Thinking of keeping a deceased parent’s home in their trust to “avoid” reassessment? Don’t do it. This common myth can lead to massive tax bills, penalties, title issues, and even trustee liability.
It’s a common misconception—and one we hear far too often in Newport Beach, Costa Mesa, and surrounding Orange County communities. After a parent’s passing, some families believe they can simply “leave the property in the parent’s trust” to avoid reassessment under California’s Proposition 19.
Let’s be clear: this is a dangerous strategy.
While we frequently assist clients navigating trust and estate sales, property transfers, and Proposition 19 claims, this approach is a classic case of kicking the can down the road — and it often leads to hefty financial consequences, legal issues, and insurance risks.
The Reality: You Can’t Outsmart the Assessor Forever
Under California law, a property is reassessed at fair market value when it changes ownership — including upon death of the owner(s).
When the trustee fails to notify the Assessor of the change in ownership, the property remains assessed at its prior (lower) tax basis, but the Assessor retains the right to issue a retroactive “escape assessment” — plus penalties and interest.
And yes, counties like Los Angeles, Orange, and others have been increasingly aggressive about enforcement. Moreover, especially in light of the ‘newer’ Prop 19 and constant efforts to create workarounds, some jurisdiction may make an example of someone, possibly pursuing fraud penalties or other legal action.
Possible Adverse Consequences
Failure to Report = Penalties & Interest
Under California Revenue & Taxation Code §482, failing to notify the Assessor of a change in ownership can trigger penalties up to 10% of the new assessed value (capped at $5,000 or $20,000 depending on exemption eligibility).
Escape Assessments
Per section 532(b)(2) of the Revenue and Taxation Code, the county assessor must retroactively assess as many as eight prior assessment rolls if the escape assessment was the result of the failure to file a required Change in Ownership Statement. For legal entities, there is no limitation as to the number of years the county assessor may make an escape assessment.
Insurance Risks & Title Problems
You may be the legal owner in name (or think you are), but if the property title and insurance don’t reflect that, any claim could be denied. We’ve seen clients inherit a nightmare when they try to refinance or sell later, only to discover major title and legal issues.
Missed Prop 19 Deadlines = Lost Tax Benefits
If you’re eligible for a Prop 19 transfer, you only have one year to file the Homeowner’s Exemption and three years to file for the Prop 19 reassessment exclusion. Miss those windows, and you’ve lost the opportunity for good.
Trustee Liability
Trustees have a fiduciary duty to administer the trust properly—including ensuring timely transfer of title and compliance with tax laws. Delaying or ignoring these duties could expose the trustee to liability.
Bottom Line: Don’t Gamble with Property Taxes or Title
At Lucas Real Estate Group, we frequently help clients unwind messy situations caused by well-meaning but ill-advised decisions like this. Our advice? Handle title transfers properly and on time.
Questions or Need Help?
We’d love the opportunity to assist with your next sale, purchase, investment, or strategic planning. Whether you need real estate brokerage, legal advice, or property management, we’re here for you.
Lucas Real Estate is a full-service brokerage offering residential real estate, legal services, and strategic tax planning—all under one roof.
Email: info@lucas-real-estate.com
Phone: (949) 478-1623
Sign up for our Newsletter
— Devin Lucas
Real Estate Broker, REALTOR®, and Real Estate Attorney
Sources:
Lucas Real Estate Group, in partnership with Coldwell Banker Newport Beach and the Coldwell Banker Global Luxury program, offers unmatched expertise in California real estate sales, property management, and real estate tax planning strategies, including Propositions 13, 58, 193, 60, 90, and new Proposition 19.
Want to discuss real estate laws, tax planning, tax considerations, private sales, intra family sales, or real estate legal matters? We conduct paid one-hour confidential consultations via Zoom, walking families through Prop 19 impacts, potential tax exposure, capital gains considerations, and the pros and cons of gifting, sales, LLCs, or hybrid solutions. For discussions requiring real estate legal advice, private family sales, family transfers, or tax-related matters, please schedule a paid one-hour consultation via Zoom, phone, or in person using this calendar (Book a consultation here.) Upon booking, you’ll receive instant confirmation and a Zoom link if applicable.
Thinking of selling California real estate or seeking a new property management company? We would love the opportunity to assist – we provide full service sales and property management in Newport Beach, Costa Mesa and surrounding areas. If you are seeking to sell or professionally manage your home in Newport Beach, Costa Mesa or the surrounding areas, call or email anytime for a free brief consultation – info@lucas-real-estate.com or 949-478-1623.
Connect With Us
Check out our countless 5-star reviews and follow us on social media:
| Google Reviews | Yelp | LinkedIn | Zillow | Avvo | Facebook | Twitter | Instagram | YouTube | Official Site | Blog | Newsletter |
—-Disclaimer —-
The content on this blog is for informational purposes only. Nothing on this blog should be construed to be legal advice, and you should not act or refrain from acting on the basis of any content on this blog without seeking appropriate legal advice regarding your particular situation, from an attorney licensed to practice law in your state. The content on this blog is not guaranteed to be correct, complete, or up to date. Devin R. Lucas’ office is in Newport Beach, California and is only licensed to practice law in California. Please be advised that Devin R. Lucas only provides legal services or advice pursuant to a written legal services agreement. The content on this blog is not intended to, and does not, create an attorney-client relationship between you and Devin R. Lucas, nor does our receipt of an email or other communication from you. Some jurisdictions may consider this site to constitute attorney advertising; accordingly, please be advised this is an advertisement.
IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, we inform you that, to the extent this communication (or any attachment) addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties under the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein (or in any such attachment).
