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Reappraisal Exclusion from Grandparent to Grandchild

ALERT: In November 2020, California voters passed Proposition 19, which makes changes to property tax benefits for families (effective February 16, 2021). Please visit the Proposition 19 resource page for more information.

Proposition 193 allows the new property owners to avoid property tax increases when acquiring property from their grandparents. 

In the State of California, real property is reassessed at market value if it is sold or transferred and property taxes can sometimes increase dramatically as a result. However, if the sale or transfer is between parents and their children, under limited circumstances, the property will not be reassessed if certain conditions are met and the proper application is timely filed.

Proposition 193, effective March 27, 1996, is a constitutional amendment approved by the voters of California which excludes from reassessment transfers of real property from grandparents to grandchildren, providing that all the parents of the grandchildren who qualify as children of the grandparents are deceased as of the date of transfer. This is a one way transfer from grandparent to grandchild. Proposition 193 is also codified by section 63.1 of the California Revenue and Taxation Code.

Transfers of real property excluded from reassessment by Proposition 193 are:

  • Transfer of principal residence (no value limit).
  • Transfer of the first $1 million of real property other than the primary residences. The $1 million exclusion applies separately to each eligible transferor.  The $1 million is the factored base year value, not the fair market value.

Definition and Terminology specific to Proposition 193:

Child (Middle Generation): Children include the following: sons and daughters, sons-in-law and daughters-in-law, stepchildren, and children adopted under 18.  Beginning January 1, 2006, a stepparent who is an in-law child of the grandparent does not need to be deceased in order for the grandchild to qualify.

Grandchild: The children of the deceased child (Middle Generation).

Gift/Purchase: Transfers such as a gift or purchase between grandparents to grandchildren are excluded with a completed Prop. 193 form.

Principal Residence: Proposition 193 does not require that the grandparent use the transferred property as his or her principal residence. This only applies the grandchild who has not received a principal residence exclusion from his parent. If the grandchild has already received a principal residence exclusion from his parents, then even though the property is the grandparent’s principal residence, this is a non-principal residence transfer subject to the $1 million exclusion.

$1 Million Exclusion:  The $1 million exclusion for other property applies for each transferor. Therefore, one parent can transfer $1 million of other property and the other parent can also transfer $1 million of other property for a total combined exclusion of $2 million. These transfers are coordinated State-wide under the million dollar limit. For this definition and terminology, the parent is the Middle Generation.

Legal Entities: Transfers directly between legal entities owned by grandparents and grandchildren are not entitled to the benefits of this measure.

Trusts: A transfer to or from a trust is treated just as a transfer to or from the trustor personally, provided the trust is revocable.

Date of Death of Decedent: The date of any transfer between grandparents and their grandchildren under a will or intestate succession is the date of a decedent's death, which must be after November 6, 1986 (the effective date of proposition 193).

Third Party: A third party is any person or entity that is not a transferee or transferor in the transfer between the parents and children.

Transfer of Real Property to a “Third Party”: For filing proposes, a transfer of the real property to a third party occurs when all the real property received is transferred to someone other than an original transferee or transferor. Therefore, a transfer may qualify for exclusion when a partial interest in the property received is transferred to a third party prior to an application being filed.

Filing Requirements:

  • A claim form must be completed and signed by the transferors and transferee and filed with the Assessor.  A claim form is timely filed if it is filed within three years after the date of purchase or transfer, or prior to the transfer of the real property to a third party, whichever is earlier.
  • If a claim form has not been filed by the date specified in the preceding sentence, it will be timely if filed within six months after the date of mailing of the notice of supplemental or escape assessment for this property.
  • If a claim is not timely filed the exclusion will be granted beginning with the calendar year in which you file your claim.
  • Complete all of Sections A, B, and C and answer each question or your claim may be denied.  Proof of eligibility, death certificate, including a copy of the transfer document and/or trust may be required.
Which transfers of real property are excluded from reassessment by Proposition 193?
For transfers of principal residences, there is not value limit. For transfers of other than the principal residence then it is the first $1 million of real property for each eligible transferor. The $1 million is the Proposition 13 factored base year value, not the fair market value.
Is there a limit on my principal residence’s assessed value that may be excluded from reassessment?
No. The $1 million limit applies only if the property was not eligible for a homeowners’ exemption or disabled veterans’ exemption before the transfer. If you did not have the homeowners’ or disabled veterans’ exemption on your principal residence prior to the parent-child transfer, then you may have to provide evidence to the assessor that the property was your principal residence. Evidence includes voter registration, vehicle registration, bank accounts, or income tax returns.
What value of the transferred property is counted toward the $1 million exclusion limit?
The Proposition 13 value (factored base year value) just prior to the date of transfer. Usually, this is the taxable value on the assessment roll. If a property is under a Williamson Act (open space) or Mills Act (historical property) contract, it is the factored base year value that is counted, no the restricted value.
Is it always beneficial to claim this exclusion?
No. In cases where the transferred property was being assessed at its current market value under Proposition 8 at time of transfer (that is, its market value had fallen below the transferor’s original Proposition factored base year value), it may be beneficial for the new owner not to claim the exclusion and instead accept a new Proposition 13 base year reassessment. By doing so in this circumstance, the assessment can result in lower property taxes over time by locking in the lower market value as the property’s new base year value as of the date of transfer. In any case, you may wish to consult with a real estate or estate planning expert for advice before claiming this exclusion.
Who are considered eligible grandchildren under Proposition 193?

