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Math of inheriting a California home: Experts answer your questions on managing property transfers

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Math of inheriting a California home: Experts answer your questions on managing property transfers


One thing is clear: the math of inheriting a home in California is complicated and depends on individual situations. 

Courtesy of the realtor

If the responses to my last column on the math of inheriting a home in California are any indication, Proposition 19 has introduced many questions into people’s finances and how they are planning for the future.

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In that column, I outlined what to consider if you inherit a home or are planning to pass property to your kids. I spoke with tax experts and estate attorneys about the implications of Prop. 19, which went into effect in 2021 and dramatically changed how Californians are taxed on inherited property. One estate attorney called it the “worst thing to happen in inheritance law in California in decades.”

Many of you sent some interesting follow-up questions. So I went back to the lawyers and reached out to several Bay Area tax assessors to get some answers.

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One thing is clear: estate planning is complex and every person’s situation is different. No advice will be one-size-fits-all, and experts urge you to contact legal and financial advisors or your local assessor’s office for specific guidance.

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Welcome to Hella Expensive, a column that’s aimed at helping readers navigate the financial aspects of living in the Bay Area. In each column, I’ll present a topic that impacts your bank account and financial future: homeownership and renting, the path to retirement, and how to manage your money in this infamously expensive region. Send your financial questions and concerns to me through the survey below, or email me at kellie.hwang@sfchronicle.com.

Question: I’ve heard that parents can set up an LLC with their children and put the house into the LLC. Since ownership does not change on the death of the parents, the property isn’t reassessed. Is this correct?

Estate planning attorney Alexandra Ayoub of Ayoub & Dodson LLP in Oakland said LLCs can be a beneficial solution for some, but warns that it must be set up correctly. 

“The rules around reassessments for LLCs are quite complex and depend on ‘change of control/change of ownership,’” she said. “If there’s a change in ownership of over 50% of the LLC, property taxes will be reassessed. Further, if the change of ownership is not reported to the California State Board of Equalization within 90 days, there are steep penalties.”

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San Francisco estate planning and probate attorney Elizabeth Button said families should consult an estate planner who specializes in this type of transfer.

“The LLC and the gifting must be done in a way that will not trigger a reassessment, with the children being minority shareholders in the LLC,” she said. “This isn’t always an option for everyone since it must be done with an attorney and can be expensive.”

She said an LLC can be put into a trust and the assets can pass free of probate, the often lengthy and costly legal process to transfer property after a property owner dies. In California, it can take on average between nine months to a year-and-a-half to go through probate, perhaps even longer.

Q: Is it possible to add an adult child’s name to the house deed before the original purchasing parent passes? Would this simplify the inheritance and possible probate court process?

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“The idea of adding children onto your deed in order to facilitate inheritance is fraught with problems,” said Steve Brickley, a CPA and financial planner with Brickley Wealth Management in San Mateo.

According to the San Francisco Assessor-Recorder’s Office, a child added to the title could be subject to California Change in Ownership rules and it could trigger a reassessment.

The California State Board of Equalization explains: “If 50% of the property is transferred, the assessor will reassess only 50% of the property at its current fair market value as of the date of the transfer, and deduct 50% from any existing Proposition 13 base year value.”

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And the Prop. 19 rule on residence would still apply no matter when children are added to the deed: the home must be the parents’ principal residence and become the child’s principal residence within one year of the parents’ passing.

The beneficiary would have the right to survivorship on the title, which would allow them to avoid probate and the property to be transferred automatically upon the parent’s death. 

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However, “this depends on how title is held on the deed (such as Joint Tenancy or Tenancy in Common), and is another example where families need to consult with a qualified attorney and financial advisor,” the S.F. assessor-recorder’s office wrote in an email statement.

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“It may bypass the probate process, but you’d be paying more in taxes yearly than you would for a probate or trust,” Button said.

Q: A reader writes: “A simple self-prepared Transfer on Death Deed recording is the least expensive, most flexible and easiest option to transfer property.” Is this true?

A revocable transfer on death deed or TOD deed allows a homeowner to transfer their property to a named beneficiary and, if the deed is done correctly, avoid probate. It has no effect until the owner dies, and can be revoked at any time, according to the California Legislative Information website.

TOD deeds are sometimes called “poor man’s trusts” because they avoid the need to set up expensive trusts to keep assets out of probate. They are especially useful for single people, including widows and widowers, according to a 2015 Chronicle story

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Ayoub said these deeds are a “relatively new vehicle by which one designates a beneficiary to inherit the subject property upon their death.”

