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Does passing a house onto an heir trigger tax reassessment?

California estate planning can get exceptionally complicated, especially when it comes to how to protect your interests when passing real estate from one person to another. If you own a piece of real estate, then you almost certainly would want to pass that on to someone when you pass away, but this is not always as simple as just making a transfer of property.

In California, when a home experiences a change in its ownership, or if the owner builds new construction on the property, the property receives a reassessment for its tax value. Whereas many states reassess real estate property tax values on a regular ongoing basis, such as every three years, in California, the reassessment only happens if and when the property changes hands or undergoes new construction. If not carefully planned for, this can serious impact an estate plan.

One way that a person might work around the reassessment is by placing the property in the ownership of an LLC or something similar. However, it is worth noting that if a person was to do this, then he or she may lose out on other benefits of personally owning a home.

Fortunately, there are some exceptions written into the law. If a parent passes a piece of property on to a child, he or she can do so without triggering a tax reassessment.

If you have concerns about the complexities of estate planning, it is always wise to consult with a professional. An experienced estate planning attorney can help you understand the scope of your estate plan and find planning strategies that meet your needs and protect your interests.

Source: Mansion Global, "Do Home Ownership Changes in the U.S. Trigger a Property Tax Reassessment?," Brenda G. Wong, July 13, 2017

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