November brought with it changes to California’s real property taxation laws. Proposition 19 passed narrowly and modified laws which were already on the books. Let’s take a look at the old rules and then how the new rules will work.

In many places in California, real property has been sky-rocketing in price in the last several decades. Having real property reassessed with regard to taxes could bring with it hefty tax bills; laws were put into place to curtail the rising tax issues.

Proposition 13 has been law in California since 1978, as an amendment to their Constitution. Proposition 13 dictated that the rate of increase of property assessments would be tied to an inflation factor and could not be greater than 2 percent each year. Also, it provided a limit on property taxes to 1 percent of the assessed value. Finally, it prohibited a reassessment on real property unless there was a change in ownership or the home was new construction.

It may seem surprising to use a wine analogy to explain a legal concept, but when discussing trust decanting, pouring wine is often a part of the conversation. When you take a bottle of wine and slowly pour the wine from the bottle into a different container, you are separating the wine from any sediments that may have formed in the bottle. This process is called wine decanting. Decanting ultimately makes the wine taste better as it removes the harsh taste of built-up sediment. Similarly, trust decanting allows a trustee to modify an irrevocable trust by “pouring” the trust assets into a new trust that has different, often more favorable terms. If a trustee has the discretionary power to distribute trust assets to and for the benefit of a beneficiary, decanting enables a trustee to use this power to dictate the terms of a new trust. 

From changes in the tax assessments of inherited property in California to new Paycheck Protection Program (PPP) guidance regarding the nondeductibility of expenses paid by PPP loans, we have recently seen significant developments in estate planning and business law. To ensure that you stay abreast of these legal changes, we have highlighted some noteworthy developments and analyzed how they may impact your estate planning and business law practice.