How to Title Real Estate to Avoid Reassessment in California

If you own property in California, you may be aware that how your real estate is titled can have a significant impact on your property taxes. In many cases, transferring real estate—whether into a trust, to a family member, or into a business entity—can unintentionally trigger a property tax reassessment under California law.

Understanding how to hold title properly is key to avoiding this costly mistake. Here’s what every California property owner should know.

What Is Property Tax Reassessment?

Under Proposition 13, California real estate is assessed based on its value at the time of purchase, and annual increases are limited to 2%. However, when there is a “change in ownership,” the property may be reassessed at current market value, which can lead to a dramatic increase in property taxes.

In some cases, a simple transfer of title—done without proper planning—can trigger a permanent increase in annual property taxes.

Common Transfers That May Trigger Reassessment

• Transferring property into an LLC or corporation

• Gifting property to children or grandchildren

• Adding or removing someone from title

• Transferring property into a trust without appropriate exclusions

• Transferring title after death or divorce

How to Title Real Estate to Avoid Reassessment

Transfer to a Revocable Living Trust (Correctly)

One of the most common and effective strategies is to transfer property into a revocable living trust. As long as the person creating the trust retains the beneficial ownership during their lifetime, the transfer is generally excluded from reassessment.

To preserve the exclusion, it is important to ensure that:

• The deed is properly recorded, and

• A Preliminary Change of Ownership Report (PCOR) is submitted at the time of recording.

Understand the Parent-Child Exclusion After Prop 19

Before Proposition 19 took effect in 2021, parents could transfer multiple properties to their children without reassessment. That is no longer the case.

Under the new rules:

• The parent-child exclusion only applies to the transfer of a primary residence,

• The child must move into the home and make it their primary residence, and

• The exclusion is capped at $1 million above the original assessed value.

If the child will not live in the home or if the property exceeds the cap, the property will likely be reassessed.

Be Cautious When Using LLCs or Corporations

Many property owners create LLCs for liability or asset protection purposes. However, transferring real property into an LLC or corporation often triggers a reassessment—even if you are the sole owner of both the property and the LLC.

There are exceptions, such as proportional ownership exclusions, but these are complex and require careful planning and documentation. Always consult with legal counsel before taking this step.

Transfers Between Spouses Are Generally Safe

Transfers between spouses or registered domestic partners are excluded from reassessment, whether done at the time of marriage, during divorce, or as part of an estate plan.

However, issues may arise when other parties are added to the trust or title. For example, transferring property to a trust for the benefit of multiple beneficiaries—such as children or siblings—may inadvertently trigger reassessment if not properly structured.

Work With an Experienced Estate Planning Attorney

California’s property tax system is intricate, and even well-intentioned transfers can lead to unexpected tax consequences. Before making any changes to how your property is titled, it’s essential to work with a qualified attorney who can help structure your estate plan in a way that preserves your Proposition 13 property tax base.

Contact Us

At Ronen Private Wealth, we help California families structure their estate plans to protect their real estate, preserve property tax benefits, and ensure long-term peace of mind.

If you are unsure whether your current title structure puts you at risk for reassessment—or if you’re considering a transfer of ownership—let’s discuss your options.

Dela Peykar Ronen, Esq.

Email: dela@ronenprivatewealth.com