Achieving Consistency: Unifying the Change in Ownership and Change in Control Filing Deadline for Decedents’ Estates and Trusts¹

By Irina Rospotnyuk and Derek Takehara²

EXECUTIVE SUMMARY

Under Proposition 13, California’s 58 county assessors are required to reassess real property upon a change in ownership. The term "change in ownership" is statutorily defined. Relevant here—absent an exclusion—is a change in ownership when a person dies and the beneficial ownership of real property transfers to another person or legal entity. In addition to direct transfers of real property, many decedents own interests in legal entities. Changes in ownership or control of real property owned by legal entities are governed by complex statutory tests. When those rules apply, a change in ownership of real property held by an entity often occurs upon an individual’s death. Whenever a change in ownership occurs, a statement must be filed with the California State Board of Equalization ("BOE") to notify the counties of the change in ownership and assist in the timely reassessment of real property.

Under current law, the deadline for filing the statement varies when a death is involved: (i) for a real property interest in a decedent’s estate, the statement must be filed when the inventory and accounting is filed with the court; (ii) for a real property interest in a trust, the statement must be filed within 150 days after the date of death; and (iii) for decedent-owned legal entity interests, the statement must be filed within 90 days of the change in ownership (for purposes of inheritance, the change in ownership is deemed to have occurred on the decedent’s date of death). This inconsistency is not only confusing to the parties required to file this statement upon the owner’s death, but failure to comply with the correct statutory filing deadline exposes the taxpayer to harsh penalties (10 percent or more). There is no rational basis for the different statutory filing deadlines. This differential treatment calls out for a change in the present filing deadlines for changes in ownership arising from the death of an owner of real property or death of an owner holding interests in an entity owning real property.