Two years after Prop. 19 became effective, assessors’ offices are still backed-up processing myriad transfers that occurred before February 2021 and new ones.
Personally, when I look back at 2023, I’m happy it’s over.
Professionally, I think of 2023 as the year we saw new laws coming and going and scrambled to keep our clients abreast of and in line with all that happened.
Proposition 19, which was billed as “The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act” passed in November 2020 and became effective in February (partially) and April 2021. The effects of this proposition are starting to become apparent.
It’s fair to say many, if not most, voters believed they were voting on a proposition that did what the Act’s title implied — it helped seniors, those with disabilities, and the victims of natural disasters. That much was true. What many voters did not realize was that the lost revenue would be made up by eliminating — except in very narrow cases — the exemption from reassessment when a parent transfers real property to a child. Now, two years after Prop. 19 became effective, assessors’ offices are still backed-up processing the myriad transfers that occurred before February 2021 and those now occurring to plan around Prop 19 where possible.
We’re also seeing families devise new plans for the parents’ primary residence or vacation home that perhaps can no longer be passed to the next generation — the property tax increase will be too much. In several cases we’ve worked with clients to make sure the transfer of property can qualify for the narrow exemption to Prop 19, whether that’s by having a child reside in the residence or qualifying the property as an “agricultural property.” Regularly, we hear that voters did not understand what they voted for.
There is now an effort to repeal a portion of Prop 19, known as “Repeal the Death Tax,” but to date it hasn’t received enough traction. The effort is led by the Howard Jarvis Taxpayers Association.
2022 saw the enactment of the Uniform Partition of Heirs Property Act in California. The UPHPA was enacted to protect the tenants-in-common property owners who inherited real estate from losing their interests in aggressive partition actions. The law applied in certain situations where tenants-in-common property interests were owned by one or more parties who had inherited the property.
UPHPA gave the heirs certain rights to purchase the property from the party seeking a partition and required any sale to be at the appraised fair market value.
But, we only had one year with UPHPA before Jan. 1, 2023 came along, and the Uniform Partition of Real Property Act replaced the UPHPA. (At least they keep the acronyms similar!)
UPRPA, in essence, did away with the “heirs” requirement and made the same rules apply anytime there is property owned by tenants-in-common. However, since UPHPA became effective for 2022, and UPRPA became effective for 2023, we have three sets of rules for partition actions — one for actions filed before Jan. 1, 2022, one for actions filed Jan. 1, 2022 through Dec. 31, 2022, and one for actions filed on or after Jan. 1, 2023. California does like to keep its attorneys busy.
While the law has good intentions, there could be myriad reasons for not wanting this law to apply to co-owners of property. The way to avoid that is through a tenants-in-common agreement, forming a partnership with an agreement, or transferring the property to a limited liability company. Like I said, California keeps its lawyers busy.
2023 also saw us finally getting regulations and a bit of guidance on how the Department of Treasury would be enacting the Corporate Transparency Act that was passed with bipartisan support in 2021. That’s right, two years later, we got the details regarding the reports that over 30 million businesses will need to file in 2024. I guess the federal government is also concerned about keeping lawyers busy.
As covered in previous articles, on January 1, 2024, a new federal law, known as the Corporate Transparency Act became effective. CTA affects LLC, S corporation, C corporation, and any other entity required to be “registered” with their respective state. The CTA was developed to expose illicit activity, money laundering, and concealment of ownership, but it’s also going to affect a lot of legitimate small business entities, irrevocable trusts, and individuals.
CTA requires the filing of federal forms reporting all beneficial owners, officers, managers, and other reporting persons and entities by name, address, and a valid ID. Gathering this information could take significant time and effort, as will getting the new forms filed in a new (government!) system.
Last year saw us contacting clients to prepare for this. We found that many were as surprised about this as they had been about Prop. 19. But then, they didn’t get to vote on CTA. That was all Congress.
Laws are constantly changing. It’s important that you have advisors in place, keep reading the news, and act swiftly to plan. With 2024 being an election year, and many tax and other laws set to expire after 2025, it’s more important than ever to stay informed.
Teresa J. Rhyne is an attorney practicing in estate planning and trust administration in Riverside and Paso Robles. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I)” and “Poppy in The Wild.” Reach her via email at Teresa@trlawgroup.net