She believes it is not a good substitution for an estate plan, and “would only be appropriate in very limited circumstances.” Like adding a child to the title, this deed could potentially avoid probate but won’t help with the Prop. 19 reassessment, Ayoub said.

She said people who try to do TOD deeds on their own often don’t do it properly, and the process can be “rife with pitfalls.”

Some other issues Button says a person could run into with a TOD deed are:

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  • If the person named in the deed dies before the homeowner, then the deed would become invalid. 
  • It doesn’t allow for a contingent beneficiary to be named.
  • Problems could arise if the deed names a minor, who wouldn’t be able to take possession of the property until they turn 18. Button said the type of deed doesn’t allow for a custodian to be named, so a custodian would need to be appointed in court.
  • The TOD leaves the named individual personally liable for the transferor’s debts, and could cause problems with title insurance, which could take years to resolve. This would lead to the named being forced to upkeep the home.

Q: How does Prop. 19 affect the inheritance of a property among siblings, when one of them lives in the property but others do not? Currently, my parents live in one unit, while my sister lives in another, smaller, unit. Assuming that remains true, how would property taxes be reassessed under Prop. 19?

According to the San Francisco Assessor-Recorder’s Office, the building as a whole is not considered a principal residence.

“Only the parent’s unit will qualify for Prop. 19 exclusion, as long as one of the children makes that unit their principal residence and files for the Homeowner’s Exemption within one year of property transfer. The other two units will be reassessed at Fair Market Value because they were not the parent’s principal residence.”

Q: My uncle owns a home in San Francisco, and is worried that if he were to go to an assisted living or nursing facility, that would change the way the home is reassessed when it passes to his kids because he wouldn’t be living there. Is this true?

Your uncle can file for the homeowners’ exemption prior to moving to a facility. Upon filing, he may be eligible for an exemption of up to $7,000 off the property’s assessed value. 

According to the San Francisco Assessor-Recorder’s Office, the homeowner would qualify for the homeowners’ exemption as long as it is not rented or leased to others, and they are expected to return to the dwelling. An absence of more than a year would “raise considerable doubt” that the home is their primary residence and that they would actually return. 

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“The issue becomes how long the assessor will honor that exemption depending on how long the uncle is out of the home, and whether the home is rented while he is absent,” said John Tuteur, assessor-recorder-county clerk for the County of Napa. “The law does provide for an expectation that the uncle will return to the home if not rented during his absence and depending on the length of time he is absent.”

Rachel A. Dodson, estate planning attorney at Ayoub of Ayoub & Dodson LLP, pointed out that there is currently proposed state legislation, SB 520, that applies to this exact situation. If passed, it would allow a person receiving the homeowners’ exemption to continue to be deemed an occupant of their home if they become confined to a care facility, as long as they intend to return to the dwelling and it is not rented or leased out while they are gone.

If you have more questions or are looking for affordable resources:

Lower-cost and DUI estate planning resources are available online, but experts warn these can easily go wrong if not handled correctly. Button said some common mistakes she’s seen include using legal terms incorrectly, unfunded trusts, no contingent beneficiaries named, and documents signed when they should be notarized or vice versa.

However, in partnership with Housing and Economic Rights Advocates, the San Francisco Office of the Assessor-Recorder provides free and low-cost estate plans to low- and middle-income San Franciscans, focusing on residents in the southeast and other neighborhoods where there is a combination of high homeownership rates, lower-income communities, and communities of color.

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The office encourages those with questions about Prop. 19 to visit in person at City Hall, Room 190, phone 415-554-5596, or email assessor@sfgov.org. 

It is also hosting an estate planning 101 workshop on Jan. 26. RSVP here. Also in January are two workshops — Jan. 12 and 19 — addressing Prop. 19 intergenerational property transfers. RSVP here.



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California

Atmospheric river will bring heavy rain, snow to California-Oregon area this week

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Atmospheric river will bring heavy rain, snow to California-Oregon area this week


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The California-Oregon region is bracing for the first major storm of the season, an atmospheric river that potentially could dump nearly 10 inches of rain on the greater Redding area by the weekend.

And while the calendar still says fall, the storm kicks off with wintry conditions driven by low snow levels.

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“It’s definitely our first significant storm. I would say depending on how you want to define winter, I suppose you could call it the first winter storm,” Sara Purdue, a National Weather Service meteorologist, said on Monday.

