I haven’t come across this situation before and I only spoke of it very superficially with a lawyer related to me, so take what I say with a grain of salt.
Still, from the County’s website:
Q: Is there a filing deadline for this exclusion?
A: A claim must be filed within three years of the date of transfer or death, or prior to the sale or transfer to a third party. In addition, a claim may be filed within six months after the mailing date of the supplemental notice or escape assessment.
Q: Is there anything I can do after the deadline?
A: If a claim is filed after the legal deadline, the exclusion may be granted but no refunds will be issued for prior years. It will be granted for the year the claim is filed as long as the property has not been sold to a third party.
So if your client can get the paperwork done, they may at least get their future tax bills fixed.
Now, somewhere else in the page, this was an interesting find as well:
LIVING TRUSTS
– Real property is frequently placed into a trust for income tax or inheritance purposes. Generally, the creation of a trust does not cause a reassessment for property tax purposes. For more information concerning the possible property tax consequences of a trust, please call the Assessor’s Office at (858) 505-6262.
Q: What is a trust?
A: A trust is a legal arrangement whereby property is held by one party for the benefit of another (beneficiary) for a specific length of time.
Q: Does placing real property into a trust cause a reassessment for property tax purposes?
A: Generally, placing real property into a trust is not a change in ownership that causes a reassessment as long as you are the sole owners, the trust is revocable or the beneficial interest is not transferred.
So by the wording, it is possible for someone to transfer their tax basis to their child (using the parent/child exclusion) and then transfer the property into a trust for said child…
It definitely sounds like something worth pursuing… Talk to the County people, they are generally helpful about these things. They won’t hold your hand during the process, but they will tell you what to do.
