

Bates introduced a bill to postpone the implementation of Prop 19 inheritance rules to February 16, 2023. The COVID-19 pandemic makes it difficult for some people to move into an inherited home within a year.

But the extension, which is still pending in the legislation, would not change the fact that it is becoming increasingly difficult for people to pass on cheap property taxes.

“Expanding (implementation) helps, but frankly it helps the lawyers,” said real estate attorney Cunningham. “People have to do unnatural things, like give their children their belongings before they die.”