One of the biggest concerns of a probate case is the property taxes for the house. Usually, the property tax base is reassessed when a person dies owning real estate and it is passed on to the person’s heirs. That would most often involve a higher assessed value for the house and an increase in the property taxes. This can be a significant increase in costs. However, there are exclusions that may apply to prohibit the reassessment of the real estate for property tax purposes. In such a case, the property tax assessment would remain the same, and save a lot of money.
Co-owners of real estate may qualify for an exclusion, if certain conditions are met. A transfer on or after January 1, 2013 of a co-tenancy interest in real estate from one cotenant at the death of the other cotenant is not a change in ownership under Rev. & Tax. Code §62.3 and would prevent the reassessment of the real estate for property tax purposes. The surviving cotenant must file an Affidavit of Cotenant Residency Form BOE-58-H with the assessor.
To qualify for the co-tenant exclusion, upon the death of one co-tenant, all of the following must be met:
1. The transfer is solely by and between two individuals who together own 100 percent of the real property in joint tenancy or tenancy in common.
2. As a result of the death of the transferor cotenant, the deceased cotenant’s interest in the real property is transferred to the surviving cotenant, resulting in the surviving cotenant owning 100 percent of the real property, and thereby terminating the co-tenancy.
3. For the one-year period immediately preceding the death of the transferor cotenant, both of the cotenants were owners of record.
4. The real property was the principal residence of both cotenants immediately preceding the transferor cotenant’s death.
5. For the one-year period immediately preceding the death of the transferor cotenant, both of the cotenants continuously resided in the real property.
6. The surviving cotenant must sign, under penalty of perjury, an affidavit affirming that he or she continuously resided in the real property with the deceased cotenant for the one-year period immediately preceding the date of death.
A transfer of co-tenancy interest in real property from one cotenant to the other shall take effect upon the death of the transferor cotenant under any of the following circumstances:
(1) Through a probate matter pursuant to the transferor cotenant’s will or trust, upon the death of the transferor cotenant.
(2) Through a probate matter by intestate succession from the transferor cotenant who died without a will.
(3) In the case of a joint tenancy, by operation of law, upon the death of the transferor cotenant.
“Co-tenancy interest” means an interest in real property held only as tenants in common or joint tenants.
“Principal residence” means a dwelling eligible for either the homeowners’ exemption or the disabled veterans’ exemption.
The cotenant exclusion can apply to relatives, such as a brother and sister, or to non-relatives, such as a boyfriend and girlfriend who are not married. The cotenant exclusion would not apply to a married couple, because the spousal exclusion allows for an exclusion from reassessment of property taxes when real estate is transferred between spouses, even at death.