When does the storm hit Oregon-Northern California?

Much of the rain and snow that will fall on the area will happen Tuesday and Wednesday, according to the National Weather Service.

The Northern Sacramento Valley, including Redding, is expected to get 6 to 8 inches of rain Tuesday through Friday, according to the National Weather Service.

The heavy rain has prompted the Weather Service to issue a flood watch for the Northern Sacramento Valley from Tuesday evening through Saturday morning.

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There is a winter storm warning for the mountains and foothills of Shasta County that is in effect through Wednesday night. The National Weather Service forecasts 8 to 18 inches of snow above 4,500 feet and 4 to 8 inches above 3,000 feet.

Snow is not expected to fall as low as the valley floor.

For Siskiyou County and the Mount Shasta-Shasta Valley area, there is the potential for 8 to 12 inches of snow Tuesday and Wednesday, said Alexis Hermansen, a National Weather Service meteorologist.

Snowfall accumulations will be higher in the mountains surrounding the city of Mount Shasta.

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“We could see a foot and a half to over 2 feet,” Hermansen said.

Winds also will be a concern in the Shasta Valley north of Mount Shasta, with gusts possibly up to 70 mph Tuesday night through Wednesday morning, the National Weather Service said.

Snow levels will increase to over 6,000 feet into Thursday and Friday.

Drivers on I-5 be prepared; carry snow chains

Mountain travel Tuesday and Wednesday will be especially challenging with the lower snow levels.

Chris Woodward, spokesman for the California Department of Transportation, said chain controls are expected to be in place at the higher elevations of Interstate 5 north of Redding.

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“The most important thing motorists need to know is to be prepared, have those chains when you need to have them,” Woodward said.

Caltrans recommends drivers check their brakes, battery, windshield wipers, defroster, heater, headlights and exhaust system before traveling in the mountains.

In addition to packing chains, Woodward said drivers should have an ice scraper and shovel, flashlight, warm blankets, water, non-perishable food items and a cell phone.

Motorists can check road conditions on the Caltrans’ QuickMap site at https://quickmap.dot.ca.gov.

There is also a chance Caltrans and the California Highway Patrol will screen motorists for chains 10 miles north of Redding on I-5 at the Fawndale exit, Woodward said.

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Screening vehicles allows authorities to meter traffic traveling through the Sacramento River Canyon, which can get treacherous and often is closed temporarily due to big-rig trucks and other vehicles spinning out on I-5 during heavy snowstorms.

“When we need to close the interstate, that screening acts like a kink in the hose, slowing that interstate traffic down and moderating the traffic,” Woodward said.

Thanksgiving travel outlook

This week’s storm is expected to linger through the weekend.

Purdue of the National Weather Service in Sacramento said Monday that it’s still early to get an accurate forecast for the busy Thanksgiving week.

“Potentially, there will be a damp start — I won’t say wet start — but damp start to the beginning of next week,” she said.

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AAA projects 80 million travelers will head 50 miles or more from their homes next week.

The extended holiday forecast, which includes the Tuesday (Nov. 26) before Thanksgiving and Monday (Dec. 2) afterwards, is expected to exceed pre-pandemic Thanksgiving travel levels and set a record, AAA said.

David Benda covers business, development and anything else that comes up for the USA TODAY Network in Redding. He also writes the weekly “Buzz on the Street” column. He’s part of a team of dedicated reporters that investigate wrongdoing, cover breaking news and tell other stories about your community. Reach him on Twitter @DavidBenda_RS or by phone at 1-530-338-8323. To support and sustain this work, please subscribe today.





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California to Start Wiping Racist Term for Indigenous Women

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California to Start Wiping Racist Term for Indigenous Women


California will soon start the process of scrubbing a racist term for Indigenous women from location names. A bill signed by Gov. Gavin Newsom in 2022 calls for the term “squaw” to removed from all of the state’s geographic features and place names, beginning Jan. 1, 2025. Within 180 days of that start date, local governments must submit replacement name recommendations; if they don’t, commissions and advisory bodies will be brought in to do so, CNN reports. The California Advisory Committee on Geographic Names will work to implement new names for nearly three dozen places, which have already been approved, by the first of the year, CBS News reports.

