Death and Taxes -- Sometimes They Go Together
Under Proposition 13 a death is considered a change of ownership as the real property passes from the deceased person to their estate. Since the Assessor must review all changes of ownership for possible reappraisal, this office receives a list each week of all persons who die in Napa County from the Health Department. We also check all probate filings. In some cases since the property has been placed in a trust and the decedent is not the trustee nor shown on the deed as a beneficiary of the trust, we cannot link the decedent to the property and no letter is sent. Unless the trustees notify us of the death of a trustor or beneficiary, we may learn of the death months or years later when the trust distributes or some other event occurs. Late discovery of deaths can generate up to eight years of escape assessments.
After checking our records to see if the deceased owned real property, we send out a “decedent letter to find out who the heirs are for that real property. Once the heirs are known, we can then determine if the property qualifies for an exclusion from reappraisal or whether we must reappraise the property. If the property passes to a spouse or if the spouse retains a life estate in the property, there is no reappraisal until the death of the spouse. If the property passes to children, the change of ownership may be excluded from reappraisal if the appropriate Claim for Exclusion is filed with our office. If the property passes directly from grandparent(s) to grandchild(ren), there may be an exclusion if the intervening generation (i.e. the parents of the (grand)child(ren)) are all deceased or, if stepparents or in-laws, remarried.
If the decedent held the property as a partner in a partnership or shareholder in a corporation, the interspousal exclusion still applies if the spouse inherits. However, a partnership or corporation is not a “parent” and therefore the parent-to-child exclusion cannot be claimed. Depending on the percentage of ownership transferred by the death, a 100% reappraisal of the property may be required. If people are holding property in family partnerships or family corporations, they should review the property tax consequences of a death of one of the owners with their financial and legal advisors. There may be a reason to temporarily dissolve the partnership or corporation before there is a death and make the transfers to the children thus taking advantage of the exclusion.
If the decedent has owned the property for many years and the heir(s) do not qualify for the interspousal, parent-to-child or grandparent to grandchild exclusions, there can be a substantial increase in the value of the property as a new base year is established as of the date of death of the decedent. It is important to remember that the date of death is the event date for reappraisal not the date of distribution of the trust or final distribution of the estate through probate. Trustees, executors and administrators are required by California law to file a Preliminary Change of Ownership Report (PCOR) with the Assessor in each county where the decedent held property.
Should you have any questions please contact Napa County Assessor John Tuteur at 707.253.4459 or by e-mail firstname.lastname@example.org.