The 750000 Primary Residence Rule

Shelia called me, distraught. Her mother had passed, leaving a beautiful beach house in Laguna valued at $825,000. Shelia assumed, like so many do, that a simple transfer to her would be…well, simple. Instead, she faced a potential property tax reassessment of tens of thousands of dollars, wiping out a significant portion of the inheritance. The problem? Shelia hadn’t moved into the house within the one-year window required by Proposition 19, and the property exceeded the updated valuation limit. A seemingly straightforward inheritance had become a financial nightmare, all because of a rule she didn’t understand.

Proposition 19, passed in 2020, dramatically altered the rules surrounding property tax transfers between generations in California. While intended to help families keep generational wealth within the state, its implementation has been fraught with complexity and, for many, unwelcome consequences. The core of the issue revolves around the ability to transfer a property tax base from a parent to a child, but with significant restrictions that require careful planning.

The most common misunderstanding stems from the belief that any property inherited from a parent automatically maintains the existing Proposition 13 tax base. This is simply no longer true. Under Proposition 19, heirs only keep a parent’s low property tax base if they move into the home as their primary residence within one year of the parent’s death. This is a strict requirement, and even a short delay can trigger a full reassessment at current market value.

Critically, for 2026, the tax-free ‘basis boost’ is capped at $1,044,586 over the original taxable value; any value exceeding this adjusted cap results in a partial reassessment even if the child moves in. This means a home originally purchased for $300,000 with a current market value of $1.3 million would be fully reassessed on the $744,586 exceeding the limit. This can result in a substantial increase in property taxes, effectively diminishing the value of the inheritance.

My firm has been helping clients navigate these complexities for over 35 years. As both an Estate Planning Attorney and a Certified Public Accountant (CPA), I bring a unique perspective. The CPA advantage isn’t just about tax preparation; it’s about understanding the nuances of ‘step-up in basis,’ capital gains implications, and accurate property valuation. A properly structured estate plan doesn’t just avoid probate; it minimizes the tax burden on your heirs.

However, Proposition 19 isn’t the only concern. For deaths occurring on or after April 1, 2025, assets exceeding $208,850 generally trigger full probate. However, per Probate Code § 13050, this calculation MUST exclude all California-registered vehicles (regardless of value), boats, and up to $20,875 in unpaid salary. Furthermore, AB 2016 now allows a simplified ‘Primary Residence’ petition for homes valued up to $750,000, significantly expanding probate shortcuts.

Digital assets are another often-overlooked element. Per the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), custodians like Apple or Google are legally prohibited from granting executors access to the content of emails or private messages without ‘explicit written direction’ in the will or trust. Metadata (the ‘catalog’) may be accessible, but the private content remains locked without this specific legal trigger.

And if your parent required medical care before passing, remember that under both federal HIPAA and the California Confidentiality of Medical Information Act (CMIA), medical providers are strictly barred from sharing details with family unless a HIPAA Release is integrated into the Advance Healthcare Directive. Without this, a spouse may be forced to obtain an emergency court-ordered conservatorship just to speak with a surgeon.

Furthermore, we’re seeing an increased emphasis on business entity compliance. Under the Corporate Transparency Act (CTA), all non-exempt small businesses must maintain active BOI Reports with FinCEN. Upon the death of a member, the estate or successor has exactly 30 days from the date the estate is settled to file an updated report; failure to meet this window triggers non-waivable fines of $500 per day.

Finally, the One Big Beautiful Bill Act (OBBBA) permanently established the Federal Estate Tax Exemption at $15 million per person ($30 million for couples) effective Jan 1, 2026. This eliminates the ‘2026 Sunset’ fear, though the top tax rate remains at 40% for assets exceeding this permanent threshold, which is now indexed annually for inflation.

The key takeaway is this: Estate planning is no longer simply about avoiding probate. It’s about comprehensively protecting your assets and ensuring your heirs receive the maximum benefit of your hard work, while navigating a constantly evolving legal landscape. Don’t let a misunderstanding of Proposition 19, or any other complex law, derail your family’s financial future.

How do California courts decide whether a will reflects true intent or creates ambiguity?

In California, a last will and testament operates within a probate system that emphasizes intent, clarity, and procedural compliance. When properly drafted, a will does more than distribute property—it creates legally enforceable instructions that guide courts, fiduciaries, and beneficiaries through administration with fewer disputes and less uncertainty.

To create a valid document, you must ensure the signer has testamentary capacity, strictly follow California will rules, and ensure you are correctly identifying the will maker to prevent identity disputes.

For California residents, understanding how intent, authority, and compliance interact is one of the most effective ways to protect family harmony and estate integrity. A will that anticipates probate scrutiny is far more likely to be honored as written and far less likely to become the source of unnecessary conflict.

Controlling Legal Standards Governing California Estate and Asset Transfers

• Probate & Court Procedure:
  California Courts – Wills, Estates, and Probate
  The official judicial branch guide for navigating the probate process; it provides updated 2026 checklists for determining if an estate qualifies for “Summary Probate” under the $208,850 personal property limit or the $750,000 primary residence threshold (AB 2016).
• Property Tax Reassessment (Prop 19):
  California State Board of Equalization (Prop 19)
  The definitive resource for understanding the “Parent-to-Child” reassessment exclusion; it outlines the strict one-year deadline for heirs to move into an inherited home as their primary residence to maintain the parent’s low property tax base.
• Advance Healthcare Planning:
  California Attorney General – Advance Health Care Directive
  Provides the official California statutory form and legal guidelines for appointing a health care agent; this resource emphasizes the necessity of combining a medical power of attorney with a HIPAA release to ensure doctors can communicate with family during an emergency.
• Federal Estate & Gift Tax:
  IRS Estate Tax Guidelines
  The authoritative federal portal for estate and gift tax reporting; this page reflects the permanent exemption of $15 million per person (effective Jan 1, 2026), effectively replacing the previously scheduled Tax Cuts and Jobs Act (TCJA) sunset.
• Digital Asset Access (RUFADAA):
  California RUFADAA Law (Probate Code §§ 870-884)
  Access the full statutory text of the Revised Uniform Fiduciary Access to Digital Assets Act; it explains why executors are legally barred from accessing encrypted accounts, email, or crypto-wallets unless the decedent provided explicit “prior consent” in their estate plan.