Property Tax Planning Issues

At Temmerman, Cilley & Kohlmann, LLP, our San Jose and Danville estate planning attorneys are experts in tax planning. We provide comprehensive tax planning services to ensure that our clients avoid or minimize the tax consequences of transfers of real property through wills, trusts and other instruments. Property taxes should be carefully considered in every estate planning, business planning or trust administration matter that involves real property.

Property Tax Issues Arising During Estate Planning

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 no more than 2 percent each year. This is favorable to property owners because, historically, real property values have increased by more than 2 percent per year.

However, a change in ownership triggers a property tax reassessment and allows 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 when they create estate plans and instruments, which can cause significant increases in property taxes every year thereafter.

This is especially true for businesses that own real property. A transfer of even as small as a 1 percent interest in a business 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 against entities for failing to timely report a change in ownership.

Our attorneys have a thorough understanding of California property tax rules. We help our clients identify whether proposed transfers of interests in real property or of a business owning real property may trigger an unwanted reassessment, and we offer planning strategies to avoid or minimize property tax reassessments. We communicate directly with the State Board of Equalization and local assessors to ensure that all available exclusions from reassessment are identified and properly claimed, including:

  • Parent-child transfers
  • Grandparent-grandchild transfers
  • Interspousal transfers
  • Transfers by people 55 and older

Parent-Child Transfers In San Jose

Under California property tax laws, transfers of real property between parents and children are excluded from reassessment. Transfers of real property from grandparents to grandchildren are also excluded if all parents of qualifying grandchildren are deceased as of the date of transfer. Certain property is not reassessed if certain conditions are met and the proper application is timely filed:

  • Transfers of primary residences (no value limit)
  • Transfers of the first $1 million of real property other than the primary residence

Knowledgeable estate planning assistance from expert tax attorneys

Our tax attorneys and estate planning lawyers in San Jose and Danville welcome your inquiry regarding our estate planning services and trust administration tax planning services.

For further information or to schedule a consultation, contact Temmerman, Cilley & Kohlmann, LLP. Call our San Jose or Danville offices at 408-780-1912 or contact Temmerman, Cilley & Kohlmann, LLP, online today.