Dollars & Sense - Grandparent/Grandchild Exclusion

Did you know it’s possible to pass on $1,000,000 to grandchildren and avoid having to pay estate taxes on the bequest? Most people are aware of the Generation Skipping Trust that the Gallo wine family succeeded in getting written into law allowing $1,000,000 to pass to grandchildren free of estate taxes. People may not be aware of a law that allows up to $1,000,000 of real property to escape reappraisal for property tax purposes if passed to grandchildren. Normally when real estate is transferred to another person the property in question is reappraised and property taxes are adjusted accordingly. California passed Proposition 193 that amended the California Constitution to exclude from the definition of “change in ownership” certain transfers between grandparents and grandchildren. The new law applies to transfers, including a change in ownership arising on the date of a decedent’s death, occurring on or after March 27, 1996. It applies to the purchase or transfer of real property from grandparents to their grandchild, provided that all of the parents of that grandchild who qualify as the children of the grandparents are deceased as of the date of purchase or transfer. There’s also a special exclusion for property involving parent/child transfers. To help you get through the claim forms that must be filed with the County Assessor’s office you may want to use the services of an estate planning attorney. Tax laws are very complicated and one slip could end up being very expensive.

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