Navigating Prop 19: Protecting Your Family's Coastal Legacy

If you own property in coastal Orange County, whether it's a beachfront home in Corona Del Mar, a family estate in Newport Coast, or an income property in Costa Mesa, Prop 19 has fundamentally changed how you can pass that legacy to your children and grandchildren. Since its implementation in February 2021, this California ballot measure has caught many affluent families off guard, potentially costing them hundreds of thousands in reassessed property taxes they never anticipated.

For decades, California homeowners relied on Proposition 58 to transfer property to their children while maintaining the original property tax basis, often dating back to when homes were purchased for a fraction of their current values. Prop 19 significantly restricted this benefit, and for families holding appreciating coastal real estate, the implications are substantial. Understanding these changes now—and planning accordingly—can mean the difference between preserving your family's wealth and watching it erode through unexpected tax burdens.

What Changed Under Prop 19

The most significant shift affects parent-to-child transfers of property. Previously, parents could transfer their primary residence and up to $1 million in assessed value of other real estate to their children without triggering a property tax reassessment. Now, only a primary residence qualifies for protection, and even that comes with conditions.

Under current law, your children can inherit your primary residence and maintain your property tax basis only if they also use it as their primary residence and if the home's market value doesn't exceed your assessed value by more than $1 million. In communities like Newport Beach and Laguna Beach, where homes regularly sell for $3-5 million or more, that $1 million cushion disappears quickly.

Here's a real-world example: imagine your parents purchased their Corona Del Mar home in 1985 for $400,000. Today it's worth $4 million, but the assessed value for property tax purposes is only $650,000 thanks to Prop 13's annual increase caps. Under the old rules, you could inherit this home and continue paying taxes on that $650,000 assessment. Under Prop 19, if you don't move in and make it your primary residence, the property gets reassessed at $4 million—increasing your annual property taxes by approximately $33,500.

Investment and Secondary Properties: The Bigger Impact

The changes hit even harder for investment properties, vacation homes, and secondary residences. These properties no longer qualify for any parent-to-child transfer exclusion. If your family owns a rental property in Irvine or a beach cottage in Laguna that's been generating income for decades, transferring it to the next generation will trigger a full reassessment to current market value.

For families who built wealth through strategic real estate holdings in Orange County, this represents a fundamental shift in estate planning. Properties that were intended to provide multi-generational income may no longer make financial sense to keep in the family.

Strategies to Consider Now

While Prop 19 closed many doors, strategic planning can still protect significant value. Some families are exploring living trusts with specific occupancy provisions, others are considering strategic sales and 1031 exchanges, and some are restructuring their estates entirely. The key is acting thoughtfully and with proper guidance before transfers occur—once property changes hands, your options disappear.

If you're over 55, Prop 19 also expanded your ability to transfer your property tax basis when downsizing or relocating anywhere in California, which can create interesting opportunities for those looking to simplify their real estate portfolio while maintaining tax advantages.

The Bottom Line

Coastal Orange County real estate represents more than financial value—it's often the centerpiece of family legacies and memories built over decades. Prop 19 requires families to approach these assets with updated strategies and clear-eyed planning. Whether you're considering how to pass your Newport Coast home to your children or evaluating a portfolio of coastal properties, understanding these rules is essential.

The intersection of real estate and estate planning has never been more complex. If you'd like to discuss how Prop 19 might affect your family's coastal properties, I'm here to help you think through your options and connect you with the right planning professionals.