Attention California vineyard owners—Prop 19 goes in effect on February 16th, 2021. Essentially, the new laws tighten rules around allowing parents to transfer California vineyards to the next generation without triggering property tax reassessment.
Specifically, Prop 19 shakes up property tax rules with respect to transfers of real property by gift, inheritance and sale between parents and children while also doing away with formerly eligible transfers between grandparents and grandchildren where the parents of the grandchild are deceased. This exclusion further applies to transfers from children to parents as well.
Exponentially higher property taxes ultimately make it more challenging for the next generation of farmers to retain the vineyard properties passed down from their parents. That makes considering the transition of ownership an urgent issue.
For vineyard owners across California, the passage of Prop 19 is motivating interest in time-sensitive transfers of wineries and vineyards within families. No one wants their children or grandchildren pressured to sell the family farm because they can’t afford the tax implications.
According to Estate and Tax Planning Attorney Lauren Galbraith, “I see families in the wine business demonstrate keen awareness that they must consider and plan for taxes, doing what they can to avoid property tax reassessment and to minimize estate tax if they want to give their heirs the best odds for success.”
What California Vineyard Owners Need to Know:
- Proposition 19 repeals the $1,000,000 parent-to-child exclusion for other real properties, including family farms. So, while Farmer Smith currently pays $11,000 in annual property taxes, his children will likely pay more than $262, 500.
- Proposition 19 severely limits the parent-to-child exclusion for transfers of a personal residence as well.
Seeking to sell your vineyard now?
Jenny Heinzen is the top vineyard Real Estate Broker across California and offers real estate representation to institutional investors, wineries, growers and lifestyle owners on the Central Coast of California. Visit our website for a variety of resources or contact her by [email protected] or (805)434-2044 today.
Resource: San Luis Obispo County Farm Bureau hosted a free educational event on December 14, 2020 explaining Proposition 19. Speakers included SLO County Assessor Tom Bordonaro; Joe Benson, Attorney with Carmel & Naccasha LLP in San Luis Obispo; and Paul Clark, Attorney at Law in Paso Robles. visit slofarmbureau.org to learn more.
Note: This blog is not offering legal advice, rather a summary of the effects of Proposition 19. Please consult your personal tax advisor for advice on how to avoid unexpected property tax reassessment.
