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California Wants Your Property

Updated: Jan 2

Many heirs must sell family homes upon passing of their parents
Many heirs must sell family homes upon passing of their parents

The Erosion of Family Legacies Under Proposition 19

As California baby boomers enter their retirement and end-of-life years, a seismic shift is underway in the state's real estate landscape. Proposition 19, passed in 2020 and effective for intergenerational transfers since February 16, 2021, has dramatically restricted the ability of families to pass down homes without massive property tax hikes. What was once a generous exclusion allowing parents to transfer low property tax bases to children—preserving family legacies for generations—has been replaced with strict limits. For many heirs, the result is simple: they can't afford to keep the family home.


Proposition 19 was sponsored by the California Association of Realtors, who raised $47million to promote "Yes on Prop 19". The Howard Jarvis Taxpayers Association criticized the proposition as undermining the original intent of Proposition 13 and declared that ads promoting Prop 19 were deceptive. Many ads indicated that the Proposition was about funding firefighting in the state. Critics argue that Prop 19 amounts to the state "wanting your property," forcing sales that flood the market and generate higher tax revenue. Combined with the aging baby boomer population—often called the "silver tsunami"—this could reshape California's housing market in profound ways, potentially increasing inventory and challenging the state's persistent high prices.


The Foundation: Proposition 13 and the Old Rules

California's property tax system has long been anchored by Proposition 13 (1978), which caps annual tax increases at 2% and reassesses properties to market value only upon sale or major change in ownership. This created generations of homeowners with low tax bills in a state where real estate prices were rising, especially in high-appreciation areas.


Before Prop 19, Propositions 58 (1986) and 193 (1996) allowed parents to transfer their primary residence to children without reassessment, regardless of value. They also permitted up to $1 million in assessed value of other properties (e.g., rentals or vacation homes) to transfer tax-free.


These rules preserved multi-generational ownership, keeping family homes and small farms intact.

In the 1960s a beachfront home like this in San Diego may have cost $125,000 - today its worth $2.9 million
In the 1960s a beachfront home like this in San Diego may have cost $125,000 - today its worth $2.9 million

Proposition 19: Limited Exclusions and Higher Taxes on Inheritance

Prop 19 repealed those broad exclusions and introduced narrow ones.

Key current rules (as of 2025):

  • Primary Residence Only: The exclusion applies solely to a parent's (or grandparent's) principal residence or family farm. The heir must make it their own primary residence within one year and claim the homeowners' exemption.

  • Value Cap: Heirs keep the parent's low assessed value plus an additional $1 million (adjusted for inflation—$1,044,586 as of February 2025). If the home's market value exceeds this, the difference is added to the taxable value, triggering partial reassessment.

  • No Break for Other Properties: Vacation homes, rentals, or commercial properties get full reassessment to current market value upon transfer.

  • Grandparent-Grandchild Rules: Similar limits apply, but only if the grandchild's parents are deceased.


If conditions aren't met (e.g., the heir doesn't live there), full reassessment occurs retroactively.


Example: In the photo above imagine the parent purchased the home in the photo for $125,000. Over the years, the property tax bill is ~ $3,000/year. Today, after inflation the home is now worth $2.9 million. Under old rules, a child inherits home with ~$3,000–$4,000 annual taxes (whether he lives in it or not). Under Prop 19, if and only if the child lives in the home making it their primary residence, taxes might rise to ~$15,000 - $19,000 due to partial reassessment. If not, full market value reassessment means ~$30,000 - $35,000+ annual tax bill. What if the child lives and works in a different city - it is virtually impossible for them to make it their primary residence - in many cases they have to sell.


Heirs Can't Afford to Keep It: The End of Family Legacies

For many families, these changes are devastating. Heirs facing tax bills jumping from a few thousand to tens of thousands often have no choice but to sell.


Estate planners and attorneys report clients forced to liquidate inherited properties, breaking generational ties to homes and family farms. One critic called it "wiping out the parent-child exclusion except in narrow circumstances."


Prop 19 did expand benefits elsewhere—allowing seniors (55+) to transfer their low tax base to a new home anywhere in California, up to three times—which encourages downsizing.


The Baby Boomer Factor: The Silver Tsunami Arrives

Baby boomers (born 1946–1964) own a disproportionate share of California's homes, many with ultra-low Prop 13 tax bases. As they age—millions entering their 80s and beyond—the "great wealth transfer" is underway, with trillions in real estate passing to heirs.

This "silver tsunami" means more properties hitting the market: boomers downsizing (aided by Prop 19 portability) and heirs selling due to unaffordable taxes.


In 2025, experts note the wave is materializing, with increasing inventory in some regions.


Case Study: Real Impacts on California Families and Farmers

To illustrate the tangible effects of Proposition 19, consider these summarized real-world examples drawn from affected families and farmers in 2025.


The Fresno County Farmer's Dilemma

Chris Matisse, a farmer in West Fresno County, purchased his land over 15 years ago with the intention of passing it down to his children. His farm, valued at around $2 million—a modest size in California's agricultural landscape—now faces insurmountable tax barriers under Prop 19. Previously, he could have transferred the property with its low Prop 13 tax base intact. Now, because the value exceeds the $1 million exclusion cap (adjusted to about $1.04 million in 2025), his heirs would see property taxes surge by $10,000 to $20,000 annually upon inheritance, even if they intend to continue farming. Matisse notes, "A million dollars is not what it used to be," highlighting how inflation and rising land values render the cap ineffective for most farms. Without the ability to qualify for full exclusion (as the heirs must live on the property as their primary residence, which isn't always feasible for multi-generational farming operations), Matisse fears his family will be forced to sell, ending a legacy of land stewardship. This scenario is echoed by other farmers statewide, who argue Prop 19 was deceptively marketed and is quietly eroding California's agricultural heritage.


The Sibling Inheritance Dispute

In a poignant example from financial planner Kurt Supe, a client's mother passed away in 2025, leaving a $1.2 million home to her three children under a simple will that aimed for equal division. One daughter had lived in the home for five years, caregiving for her mother, and wished to keep it as her residence. However, her siblings demanded their immediate $400,000 shares, forcing a sale amid a soft market. The home sold for $980,000 after fees, netting each only $300,000. The caregiving daughter not only lost her home but also $100,000 in potential value, while family relationships fractured irreparably. Under Prop 19, even if she had inherited solely, the property's value exceeding the exclusion cap would have triggered a partial reassessment, potentially adding thousands in annual taxes and complicating her ability to stay. Supe emphasizes that basic wills fail to address Prop 19's nuances, urging advanced estate planning like buyout provisions or trusts to mitigate such outcomes. This case underscores how the law amplifies family tensions and accelerates forced sales.


These cases highlight a broader trend: Prop 19 not only hikes taxes but disrupts family dynamics and long-term planning, often leading to the loss of cherished properties.


A Real Estate Reckoning Ahead?

California's housing market has long suffered from low inventory and sky-high prices. The silver tsunami, accelerated by Prop 19, could change that by boosting supply.

Some predict moderated price growth or even declines in certain areas as more boomer-era homes list for sale.


Whether this bursts a "bubble" or simply normalizes the market remains debated—strong demand from younger buyers and investors may absorb much of the influx. But for families losing generational homes to taxes and sales, the legacy is already lost.


In the end, Proposition 19 prioritizes tax revenue and senior mobility over unrestricted inheritance. As one observer put it: the math on keeping the family home has "totally changed." For heirs and the market alike, the consequences are just beginning to unfold.

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