“The names we give to places in California reflect our shared history and culture. These place names should never insult communities or perpetuate discrimination,” the secretary of the California Natural Resources Agency says in a statement. Native American tribes worked with the agency to come up with the replacement names for locations including roads, a bridge, and a fire station. In West Sacramento, for example, the word was replaced with “tebti,” a word and blessing translating to the idea of streams that flow together. The federal government is also working to wipe the term from federal sites, and one iconic California ski resort has already made the change on its own. (More California stories.)

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Two “doomsday fish” spotted on California beaches in less than three months

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Two “doomsday fish” spotted on California beaches in less than three months


A rare deep-sea Pacific oarfish measuring 9.5 feet was recovered last week at Grandview Beach in Encinitas, California, marking only the 21st time since 1901 that this species has washed up on California shores. The discovery was made by PhD candidate Alison Laferriere from the Scripps Institution of Oceanography. The oarfish was found stretched out on the rocky shoreline and has since been moved to the Scripps Institution for further study and an autopsy.

The sighting was reported by New York Post, Asia Economy, among other outlets.

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Oarfish are exceptionally rare creatures, typically inhabiting depths between 200 and 1,000 meters. They can grow to lengths of up to 30 feet, making them the longest bony fish in the world, yet they remain largely unstudied by scientists due to their deep-sea habitat and infrequent appearances near the coast. They are characterized by their long, scaleless, ribbon-like silvery bodies with dark spots and a long red dorsal fin crest extending from the top of their heads.

This recent wash-up offers scientists a unique opportunity to study this elusive species without needing to dive into the ocean. “We took samples and froze the specimen pending a more detailed study and its final preservation in the collection,” explained Ben Frable, Scripps Marine Vertebrate Collection Manager. He added, “Like with the previous oarfish, this specimen and the samples taken from it will be able to tell us much about the biology, anatomy, genomics and life history of oarfishes.” The oarfish will undergo a necropsy to determine its cause of death, providing invaluable data for researchers.

This incident comes just months after another oarfish measuring 12.25 feet was found by kayakers on August 10 near La Jolla Cove, California, only 20 miles south of Grandview Beach. The two discoveries within three months are particularly notable, as only 21 oarfish have been found on California beaches in over a century. Even oarfish bodies rarely float into shallow waters, making these recent events extremely unusual.

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The proximity of these strandings has reignited discussions about the oarfish’s mythical reputation as a predictor of natural disasters. Oarfish have sparked myths and legends for centuries and are sometimes referred to as “doomsday fish.” There is a superstition that their appearance is a precursor to disasters like earthquakes, particularly fueled by the sighting of 20 oarfish washed ashore before the 2011 Great East Japan Earthquake. Notably, two days after the oarfish was found in August, a magnitude 4.4 earthquake occurred in Los Angeles, California, raising concerns about this mythical association.

However, scientists emphasize that there is no confirmed correlation between Pacific oarfish and earthquakes. A 2019 study by researchers in Japan found no solid scientific evidence linking oarfish to earthquakes, leaving the doom they may or may not portend open to anyone’s guess. Experts have declared, “There is no confirmed correlation between Pacific oarfish and earthquakes,” and “There is no scientific basis, so we should not make hasty conjectures,” despite the longstanding myths surrounding their appearances.

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According to researchers, the recent oarfish sightings are much less nefarious. Pacific oarfish are known to come close to the surface when they are sick, dying, or disoriented. Various factors could contribute to these strandings. “We do not know the clear reason for the death of the Pacific oarfish, but changes in the marine environment, population increase, El Niño, and La Niña are variables that may be at play,” explained Ben Frable. He suggested that the sightings could be related to changes in ocean conditions and an increase in the oarfish population in the region. “There was a weak El Niño earlier this year,” he stated.

The recent wash-up coincided with the red tide and Santa Ana winds last week, but many variables could lead to these strandings. The phenomenon of oarfish sightings has sparked researchers’ interest in the possible causes behind these occurrences, with broader shifts such as El Niño and La Niña patterns being considered.

For scientists at the Scripps Institution of Oceanography, these rare specimens present an incredible opportunity to learn more about a species that is largely unstudied due to its deep-sea habitat. The oarfish’s unique biology, anatomy, genomics, and life history can provide insights into deep-sea ecosystems and how changes in ocean conditions might affect marine life.

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The discoveries have also drawn attention to the species’ elusive nature and the mysteries that still surround the ocean’s depths. Oarfish typically inhabit the dark ocean depths, and their long, ribbon-like bodies and rare appearances have historically contributed to sea serpent legends.

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This article was written in collaboration with generative AI company Alchemiq





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