My brother thinks that one must become a "tenant in common" to keep Prop 13 benefits when one inherits a paid for home that is part of the family trust. Isn't there some protection for transfer of property from parent to child in this case? Thanks!
There is a limited exemption from increase in property tax for real estate transferred between parents and children. The last time I checked the maximum value that could be transferred without increasing property tax was $1,400,000, though whether it was the transferor's home can affect that number. When property is disbursed from a testementary trust or a probate it generally goes to co-inheritors as tenants in common. But that has nothing to do with either property tax or a Proposition 13 exemption. Stu
Thanks Stu, one more question if you don't mind.
Would there be any tax or inheritance advantages to setting up "tenents in common" with my parents?
I'd really have to know a whole lot more about the situation, what you want and what you think you want before I could give you a good answer.
But in general there are no inheritance advantages to holding title as tenants in common. If you hold title as joint tenants that can avoid probate. But it can result in higher estate or income taxes later under some circumstances.
Stu
Thank you so much for responding!
This situation is that my parents created a trust some years ago, leaving certain assets to my 3 siblings, and the family home to me. Home is paid for and under Prop. 13. My bother told me that he read someplace I might lose the Prop. 13 status when I inherit, but from what I've read on line, that doesn't seem to be the case. He thought that if my parents made me a "tenent in common" I would keep the Prop. 13 status. Again, from what I've read, that doesn't seem necessary. But, my reading also made me wonder if their might be other tax advantages to becoming a tenent in common? Thanks again, you are very kind and generous to pass on this info. to everyone!!
You're right. But you do have to do something when your parents die to be eligible for the exemption. You have to file a Preliminary Change of Ownership form notifying the county of the change of ownership. You also have to file a form to claim the parent-child exemption. If you don't, you could lose it.
Actually it's the opposite. If you become a tenant in common while your parents are alive, you will likely have a lower basis in the property, and thus higher income tax, when the property is eventually sold after they die.
Stu
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