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Using an LLC to Avoid Reassessment

When used properly, LLCs are an effective way to insulate property owners from personal liability, especially in the case of rental properties. But did you know that LLCs can also assist in mitigating the possibility of a property tax reassessment at death? By utilizing the unique property tax rules that are applicable to business entities, clients can mitigate the negative effects of Proposition 19 which requires a full property tax reassessment of all secondary properties when transferred to children after the death of a parent.

As we previously wrote on, Proposition 19 became effective on February 16, 2021. It changes the way that property taxes are reassessed after death by narrowing the types and scope of applicable exclusions from reassessment. Prior to Proposition 19, parents could pass a primary residence and up to one million dollars of assessed value of secondary real properties to their children at death without being subjected to property tax reassessment. Now, under Proposition 19, only one million dollars of appreciation may be excluded from reassessment when a parent transfers their primary residence to a child, and only if the child uses the property as their primary residence as well. All secondary properties, such as rental or vacation homes, are subject to full reassessment.

If you’d like to discuss how Proposition 19 will affect your children’s inheritance and whether or not there is something you may do to mitigate those effects, contact our qualified estate planners today.

The material in this article, provided by Chauvel & Glatt, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute, legal advice or promise similar outcomes. For information on your particular circumstances, please contact Chauvel & Glatt at 650-573-9500. (Photo Credit depositphotos.com).


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