An eligible “grandchild” for purposes of Proposition 193 is any child of parent(s) who qualify as child(ren) of the grandparents as of the date of transfer. The parents of the grandchild who would qualify for a Proposition 58 exclusion from the grandparents must be deceased.

Are my grandchildren eligible transferees of my property for purposes of Proposition 193 if my daughter passed away and she was divorced from her husband (my ex-son-in-law) who is still living?
Yes. Your daughter's divorce terminated the relationship between you and your son-in-law. Since your ex-son-in-law is not considered your child for purposes of this exclusion, your grandchildren are eligible transferees of your property.
Are my grandchildren eligible transferees of my property for purposes of Proposition 193 if my daughter passed away and her husband (grandchildren's father) has not remarried?

No. Your son-in-law is still deemed to be a “child” of yours, until he remarries, thus disqualifying your grandchildren as eligible transferees, unless he is a step-parent, in which case they would qualify.

I have raised my two stepchildren alone since their mother, my wife died ten years ago. Now that the children are grown adults, their grandparents wish to gift a piece of base land to them. Is this transfer eligible for purposes of Proposition 193?
Yes, assuming the other conditions are met and a proper claim is filed. For transfers occurring on or after January 1, 2006, it is not necessary that the son-in-law or daughter-in-law who is stepparent to the grandchild be deceased in order for the grandchild to be eligible transferees.
I want to give my second home to my grandson, but his father, my son, is still alive. Can my son file a disclaimer so that my grandson is eligible for the grandparent-grandchild exclusion?
No. Even though a disclaimer means the person filing the disclaimer is treated as predeceased, this does not make the person dead as required by the California Constitution.
I’m thinking of giving several rental properties to my grandchildren. Can I decide which grandchild gets the exclusion?
Yes. The Assessor’s office will require written instructions on which property to apply the exclusion. If there are no instructions, the property that transferred first, for which a claim was filed, will get the exclusion. Therefore, other properties may also receive the exclusion as long as the cumulative Proposition 13 factored base year value of the properties excluded has not exceeded $1 million.
Our parents predeceased my grandmother. Recently my grandmother died. She owned three properties via her trust. The trust provides that my two sisters and I, the grandchildren are to share and share alike all the trust assets. However, each of us wants to take title to a separate property. Would the properties be eligible for the grandparent to grandchild exclusion?
The administration of a trust is governed by the trust instrument. If the trustee has the power to distribute to a non-pro rata basis, this means the trustee can allocate specific assets to individual beneficiaries. If one grandchild receives real property and other grandchild other assets, then the one grandchild can receive the grandparent to grandchild exclusion as long as the value of the real property does not exceed that grandchild’s share of the entire estate. If the value of the real property exceeds that grandchild’s share of the estate, the excess is considered to be coming from a sibling and thus, subject to reassessment as a sibling-to-sibling transfer.

My grandmother’s property was in a trust. The assessor asked for a copy of the trust. Can I provide a certification of trust in lieu of the trust documents?
No. A certification of trust is not sufficient evidence to make a determination of eligibility for the grandparent to grandchild exclusion.
Why do I have to provide a death certificate and social security number of my father who is deceased when my grandmother is transferring her property to me, the grandson, for the grandparent to grandchild exclusion?
The cumulative total of Proposition 13, factored base year value of $1 million is coordinated State-wide is tracked based on your father’s social security number and not your grandmother’s social security number. If you received a principal residence transfer from your father when your father died, and this is your grandmother’s principal residence that is being transferred to you, this transfer will be added to the cumulative total of your father’s non-principal residence transfer of the $1 million. If your father’s non-principal residence transfers had exceeded $1 million, then the transfer from grandparent to grandchild will not qualify for the Proposition 193 exclusion.
Is the transfer of real property to or from my family partnership eligible for the exclusions?
No. A transfer of partnership interest is not eligible for the grandparent to grandchild exclusion.
I am over 55 and planning on selling my long-time residence to my grandchild. Can my grandchild benefit from the grandparent to grandchild exclusion, assuming all other qualifications are met, and can I also transfer my base year value Proposition 60 when I purchase a replacement property?
No. You must choose which exclusion you wish to apply your base year value. If you sell the property to your grandchild and choose to transfer your base year value using the grandparent to grandchild exclusion, then the base year value is no longer yours to transfer to a replacement property.
I still have questions about Propositions 193, grandparent to grandchild transfers. Where can I find more information?
If you still have questions about Proposition 193, please call the San Francisco Assessor’s Office at 415-554-5596 for more information.