If you plan to transfer a business, home or other major assets to your children in California, you must complete certain legal and tax steps. These steps differ by asset type and help you avoid penalties, delays or misunderstandings during the process.
Transferring real estate
Transferring real estate to your child may trigger a reassessment of the property for tax purposes. However, Proposition 19 allows you to avoid reassessment if your child makes the home their primary residence, the value falls within permitted limits and you file the required claim.
To qualify for this exclusion, you need to file Form BOE-19-P (California’s Claim for Reassessment Exclusion for Transfer Between Parent and Child) within three years of the property transfer date. If you do not submit the form within this period, the county assessor will reassess the property based on its current market value, which may increase the property tax.
Another option is to place the property in a revocable living trust. Passing on the property this way lets you maintain control over it while you are alive. After your death, the home will transfer directly to your child and avoid the probate process, which can be lengthy and public.
Passing on a business
When transferring a business to your child, you must update both legal records and operational roles to ensure continuity and compliance. Start by taking the following actions:
- Update local business licenses, seller’s permits and state registrations
- Revise ownership documents filed with the Secretary of State
- Amend internal agreements to reflect new ownership roles
- Assign or adjust signing authority and operational responsibilities as needed
- Notify vendors, clients and employees of the change in ownership
These adjustments may affect daily operations, so early communication with staff and partners can help maintain stability. Gradually involving your child in operational responsibilities before transferring complete control can ease the transition.
You may also use legal tools, such as buy-sell agreements or a family limited liability company (LLC), to define ownership shares, voting rights and succession terms. Another option you can consider is to transfer business interests into a trust to delay full ownership, provide income distributions or coordinate future control.
Distributing other significant assets
For other valuable assets, such as financial accounts, retirement plans or high-value items, there are several legal tools you can use to simplify their transfer:
- Use payable-on-death (POD) or transfer-on-death (TOD) designations for bank and investment accounts.
- Complete beneficiary forms for retirement plans or life insurance policies.
- Consider annual gifting for items such as artwork or vehicles.
The Internal Revenue Service (IRS) allows you to give gifts each year without paying federal gift tax, provided the value stays within the annual exclusion threshold. If the total value of a gift exceeds this limit, you must report it to the IRS using Form 709.
In addition, if the total value of your estate surpasses the federal exemption limit, your estate may be subject to taxes when transferred to your heirs. These figures can change every year, so check the latest IRS guidelines before = gifting items with significant value
Transferring assets to your children in California requires careful planning. You need to meet legal deadlines, complete proper paperwork and choose the tools that match your family’s needs. An estate planning attorney or tax advisor can help you stay compliant and avoid costly mistakes.