How Proposition 19 Changed Inheritance Rules
California’s Proposition 19, approved by voters in November 2020, significantly altered long-standing property tax protections for families. While it maintained the ability for children to inherit a parent’s primary residence without triggering a full property tax reassessment, it added strict new conditions.
The inheriting child must use the home as their primary residence within one year of transfer—and file for the homeowner’s exemption. More critically, if multiple heirs inherit the property but only one intends to live there, the law requires that all beneficiaries receive an equal share of the estate’s total value.
This “equalization” rule often forces families to sell the home unless they can quickly access cash to compensate non-occupying heirs.
The Role of Probate Lending
This is where probate lending becomes a powerful solution. Unlike traditional bank loans—which typically require credit checks, income verification, or collateral from individual heirs—probate loans are made directly to the estate or trust.
These short-term, non-recourse advances provide immediate liquidity during the often-lengthy probate process. Families can use the funds to buy out co-heirs, cover estate taxes, or settle debts—all while keeping the family home intact.
Because the loan is repaid from estate assets (usually upon sale or refinance), it doesn’t burden individual heirs with personal liability.
Preserving Generational Wealth
The stakes are high.
Under Proposition 13, many California homes have been assessed at values far below current market rates—sometimes for decades. Losing that protected tax base due to a forced sale can result in annual property tax increases of 10x or more. For example, a home purchased in 1980 for $150,000 might still carry a tax bill based on a $200,000 assessed value.
After reassessment at today’s $1.5 million market price, taxes could jump from ~$2,500 to over $18,000 per year. Probate lending helps families avoid this financial shock by enabling compliance with Prop 19’s equal-distribution rule—without sacrificing the home or its tax benefits.
Why Timing Matters
Probate can take 12–18 months or longer in California. Waiting until the last minute to address inheritance imbalances often leaves families with few options.
By securing a probate loan early—sometimes even before the court formally opens the estate—heirs gain breathing room to make thoughtful decisions.
This not only prevents rushed, below-market sales but also reduces emotional strain during an already difficult time.
A Strategic Tool for Modern Estates
As housing costs soar and generational wealth preservation grows more complex, probate lending has evolved from a niche option into a mainstream estate planning tool.
It’s especially valuable in multi-heir scenarios, blended families, or when heirs live out of state and can’t occupy the property.
Working with experienced lenders who understand California’s unique tax landscape ensures families meet Prop 19 requirements while honoring their loved one’s wishes.
Call us today at (626) 796-1680 or visit capitaldf.com
Sources: Probate & Estate Loan Market Analysis – California (2025); California State Board of Equalization – Proposition 19 Guidelines