California recently approved Proposition 19, which, effective February 16, 2021, (1) eliminates the $1 million parent-child and grandparent-grandchild exclusion for transfers of real property other than a primary residence; and (2) modifies the manner in which the taxable value of a primary residence is calculated following transfer.
In light of the recent election, the nature of the tax code may be changing significantly in the near future. As 2021 approaches, it is crucial to understand potential changes to estate, gift, generation-skipping and related income taxes, and consider planning options immediately. In some cases, it may be advantageous to complete certain planning techniques prior to the end of calendar year 2020. However, it is important to keep in mind that, with the exception of Proposition 19 (which is now law), the matters discussed in this memorandum are potential changes. Future tax law and its effect on estate planning matters remains uncertain.