Prop 19 Changed the Math on Inherited Property

Proposition 19 changed the math on inherited properties across California, and most families still have not run the numbers. I see it in trust administration conversations every month.

What changed in February 2021

Before February 2021, heirs could generally retain a parent’s assessed value on an inherited property regardless of whether they occupied it. That is no longer the case. The parent-to-child exclusion now largely requires the heir to use the property as a principal residence, with a value cap above which partial reassessment applies.

Second homes and rentals

An heir who keeps the home as a second home or a rental should expect reassessment to current market value. That change in annual carrying cost is large enough to reverse a hold-versus-sell decision for many families.

If you’re weighing a rental, Summit Property Management can help you look at the rent side of the numbers.

The capital gains side

Capital gains are the next issue. The inherited property generally receives a stepped-up cost basis to fair market value as of the date of death. A sale executed within a year of the date of death often produces little or no taxable gain. For most beneficiaries, there’s little choice but to sell.

Talk with your tax professional about your situation. And if you’re facing this dilemma, call me…

Originally published in The Trusted Advisor, August 2026.