Property Tax Issues

Property taxes should be carefully considered in every estate planning, trust administration, or business planning engagement involving real property.

In California, annual property taxes are calculated as a percentage of a real property's assessed value.  Absent a "change in ownership," Assessors may increase a real property's assessed value by only 2% each year.  This is favorable to property owners because, historically, real property values have increased more than 2% per year. 

However, a "change in ownership" will trigger a property tax reassessment, and allow the County Assessor to adjust the assessed value of the real property to the current fair market value.  The "change in ownership" rules are complex and confusing.  Property owners often inadvertently trigger a reassessment, which can cause significant increases in property taxes each and every year thereafter.

This is especially true for businesses which own real property.  A transfer of even a small interest in a business (even as small as 1%) can trigger a reassessment of all of the California real property owned by the entity.  Furthermore, the State Board of Equalization now imposes substantial penalties for failing to timely report an event triggering a change in ownership with respect to an entity owning real property.

Our attorneys have a thorough understanding of the California Property Tax rules.  We can help our clients identify whether proposed transfers of interests in real property (or a business owning real property) may trigger an unwanted reassessment and offer planning strategies to avoid, or at least minimize, an increase in assessed value.  We communicate directly with the State Board of Equalization and local Assessors to ensure all available exclusions from reassessment are identified and properly claimed (including parent-child transfers, grandparent-grandchild transfers, interspousal transfers, and transfers by persons 55 years or older).

We welcome your inquiry regarding our estate planning services.  For further information, or to schedule a consultation, contact Temmerman, Cilley & Kohlmann, LLP.  Our San Jose law firm represents clients in Santa Clara, San Mateo, Alameda, Santa Cruz, Monterey, and San Francsico counties.