SB 974: Property taxation: change in ownership: generational transfers: special needs trusts.

The California Constitution limits the amount of ad valorem taxes on real property to 1% of the full cash value of that property, defined as the county assessors valuation of real property as shown on the 197576 tax bill and, thereafter, the appraised value of the property when purchased, newly constructed, or a change in ownership occurs after the 1975 assessment, subject to an annual inflation adjustment not to exceed 2%. Existing property tax law, pursuant to specified provisions of the California Constitution, authorizes an owner of a primary residence who is over 55 years of age, severely and permanently disabled, or a victim of a wildfire or natural disaster to transfer the taxable value of property that is eligible for either the homeowners exemption or the disabled veterans exemption to any replacement dwelling that is purchased or newly constructed as that persons principal residence within 2 years of the sale of the original primary residence, as provided. provides that the purchase or transfer of real property that is the principal residence or a family farm, as those terms are defined, of an eligible transferor in the case of a purchase or transfer between parents and their children, or between grandparents and their grandchildren if all the parents of that grandchild or those grandchildren are deceased as of the date of purchase or transfer, is not a purchase or change in ownership for purposes of determining the full cash value of property for taxation, as provided. Existing law defines transfer for these purposes to include, but not be limited to, any transfer of the present beneficial ownership of property from an eligible transferor to an eligible transferee through the medium of an inter vivos or testamentary trust.

Existing law authorizes the establishment of a special needs trust if a court makes specific determinations, including that the minor or person with a disability has a disability that substantially impairs the individuals ability to provide for their own care.

This bill would require the county assessor to determine that a person is eligible as a severely and permanently disabled claimant under the above-described provisions relating to transfers of taxable value if the county assessor receives a letter certifying a special needs trust, as specified. The bill would authorize the county assessor to issue determination of preliminary eligibility, as provided, and would require the claimant be liable for property tax at the appraised value of the replacement dwelling at the time of transfer for the years since the transfer if the trust fails to produce the letter within 5 years. The bill would require the State Department of Health Care Services to develop and establish a method for a claimant to request, and the parameters for issuing, a letter certifying a special needs trust. revise the definition of transfer for purposes of the above-described property tax law provisions to specify that an inter vivos or testamentary trust includes, but is not limited to, a special needs trust.