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January 13, 2011 Written by 

Grandparent-Grandchild Transfers

The transfer of real property from grandparents to grandchildren may be excluded from reappraisal for property tax purposes. You must file a claim to determine eligibility

Grandparent-Grandchild Transfers (R&T Section 63.1)

The Basics

  • Real estate that is transferred from grandparent(s) to their grandchild(ren) may be excluded from reassessment
  • Exclusion is not automatic; there must be a timely filed claim with the Assessor's Office
  • Parents of the grandchild must be deceased as of the date of transfer
  • The established Prop. 13 taxable value is not affected by the transfer
  • Taxes are calculated on the established Prop.13 factored value
  • $1 million limit (taxable value) on transfers of non-principal residence property
  • No dollar limitation on grandparent's principal residence
  • Transfers directly between legal entities (i.e., corporations, partnerships) that are owned by grandparents do not qualify

In March, 1996, California voters approved Proposition 193, which expanded the parent-child property tax relief under Proposition 58 to include transfers of real property by grandparent(s) to their grandchild(ren). The provisions of this constitutional measure apply only to transfers, including a change in ownership arising on the date of a decedent's death, which occur on or after March 27, 1996.

In order to qualify for this relief, all of the parents of that grandchild (who qualify as the children of the grandparents) must be deceased as of the date of transfer.

Definitions And Terminology

"Parent" Defined : In general terms, "parent' means a grandchild's parent who is a natural or legally-adopted child of the grandparent(s). "Parent" also includes a stepchild or in-law child of the grandparent(s), unless the marriage on which the relationship was based was terminated by divorce. However, where the marriage on which the relationship was based was terminated not by divorce, but instead by the death of the grandparent's natural or legally-adopted child, the surviving spouse (i.e., the stepchild or in-law child of the grandparent(s) is considered a "child" of the grandparent(s) until he/she remarries.

Principal Residence: Proposition 58 does not require that the grandchild(ren) use the transferred property as his or her principal residence. In addition, the $1 million limit does not apply to the transferor's principal residence. However, if a grandchild(ren) previously received a principle residence excluded under a Proposition 58, any principal residence from the grandparent(s) will be considered "other real property" and subject to the $1 million exclusion.

One-Way Transfer Limitation: Transfers must mean a purchase or transfer from a grandparent(s) to a grandchild(ren). Transfers from grandchild(ren) to grandparent(s) do not qualify for the exclusion from a change in ownership.

$1 Million Dollar Exclusion: The $1 million exclusion available to grandchild(ren) for property other than a principal residence is the same $1 million full cash value exclusion which they have remaining available from their parents under Proposition 58. Therefore, a grandchild(ren) can have excluded only $1 million of property transferred from his/her father and his parents (paternal grandparents) and $1 million of property transferred from his/her mother and her parents (maternal grandparents). Claims are reported against the deceased parent's social security number.

Filing Requirements: Similar to Proposition 58, current law requires that the claim form be filed within three (3) years after the date of the transfer of real property or prior to the transfer of the real property to a third party, whichever is earlier. However, even if a claim is not made within this filing period, a claim is considered timely if it is filed within anytime prior to or within six (6) months after the mailing date of a Notice of Supplemental Assessment or Notice of Proposed Escape Assessment, whichever is later. For example if a taxpayer received a Notice of Supplemental Assessment or Notice of Proposed Escape Assessment, whichever is later. For additional clarification on filing requirements from the Board of Equalization, see Letter to Assessors No. 2013/30.

You may download the form here:

 Claim for Transfer from Grandparent to Grandchild

 



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